For about two years the Government has threatened to revive the “Responsible Corporate Officer” (RCO) Doctrine, or as it is more commonly known, the “Park Doctrine.” Based on the Supreme Court’s decision in United States v Park, 421 U.S. 658 (1975), the Park Doctrine stands for the proposition that a corporate officer who is in a position of authority to prevent or correct a violation of the Food Drug and Cosmetic Act (FDCA), but who fails to do so, may be convicted of a misdemeanor by virtue of such authority even if the officer was unaware of the violation. Although the Government has made a lot of noise about going after high-profile C-suite executives for misconduct committed by their underlings, no convictions have been obtained and not much in the way of cases has been brought. Given the absence of conscious wrongdoing by these so-called “head in the sand” executives and the low bar the Government has set for itself, what accounts for the Government’s lack of success in putting some bite into the Park Doctrine bark? Quite simply, a sense of fair play.
To understand how the concept of fair play works against the Government in so-called Park Doctrine prosecutions, we need to go back to the Park case itself. John Park was the President of Acme Markets, Inc., a large national retail food chain. In 1970 the FDA cited Acme for unsanitary conditions (rodent infestation) at its Philadelphia warehouse and so notified Park. In 1971, Acme was again cited for similar conditions at its Baltimore warehouse, with Park receiving a warning letter in January, 1972. Park consulted with Acme’s legal counsel who advised that the warehouse manager in Baltimore was taking remedial action. However, in March, 1972, the FDA re-inspected the Baltimore facility and still found evidence of rodent infestation. As a result, the Government charged Acme and Park with shipping adulterated food in interstate commerce, a misdemeanor in violation of Sections 331(k) and 333(a) of the FDCA. Acme pleaded guilty, but Park went to trial and was convicted. Although the Court of Appeals threw out Park’s conviction, the U.S. Supreme Court reversed. Relying on U.S. v Dotterweich , 320 U.S. 277 (1943), in which a company president was convicted of a similar offense under a theory of strict liability, the Court ruled that the FDCA imposes a positive duty on responsible corporate officers not only to remedy violations, but to “implement measures that will insure that violations will not occur.” 421 U.S. at 672. Acknowledging the demanding requirements the FDCA imposes on corporate officers, the Court ruled that the statute’s obligations were appropriate for “those who voluntarily assume positions of authority in business enterprises whose services and products affect the health and well-being of the public that supports them.” Id.
If you aren’t feeling sorry for Mr. Park, it’s probably because he received two warnings from the FDA about the same problem in two different Acme warehouses and there was certainly much more he and/or his subordinates could have done to remedy the problem. Indeed, if the Government’s stated intention to prosecute “responsible” corporate officers under the Park Doctrine today were limited to those situations where the officer had knowledge of an FDCA violation and, despite such knowledge, failed to correct the problem, there wouldn’t be much controversy and I wouldn’t be writing this post. But that’s not the case. Under the 2011 FDA Regulatory Procedures Manual and 2010 Guidance from HHS-OIG, a responsible corporate official can be held liable for a misdemeanor violation of the FDCA, even if the official had no knowledge of the violation, based solely on his or her position within the company. Indeed, over the past couple of years, Government officials (particularly those at the FDA) have made it clear that they intend to go after C-suite executives in pharmaceutical and medical device companies, obtain misdemeanor convictions (since they don’t need to prove knowledge of wrongdoing) and exclude such executives from participating in any federal healthcare program (i.e., render them unemployable in the industry). Why such a hard line? According to these Government officials, nothing short of the threat of exclusion from the industry will ensure that these executives take the necessary measures to achieve compliance with the fraud and abuse rules (i.e., regarding anti-kickback violations, off-label promotion, etc.).
Talking the talk is one thing. Walking the walk is something else. Last April, HHS-OIG sent Forest Labs CEO Howard Solomon a letter threatening to exclude him from participating in federal healthcare programs, based on his company’s $313 million settlement related to off-label promotion, despite no finding of knowledge or wrongdoing on Solomon’s part in the settlement. However, when Solomon aggressively fought back, the Government sent him a second letter in August stating it was no longer interested in putting him out of business. Why the about-face?
I used to be a federal prosecutor and speak with my former colleagues on a regular basis and this much I know: a prosecutor may threaten to invoke the Park Doctrine to scare C-suite executives into beefing up their compliance programs and hiring pricey lawyers and auditors to fix any problems, but no prosecutor worth his or her salt is going to charge a corporate officer with no knowledge of wrongdoing, no matter how much some FDA official screams that Park Doctrine prosecutions are necessary to deter corporate misconduct. Furthermore, the Park Doctrine doesn’t even make sense in today’s high tech, global economy. PD Villarreal, the Head of Global Litigation for GlaxoSmithKline, summed it up best at last year’s DRI annual meeting: “The Park Doctrine breeds cynicism in the workplace, since liability isn’t predicated on fault . . . It’s also an odd time for us to be talking about the Park Doctrine, which has its roots in the mid-20th century, a time when the company president could see the factory floor from his office window. Today a typical company president has operations around the globe.”
Global company president or not, as long as there are juries and judges who believe in fair play, the only company presidents we’re likely to see prosecuted under the Park Doctrine will look a lot like good old Mr. Park.