Federal Appeals Court Affirms Collateral Consequences of Park Doctrine

Aug 14, 2012   

On July 27, 2012, the United States Court of Appeals for the D.C. Circuit in Freidman v. Sebelius upheld the U.S. Department of Health and Human Services (“HHS“) determination to exclude three former Purdue Pharma executives from participating in federal healthcare programs after they pled guilty to misdemeanor misbranding violations under the Federal Food, Drug, and Cosmetic Act (“FDCA”) based on the Park Doctrine. The Freidman case is an example of the potential collateral consequences of Park Doctrine prosecutions.

The Park Doctrine, also known as the “Responsible Corporate Officer Doctrine” (“RCO”), allows corporate officials to be convicted of misdemeanors based entirely on his or her position and responsibility in a corporation. Notably, the Governments burden to support a misdemeanor conviction under Park is relatively low. The Government must only show that the violation occurred and that the alleged person to be the responsible corporate official occupied a position of responsibility where the official could have prevented or corrected the violation. There is no requirement that a person had any criminal intent or acted personally in any wrongdoing, or for that matter, was even aware of a violation. We have previously blogged about the recent use of the Park Doctrine by the U.S. Food and Drug Administration (“FDA“), here and here.


As we previously reported, in 2007, Purdue Pharma L.P. and Purdue Frederick Company, Inc. (hereinafter “Purdue”) pled guilty to one felony count of misbranding in violation of 21 U.S.C. § 331(a) for knowingly and intentionally marketing OxyContin, a schedule II controlled substance, as less addictive, and less subject to abuse and diversion, and less likely to cause tolerance and withdrawal than other pain medications. Additionally, three Purdue executives pled guilty to one count of misdemeanor misbranding in violation of 21 U.S.C. § 331(a) and for their admitted failure to prevent Purdues fraudulent marketing of OxyContin under the Park Doctrine. At sentencing, the three executives were sentenced to probation and disgorged millions of dollars of income.

However, soon after the executives entered their guilty pleas, HHS excluded them from any participation in federal health care programs for 12 years because their convictions were based on fraud and the unlawful manufacture of a controlled substance. As a consequence of this exclusion, the corporate officers will be unable to engage any in business which participates in federal health care programs such as Medicare and Medicaid. HHSs decision was upheld by the U.S. District Court for the District of Columbia.

Appeals Court Decision

On appeal to the United States District Court of Appeals for the D.C. Circuit, the executives argued that (1) their misdemeanor misbranding convictions did not rise to the level of "relating to fraud" as to warrant the penalty of exclusion under 42 U.S.C. § 1320a-7(b)(1), and (2) the length of their exclusions was not supported by substantial evidence and thus was arbitrary and capricious.

In its decision, available here, the Court of Appeals held that HHS has the authority to exclude individuals convicted of a misdemeanor if the conduct underlying the conviction is related to fraud, even if the individual is an executive that had no knowledge of the underlying fraudulent conduct based on the Park Doctrine. However, the Court of Appeals also found that the 12 year exclusion of the Purdue executives was arbitrary and capricious because HHS failed to justify the unprecedented length of the exclusion as required by the Administrative Procedure Act. The Appeals Court therefore remanded the case to the District Court with instructions to remand the matter on to HHS for further consideration of the length of the exclusions.

Significantly, the exclusions in Friedman, even if reduced, constitute a severe penalty for executives facing a misdemeanor prosecution under the Park Doctrine. As we previously reported, the FDA has expressly stated that it will seek to increase the amount of Park Doctrine criminal prosecutions of corporate executives whose companies commit FDCA violations.

The FDA and white collar criminal defense lawyers at Fuerst Ittleman are experienced in handling even the most complex cases where clients are facing allegations of criminal actions. Fuerst Ittleman attorneys have represented clients in a variety of FDA-related criminal investigations and prosecutions including violations of the FDCA under 21 U.S.C. §§ 331 and 333 as well as prosecutions of corporate officials under the Park Doctrine. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com