Ignorance Is Not Bliss: Feds Hold Executives Criminally Liable for Corporate Misdeeds

[Link: Responsible Corporate Officer Doctrine: Executives Who Allow Misdeeds Face Career-Ending Consequences – LXBN]

Corporate executives who fail to notice – and put an end to – criminal misdeeds that happen on their watch can pay a high price for their lack of oversight.

Case in point: Purdue Pharma’s fraudulent marketing of OxyContin, which led not only to a $600 criminal and civil settlement for the company, but also to criminal charges against the company’s corporate officers.

Federal authorities charged the executives, who pleaded guilty to misdemeanor misbranding of the drug, under the terms of the Responsible Corporate Officer Doctrine.

The D.C. Court of Appeals recently reduced the length of the sentence imposed on the corporate officers to three years’ debarment from participating in federal health programs (the original sentence was a 12-year exclusion). But for the three executives, the result is essentially the same: a potentially career-ending sentence for not minding the store.

For your reference, three takeaways:

1. Ignorance of corporate wrongdoing is no excuse:

“…the company’s top executives … pleaded guilty, under the so-called ‘Responsible Corporate Officer doctrine,’ to ‘misdemeanor misbranding . . . for their admitted failure to prevent Purdue’s fraudulent marketing of Oxycontin.’ In their plea agreements, the executives disclaimed any knowledge of the fraudulent marketing of Oxycontin; they admitted only that they failed to discharge their ‘”responsibility and authority to prevent in the first instance or to promptly correct” the misrepresentations certain unnamed Purdue employees made regarding Oxycontin.’” (D.C. Circuit Holds That Former Purdue Pharma Executives Who Pleaded Guilty to Misdemeanor Misbranding May Be Excluded From Participation in Federal Health Care Programs by Ropes & Gray LLP)

2. Authorities appear willing to prosecute irresponsible executives to the fullest extent of the law:

“The OIG initially sought a twenty-year exclusion [from participation in federal health care programs] for each executive, based on the fact that: (1) the conduct at issue lasted for more than three years, (2) the amount of the loss to the federal health care programs exceeded $5,000, and (3) the conduct had an adverse impact on program beneficiaries.” (D.C. Circuit Rejects Length of Purdue Executives’ Exclusion but Remands for Reconsideration by Mintz Levin)

3. Compliance programs can help mitigate risk:

“Robust compliance programs, with visible-top support and regular testing, can prevent violations or at least detect them early enough to mitigate risk and allow the entity to consider self-reporting in an effort to avoid or minimize criminal or regulatory exposure.” (Even Without Knowledge or Participation, Corporate Officers Can Be Criminally Liable For Subordinates’ Misdeeds by Fox Rothschild)

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