(Story updated at 5:27 p.m. ET)
The trial of a former Warner Chilcott president may be among the first of more to come for healthcare executives as the U.S. Justice Department increasingly holds individuals accountable for corporate wrongdoing.
Former Warner Chilcott President W. Carl Reichel was arrested in October and charged with conspiring with members of the drug company's sales force to pay kickbacks to doctors in exchange for writing prescriptions. He allegedly encouraged members of the sales force to take doctors out to so-called medical education dinners that were actually social events, and pay doctors to speak at those events so long as they prescribed the company's products.
An attorney for Reichel declined to comment Monday. But his attorneys have argued in court documents that there's no direct evidence that Reichel ever gave his sales people such direction, and that they may have misinterpreted his actual instructions.
His trial was scheduled to begin Monday in federal court in Boston. As a company, Warner Chilcott agreed in October to plead guilty to healthcare fraud and pay the government $125 million to resolve civil and criminal allegations.
Many say the case against Reichel is evidence of the Justice Department's recent pledge to hold accountable more executives tangled in fraud allegations.
Fraud fighters have long complained that the Justice Department too often lets corporate executives off the hook and that only by holding individuals accountable will the government be able to truly deter fraud.
Last September, U.S. Deputy Attorney Sally Quillian Yates penned a memo emphasizing the importance of accountability in cases of corporate corruption. In that memo, Yates said that companies must now disclose “all relevant facts relating to the individuals responsible for the misconduct” in order to qualify for “cooperation credit”—less severe penalties in exchange for cooperating with the Justice Department.
Since that memo, the Justice Department has more closely scrutinized individuals in both civil and criminal cases, such as the one against Reichel, said Marc Raspanti, a partner at Pietragallo Gordon Alfano Bosick & Raspanti who represents whistle-blowers and is a former government prosecutor.
Raspanti said he knows of “many, many individuals” the department is now investigating, though their names have not yet been released publicly.
Following that Yates memo, Department prosecutors now have to formally indicate whether they will or will not pursue individuals in cases of corporate misconduct, said Bill Jordan, a partner at Alston & Bird and a former senior official at the Department of Justice.
Because of that, "you're going to see a lot more" of these cases, Jordan said. “I do think it's a trend that's only going to increase over the next few years.”
Gabriel Imperato, a managing partner at Broad and Cassel who represents healthcare companies, said the Justice Department's pursuit of a criminal case against an executive such as Reichel isn't new. He said the department would likely have charged Reichel with or without the Yates memo.
But he said the department's attitude toward individuals involved in allegations of corporate wrongdoing on the civil side has definitely shifted.
In the past, for example, attorneys could often get the department to release individuals involved from liability. The department isn't keen on that anymore, he said. Imperato said the department refused his request in a recently settled a small False Claims Act case.
“There is some anecdotal evidence that executives, I think, are taking notice, paying more attention to compliance,” Imperato said.
Reichel is not the only executive facing trial over allegations of corporate wrongdoing.
William Facteau and Patrick Fabian, former CEO and vice president of sales at medical device company Acclarent, are also scheduled to stand trial June 6 in federal court in Boston. The two were indicted last year on one count of conspiracy, three counts of securities fraud, four counts of wire fraud and 10 counts of introducing adulterated or misbranded medical devices into interstate commerce.
They allegedly fraudulently drove up Acclarent revenues and stock valuation by illegally marketing a medical device known as the Relieva Stratus Microflow Spacer for uses not cleared or approved by the Food and Drug Administration, according to the Justice Department. The device was meant to maintain an opening to a patient's sinus, but was allegedly marketed as a steroid delivery device despite the FDA's refusal to approve it for that purpose.
Facteau and Fabian allegedly hid the company's illegal promotion and distribution of the device from Ethicon, a subsidiary of Johnson & Johnson, which purchased Acclarent in 2010.
Attempts to reach attorneys for Facteau and Fabian were not immediately successful Monday, but their attorneys have said in court documents all counts of the indictment should be dismissed.
Other executives who've been held accountable in the past include three from Pharma Purdue, formerly known as Purdue Frederick. In 2012, a federal appeals court ruled they could be excluded from doing business with the federal government after they pleaded guilty to failing to prevent the company's fraudulent marketing of the pain medication OxyContin.
