Recent sentencing of corporate executives of a food production company for violations of the Federal Food, Drug, and Cosmetic Act (FDCA) indicate a potential resurgence of FDCA prosecutions under the principle of individual criminal liability known as the Park Doctrine. Recent trends in enforcement, coupled with federal agency guidance emphasizing individual accountability for corporate misconduct, signal a continued commitment by the government to hold individuals responsible for corporate fraud.
Responsible Corporate Officer Prosecutions under the Park Doctrine
The Park Doctrine, named for the 1975 Supreme Court case United States v. Park, allows corporate officials to be held criminally liable based on their position in the corporate structure if the government can demonstrate that the official had responsibility over the conduct violating the FDCA.1 In recent years, the government has pursued individuals for FDCA violations within the pharmaceutical industry, increasingly relying on the Park Doctrine to prosecute them. In 2007, three former Purdue Frederick Company executives pleaded guilty to misbranding the company's drug OxyContin because they were ultimately responsible for the branding, had authority to act for the company, and failed to correct the misbranding. These executives were ordered to pay in excess of $634 million in civil and criminal penalties and faced 12 year exclusions from federal healthcare programs.2 Notably, the Purdue case not only marked a renewed reliance on the Park Doctrine to prosecute FDCA violations for off-labeling and misbranding, but also signaled a shift to holding officers liable simply for their position of responsibility within a company, regardless of their lack of personal knowledge of underlying misconduct or intent to defraud.3 Further, in January 2011, the U.S. Food and Drug Administration published criteria for individual criminal prosecutions under the Park Doctrine, stating that "knowledge of and actual participation in the violation are not a prerequisite to a misdemeanor prosecution," but are factors that should be considered when determining whether to recommend the charge.4 In other words, intent is not an obstacle to application of the Park Doctrine to a criminal misdemeanor charge. More importantly, prosecutors will consider the executive's position in the company in relation to the violation and authority to correct or prevent the violation.
Recent Park Doctrine Prosecution: United States v. Quality Egg, LLC
Government officials continue to emphasize their intent to go after individuals for their corporate misconduct. On September 17, 2014, Marshall Miller, Principal Deputy Assistant Attorney General for the Criminal Division of the U.S. Department of Justice spoke before the Global Investigation Review Program, emphasizing that a company making a voluntary disclosure to the government does not "truly cooperate" if it does not identify culpable individuals. Miller stated, "Corporations do not act criminally, but for the actions of individuals. The criminal division intends to prosecute those individuals, whether they're sitting on a sales desk or in a corporate suite."5
On April 13, 2015, two top executives of Quality Egg, LLC (Quality Egg) received three-month prison sentences for their role in a Salmonella epidemic that swept the nation in August 2010, resulting in a voluntary recall of hundreds of millions of eggs from the market.6 The government charged Quality Egg with bribery of a public official, introduction of misbranded food into interstate commerce with intent to defraud or mislead, and introduction of adulterated food into interstate commerce. Austin DeCoster, the 81-year-old owner of Quality Egg, and his son Peter, Quality Egg's chief operating officer, received three-year prison sentences with one year of supervised release, and a $100,000 fine each for violating section 333(a)(1) of the FDCA, a strict liability misdemeanor offense. The government's sentencing memorandum details years of disregarded food safety standards by Quality Egg employees, deception of major customers regarding adherence to these standards, years of testing indicating the presence of Salmonella in its hens, purposeful concealment of the company's food safety practices, and falsified food safety audits.7 Quality Egg admitted that its employees had bribed food inspectors to release contaminated eggs and that it introduced misbranded eggs into interstate commerce with the intent to defraud by affixing labels with false expiration dates.
Both executives admitted that the tainted eggs had shells that contained Salmonella, qualifying them as adulterated food and violating the FDCA, but indicated that they had no knowledge that the eggs distributed by Quality Egg were contaminated. The executives argued that imprisonment for a strict liability misdemeanor offense violated their due process under the Constitution. However, the Court determined that imprisonment was recognized as appropriate under section 331(a) of the FDCA, which prohibits the introduction of any adulterated or misbranded food, drug, device, tobacco product, or cosmetic into interstate commerce, even without proof of intent.8 The Court found that the executives fostered a work environment in which employees felt comfortable, even compelled, to disregard regulations and in which such non-compliant behavior was condoned.9 The government press release warned that "corporate officials are on notice" and that the prosecutions should serve as a warning to executives "tempted to place profits over people's welfare."10 Specifically, the government cautioned that claims of ignorance or delegation of oversight responsibility serve as no defense to criminal liability for executives.
Corporate executives whose industries are governed by the FDCA, including, in particular, the food production, healthcare and life sciences industries, should take heed and institute appropriate compliance measures to protect both their companies and themselves from liability. The specter of Park Doctrine prosecutions should provide additional encouragement for executives to follow the Practical Guidance for Healthcare Governing Boards on Compliance Oversight, which was recently issued by the Office of Inspector General in conjunction with the American Health Lawyers Association (AHLA), the Association of Healthcare Internal Auditors (AHIA), the Health Care Compliance Association (HCCA), and discussed further here. Companies and their executives both benefit from a robust corporate compliance program that emphasizes ongoing awareness of risks at the executive level, as well as a commitment to and involvement in mitigating such risks.
1 United States v. Park, 421 U.S. 648 (1975); see also United States v. Dotterweich, 320 U.S. 277 (1943).
2 See Press Release, U.S. Attorney's Office, Western District of Virginia, The Purdue Frederick Company, Inc. and Top Executives Plead Guilty to Misbranding OxyContin; Will Pay Over $600 Million (May 10, 2007), available at https://media.defense.gov/2007/May/10/2001711223/-1/-1/1/purdue_frederick_1.pdf.
3 See United States v. Purdue Frederick Co., 495 F. Supp. 2d 569, 571 (W.D. Va. 2007).
4 U.S. Food and Drug Administration, Inspections, Compliance, Enforcement, and Criminal Investigations (Jan. 26, 2011), available at http://www.fda.gov/ICECI/ComplianceManuals/RegulatoryProceduresManual/.
5 Press Release, Remarks by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller at the Global Investigation Review Program, available at http://www.justice.gov/opa/speech/remarks-principal-deputy-assistant-attorney-general-criminal-division-marshall-l-miller.
6 United States v. Quality Egg, LLC, 2015 WL 1769042, (N.D. Iowa).
7 Press Release, U.S. Attorney's Office, Northern District of Iowa, Quality Egg Company Owner and Top Executive Sentenced In Connection with Distribution of Adulterated Eggs (Apr. 13, 2015), available at http://www.justice.gov/usao-ndia/pr/quality-egg-company-owner-and-top-executive-sentenced-connection-distribution.
8 See Quality Egg at 13-14.
9 See id. at 21.
10 See id.