Who Will Monitor the Monitors?

We have discussed deferred prosecution agreements involving a number of notable US health care organizations, e.g, a hospital (Roger Williams Medical Center), health care university (University of Medicine and Dentistry of New Jersey), not-for-profit health care insurer (Blue Cross Blue Shield of Rhode Island), pharmaceutical company (Bristol-Myers-Squibb), and multiple medical device companies (Biomet, DePuy, Smith and Nephew, and Zimmer).

Deferred prosecution agreements may be made between federal prosecutors and corporations, including not-for-profit corporations. I am not a lawyer, but my best interpretation is that pursuant to these agreements, usually the corporation involved agrees to specific compliance measures, often including the appointment of a "monitor," and in return, the prosecutor agrees not to prosecute the corporation for crimes it was alleged to have committed as long as it continues the compliance measures.

The Washington Post reported that such agreements, which have become a more frequently used tool in the US against white-collar crime, are generating more controversy. According to the Post,

The number of corporate monitors has risen more than sevenfold since 2001, researchers said, a move that reflects a shift from lodging criminal indictments against businesses for fear they will collapse and cost employees their jobs. Instead, the government has taken a different path: forcing companies to submit to outside oversight at their own expense as a condition of settling fraud and corruption cases. Major companies from AOL and Bristol-Myers Squibb to Merrill Lynch have yielded to such oversight after recent financial scandals.

The arrangements all but give prosecutors a seat in the corporate boardroom. The arrangements are spelled out in contracts and vary depending on the company and its problems. Generally, though, monitors enjoy wide latitude to interview employees, sift through business contracts, uncover legal violations and mandate that companies change their ways. In recent years the overseers have made recommendations to hire and fire workers, enlisted high-priced accountants and consultants to review corporate operations, and blown the whistle to prosecutors if the company fails to respond to their concerns. The monitors typically send private reports to update prosecutors several times a year -- and send their bills to the companies.

The controversy seems to be about who gets appointed to be the monitors.

A consulting firm led by former U.S. attorney general John D. Ashcroft recently won an assignment, valued at more than $25 million, to ensure that a medical equipment maker [Zimmer, and see coverage in the NY Times here] stops paying kickbacks to doctors who use its products. Other former government officials with ties to the Bush administration have secured similar deals, which are paid using corporate funds and entail few, if any, checks on spending.

One particular example was the monitor for Bristol-Myers-Squibb,

The deals now drawing sharp outside criticism involve [New Jersey District US Attorney Christopher J] Christie, a GOP fundraiser who has served as New Jersey's top federal prosecutor since 2001.

One of the steps that Bristol-Myers Squibb took to resolve accounting charges was an endowment to create a job "dedicated to the teaching of business ethics and corporate governance" at Seton Hall University's law school, Christie's alma mater. That came on top of more than $300 million in criminal penalties and millions more in fees that the drugmaker paid to corporate monitor Frederick Lacey, a retired federal judge and New Jersey U.S. attorney under President Richard M. Nixon. Lacey played a role in the ouster of Bristol's chief executive two years ago. He did not return calls placed to his law office.

So,

The chairmen of the House and Senate Judiciary committees last week demanded that Justice Department leaders provide a list of all such deals and the fees they have generated. The Project on Government Oversight watchdog group has questioned whether the agreements reward 'cronies' who share political affiliations or backgrounds with the U.S. attorneys handing out the deals.

The arrangements raise alarms about 'potential favoritism and political interference that can undermine our judicial system,' said Rep. Frank Pallone Jr . (D-N.J.). Pallone has been critical of U.S. Attorney Christopher J. Christie, the New Jersey prosecutor who chose Ashcroft and a possible GOP gubernatorial candidate in the state.

Concerns were also raised by Republicans,

Richard C. Breeden, a former Republican chairman of the Securities and Exchange Commission, engineered a nearly complete overhaul at WorldCom after its top executives faced criminal charges in one of the largest fraud schemes in the nation's history. After being appointed by a federal judge from a different political party, Breeden and his team helped reshape WorldCom from its board of directors to its executive ranks, before guiding the telecommunications company, which emerged from bankruptcy protection as MCI, into a 2006 merger with Verizon.

'People should be very careful to make sure that monitorships do not become political plums,' said Breeden, who stressed that he was not speaking about specific cases. 'The key is the person who is monitor has to have a very good understanding of the business they're dealing in.'

The rising number of deferred prosecution agreements involving health care corporations has been at least an indicator that white collar crime involving large health care organizations is getting more attention.

I am certainly no expert in the legal issues involved, but it does seem that whether deferred prosecution agreements are good deterrents of misconduct by corporate executives, particularly in health care, deserves discussion.

However, there has been precious little discussion of these agreements in the health care context. Searching Medline for the term "deferred prosecution" yielded a single article, on the prosecution of driving while intoxicated, but absolutely nothing on white collar health care crime. I suspect that the best collection of discussion of deferred prosecution agreements in health care is right here in our Health Care Renewal archives.

So we end with another example of the anechoic effect. Misconduct by the leaders of health care organizations in general remains a taboo topic. As long as we are afraid to even discuss it, we will come no closer to a solution.

ADDENDUM (18 January, 2008) - See also comments by Joe Paduda in the Managed Care Matters blog, and by Matthew Holt in the Health Care Blog.