The Park Doctrine and FDCA Violations: Holding Corporate Executives Accountable

Over the past several months, the life sciences industry has been discussing a recent development in law enforcement: the Department of Justice’s (DOJ’s) and Food and Drug Administration’s (FDA’s) recent interpretations of the so-called Park Doctrine as creating strict liability—meaning that a prosecutor does not need to prove criminal intent.   

As noted by a recent article from the Food and Drug Law Institute (FDLI), “DOJ and FDA have demonstrated an increasingly aggressive view of the Park Doctrine, bringing prosecutions against corporate officers even absent any proof of knowledge or intent to commit a violation under the Food, Drug, and Cosmetic Act (FDCA).”

In fact, just this week, a federal judge sentenced executives of the medical device company Synthes North America to prison for unapproved testing of bone cement that left three people dead.  The executives are among the first corporate officials sent to prison for misdemeanor pleas as “responsible corporate officers” under the 1975 Park Doctrine.

Former President Michael Huggins, and former Senior Vice President Thomas B. Higgins, were sentenced to nine months in prison. John J. Walsh, the former director of regulatory and clinical affairs, received a five-month sentence.  All four executives have lost their careers and agreed to pay fines of $100,000 apiece.

According to U.S. District Judge Legrome D. Davis, the Synthes officials wanted to beat their competitors to market without going through the lengthy process of getting the bone cement product approved by FDA. So they plotted to train select surgeons in its off-label use and then have the doctors publish their findings, the judge said.

The program continued even after a patient died in surgery in Texas in 2003 and another died in California. The patients suffered sharp drops in blood pressure after the bone cement compound was injected into their spines. Synthes only halted the training after a third death in California in 2004.  “One adverse event should have been enough to let you know that this course was not right,” the judge said.

The bone cement, Norian XR, had been approved for surgical use in the arm but not in the weight-bearing spine.  Pilot studies had shown it could cause blood clots in humans, and pig research suggested the clots could move to the lungs, causing death within 30 seconds, government experts said. Synthes used the cement in about 200 spine patients.  None of the surgeons could rule out the bone cement as a factor in the three deaths, but it also wasn’t definitively blamed for them.

According to prosecutors, the Synthes North America executives also failed to report the patient deaths and lied to FDA investigators during an on-site audit. The government applauded the sentences Monday.  “It sends the right message, that lying to the FDA and disregarding patient safety has consequences,” Assistant U.S. Attorney Mary Crawley said.

The judge called the officers’ conduct egregious and said they showed “disregard for the safety of others … and for the sanctity of human life.” He sent Huggins to prison immediately. Higgins, who ran the spine unit, was given two weeks to report to prison because of family issues. Walsh got a week to report to celebrate his child’s birthday.

Both Synthes and its former subsidiary Norian Corp. pleaded guilty to corporate health care fraud charges and agreed to pay $23 million in fines. As part of the plea, Synthes agreed to sell the subsidiary. In April, Johnson & Johnson agreed to buy Synthes Inc., which had its global headquarters in Switzerland, for $21.3 billion.

Park Doctrine and Responsible Corporate Officer 

The article explained how “The decision in United States v. Park represents the furthest reach of misdemeanor liability under the FDCA to have been sanctioned by the U.S. Supreme Court.  The Park decision is often interpreted as creating strict liability.”  

However, the article asserted that “DOJ’s and FDA’s recent interpretations treating Park as a strict liability doctrine fly in the face of the Court’s language and the underlying facts of Park itself, newer Supreme Court precedent, congressional intent and notions of fundamental fairness long engrained in criminal law.” 

Contrary to these misapplications of the Court’s decision, the article asserted that, “Park liability must require, at a very minimum, proof of knowledge and failure to act as a reasonably prudent corporate manager would have acted in a similar situation—the touchstone of negligence.”  The authors maintained that, “As Park is now being applied, it is not possible for even the most conscientious corporate managers to protect themselves from liability.” 

The article then went on to explain how common law “crimes require not only a criminal act, but also a criminal state of mind.”  But the article recognized that the Supreme Court has sometimes dispensed with the criminal mind (mens rea) requirement and noted that, “It is settled law in the area of food and drug regulation that a guilty intent is not always a prerequisite to the imposition of criminal sanctions.” 

The article then explained the “responsible corporate officer (RCO) doctrine,” established by United States v. Dotterweich and Park (reaffirming Dotterweich), which provides “that a corporate agent who stands in a ‘responsible relation’ to misconduct may be held criminally liable even without having played any direct role in the misconduct. 

Standing in such a “responsible relation” means the corporate agent must have “had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so.” 

FDA & DOJ View and Application of the Park Doctrine

The article recognized that “FDA and DOJ have demonstrated an increasingly aggressive and disconcerting view of the Park Doctrine” in recent years. For example, the authors pointed to a public letter from FDA Commissioner Margaret Hamburg to Senator Charles Grassley in March 2010, advising him that FDA recommended “increas[ing] the appropriate use of misdemeanor prosecutions, a valuable enforcement tool, to hold responsible corporate officers accountable.” Hamburg’s letter also informed Grassley, “Criteria now have been developed for consideration in selection of misdemeanor prosecution cases,” but did not specify what those criteria were. 

In January 2011, following persistent prodding in the form of a Freedom of Information Act request and two administrative appeals by the law firm of Ropes & Gray, FDA published  its criteria for recommending Park Doctrine prosecutions. These nonbinding criteria instruct FDA personnel to consider: 

• The individual’s position in the company  
• The Individual’s relationship to the violation, and
• Whether the official had the authority to correct or prevent the violation.” 

With regard to criminal intent (mens rea), FDA asserts that under the Park Doctrine: 

[A] responsible corporate official can be held liable . . . without proof that the corporate official acted with intent or even negligence, and even if such corporate official did not have any actual knowledge of, or participation in, the specific offense. . . . Knowledge of and actual participation in the violation are not a prerequisite to a misdemeanor prosecution but are factors that may be relevant when deciding whether to recommend charging a misdemeanor violation. 

FDA also provides a non-exhaustive list of seven “[o]ther factors” to consider, making clear that “the absence of some factors does not mean that a referral is inappropriate where other factors are evident,” including: 

(1)  whether the violation involves actual or potential harm to the public

(2)  whether the violation is obvious;

(3)  whether the violation reflects a pattern of illegal behavior and/or failure to heed prior warnings;

(4)  whether the violation is widespread;

(5)  whether the violation is serious;

(6)  the quality of the legal and factual support for the proposed prosecution; and

(7)  whether the proposed prosecution is a prudent use of agency resources.

The FDA Law Blog noted that, “these criteria are hardly unique and the same as those considered in any decision of whether to proceed criminally, misdemeanor or felony.”  These criteria instruct that: 

Personal knowledge of an FDCA violation is not required, but is only a factor that “may be relevant” (and presumably, may be wholly irrelevant) in deciding whether to bring criminal charges likely to end careers by way of exclusion from participation in federal health care programs by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services. 

In FDA’s view of the Park Doctrine, criminal liability requires the same proof of intent or knowledge – that is to say, none whatsoever – to convict corporate managers as tort law imposes on possessors of wild animals. 

Consequently, it was noted that DOJ and some federal courts have been willing to apply the Park doctrine and this criteria.  For example, in 2007, a federal district court accepted the plea agreements of three Purdue Frederick Company executives who pleaded guilty to an FDCA misdemeanor charge of misbranding OxyContin. These executives pleaded guilty “solely as responsible corporate officers;” they were “not charged with personal knowledge of the misbranding or with any personal intent to defraud.” 

The article also noted that the Office of the Inspector General (OIG) at the Department of Health and Human Services (HHS) “has also grown increasingly willing to exclude individuals with no evidence of personal wrongdoing or knowledge.”  For example, in “December 2010, another district court upheld the same Purdue Frederick executives’ 12-year period of exclusion (previously reduced from 20 years), even where the parties had stipulated that none of the excluded individuals had personal knowledge of the misbranding conduct.” 

In addition, OIG notified the CEO of Forest Laboratories in April 2011, “that it was seeking to exclude him based on last year’s guilty plea and $313 million payment by the company in connection with sales related FDCA misdemeanors.”  However, “OIG’s action came in the absence of any allegation of misconduct or knowledge by the CEO and without any underlying RCO case against or guilty plea by him. In August 2011, following significant publicity, OIG reversed course and notified Forest it would not seek to exclude its CEO. 

Supreme Court Precedent in Park at Odds with DOJ/FDA  

The authors recognized that the Park Doctrine “requires minimum mental culpability of negligence.”  However, the authors maintained that, “Viewing this doctrine as creating true strict liability does not square with Supreme Court case law, nor is it what Congress had in mind for the FDCA.”  For example, the article noted that, “In Park itself, the Supreme Court imposed certain limits on strict liability under the FDCA:” 

[T]he Act, in its criminal aspect, does not require that which is objectively impossible. The theory upon which responsible corporate agents are held criminally accountable for ‘causing’ violations of the Act permits a claim that a defendant was ‘powerless’ to prevent or correct the violation to ‘be raised defensively at a trial on the merits.’    

These Supreme Court-imposed bounds accord with the government’s own position in Park. In its Supreme Court brief, DOJ represented: 

“The government’s policy is to prosecute only those individuals who are in a position and who have an opportunity to prevent or correct violations, but fail to do so.” 

Moreover, the underlying facts in Park included unmistakable negligence by the defendant, who was on notice of a serious but solvable problem (rodent infestation of a food warehouse) that he chose to ignore. This made him negligent, at best, in that he failed to act as a reasonably prudent corporate manager would have acted in a similar situation.   

personally had received a letter from FDA . . . advising him of serious rodent infestation in [the company’s] warehouse . . . . [but] simply passed FDA’s report on to his subordinates, as if he had no personal responsibility to require effective measures to put an end to the serious existing violations of the Act that had been brought to his attention. Simply put, the defendant in Park.

As one analysis has found: 

Of the few cases that invoke “responsible corporate officer” liability, the overwhelming majority (if not all) have involved a defendant who was aware of the conduct giving rise to the violation but failed to correct it.  In Park itself, for instance, FDA had repeatedly notified the company about the infestation problems in its warehouses, and Park had personally received notice of at least one failed inspection. 

Congressional Intent at Odds With DOJ/FDA 

The authors also explained how Congress’s reaction to Park also shows that true strict liability under the FDCA is improper.  For example, in  the Park decision’s aftermath, Congress considered amending the FDCA to “requir[e] proof of negligence, knowledge, or intent” for a misdemeanor conviction under the Act.  The Department of Health, Education, and Welfare, then parent agency to FDA, opposed this amendment on the ground that “properly construed,” the Act already included this requirement(observing, “It is the officer’s personal neglect that is punishable.”). 

The Senate Committee concluded the amendment was unnecessary because “introducing statutorily the concept of negligence” would merely “codify existing policy with respect to enforcement of the Act.” 

The article noted that, “Because the FDCA’s misdemeanor provision is silent as to intent, the question of whether it requires some degree of mens rea is a question of law to be determined by the court. This is a question of legislative intent.”  Accordingly, “Given Congress’s reaction to the Park decision, it is entirely feasible that the Supreme Court will conclude, when it next faces the issue, that Congress intended to require some level of mental culpability for misdemeanor FDCA liability.”  The article noted four recent Supreme Court holdings, which lend further support to this reading of Park—the companion cases of Skilling v. United States, and Black v. United States(on the issue of fair notice); United States v. Santos,(on the rule of lenity), and Arthur Andersen LLP v. United States(requiring proof of consciousness of wrongdoing to provide fair warning of criminal line drawing) 

The authors noted that in Skilling and Santos, the Court recognized the familiar principle that ‘ambiguity concerning the ambit of criminal statutes should be resolved in favor of’ defendant.  The Court explained that, “The rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them. This venerable rule . . . vindicates the fundamental principle that no citizen should be held accountable for a violation of a statute whose commands are uncertain, or subjected to punishment that is not clearly prescribed.” 

Conclusion 

“A broad theme in law enforcement these days is holding individuals accountable,” explained Mary E. Riordan, Senior Counsel in the Administrative & Civil Remedies Branch of HHS OIG. “Million dollar settlements do not change behavior, but holding individuals accountable does.” 

During a recent FDLI panel, Riordan warned that companies “will continue to see cases against individuals … and the device industry is not immune.”  She recommended “that even if your corporation is not under a corporate integrity agreement (CIA), you should be thoughtful about what kinds of activities would or should be audited.” 

Riordan emphasized that individual accountability is also becoming an increasingly prevalent theme in the HHS exclusion context, primarily resulting from an individual criminal plea or a violation of the role of responsible corporate officers. 

Ultimately, the authors concluded that these “recent Supreme Court decisions cast serious doubt on FDA and DOJ’s increasingly manifest view of Park as a strict liability doctrine.”  They asserted that, “the FDCA’s misdemeanor provision wholly fails to provide fair notice or warning that corporate managers can be held criminally accountable for violations in the absence of any personal knowledge. This is true not only on the face of the statutory language (which is silent as to intent), but also in light of the Supreme Court’s decision in Park itself and legislative history in Park’s aftermath.” 

Accordingly, the authors maintained that given “there is good evidence that neither the Park Court nor Congress intended” strict liability, “Contrary to FDA’s recent criteria, Park liability must require, at a very minimum, proof of personal knowledge and failure to act as a reasonably prudent corporate manager would have acted in a similar situation, the touchstone of negligence.”