Archive for the ‘Double Standard’ Category

“The Most Corrupt Health System Globally Is That in the US. Unfortunately It is Also the Most Influential Medical System”

Tuesday, July 21st, 2015

PillsIn response to this recent post, I received the following from an individual who prefers to be called “a fraud investigator from the United Kingdom.”

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I was interested to read your points and observations about health care and the foreign official issue. Notwithstanding whether or not employees and physicians connected to state owned or controlled hospitals etc are foreign officials, there is a very real concern, certainly in the UK, that financial interests undermine medical decision making. Indeed there are various studies which appear to prove the effect.

I know from experience there is a resultant detriment to state funds here, so in this context and in the absence of other meaningful regulation of health care corruption, the broad use of “foreign officials” is welcome.

Many people working in my industry recognise that health care presents unique issues with corruption. This may be explained by market forces. For example, if you ‘marketize’ an essential service where the purchasers are entirely reliant on people with financial interests (Physicians) to decide what is best for them, and at the same time patients cannot challenge those people without potentially jeopardizing their own care, it is arguable that such a market cannot ever function effectively, particularly when huge amounts of money are involved.

Health care is also unique in how and why it is utilized. You can walk away from your lawyer, accountant etc if you feel uncomfortable, but you can’t so easily walk away from a Physician who may hold the key to curing you. It follows that you are very unlikely to question or care about their financial interests, particularly when your insurer or the government is paying most of the costs.

Ultimately though, patients not only trust Physicians based on them being people of high public standing, but they also have to trust Physicians if they are to be confident of getting well. It is this inherent trust which is exploited and undermined by financial interests. I think everyone knows fundamentally how wrong it is for payments to be made to Physicians and other health care professionals, the question is how to stop the practices and to cure the underlying cultural cause.

Within the US health care sector there are agencies who use well intentioned laws to prosecute wrongdoing such as under Stark or the Federal Anti-Kickback statute; HHS-OIG and the FBI publicize high profile prosecutions very frequently. However, those efforts appear never ending – presumably because the profits are so great that for many people it is considered worth taking the risk. However, I also know in some parts of the US that businesses are unable to compete for patients on a legitimate basis because all other providers are paying kickbacks to secure business.

My interest and point in contacting you, is one of culture. Health care is an essential need for everyone and the corruption of those services affects all levels of society globally. Unfortunately, the US has suffered so much misconduct in medical practices that it has become almost the norm. For example, the very idea of so called “Patient Recruiters” goes against everything I understand to be reasonable yet they form part of the structure of health care provision in the US.

If you consider – Pharma payments, medical devices such as cardiac implants, CPD coding, patient recruiting, hospital kickbacks, pathology overuse, durable medical equipment and ambulatory care as headline issues (there are many others), you will find the US system is rife with problems. Although nowhere near to the same extent here in the UK, it is clear that in India, Serbia, Greece, China, Russia and many other countries there are massive issues with corruption in health care. However, my view and I suspect that of many others, is the most corrupt health system globally is that in the US, primarily due to conflicts of interest. Unfortunately it is also the most influential medical system.

The corruption is partly explained by the lack of transparency around pricing and proven clinical benefits. For example, I travelled to the US not so long ago and required a common over the counter remedy available in the UK for about 15 dollars. In the US, the same medicine is prescription only and costs $150 dollars plus $150 dollars to see a Physician for the prescription. Fortunately, a colleague had brought some with him as on his last trip he had ended up paying the $300 dollars.

Another example is just looking at all the people wearing physiotherapy aids. I couldn’t quite believe it when I was just walking around a US city, but came to understand that there is big money in prescribing pointless wrist, knee, elbow supports and the like. The reason for these two simple examples is to show that pricing in the US is out of control and that treatments of questionable clinical benefit are routinely offered and accepted.

What I wonder is:

  • How much global health care corruption can be accounted for by large corporates which are either directly based or primarily selling in the US (Pharma and device manufacturers in particular)?
  • Is the issue in fact that financial practices designed to influence Physicians’ independent decision making have become so commonplace in the US that they are replicated overseas as a matter of course? In other words if usual business practice in the US is on a corrupt basis, and indeed is necessary just to compete with rivals, then when those corporate move into overseas markets the natural tendency must be to use the same methods. This is certainly evident in FCPA cases in China. It would be easy to make a lot more discussion around what happens when US corporate practices are applied in countries with endemic corruption issues.
  • Would it be better to have an anti-corruption focus and international agreement specifically targeting designated sectors – health in this case but also perhaps mining, energy and other areas where problems are similar on a global level, are well known about and the market is one which all people are to an extent dependent on?

One final thought/question. Should the US be policing health care overseas under the guise of the “foreign official” enforcement theory or should the US be policing it by redefining how businesses operate in the US as a starting point and then applying those standards overseas?

I will certainly continue to watch developments on your website with interest and thank you for your excellent insights – do keep up the good work.

Friday Roundup

Friday, July 17th, 2015

Roundup2A reading stack edition of the Friday roundup.

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Miller & Chevalier’s FCPA Summer Review 2015 is here.

Regarding the DOJ’s latest FCPA trial court debacle in the Sigelman case (see hereherehere and here for prior posts), the review states:

“The DOJ’s prosecution and trial of Joseph Sigelman deserves special notice, as it was the DOJ’s first trial of an individual on FCPA charges since the acquittal in January 2012 of John Joseph O’Shea. Sigelman’s trial … lasted nine days and ended with prosecutors entering into a negotiated guilty plea with Sigelman on only one of the six counts with which he was charged after a key government witness admitted to lying on the stand. Sigelman’s sentence of probation with no imprisonment was essentially a victory for Sigelman, and the judge was particularly critical of the government’s key witness as well as its sentencing recommendation. The trial adds to a string of recent FCPA prosecutions involving individuals in which the government has failed to secure a conviction or its recommended sentence, highlighting the difficulties the DOJ has sometimes encountered when forced to bear its burden of proof in court.”

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Relevant to the double standard issues frequently highlighted on these pages, one interesting side note to come out of the Sigelman trial was testimony about the alleged “commonplace” practice among certain law firms of providing expensive tickets to high-profile sporting events to corporate clients.   (See here from Bloomberg).

Do that with certain other clients or potential clients and the DOJ/SEC would be apt to call that bribery.

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My Southern Illinois University School of Law colleague Lucian Dervan co-authored an article with Ellen Podgor (White Collar Crime Prof Blog) titled “White Collar Crime: Still Hazy After All These Years.” The abstract states:

“With a seventy-five year history of sociological and later legal roots, the term “white collar crime” remains an ambiguous concept that academics, policy makers, law enforcement personnel and defense counsel are unable to adequately define. Yet the use of the term “white collar crime” skews statistical reporting and sentencing for this conduct. This Article provides a historical overview of its linear progression and then a methodology for a new architecture in examining this conduct. It separates statutes into clear-cut white collar offenses and hybrid statutory offenses, and then applies this approach with an empirical study that dissects cases prosecuted under hybrid white collar statutes of perjury, false statements, obstruction of justice, and RICO. The empirical analysis suggests the need for an individualized multivariate approach to categorizing white collar crime to guard against broad federal statutes providing either under-inclusive or over-inclusive examination of this form of criminality.”

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Bruce Carton (Securities Docket) recently hosted this webinar titled “The U.K. Bribery Act After Five Years – Where Are We Now?” Panelists were Barry Vitou (author of thebriberyact.com) and Anne-Marie Ottaway of the law firm Pinsent Masons; Vivian Robinson QC, former general counsel to the UK’s Serious Fraud Office and now a partner at McGuireWoods; and Julian Glass of FTI Consulting.

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A good weekend to all.

 

 

What’s The Difference?

Wednesday, July 8th, 2015

What's the DifferenceIt was not my intent to publish a third-straight post on double standard issues, let alone a post with the same headline as yesterday (see posts here and here from earlier this week).

However, in writing on the double standard topic (that is how business interactions with alleged “foreign officials” seem to be subject to different standards than business interactions with similarly situated U.S. parties) numerous examples abound that are hard to ignore.

Consider the following.

A Foreign Corrupt Practices Act enforcement action included allegations that a company paid royalties to Argentine physicians and for travel of Chinese physicians.

Another FCPA enforcement action included allegations that a company provided various gifts such as vacation packages, televisions, and laptops to Mexican healthcare workers.

Another FCPA enforcement action included allegations that a company provided various gifts such as meals, wine, visits to bath houses, card games, specialty foods,  door prizes, spa treatments, cigarettes and visits to karaoke bars to Chinese physicians.

Another FCPA enforcement action included allegations that a company provided travel benefits to Polish and Romanian physicians.

Another FCPA enforcement action included allegations that a company provided travel benefits to Croatian physicians; hospitality, gifts, and support for international travel for Chinese physicians; international travel and recreational opportunities for Czech physicians; and gifts, and support for domestic and international travel for Italian physicians.

Another FCPA enforcement action included allegations that a company provided travel to medical conventions for Polish physicians as well as travel and other gifts for Romanian physicians.

Other examples could also be cited, but by now you should get the point – numerous FCPA enforcement actions have included allegations that a company subject to the FCPA provided various things of value to foreign physicians or other foreign healthcare workers.

Against this backdrop, this recent Wall Street Journal article titled “Drug and Medical-Device Makers Paid $6.49 Billion to Doctors, Hospitals in 2014″ notes:

“Drug and medical-device makers paid $6.49 billion to U.S. doctors and teaching hospitals during 2014, according to the federal government’s first full-year accounting of the breadth of industry financial ties with medical providers.

The tally comprises company payments to more than 600,000 doctors and 1,100 hospitals for services such as consulting, research and promotional speeches about drugs, as well as the value of free meals provided to doctors by sales reps pitching products.

[...]

Payments for food, beverages, travel and lodging amounted to $403.64 million, the vast majority of it in in-kind payments. Details of some payments for miscellaneous “entertainment” included a $65 massage at an airport, Alcatraz tickets and a $2,000 payment for a training seminar in the Cayman Islands.”

So what’s the difference between this conduct and the conduct alleged in FCPA enforcement actions?

If your answer is that the FCPA enforcement actions involved “foreign officials” you are correct to the extent the DOJ/SEC alleged that physicians and other healthcare workers of the above healthcare systems were “foreign officials’ even though there is no legal support for this position.

Even if there was,  given that approximately 20% of U.S. hospitals are owned by state or local governments (see here) and an additional 150 or so medical centers are run by the Veterans Health Administration (see here), one can presume that portions of the $6.49 billion in 2014 was given to U.S. officials – if the enforcement theory is to be applied in an intellectually consistent manner.

Yet, one should not hold their breath waiting for enforcement actions under 18 U.S.C 201, the U.S. domestic bribery statute with very similar elements to the FCPA’s anti-bribery provisions.  Nor should one hold their breath as to any books and records or internal controls enforcement actions regarding such payments by issuer companies.

But the question is why?

Assuming that foreign physicians and healthcare personnel are indeed “foreign officials” under the FCPA, why should corporate interaction with a “foreign official” be subject to greater scrutiny and different standards of enforcement than corporate interaction with a U.S. official?  Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home?

For additional posts on the specific double standard highlighted above, see here and here.

What’s The Difference?

Tuesday, July 7th, 2015

JebAs readers no doubt are aware, since August 2013 JP Morgan has been under FCPA scrutiny for its alleged hiring of so-called Chinese princelings (family members of alleged Chinese officials) to curry favor with Chinese officials in a position of influence over its business.

JP Morgan’s FCPA scrutiny soon lead to an industry sweep of the financial services industry concerning hiring practices in China and other Asian countries. Among the other banks under scrutiny are: Bank of New York Mellon Corp., Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sach Group Inc., Morgan Stanley, and UBS AG.

Given the industry, the FCPA scrutiny has generated a significant amount of critical commentary.  For instance, in this Wall Street Journal editorial former SEC Commissioner Arthur Levitt called the FCPA scrutiny of the financial industry “scurrilous and hypocritical.”  He wrote:

“If you walk the halls of any institution in the U.S.—Congress, federal courthouses, large corporations, the White House, American embassies and even the offices of the SEC—you are likely to run into friends and family members of powerful and wealthy people.”

Double standard aside, in response to the FCPA scrutiny FCPA Inc. churned out clients alerts and other publications regarding best practices for hiring family members of foreign officials.

The following best practices were rightly noted (see here and here).

  • Check the educational and professional qualifications of the individual being considered for employment and ensure that they are appropriate for the position being filled.  Evidence that a relative of a government official was hired into a position for which he or she was not qualified will likely result in a finding that they were hired for improper purposes.
  • Ensure that the salary and treatment given to the relative of the government official is commensurate with the position and consistent with other individuals in a similar position.  Evidence that the relative of the government official is receiving a salary significantly higher than other individuals at a similar level and occupying similar positions suggests the additional funds may be provided to influence the related government official.
  • Confirm that the position was not created specifically for the relative of the government official.  Evidence that the position was created for a specific person will suggest that the company’s sole purpose in hiring the individual was to gain influence with the government official.
  • Make certain that, to the extent possible, the responsibilities of the relative of the government official do not fall in the realm of conduct over which the government official holds regulatory or other decision making authority.  For example, a relative of a government official charged with bank oversight should not be hired as the compliance officer for a bank subject to that authority.  Similarly, the hiring decision-maker should be independent of the business unit that may interact with the government official.
  • “An individual whose sole qualification for a prestigious Wall Street gig is a powerful mother or father in the … government should raise red flags.” If an individual “is not otherwise qualified for the position at [a] financial services company, the DOJ and SEC will ask about the basis for the hiring.”

Against this backdrop, as highlighted in this recent New York Times article:

“As [former Florida Governor and Republican Presidential Candidate Jeb] Bush sought to create a personal fortune for himself and his family after eight years in public office, he found a ready source of income: speeches sponsored by corporations and industry trade groups, including some that benefited from his administration’s policies.

Since 2007, Mr. Bush has delivered about 260 paid speeches, earning around $10 million in the process, according to records provided this week by his presidential campaign. The speeches, combined with his consulting and investment businesses, rapidly transformed his finances: His and his wife’s net worth soared to at least $19 million from $1.3 million over the past eight years.

The wealth he amassed from the speaking circuit pales in comparison to that collected by Hillary Rodham Clinton, a Democratic candidate. But it underscores the ease with which political figures can turn their public prominence into private riches.”

As relevent to the FCPA scrutiny of the financial services industry, as recently highlighted here by the Wall Street Journal, a release of Mr. Bush’s tax returns reveals that “over about six years as an adviser for the defunct Wall Street bank Lehman Bros. and later Barclays PLC, Mr. Bush earned, on average, between $1.3 million and $2 million.”

If the above bullet-point best practices were asked in connection with Mr. Bush’s adviser positions with Wall Street Banks, would what the answer be?

If the answers turned out to be the same as the answers regarding Wall Street’s FCPA scrutiny for allegedly hiring Chinese princelings, what’s the difference?

Let’s call a spade a spade.

We have princelings in this country too as well as individuals who bounce in and out of politics and “private” life so often that they are effectively part of the political class regardless of the precise moment in time in which the question is posed.

Senator Grassley Is Right To Ask The Questions That Need To Be Asked

Monday, July 6th, 2015

GrassleyBecause Senator Chuck Grassley is a Republican and Hillary Clinton is a Democrat, it would be easy to dismiss the underlying issues as merely political gamesmanship.

However, if that is your reaction to this recent letter from Senator Grassley to U.S. Attorney General Loretta Lynch (and others) it would be unfortunate because the underlying issues go to the glaring double standard that has frequently been highlighted on FCPA Professor.

The double standard being how business interactions with “foreign officials” seem to be subject to different standards than business interactions with U.S. officials.

Senator Grassley’s letter concerns allegations first raised in this New York Times article (see also here) concerning the “Clinton Foundation’s tie to a number of investors involved in a business transactions that resulted in the acquisition of Uranium One, owner of U.S. based Uranium assets, by a subsidiary of Rosatom, a Russian government owned company.

As stated in Senator Grassley’s letter:

“[D]uring critical stages of the acquisition approval, interested parties made large donations – some in the millions of dollars – to the Clinton Foundation while Ms. Hillary Clinton held the position of Secretary of State. When millions of dollars flow to decision makers who have substantial discretion to provide support for or against approval of controversial transactions, public confidence in the integrity of the process requires a commitment to transparency and responsiveness to oversight inquiries.”

The Uranium One deal is merely one of several criticisms or concerns of financial ties between the Clinton Foundation and various business interests.  See here, here, here, here, here, here, here, here, here and here. In fact, new revelations and findings are so numerous it is hard to keep up.

In this recent Breitbart news article I stated as follows.

“When asked if the donations to the Clinton Foundation by defense contractors including Boeing (which subsequently received State Department approval of sales of their products to foreign governments) constituted a violation of domestic bribery statues, Law School Professor and Foreign Corrupt Practices Act (FCPA) expert Michael Koehler tells Breitbart News, “I’ll answer that question by quoting a former law professor who was fond of saying ‘if it walks like a duck and quacks like a duck chances are it is a duck’”

I was an intern in the Clinton White House and I generally admired the Clintons.  However, with each new revelation or finding, it is hard not to see several potential double standards.

After all, several FCPA enforcement actions have been based on donations to charities or foundations favored by “foreign officials” and/or things of value provided to family members of “foreign officials.”

Recently, I was contacted by an individual who has a brother in federal prison for violating the FCPA.  The individual asked why is my brother in federal prison while Hillary Clinton is running for President?

As a professor, I always strive to give substantive, well-reasoned answers to questions? However, with this one, I was left scratching my head.