The Former Crazy Eddie CFO on Impunity
Those of a certain age who were in or near the New York area remember Crazy Eddie, a discount appliance and electronics retailer with insane advertisements.
As reported by CNN, Sam F Antar, the former Chief Financial Officer of Crazy Eddie, was a speaker on a conference on financial fraud,
The U.S. government is losing the war against white collar crime.
That's the message from Sam E. Antar, one of the masterminds of the massive Crazy Eddie fraud of the 1980s.
'We are in the golden era of white-collar crime. My biggest regret is I should've been a criminal today rather than 20 years ago,' Antar told CNNMoney on the sidelines of a New Jersey securities fraud summit.
Antar drew a big round of applause when he pointed out that no one from Wall Street went to prison because of crimes that led to the financial crisis.
'We are devoting far less resources to combating crooks like myself today than back in my day,' he said.
Antar knows a thing or two about corporate fraud. He served as Chief Financial Officer of Crazy Eddie, the electronics retailer that became one of the symbols of white-collar crime in the 1980s.
Known for its loud commercials promising "INSAAAANE" prices, Crazy Eddie got into trouble for understating income to avoid taxes and then committing securities fraud once it decided to go public.
'Crazy Eddie was from Day One planned to be a criminal enterprise. We committed our crimes simply because we could,' said Antar, whose cousin Eddie Antar founded the chain.
Because he 'showed the feds where the bodies were buried,' Antar got off with only six months of house arrest, community service and tens of thousands of dollars in civil penalties. Crazy Eddie co-founder Eddie Antar served more than six years in prison.
Today, the convicted felon is advising the government and private companies about white-collar crime. Antar expressed frustration with the government's failure to put Wall Street bankers behind bars.
'We have turned prosecutors into tax collectors,' he said. 'Corporations don't commit crimes, people commit crimes.'
While the focus of this conference was corporate fraud and crime in the financial sector, we have frequently discussed corporate crime and corruption in the health care sector. We have noted, especially in our posts on the march of legal settlements, that most wrongdoing by big health care organizations is punished - if it is punished at all - only by fines assessed against the organization, and perhaps a lightly enforced corporate integrity or deferred prosecution agreement. Rarely does the organization admit wrongdoing. Rarely are criminal charges involved (the settlements are usually civil). Almost never do any individuals who authorized, directed or planned the wrongdoing suffer any negative consequences.
However, in health care, corporations do not do wrong. People do wrong.
This brings us to our latest example.
Biotronik Settles Kickback Allegations for $4.9 Million
This story barely rippled the media waters, getting its most extensive coverage in the (Portland) Oregonian.
Biotronik, Inc, the Lake Oswego medical device manufacturing firm, will pay $4.9 million to the federal government to resolve allegations that the firm paid kickbacks to doctors in Nevada and Arizona to use its products.
In particular, the Department of Justice charged,
The settlement resolves allegations that Biotronik, through the payment of kickbacks to physicians, caused hospitals and ambulatory surgery centers to submit false claims to Medicare and Medicaid for the implantation of Biotronik pacemakers, defibrillators and cardiac resynchronization therapy devices.
Biotronik allegedly induced electrophysiologists and cardiologists practicing in Nevada and Arizona to continue using Biotronik devices, or to convert to Biotronik devices, by paying the implanting physician in the form of repeated meals at expensive restaurants and inflated payments for membership on a physician advisory board.
So the issue was not only defrauding the government, but giving kickbacks to doctors to induce them to use Biotronik devices, presumably whether or not such devices were the best treatments for their individual patients. Thus, the alleged conduct could have resulted in the unnecessary or inappropriate implantation of devices, leading to patient risks in the absence of benefits.
Nonetheless, as is usual in such cases, Biotronik did not admit any guilt, and in fact refused to talk to the reporter. Furthermore, no one at Biotronik who authorized, directed or implemented the conduct in question suffered any negative consequence.
The light touch of the law on Biotronik was striking considering the company's track record.
Biotronik's Track Record: 2011 - 2013
Physicians Settle Allegations They Concealed Payments from Biotronik
In fact, the 2014 settlement was actually the second settlement resulting from allegations that Biotronik paid physicians to get them to use its devices. As the Oregonian reported in 2013,
The state recently concluded a court case against two Salem doctors who put heart implants into patients without telling them that a manufacturer's training program put a sales representative into the operating room. The [Oregon] DOJ accused the doctors in the civil case of having 'misrepresented' their services as 'for the exclusive benefit of the patient' and 'concealing' from patients payments that created a potential "incentive" to use Biotronik implants -- defibrillators and pacemakers. The surgeons received between $400 and $1,250 for implant surgeries when a trainee was present.
This case was unusual in that the prosecutors, from the state of Oregon here, not the US Department of Justice, targeted the physicians who received the money rather than the corporation that provided it. So these individuals actually suffered some negative consequences, albeit rather minor,
cardiologists Matthew Fedor and Kyong Turk admitted no wrongdoing but agreed to pay $25,000 each and inform future patients of any payments from a drug or device maker in connection with their services to that patient and when admitting sales representative trainees to the operating room.
At the time,
At Biotronik's U.S. headquarters in Lake Oswego, president Jake Langer called the state's case unfair and detrimental to good health care.In 2011, Documents Revealed Biotronik's Marketing Tactics
'We are really clean when it comes to our relationships with physicians,' he said. He blamed the first-of-its-kind case on overzealous prosecutors trying 'to set up a new law' without going to the Legislature.
Furthermore, the relatively meager penalties provided for by the 2014 and 2013 settlements were more incongruous given the colorful evidence provided by a disgruntled Biotronik employee reported in a 2011 New York Times article, about which we posted here. The article suggested that Biotronik attempted to boost sales through "seeding trials," which are more about recruiting doctors than clinical research, paying "consulting fees" to doctors who wanted their patients implanted with Biotronik products, and who actually implanted such products, and finally currying physicians' favor by hiring their spouses.
Those government settlements really are INSAAANE.
The Biotronik settlements followed a familiar pattern. Now that we have been following organizational misbehavior in health care for some years, we see that organizations that get into trouble once are very likely to get into trouble again.
This may be enabled by how government regulators and law enforcement give large health care organizations such gentle treatment. We have talked about the march of legal settlements by such organizations before. Allegations are usually resolved with legal settlements that involve no admissions of guilt, small monetary penalties (compared with these organizations' total revenues), and sometimes apparently toothless corporate integrity agreements. Settlements get desultory public notice, rarely informed by previous settlements or other evidence of previous misbehavior. No individual who may have authorized, encouraged, directed, or implemented the bad behavior is likely to suffer any negative consequences. It does not help that while nominally public, these settlements get little press, and what coverage there is usually fails to put the whole pattern together.
So we would urge the reporters who cover the next settlements by big health care organizations at least look to see if the organizations had been involved in similar settlements in the past.
Furthermore, as we have said all to often,... The failure of the current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders. Pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction. So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.