After Enron, Arthur Andersen and the passage of Sarbanes-Oxley, in-house lawyers quickly realized they were more than fair game for civil and criminal actions for alleged corporate misdeeds. In November, the Justice Department filed an indictment that could mark a new direction in their focus on corporate counsel, and it's a direction that should have lawyers reassessing how they handle government investigations.
The Nov. 9, 2010, indictment shows that Lauren Stevens faced a not unfamiliar scenario for an in-house lawyer. The FDA had launched an investigation into possible off-label marketing at the pharmaceutical company where she was vice president and associate general counsel, and Stevens was the point person. Then she became a target herself.
"What makes this case different is it's not that the lawyer was doing anything wrong with regard to what the underlying government investigation was," says Peter Henning, a Wayne State University law professor and blogger for the New York Times' DealBook. "It was how she represented the company in responding to the government inquiry. That we really haven't seen before, and I suspect it's going to spook in-house counsel. This case sends a warning shot across the bow."
During the October 2002 investigation, the FDA asked for information related to the marketing of a drug at Stevens' company. (The indictment doesn't name the company, but GlaxoSmithKline has confirmed Stevens is now retired from its law department and the drug in question was Wellbutrin SR.) The indictment alleges Stevens signed and sent letters denying that Glaxo had marketed Wellbutrin for off-label use despite knowing the company paid physicians to promote the drug in talks that included information on unapproved uses. It also alleges Stevens withheld documents showing as much despite telling the FDA she had produced all relevant information. Other lawyers at Glaxo allegedly knew about the information and contributed to the decision not to turn it over, but only Stevens is charged with one count of obstructing an official proceeding, one count of concealing and falsifying documents to influence a federal agency, and four counts of making false statements to the FDA.
"This indictment shows that we will investigate those responsible for unlawful acts done on a company's behalf. ... Individual employees now know that concealing information from the government, obstructing investigative activity and making false statements to federal investigators will be investigated and prosecuted," Richard DesLauriers, Special Agent in Charge of the Boston Division of the FBI, said in a DOJ statement on the Stevens indictment. The FBI was involved in the investigation.
Stevens' lawyers, who were unable to comment on this story, have given press statements saying Stevens' actions during the investigation were consistent with ethical lawyering and the advice of top-notch outside counsel. The facts of the case are still emerging, and Stevens' side of the story hasn't yet been told, but if that statement is true, in-house counsel at companies under government investigation face a new set of challenges.
"I don't think what she was doing was unusual," Henning says. "Any number of lawyers will say, 'I won't do what she did,' but do you know that for sure? You could make the argument that Stevens should have said on behalf of Glaxo, 'Yes, we violated the law.' Well, you don't think of a lawyer doing that. So when do you cross the line from aggressive advocacy to obstruction? This case may give more definition to that line." (See "Brightening the Line.")
The Stevens indictment was made possible by the obstruction of justice statutes that were significantly strengthened and broadened following the Enron/Arthur Andersen debacle--it's also a reminder to companies of what those heightened statutes, still new and rarely used, could mean for them.
"Now anything you do to interfere with or mislead a government investigation, even if there's not a subpoena out to you, can result in criminal liability," says Max Kennerly, a lawyer at the Beasley Firm. Kennerly runs the Litigation and Trial Blog. "I don't know what role that played here. But there's an impression among some attorneys and a good number of business executives that until you get a subpoena or you're testifying under oath, there's not really a legal duty on you one way or another. Here that wasn't the case."
In Stevens' case, there was no subpoena, just a free-form investigation. But in-house counsel shouldn't treat them lightly, even in their earliest stages, as they present heightened duties. Many of the allegations against Stevens probably wouldn't be that unusual if it happened in the course of civil litigation, Kennerly says. She provided a fair amount of information to the FDA, but not everything.
"Based on the indictment, she knew there were other documents relevant to the investigation but didn't produce them, and told the FDA she'd produced everything relevant," Kennerly says. "That's where the problem comes: If that happens in civil litigation, there's no criminal liability, it's just motion practice and further discovery. In the context of government investigation, though, everything changes."
In-house lawyers handling government investigations have a broad duty of candor to government investigators, Kennerly says, and should be very clear to the government about what they are actually disclosing, what they know and what they're not disclosing.
"Any in-house counsel needs to verify facts that he or she is reporting to the government," says Geoffrey Garinther, chair of the litigation division at Venable. "That's always been important. But there's certainly a heightened level of scrutiny in this environment that I think inside and outside counsel will be feeling for some time. The danger is it chills people's willingness to be on the frontline when reporting to government."
The Stevens case, however, will be a good test of some of the issues those broadened obstruction statutes present. For instance, the media statement by Stevens' lawyers that her conduct was consistent with "the advice provided her by a nationally prominent law firm retained by her employer specifically because of its experience in working with FDA" suggests that the advice-of-counsel defense will have a vital role in the case. Stevens will have to show both that she fairly disclosed everything that was material to outside counsel and that she relied on this advice in good faith, a standard several federal courts have cited, including the 8th Circuit in Covey v. U.S.
"It's a rigorous view of the advice-of-counsel defense," Kennerly says. "You can't just have lawyers circling around the events in question. You need a full-fledged give-and-take dynamic."
That can be tricky to prove if, for instance, Stevens forgot to mention a detail to counsel, or if counsel gave hedging advice, the defense could quickly fall apart. Even if Stevens sat with attorneys for hours of intense back-and-forth discussion, if outside counsel left the meeting without giving her clear guidance on what she should do--as is apt to happen sometimes even in the most intensive head-to-heads--the defense fails.
The gold standard, Kennerly says, would be to get an opinion letter. Although they may be common in patent and tax law, it's not so simple to ask outside counsel to issue opinion letters at every juncture of a circuitous investigation. Still, keeping written communications with outside counsel, and even among in-house counsel, can clarify down the line that in-house counsel were seeking advice in good faith and were disclosing all the relevant facts. As the Stevens case proceeds, it may shed further light on what the defense requires in such scenarios and what level of discussion with counsel is sufficient, which will be helpful both for in-house and outside counsel and company representatives.
"If it comes out that Stevens had a full-disclosure discussion with outside attorneys and [approved her statements] and she is exonerated, it would inform how you talk to outside counsel in advising you in an FDA investigation," Kennerly says. "If not, it would be a lesson to everyone else on the ways this process can go wrong even at a very large, sophisticated corporation that additionally has large, sophisticated outside counsel."