General counsel at major corporations are closely watching a case filed in federal district court in New Haven, Conn. The case -- records of which were just unsealed on Dec. 7 -- involves an appeal by Howard Udell, the first general counsel known to have been debarred from working at companies that do business with federal agencies.
Udell's appeal, expected to be argued next spring or summer, stems from a May 2007 settlement between the U.S. Attorney for Western Virginia and three top executives at Purdue Frederick Co. Inc., over the misbranding of the addictive painkiller OxyContin. Udell was one of those executives. The government claimed that Purdue Frederick misled patients and doctors about the drug's dangers and addictiveness.
Purdue Frederick, a subsidiary of Norwalk, Conn.-based Purdue Pharma L.P., pled guilty to felony misbranding as part of the settlement, and, by federal law, was automatically debarred from getting any new government contracts. The parent company, which avoided criminal charges by striking a nonprosecution agreement with authorities and agreeing to pay $634.5 million in fines, is still eligible to receive such contracts.
As part of the case, the U.S. Attorney also convicted the former executives, including Udell, on a criminal misdemeanor, based on the legal theory of strict liability. Under the theory, "responsible corporate officers" who fail to prevent, detect, or correct federal drug violations can be held strictly liable for failing to act on their authority -- without proof of any misconduct on their part.
All three executives pleaded guilty and, in exchange for no jail time, agreed to pay hefty fines; Udell's was $8 million. At the time, U.S. Attorney John Brownlee said only, "It was important to have individuals charged as well as the company."
Then came a surprise -- personal debarment. Although federal law does not require it, the Department of Health and Human Services' office of inspector general decided to debar the three execs through an administrative order -- effectively ending their careers in the health care sector.
Court documents indicate this is the first time the federal government has ever imposed such an exclusion based on a "responsible corporate officer" misdemeanor. Debarred along with Udell were Purdue Frederick chief executive Michael Friedman and science chief Dr. Paul Goldenheim. All three appealed their debarment in federal district court, which sealed the record and sent the trio back to HHS to exhaust their administrative remedies.
After losing that round last January, they filed a new appeal in federal court in October. Udell's attorney, Andrew Ceresney of Debevoise & Plimpton, responded to questions about the case by releasing the following statement on Friday: "The decision to exclude Mr. Udell and two others based on strict liability, no intent misdemeanors, resulting solely from their status as officers of Purdue at a time when others engaged in conduct of which they were unaware, was arbitrary, unfair, and exceeded the inspector general's statutory powers."
Udell's complaint states that the record contains no evidence that he "committed any unlawful act or [was] aware of any unlawful act committed by other Purdue employees." He seeks a declaratory judgment that the debarment was arbitrary, capricious, and contrary to law. He also asks the court to vacate and enjoin his exclusion.
http://www.law.com/jsp/article.jsp?id=1202437125589&rss=newswire
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