Sidley’s Carter Phillips on Purdue Execs Exclusion

Carter Phillips is not fond of the responsible corporate officer doctrine. Phillips is a partner at Sidley Austin in Washington, D.C.

And he represents three Purdue Pharma executives who were convicted under that doctrine for a misdemeanor misbranding crime. The company itself was convicted of a felony – misbranding the painkiller OxyContin.

The collateral consequence for the executives? Secretary of the Department of Health and Human Services excluded them from federally funded health care programs for twelve years.

Phillips argued to the DC Court of Appeals that the Secretary didn’t have the authority – and even if she did, twelve years was too long.

Last month, the Court of Appeals, in a 2-1 ruling, held that the Secretary of Health and Human Services was within her authority in excluding three Purdue Pharma executives for twelve years.

“ It was a badly divided court,” Phillips told Corporate Crime Reporter in an interview earlier this month. “But on the question of whether or not the Secretary has the authority to impose an exclusionary order for something that involves merely misbranding, the Court said – yes, their reading of the statute was that Congress meant it to be okay for the Secretary to exclude someone who engaged in this kind of behavior.”

“Two other judges said that the Secretary is not permitted to act arbitrarily and capriciously in these circumstances.”

“And therefore it would be incumbent on her to review the duration of this exclusionary order compared to the duration of others and the circumstances that gave rise to them and come up with some kind of an explanation, if possible, for why there is a seemingly wide disparity between what others similarly situated received in terms of exclusion or what it is that these individuals did that would make them comparable to someone sent to prison for engaging in intentional violations of federal law.”

Groups like Taxpayers Against Fraud believe that exclusion is the big stick for executives who engage in this kind of behavior.
“Well, the theory is that these executives didn’t do anything,” Phillips said.

But they pled guilty to wrongdoing, right?

“To be sure,” Phillips said. “But under a standard that still imposes criminal liability for not doing enough to prevent something as opposed to actively doing something that would be a violation of the law. So, we are dealing with a fairly unusual situation.”
Would you argue that there should be no exclusion for executives who plead guilty under the responsible corporate officer doctrine?

“Yes,” Phillips said. “I would argue that. We didn’t have to for purposes of the DC Circuit case. But I would not hesitate to argue that. Congress’ intent was to require some greater showing of individual culpability, mens rea, or bad intent than is required by that doctrine in any particular case. If you were going to get somebody sanctioned under these circumstances, I would hope that it would be in situations where somebody has pled guilty to something more than simply failing to do more to prevent wrongdoing in particular circumstances.”

[For a complete transcript of the Interview with Carter Phillips, see 26 Corporate Crime Reporter 33, August 27, 2012, print edition only.]

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