Copyright 2010 Hyman, Phelps & McNamara, P.C. Are Attorneys the FDA’s New Enforcement Target? John R. Fleder, Esq. (202) Douglas B. Farquhar, Esq. (202) Webinar presented by Thompson Interactive December 20, 2010

Copyright 2010 Hyman, Phelps & McNamara, P.C. 2 Hyman, Phelps & McNamara, P.C. Largest dedicated food and drug law firm in the country. Visit us at Visit our blog at Jamie K. Wolszon, Esq., an Associate at Hyman, Phelps & McNamara, P.C., is the principal author of this presentation.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 3 Presenters John R. Fleder – Former Director, Department of Justice, Office of Consumer Litigation ( ) – Served in other capacities in that office (1973 to 1985) Douglas B. Farquhar – Former Assistant United States Attorney, District of Maryland ( ) Disclaimer: The presenters and authors do not possess any knowledge of the facts of the Stevens’ case except what is available in the public domain.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 4 Indictment of Attorney Lauren Stevens November 9, 2010 Indictment in the United States District Court for the District of Maryland. The six-count Indictment was against Lauren Stevens, former Vice President and Associate General Counsel for GlaxoSmithKline. Four of the counts allege false statements (concealment of fact and false statement offenses). The other two counts allege obstruction of justice (falsification of documents and obstruction of justice). All these counts were brought under Title 18 of the United States Code. None of the counts allege violations of the Federal Food, Drug, and Cosmetic Act (FDCA).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 5 Allegations in the Stevens’ Indictment FDA’s DDMAC launched an investigation in October 2002 into the company’s alleged off-label promotion of the anti-depressant Wellbutrin for weight loss. Ms. Stevens was then the corporate attorney responsible for, and who signed and sent in, the responses to FDA. Ms. Stevens allegedly signed several letters stating that the company had not engaged in off-label promotion, when she knew that to be false.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 6 Allegations in the Stevens’ Indictment Ms. Stevens allegedly promised FDA that she would gather and provide to the agency presentations from those speaking on behalf of the company. She allegedly requested slides from over 500 of the company’s promotional speakers. At least 28 responded with materials containing evidence of off-label promotion, but she did not provide those materials to the agency. She allegedly consulted a memorandum that laid out the pros and cons of providing the promised materials to FDA. She allegedly told the agency that the response to the agency was complete despite withholding these materials.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 7 Allegations in the Stevens’ Indictment When a whistleblower sent evidence of off-label promotion to the investigators, Ms. Stevens allegedly stated that this evidence represented an aberration that was not part of the normal practice, when she allegedly knew this to be false. Ms. Stevens informed FDA that the firm did not compensate attendees of company-sponsored presentations for anything but parking, when in fact the firm allegedly provided attendees with gifts and entertainment. Ms. Stevens allegedly removed the evidence of the gifts and entertainment of the attendees from documents sent to the agency.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 8 Potential Jail Time for Ms. Stevens Each of the obstruction charges carries a maximum penalty of twenty years in prison. Each of the false statement charges carries a maximum of five years in prison.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 9 Statutory Basis for False Statements in the Stevens’ Case 18 U.S.C. § 1001(a)- “[w]hoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully-- (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years….”

Copyright 2010 Hyman, Phelps & McNamara, P.C. 10 Statutory Bases for Obstruction of Justice in the Stevens’ Case 18 U.S.C. § 1512(c): “Whoever corruptly-- (1) alters, destroys, mutilates, or conceals a record, document, or other object, or attempts to do so, with the intent to impair the object's integrity or availability for use in an official proceeding; or (2) otherwise obstructs, influences, or impedes any official proceeding, or attempts to do so, shall be fined under this title or imprisoned not more than 20 years, or both.”

Copyright 2010 Hyman, Phelps & McNamara, P.C. 11 Statutory Bases for Obstruction of Justice in the Stevens’ Case (Cont.) 18 U.S.C. § 1519: “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”

Copyright 2010 Hyman, Phelps & McNamara, P.C. 12 Statutory Basis for Criminal Prosecutions Under the FDCA 21 U.S.C. § 333(a)(1) – “Any person who violates a provision of [21 U.S.C. § 331 (“prohibited acts”)] shall be imprisoned for not more than one year or fined... or both.” No “knowledge” or “intent” requirement. Compare with 21 U.S.C. § 333(a)(2) – “if any person... commits such a violation with the intent to defraud or mislead, such person shall be imprisoned for not more than three years or fined... or both.”

Copyright 2010 Hyman, Phelps & McNamara, P.C. 13 United States v. Park Misdemeanor criminal case can be instituted against company officials for violations of the FDCA—even if a corporate official did not know of the violation—if the official was in a position of authority to prevent or correct action and omitted to do so. FDA officials have indicated heightened interest in use of the Park doctrine by targeting corporate officials even when they have not necessarily intentionally violated the FDCA. See HPM’s October 8, 2010 webinar: FDA and the Park Doctrine.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 14 Stevens’ Trial Scheduled for February 2011 Ms. Steven’s legal team says their client is “going to trial and looking forward to it, and we fully expect her to be vindicated.” – Duff Wilson, Ex-Glaxo Executive is Charged in Drug Fraud, The New York Times (Nov. 9, 2010). Trial is scheduled to begin on February 1, 2011 in Greenbelt, Maryland. Ms. Stevens Pled Not Guilty on November 30, 2010.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 15 Motion Reveals Ongoing Gov’t. Probe The government has filed a motion for protective order alleging that its investigation is ongoing. – “These charges are part of a broader, ongoing investigation. The discovery relevant to the instant case thus contains information not only about this case, but also relates to the ongoing, underlying health care fraud investigation, including potential criminal activity by others.”

Copyright 2010 Hyman, Phelps & McNamara, P.C. 16 Ms. Stevens Appears Poised to Raise An Advice of Counsel Defense One press account suggests that she may invoke the advice of counsel defense. – “Everything she did in this case was consistent with ethical lawyering and the advice provided her by a nationally prominent law firm retained by her employer specifically because of its experience in working with FDA.” Duff Wilson, Ex-Glaxo Executive is Charged in Drug Fraud, The New York Times (Nov. 9, 2010).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 17 Advice of Counsel: Negating Intent An Advice of Counsel defense can negate the intent element of specific intent crimes such as obstruction of justice and false statements. Some cases say that it is an absolute defense. – See, e.g., U.S. v. Walters, 913 F.2d 388,391 (7 th Cir. 1990); U.S. v. DeFries, 129 F.3d 1293, 1309 (D.C. Cir. 1997); U.S. v. Ragsdale, 426 F.3d 765, 778 (5 th Cir. 2005). Other cases say it is not an absolute defense, but rather one factor to consider in determining intent and good faith. – See, e.g., U.S. v. Winans, 612 F.Supp. 827, 848 (S.D.N.Y. 1985), aff’d in part rev’d in part, 791F.2d 1024 (2d Cir. 1986); U.S. v. United Medical and Surgical Supply Corp., 989 F.2d 1390,1403 (4 th Cir. 1993); Securities and Exchange Commission v. Savoy Industries, Inc., et. al., 685 F.2d 1310, 1315 n.28 (D.C. Cir. 1981).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 18 An Advice of Counsel Defense Generally “If a man honestly and in good faith seeks advice of a lawyer as to what he may lawfully do… and fully and honestly lays all of the facts before his counsel and in good faith and honestly follows such advice, relying upon it and believing it to be correct, and only intends that his acts shall be lawful, he could not be convicted of a crime [sic] which involves willful and unlawful intent[,] even if such advice were an inaccurate construction of the law.” – U.S. v. Beech-Nut Nutrition Corp., 871 F.2d 1181, (2d. Cir. 1989) (quoting Williamson v. United States, 207 U.S. 425, 453 (1908)).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 19 Elements of An Advice of Counsel Defense Complete disclosure to attorney of material relevant facts. Client requests advice of counsel on the legality of an action the client is considering taking. The lawyer concludes that conduct would be legal. The client relies in good faith on that advice. – See, e.g., Securities and Exchange Commission v. Savoy Industries, Inc., et. al., 685 F.2d 1310, 1315 n.28 (D.C. Cir. 1981); U.S. v. Lindo, 18 F.3d 353, 356 (6th Cir. 1994).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 20 Person May Not Invoke Defense if His/Her Lawyer Is a Partner in Venture The advice of counsel defense is not available “[w]hen the lawyer is a partner in a venture, takes a share of the profits, or is ‘not a lawyer who had no interest save to give sound advice for a reasonable fee.’” – U.S. v. Carr, 740 F.2d 339, 347 (5th Cir.1984); Sorrell v. Securities and Exchange Commission, 679 F.2d 1323 (9th Cir. 1982).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 21 The Advice of Counsel Defense Affects Privilege and Work Product Invoking the advice of counsel defense requires waiver of the attorney-client privilege for “communications and documents relating to the advice.” “[A]s result [of assertion of advice of counsel], a party must produce not only other communications and opinions of the same attorney, but also privileged information from other counsel involving the same subject.” Also may constitute waiver of work product doctrine protections. – Chiron Corp. v. Genentech, 179 F.Supp.2d 1182, (E.D. Cal. 2001); see also Trouble v. Wet Seal, Inc., 179 F.Supp.2d 291, 304 (S.D.N.Y. 2001).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 22 Crime Fraud Exception to Attorney- Client Privilege No protection for communications “‘made for the purpose of getting advice for the commission of a fraud’ or crime.” The attorney-client privilege is intended to encourage frank conversations between client and attorney about client’s past wrong-doing, not to encourage future wrong-doing. – U.S. v. Zolin, 491 U.S. 554, (1989).

Copyright 2010 Hyman, Phelps & McNamara, P.C. 23 Dangers of Relying on Oral Statements of Others If a company attorney signs a document, he or she often relies on oral statements made by other officials within the company. Both the attorney who signs the submission and persons making oral statement upon which the attorney relies could be liable if the statement submitted to FDA is incorrect or omits material information.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 24 Reliance on Oral Statements: U.S. v. W. Scott Harkonen DOJ begins to investigate InterMune, Inc. for alleged marketing drug Actimmune for off-label use idiopathic pulmonary fibrosis (IPF) in Dr. Scott Harkonen, former InterMune CEO, was indicted for alleged federal mail fraud and making false statements with “intent to defraud and mislead” about the efficacy of the drug, leading to misbranding charges under the FDCA. – Convicted of wire fraud; acquitted of FDCA violations. Statements at issue were in press releases.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 25 Reliance on Oral Statements: Rosenfield Testimony InterMune General Counsel testified that while on vacation he approved the press release. He testified that he relied on statements of Dr. Harkonen and other employees. – He approved language indicating that the company “demonstrated” clinical benefit for IPF after discussions with Dr. Harkonen and other employees. On cross-examination he testified that the defendant withheld relevant information. – He thought Dr. Harkonen had consulted with other officials. – He did not know of informal communications with the agency.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 26 Prior Prosecutions of a lawyer of FDA- Regulated Firm: Paul Kellogg The Stevens case is not the first time the government has prosecuted an in-house attorney at a FDA-regulated company. Paul Kellogg was former in-house counsel for Berkeley Nutraceuticals (Berkeley). He was convicted on one count of conspiracy to obstruct proceedings before FDA, and one count of conspiracy to obstruct proceedings before the FTC.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 27 Prosecution and Sentencing of Paul Kellogg (Cont.) Conspiracy to obstruct an FDA proceeding. – In connection with an FDA inspection, Mr. Kellogg allegedly directed Berkeley staff to drive a truckload of the company’s dietary supplement Rovicid “old labeling” to an off-site location so the agency inspectors would not discover the labeling. – After the inspectors left, the employees purportedly drove the truck with the documents back to the company. Conspiracy to obstruct an FTC proceeding. – Mr. Kellogg allegedly named as trustee in two trusts created to hide money from FTC. – Mr. Kellogg did not create documents, and was in hospital at time. Mr. Kellogg was sentenced to a year and a day in jail; the company’s founder Steven Warshak was sentenced to a 25 year prison term.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 28 Example of Prosecutions of Officials Who Are Not Lawyers for Obstructing FDA: Thomas Farina Former Pfizer, Inc. District Manager Thomas Farina was convicted of obstruction of justice (falsification of documents). Mr. Farina was sentenced to six months home arrest with electronic monitoring and three years of probation. After being told that government was investigating off-label promotion practices, Mr. Farina allegedly directed a sales representative that he managed to alter and backdate the alterations on the computer to hide off-label promotion.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 29 Lessons Learned from the Allegations in the Stevens Case. In house lawyers and other company officials who provide oral or written information to FDA must take great care to make sure that information conveyed to the agency is correct. Do not guess as to whether information being provided is correct. Where available, put disclaimers on information that is submitted orally or in writing such as: “Based on the information available to us”; “We have been unable to undertake a full investigation”; “We believe” (as opposed to “We know”); “We do not know the answer to your question”. Avoid making unnecessary affirmative statements in writing about company actions or documents. Do not say something orally or in writing just because you think it is what FDA wants to hear. They want to hear the truth. Making statements to FDA just to keep the agency happy usually does not work. For an in-depth discussion about some “do’s and don’ts” for responding to FDA inquiries you can consult the following article: Responding to FDA Form 483 and FDA Warning Letters,

Copyright 2010 Hyman, Phelps & McNamara, P.C. 30 Verify All Oral and Written Statements Do not blindly incorporate oral statement obtained from other company officials. Where possible, prior to signing any document for submission to FDA or any other government agency that is based on information obtained from another company official, attempt to independently verify those statements.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 31 Document Retrieval Carefully document the steps taken to retrieve company records for the purpose of responding to subpoenas or information requests from FDA and other government agencies. Document the process that the company used to find documents, including where the company did and did not search. Make sure relevant documents are searched for, and if responsive, produced to the government.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 32 Avoid Cover-ups Cover-ups in the face of an agency investigation leave officials extremely vulnerable to obstruction charges. In today’s enforcement environment every company employee is a potential whistleblower. Thus, any company person who knows of a company cover-up can potentially “spill the beans” to FDA. Paul Kellogg was prosecuted for participation in cover-up, not for his legal advice.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 33 Conclusion It is certainly not unusual for the government to criminally prosecute in-house or attorneys or other officials at FDA- regulated companies for obstruction of justice or making false statements. The Stevens’ case presents serious risks to the defendant. Moreover, the government has indicated that Ms. Stevens’ indictment may be followed by charges against others. Attorneys and other officials at FDA-regulated companies need to be careful to take all appropriate steps to protect themselves against such prosecutions.

Copyright 2010 Hyman, Phelps & McNamara, P.C. 34 Questions? John R. Fleder, Esq. Douglas B. Farquhar, Esq.