The Ethical Barometer

The Pharma Fines for Off-Label Marketing Round-Up

Tuesday, July 6th, 2010

Here’s the tally of fines for the past year for illegal marketing of drugs:

AstraZeneca $520 million Seroquel

Pfizer $2.3 billion ($1.3 billion criminal) Bextra

Eli Lilly $1.9 billion ($515 million criminal) Zyprexa

Bristol-Myers Squibb $515 million Abilify

Johnson & Johnson $81 million Topamax

Illegal marketing means that the companies were touting the drugs (more…)

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And more in the “under the bus” category — Another Galleon guilty plea

Saturday, March 20th, 2010

Former Intel executive Rajiv Goel, entered a guilty plea to two counts of conspiracy and securities fraud, admitting that he passed inside information along to his friend of 25 years, Raj Rajaratnam, the former hedge of Galleon Group hedge fund. The two met at the Wharton Business School and their families vacationed together. Twenty-two folks have been charged in the tentacle-like insider trading case. Ten have entered guilty pleas and are cooperating with federal authorities.

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The FCPA — More Prosecutions Than Ever

Friday, March 19th, 2010

The National Law Journal, in an article by attorneys William V. Roppolo and Marcus R. Cohen, reports that there have been more FCPA prosecutions concluded in the last 4 years than in the previous 28. Prosecutors are able to put cases together when businesses ignore red flags. What are red flags? Well, when Fortune magazine refers to your consultant in the country in which you are doing business as “The Pirate of Prague,” you have crossed into red-flag territory. So, keep up on your web searches on your consultants. In addition:

Question UNUSUALLY high fees to those consultants
Commissions are tricky elements under FCPA, especially UNUSUALLY high commissions
ODD methods of payments i.e., weaving your way through bank accounts, deposits, third parties
KNOW the country — go to Transparency International and check out the country’s corruption index. If the country is near Equatorial Guinea on the corruption list (not encessarily geographically), pay close attention or even consider this, “Is it worth it to do business in this country?”
An agent with no records
An agent who says, “You don’t need a FCPA certification.”
Don’t distance yourself from foreign operations; it doesn’t work anyway. You are deemed to know.

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Skilling Conviction Partially Reversed by U.S. Supreme Court; Sentencing Remand

Thursday, January 8th, 2009

Jeffrey Skilling, the former CEO of Enron, had a partial victory on the appeal of his conviction to the U.S. Supreme Court. But, the Court’s reproduction of jurors’ comments about him had to sting despite the victory.

Mr. Skilling was charged with, among other things, conspiracy to commit “honest-services” wire fraud. 18 U.S.C. §§ 371, 1343, and 1346. Honest-services fraud is an oxymoronic and a legalistc way of saying that Skilling deprived Enron and its shareholders of the intangible right of his honest services. (more…)

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Government Issues: Some Honor, Some Indictments

Monday, December 8th, 2008

With Detroit’s mayor now sentenced and Ted Stevens not re-elected, we were breathing a sigh of relief on government officials. However, this week saw the mayor of Birmingham, Alabama, Larry Langford, indicted for his alleged receipt of gifts and cash in exchange for the award of the city’s bond business to a particular firm. The bonds are now rated “D,” as in default.

Maricopa County Commissioner Don Stapley faces a 118-count indictment that includes charges related to his public disclosure forms. The indictment alleges differences between the public disclosure lists of property ownership and the private lists of ownership Mr. Stapley supplied on loan applications for business purposes. Mr. Stapley’s land development practices were investigated by the Arizona Department of Real Estate in 2000, but he was not charged with any violations.

But, on the bright side, there is Shivraj Patil, the home minister in India’s cabinet (the top domestic security official). Mr. Patil resigned following the terrorist attacks in Mumbai. If you have made a mistake, you say so. He cannot bring back the lost lives, but he can allow someone with new perspective to protect the people of India. He has done the right thing.

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The Rangel Round-Up

Monday, December 8th, 2008

For those of you keeping score, Charles Rangel has become to Washington, D.C. and Harlem what Kwame Kilpatrick was to Detroit during his mayoral days there. You just didn’t know from day to day what new charges of ethical and/or legal lapses would emerge. So, The Barometer begins the Rangel Round-Up. The Barometer will attempt to keep you posted on what’s happening with the representative from Harlem (D., NY). The Barometer is considering a National Forest Service type of posting: “Ethical Breach Danger Today: High Medium Low.” Here’s a Rangel summary: 1. In rent-controlled NYC, Rangel managed to wrangle several apartments from his landlord at the rock-bottom prices that characterize rent-control markets. When asked about his cornering of the Harlem real estate, Rep. Rangel responded, “What? There’s a problem here?” 2. Rep. Rangel, who chairs the House Ways and Means Committee, the group responsible for writing the tax code, failed to report income he earned over two decades from renting his villa in the Dominican Republic. Rangel responded in several ways, “No hablo espanol,” was one defense, followed by (more…)

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Governor Sarah Palin Cleared

Tuesday, November 4th, 2008

Governor Sarah Palin was cleared by the Alaska Personnel Board of any ethical violations or abuse of power in her decision to fire the state’s public safety commissioner, Walt Monegan. A previous legislative investigation concluded that Governor Palin had abused her power. However, the testimony upon which that finding was based was categorically denied by statements and testimony given by several witnesses for the Personnel Board’s investigation. Governor Palin had requested the Personnel Board investgation, which was onoing when the Alaska legislature began its investigation. (more…)

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Sentaor Ted Stevens Found Guilty on All 7 Counts

Sunday, November 2nd, 2008

In deliberations that lasted about one-half day, a DC jury convicted Sentaor Ted Stevens of all 7 felony counts related to his failure to report expensive gifts, including everything from a barbecue to a steam room. Senator Stevens needs to go. However, based on the reception he received upon his return to Alaska, the Barometer predicts he will be re-elected. What’s a felony here and there among friends?

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Wall Street Tally

Saturday, October 18th, 2008

Three, count ‘em, three, U.S. Attorneys (Brooklyn, Manhattan, and New Jersey)are investigating Lehman Brothers. Subpoenas are flying for e-mails that might contradict the public statements Lehman executives made in the days and weeks prior to its financial collapse and bankruptcy declaration. Former Lehman executives (12, count ‘em, 12) who have received subpoenas include Robert S. Fuld, Jr. (former CEO), Joseph Gregory (former president), and Erin Callan (former CFO).

Two former Bear Stearns managers, Ralph Cioffi and Matthew M. Tannin, were indicted in June for securities, mail, and wire fraud. The Barometer will attempt to keep you posted as Wall Street unravels (in many different ways).

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The Branchflower Report on Palin

Friday, October 17th, 2008

Be sure to note that The Barometer was on top of this government ethics issue on July 31, 2008, a full month before Governor Palin was tapped for the vice president’s slot on the Republican ticket. The report by independent investigator Stephen E. Branchflower into allegations that Governor Palin fired her Commissioner of Public Safety for not firing her former brother-in-law is out, and here’s the news: (1) This was one wacky state trooper at the heart of the problem — I’m no prude, but Tasering children and having a beer whilst in your patrol car does cross a a few legal and ethical lines; (2) Governor Palin and the first dude probably should have kept their distance from the investigation into the trooper’s conduct; and (3) the Commissioner of Public Safety was a defiant sort who, serving at the discretion of the Governor, needed to go. The legal conclusion of Mr. Branchflower’s report is that Governor Palin “abused her power” in violation of an Alaska statute that prohibits the use of power for personal benefit. The case is a classic one of a step over the line for good intentions. (more…)

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The FBI has 26 open investigations for corporate fraud, including newly opened investigations at Fannie Mae, Freddie Mac, Lehman Brothers, and American Express — Stay tuned!

Thursday, October 2nd, 2008

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Former KB CEO Settles Backdating Case with SEC for $7 Million

Saturday, September 20th, 2008

Former KB Home CEO agreed to pay $7 million to settle SEC charges that he backdated stock options granted to him by the company. Bruce Karatz, known for being a brilliant marketer of homes, did not admit any wrongdoing as part of the settlement. Mr. Karatz stands out among the executives charged with backdating because he continued to backdate even after Sarbanes-Oxley was passed in 2002. Most execs read the writing on the wall as well as the actual statute and stopped fooling around with options dates once SOX passed. Mr. Karatz rolled forward right into 2006 on options backdating.

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Settle Up; Don’t Fight

Wednesday, September 10th, 2008

A study published in Columbia Business Law Review teaches an important principle when it comes to personal injury suits brought against businesses: Pay early and pay less. The study shows that the savings per claim average is $114,000 and for severe injuries the average is $670,000. Likewise, savings on lawyer fees average $32,000 (and $211,000 for severe injuries). The study, done by Professor Jeffrey O’Connell (Virginia School of Law) and Associate Professor Patricia Born (Cal State Northridge), looked at settlements between 1988 and 2004 in Texas and Florida. There is a risk for businesses in taking these cases to a jury. The good professors’ work, ” The Cost and Other Advantages of an Early Offers Reform for Personal Injury Claims Against Business, Including for Product Liability,” can be found at 2008 Col. Bus. L. Rev. 423.

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Broadcom Co-Founder’s Plea Agreement Rejected in Options Case

Tuesday, September 9th, 2008

Dr. Henry Samueli, a co-founder of Broadcom Corporation, entered a guilty plea in June to lying to SEC investigators during the agency’s investigation of the backdating of the company’s options grants. Broadcom settled with the SEC by paying a $12 million fine and restating its financials to reflect an additional $2.2 billion in expenses related to the options. The government recommended 5 years probation for Dr. Samueli, but the federal district court judge, Cormac J. Carney, rejected the plea because “the probationary sentence does not capture the seriousness of Dr. Samueli’s alleged misconduct.” Both sides asked for more time. Eighty companies have issued restatements because of options backdating.