Presentation on theme: "Corporate Compliance Officer The New Enforcement Target? Medical Technology Learning Institute Audio Conference January 30, 2008."— Presentation transcript:
Corporate Compliance Officer The New Enforcement Target? Medical Technology Learning Institute Audio Conference January 30, 2008
Kathleen McDermott, Esq. Washington, D.C. Discussion Agenda U.S. Sentencing Guidelines: Expectations for an effective compliance and ethics program and the role the Compliance Officer in meeting those expectations. Enforcement actions and legal liability theories. Strategies to identify and respond to ethical and legal challenges posed to Compliance Officers in the discharge of Compliance Program duties. Factors to assess in evaluating the effectiveness of a Compliance Officer.
Kathleen McDermott, Esq. Washington, D.C. U.S. Sentencing Guidelines Section 8B2.1 Effective Compliance and Ethics Program. Exercise due diligence to prevent and detect criminal conduct. Promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law. Implement a Compliance Program that is generally effective in preventing and detecting criminal conduct. High level personnel of the organization must ensure an effective compliance and ethics program and have overall responsibility for compliance and ethics program. Specific individuals, i.e., Compliance Officer, must be delegated day-to- day operational responsibility for compliance and ethics program.
Kathleen McDermott, Esq. Washington, D.C. U.S. Sentencing Guidelines Compliance Officers must be able to report to the governing authority of the company, or an appropriate subgroup of the governing authority, on the effectiveness of the Compliance Program. To carry out operational responsibilities, Compliance Officer must be given adequate resources, appropriate authority and direct access to the governing authority or appropriate subgroup. Effectiveness of a Compliance Program may be judged by qualifications of Compliance Officer, resources dedicated to Compliance Program and access. An organization’s compliance with industry standards or practice for regulatory compliance is a factor in effectiveness. Small organizations may implement Compliance Program requirements more informally and with greater flexibility and training, provided key areas covered.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo Compliance Officer and Corporate President indicted and convicted of federal felonies associated with off-label promotion and other fraudulent conduct. Judicial opinion sets forth legal standard for Compliance Officers in discharge of compliance duties. Court explains role of Compliance Officer in ensuring ethical and legal corporate environment.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo AbTox - medical device manufacturer marketed a single product: AbTox Plazlyte™ sterilizer for hospitals for use in sterilizing reusable medical devices. AbTox subject to regulation by FDA. AbTox product marketed off-label. After FDA noticed, AbTox continued selling sterilizers to hospitals under misimpression they were buying a sterilizer cleared by the FDA for certain corneal eye procedures. Series of FDA communications regarding promotion of sterilizer for off- label use.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo Off-label promotion had direct patient impact, causing serious eye infections. The sterilizer did not work with certain medical instruments causing a failure of sterilization. Routine eye surgery resulted in corneal decompensation, a rare and devastating eye injury involving destruction of the endothelial cell wall separating the cornea from vitreous matter and leading to permanent blurred vision. Compliance Officer was on notice of FDA concerns and reports of patient harm.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo AbTox never obtained FDA clearance for expanded use but continued marketing sterilizer, causing continuing outbreaks of devastating corneal decompensation from routine surgery. Compliance Officer made aware of toxicology information, concealed information, and advised FDA of false reason for eye infections (lack of soap). Compliance Officer’s inaction was “last clear chance” to avoid additional devastating eye injuries for patients.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo cont’d Corporate President and Compliance Officer believed FDA violations technical and the FDA a nuisance. Compliance Officer motivated by economic factors. Twenty-five patients at five hospitals known to have suffered corneal decompensation in at least one eye after ocular surgery performed with instruments sterilized in the illegal AbTox sterilizer.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo Court: By any measure, AbTox system of corporate compliance was a failure from top to bottom. Compliance Officer Riley selected as Chief Compliance Officer for all the wrong reasons. President could manipulate and dominate Compliance Officer. Compliance Officer did not have real training as a Compliance Officer. Marketing and business background prior to working in health industry. Lack of commitment to mission of regulatory bodies, such as FDA.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo Corporate Compliance Officers are fire personnel and first responders. Must be proactive to be effective, prevent crime and promote corporate ethical behavior. AbTox behavior turned the concept of corporate compliance on its head. Compliance Officer assisted business leader in subverting standard compliance expectations. Used regulatory expertise to shield and cover-up offenses rather than proactively advance compliance. Failed to self-report adverse scientific or health care results of the sterilizer to the FDA. Willfully participated in the submission of numerous misleading regulatory filings and statements with the FDA.
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Caputo Corporate crime remains one of nation’s largest problems. The need for general and specific deterrents is important to support regulatory safeguards. Head-in-the-sand ostrich behavior by Compliance Officer will not be accepted in evaluating criminal conduct. Cannot pass the buck. Court advised that ostrich pro-knowledge instruction will be given in corporate trials involving compliance issues. Knowledge inferred from a combination of suspicion and indifference to the truth. Rejects Compliance Officer defense that they did not understand actions were illegal.
Kathleen McDermott, Esq. Washington, D.C. Case Study: U.S. v. Sulzbach False Claims Act action against former Tenant Chief Compliance Officer for false certifications of compliance in Corporate Integrity Agreement annual report. Corporate Compliance Officer signed allegedly false declarations stating to the best of her knowledge, company was in material compliance with all federal program legal requirements. Alleged false declarations allowed corporation (Tenet) to bill Medicare for millions of dollars in claims in violation of the Stark self-referral prohibition. Government’s efforts to find truth were obstructed as well by reliance on certification.
Kathleen McDermott, Esq. Washington, D.C. Case Study: U.S. v. Sulzbach Compliance Officer’s certification made in highly complex regulatory matter. Compliance Officer had engaged outside counsel to review findings. Annual Compliance Report required under OIG Corporate Integrity Agreement, including sworn declaration of compliance, required shortly after outside counsel’s findings provided to Chief Compliance Officer. What level of diligence is required by compliance officials before providing any certification of compliance?
Kathleen McDermott, Esq. Washington, D.C. Case Study: United States v. Patricia Syling Corporate Compliance Officer indicted for scheme to defraud employer in award of contract to family. Concealed conflict of interest. Compliance Officer employed as a Corporate Compliance Administrator for hospital and various health entities involved in processing procurement matters, specifically vendor and service contracts with respect to billing and collection operations. Responsible for selecting vendors. Failed to disclose conflict of interest in selection of vendor. Vendor was sole proprietorship business owned and operated by Corporate Compliance Administrator. Danger Zone: Compliance Officer wearing too many hats-business, regulatory, compliance.
Kathleen McDermott, Esq. Washington, D.C. Legal Theories of Liability False Claims Act: Knew or Should Have Known Causation Standard Mail fraud and conspiracy (Caputo). Participant in crime by omission or commission. Participation in transmission of information that is false and misleading to regulatory agency. False certification causing fiscal or other impact to program integrity.
Kathleen McDermott, Esq. Washington, D.C. Factors in Assessing Effective Compliance Officer Qualifications and training for position. Actual experience in industry. Commitment to compliance as profession beyond mission of company. Skills in evaluating electronic and other business information. Skills at tracking and organizing information. Professional demeanor and ability to inspire confidence in business and operational personnel. Willingness to engage in continuous education of legal and industry developments.
Kathleen McDermott, Esq. Washington, D.C. Factors in Assessing Effective Compliance Officer Willingness to learn business on-site, not behind the desk. Commitment to visible profile. Willingness to disagree with business decisions and use good judgment in knowing when disagreement is legal issue. Advocate for resources to governing body, CEO, CFO, Board of Directors. Use of internal and external expertise to evaluate compliance and regulatory issues. Commitment to complete and open dialogue with regulatory bodies.