I have spoken to several in-house counsel meetings about the Laura Stevens criminal case. It is amazing to me how many have not heard about the case or appreciates the implications for in-house counsel and especially global businesses. In-house counsel have a very challenging job and often have little time to devote to non-emergencies.
I will try and boil down the implications to make it short and sweet. Just as a refresher, Laura Stevens was the GSK in-house counsel who was criminally prosecuted in the District of Maryland for obstruction of justice and false statements. The US Attorney’s Office for the District of Maryland did not (and refused to) participate in the criminal prosecution which is especially telling.
The evidence against Ms. Stevens centered on her failure to ensure that GSK produced certain documents in response to an informal letter request from the Food and Drug Administration relating to off-label marketing practices. Ms. Stevens was assisted by outside counsel from King & Spalding, none of whom were indicted. Ms. Stevens relied on outside counsel’s advice and assistance, she and other attorneys sought to communicate with the FDA concerning the production, and eventually charged because the Justice Department later learned about some documents which were not produced.
At the conclusion of the government’s case, the judge dismissed the case, and made a blistering statement on the record which rebuked the government prosecutors for bringing the case (and vindicating the US Attorney’s opposition to the case). The prosecutors who handled the case have since restated their intent (and DOJ’s) to prosecute similar cases if the facts occur.
In-house counsel (and outside counsel) need to be careful. The new risks include:
1. Informal communications between counsel and regulatory agencies may now become the subject of criminal prosecutions for obstruction of justice or false statements. The lifeblood of government usually requires frank and informal conversations between counsel and government attorneys. The calculus has now changed. Laura Stevens was prosecuted based on statements made and actions taken (or not taken) during this informal and necessary process. By raising the stakes and possibly prosecuting counsel for potential obstruction or false statements, counsel need to take greater care in their informal communications and document their interactions.
2. Global companies have a new and significant risk in responding to government requests and subpoenas for documents and information. A global company may have responsive documents in numerous offices in different countries. In responding to a government inquiry, counsel may be at risk for the accuracy of the production and any failure to produce a document which the government may learn about. How should counsel respond to this risk? It will be important for counsel to narrow a scope of a search by agreement with the government. If the government is unwilling to do so, the company may have to seek relief from the courts or face some significant costs to reduce the risk.
3. Companies will need to rely more often on advice of counsel, and hire outside counsel more often to assist in responding to regulatory agencies. An advice of counsel defense may be important in providing an additional layer of protection for in-house counsel in their dealings with regulatory agencies.
4. The increased risk of criminal prosecution once again underscores the need for lawyers, compliance officers, and internal auditors to document their actions, as well as their interactions with the government. In the end, contemporaneous documentation is the window into the mind of every actor and will protect in-house counsel from criminal prosecution.
The Stevens case is often cited as one of many examples of the Justice Department and the SEC’s focus on gatekeepers. The clear intent of this stepped up enforcement is to “convince” in-house counsel, compliance officers and internal auditors to supply the government with information about possible wrongdoing in their companies. Companies have to recognize this new reality and respond to this risk.
The government, however, has not learned its lesson from the Stevens case. Prosecutors continue to make aggressive statements that they intend to prosecute in-house counsel and any other company officials for obstruction and false statements. It is even more alarming that such statements are being made when the US Attorney and other career prosecutors in the US Attorney’s Office in Maryland opposed the prosecution, and the Maryland judge rebuked the prosecutors for bringing such an irresponsible case. Prosecutors need to listen, adapt their strategies and not be afraid to move on to other cases which are more worthy of prosecution.