May 23, 2016

Troubling Trend: Over-Enforcement of Civil And Criminal Laws

The apparent frequency with which federal and state enforcers are engaging in over-enforcement of civil and criminal laws is a troubling trend. While this growing phenomenon is harming American businesses and consumers alike, few studies have examined it in detail.

In a new report set to be released this week, Enforcement Gone Amok: The Many Faces of Over-Enforcement in the United States, John Beisner, a partner at Skadden, looks at a series of over-enforcement abuse examples. These abuses come in many forms, including burdensome “pile-on” litigation, overly aggressive parallel proceedings, and overzealous exercise of prosecutorial discretion.

John answers questions below about these varying forms of over-enforcement abuse and offers a sneak peek into his report. Learn more about his insights and this research by attending ILR’s joint over-criminalization symposium with NACDL on May 26th

What is the most egregious example of unchecked prosecutorial discretion?

The research paper details a number of egregious examples, including novel legal theories and excessive punishments. But one example that’s most disconcerting is the failed Department of Justice (DOJ) prosecution of GSK in-house counsel Lauren Stevens. The government prosecuted Ms. Stevens as a result of GSK’s responses to the FDA’s request that GSK voluntarily provide information related to potential off-label promotion of Wellbutrin. The charges subjected Stevens to a potential maximum sixty-year sentence. While Stevens was ultimately vindicated, the case demonstrates the risks of aggressive enforcement of companies and their in-house counsel based solely on the furnishing of legal advice with which the government disagrees. 

What do you mean by “pile-on” litigation?

“Pile-on” litigation occurs when a single investigation or settlement precipitates subsequent investigations and litigation by other governmental entities. This most commonly arises when the DOJ announces that it is targeting a particular company in a single investigation. This announcement then creates a chain reaction in which other federal or state regulators, state attorneys general, and other actors jump on to ride the coattails of the initial investigation for their own benefit. A prime example of this “pile-on” effect is the DOJ’s unprecedented $13 billion settlement with JPMorgan regarding the company’s mortgage-backed securities. The mammoth settlement continues to prompt duplicative litigation by other governmental entities.    

How does the government secure settlements that satisfy its expansive demands?

More and more, the government is using the threat of drawn-out litigation to coerce onerous settlements. Rather than risk the reputational harm and excessive civil penalties associated with a protracted litigation fight with the government, American companies are increasingly entering into settlements, the terms of which are dictated by prosecutors. This is playing out in the context of “off-label” promotion of pharmaceutical drugs, which had traditionally been handled by the FDA through regulatory warning letters and violations. Recently, however, the DOJ has swooped into the fray, seeking to enforce violations of FDA regulations by threatening criminal felony charges against those who directly promote drugs for off-label uses. That was the approach taken by the DOJ with regard to Evista, a drug manufactured by Eli Lilly. As a condition of a misdemeanor consent decree and in order to avoid a felony conviction, Eli Lilly agreed to substantial DOJ-imposed obligations with respect to Evista, including a requirement that the company submit to the government all market research conducted by the Evista marketing team. 

What can be done to rein in government over-enforcement?

There are a number of potential reforms and safeguards that state and federal policymakers should consider to mitigate overzealous government enforcement. Regulators should collectively promote rational enforcement of the law, and public policies regarding enforcement should be designed to encourage cooperation and compliance.

When it comes to “pile-on” enforcement, only a single enforcement entity should be permitted to take action with respect to particular corporate conduct.  And government agencies should establish and publicize standards for calculating fines and penalties, which would promote fairer punishments and guard against the use of threatened massive penalties to coerce dubious settlements.



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