U.S. Court Tests Liability of Healthcare Execs

By Andrew Longstreth | December 6, 2011

After decades in relative obscurity, a U.S. legal doctrine that holds corporate officers liable for company wrongdoing is finding its way back into some high-profile healthcare prosecutions.

The “responsible corporate officer” doctrine allows for prison terms of up to one year for misdemeanor violations of the Federal Food, Drug and Cosmetic Act, but typically defendants have received only probation.

Recently, however, the government has sought to reinvigorate the doctrine, and some executives are facing stiffer penalties than they had ever imagined.

On Tuesday, the Department of Health and Human Services will seek to convince a federal appeals court to uphold a 12-year exclusion from government business for three former executives of Purdue Pharma. The executives had pleaded guilty in 2007 to a misdemeanor for misbranding the painkiller OxyContin.

And on Nov. 21, three former executives at medical-device company Synthes Inc received prison sentences of between five and nine months for their role in an illegal test of a bone-cement product.

The government claimed that Synthes, which agreed to be bought by Johnson & Johnson in April, tried to cover up its conduct after three patients treated with the product died during surgery.

In pleading guilty, the Synthes executives did not admit to knowingly violating the law. But that did not help them. Under the “responsible corporate officer” doctrine’s so-called strict liability standard, prosecutors do not have to prove that an executive was aware of an alleged violation. They must only establish that the executive was in a position of responsibility to prevent the offense.


The principle behind the doctrine was validated by the Supreme Court in 1975, when it affirmed the conviction of John Park, the chief executive of a national food chain who had been charged with allowing warehoused food to be exposed to rodent contamination. The court held that, to convict Park, the jury did not have to find that he was aware of the unsanitary conditions, only that he was in a position of authority to prevent them.

Over the next few decades, prosecutors used the doctrine sparingly, concerned that overuse would bring unwanted judicial scrutiny, said Paul Hyman, formerly of the U.S. Food and Drug Administration’s Chief Counsel’s Office and now a director at the law firm of Hyman, Phelps & McNamara.

But earlier this year, after a government report critical of the Food and Drug Administration’s oversight of its criminal investigations, the FDA toughened its policy on misdemeanor prosecutions.

The Purdue Pharma case, which is before the U.S. Court of Appeals in Washington, could be an important test for the new policy, as the government tries to find out how tough it can get in the absence of evidence that the executives knew of any wrongdoing.


Carter Phillips, a well-known Supreme Court litigator who leads the Purdue Pharma defense team, has argued in court papers that the 12-year ban is unreasonable and unsupported by the evidence.

“By employing this extraordinary species of criminal liability, the government avoided the substantial burden of proving any fraudulent conduct,” Phillips wrote in a brief to the appeals court. “It did so for good reason: There was no evidence that appellants were aware of any misbranding of OxyContin, the drug their company manufactured.”

Phillips noted that the Supreme Court has acknowledged the validity of strict-liability convictions where penalties “are relatively small, and conviction does no grave damage to an offender’s reputation.” By that standard, the punishment, which “effectively ended appellant’s careers,” does not fit their crime, he argued.

The lower court, in a 30-page decision last December upholding the ban, said that the consequences of the penalty “are not nearly as dire as plaintiffs contend, as plaintiffs remain free to seek private employment at a company that does not rely on federal or state funds.”

The future of the responsible corporate officer doctrine could depend on whether executives who plead guilty under the doctrine are able to find other employment.

Cory Andrews, a lawyer with the Washington Legal Foundation, which filed a friend-of-the-court brief on behalf of the Purdue defendants, said that as the severity of penalties increase for misdemeanors, so do the odds of a constitutional challenge.

“Arguably, where the deprivation is very small, the due process violations are not as significant,” Andrews said. “But where the deprivation goes to someone’s ability to earn a living — I think that raises the constitutional temperature.”

(Reporting by Andrew Longstreth in New York; Editing by Jesse Wegman)

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