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Full D.C. Circuit Turns Deaf Ear to Banished Purdue Executives and GC
The National Law Journal
An en banc federal appeals court gave a terse answer to pleas by executives of one of the pharmaceutical industry's biggest corporations to rescue their careers: No.
The full U.S. Court of Appeals for the D.C. Circuit refused on November 29 to hear an appeal by Michael Friedman, Paul Goldenheim and Howard Udell of Purdue Frederick Co., who were convicted of misdemeanor misbranding tied to the promotion of thepainkiller Oxycontin as less addictive than other medication.
The U.S. Department of Health and Human Services subsequently excluded the three from participating in federal health programs for 12 years, finding the misdemeanor criminal offense "related to fraud," effectively trashing their careers.
"Obviously, we are disappointed, but have not made any decisions about next steps," said Carter Phillips of Sidley Austin, who represented the executives.
The men were convicted under the "responsible corporate officer" doctrine, which holds officers liable for a company's conduct even if they had no knowledge of or participation in the crime. Friedman was the company's former chief executive officer, Goldenheim the chief medical officer and Udell the general counsel. In separate deals, the three gave up $34.5 million in compensation.
Phillips, co-chairman of his firm's executive committee, argued that the law doesn't allow exclusion under the circumstances of the misdemeanor conviction. Phillips also challenged the length of the exclusion.
A majority on the three-judge D.C. Circuit panel agreed with Phillips on the length issue andsent the case back to the department for further proceedings regarding how long the executives should not be permitted to work in the pharmaceutical and health care industries.
Phillips urged the full appeals court to take up the case, saying in a petition that "the panel decision's permissive approach gives HHS intolerable latitude to impose harsh, career-ending exclusions."
D.C. Circuit Chief Judge David Sentelle and Judge Douglas Ginsburg, the majority in the panel decision, determined that the exclusion of the three executives didn't violate federal law. The judges said the law allows exclusion for a person convicted of conduct "factually related to fraud."
Writing separately, Senior Judge Stephen Williams said the majority's "nexus" test "offers none of the 'precision and guidance [that] are necessary so that those enforcing the law do not act in an arbitrary or discriminatory way.'"
Phillips trumpeted Williams' position in urging the full-court to hear the case. The criminal offense itself, and not the factual basis for a conviction, must "relate to" fraud, Phillips said. No misdemeanor offender, Phillips said, has ever been excluded for more than four years.
This article originally appeared in The National Law Journal.