The Department of Justice wasted no time in showing that its new policy of going after individuals, not just companies, engaged in fraudulent conduct was for real. (See, Blog post DOJ to Focus on Individual Accountability for Corporate Fraud.) Late last week, October 29, 2015, the government charged the former president of a subsidiary of Warner Chilcott PLC, a pharmaceutical division, with conspiracy to violate the Anti-Kickback Statute. This is an important step in holding individuals accountable for the conduct of business units for which they are responsible.
For too long, companies could engage in fraudulent conduct only to pay a hefty fine, with the individuals responsible for the fraud suffering little or no consequences and often reaping the benefits of their unlawful conduct with increased pay and bonuses. If a company faced a significant fine, or debarment from a government program, which impacted the company’s earnings, the only people likely to suffer were its shareholders. Investor Bill Ackman said that drug companies get sanctioned all the time, but that does not mean that they are bad investments. According to Ackman, the $390 million Novartis settlement was just the cost of doing business. (See, Bloomberg.)
Engaging in fraud should never be a conscious business decision. Holding individuals responsible will hopefully, deter this type of conduct.