Corporate Plea Bargains Under Fire Again

Any time a federal judge begins a ruling with the words, “Let’s see if I’ve got this straight,” you know you’re in for something special.

Last week, district court judge William Young did not disappoint.

With that opening sentence, Young, a veteran and respected judge in Boston, delivered a 24-page broadside against the Justice Department’s approach to prosecutions of corporate misconduct in US v Aegerion Pharmaceuticals. He cited Shakespeare the poet; he cited Margo Price the country music singer. Young’s shots ranged from the Yates Memo, to Russian interference in our election, to President Donald Trump calling our judicial system a laughingstock.

It is the sort of opinion anyone could read. And if you’re a compliance professional who cares at all about how the executive and judicial branches try to work together to resolve corporate misconduct, you should give it a read, immediately.

His ruling centers on Aegerion Pharmaceuticals. In 2013 Aegerion launched Juxtapid, a treatment for high cholesterol with an annual cost of more than $300,000. Almost immediately, Aegerion executives engaged in deceptive sales practices that foisted  Juxtapid on people who would get no benefit from it.

So Aegerion was defrauding taxpayers (since Medicare and Medicaid often pay for prescription drugs); defrauding patients (who were paying for a treatment that didn’t help them); and actually harming at least some patients, too (who suffered liver trouble as a result of taking Juxtapid). Pretty egregious stuff.

Fast forward to today. The Justice Department brought two misdemeanor charges against Aegerion for selling misbranded drugs across state lines. Federal prosecutors agreed to a plea bargain where Aegerion—now under new management, and cooperating assiduously with federal authorities—would pay $6.2 million in fines and penalties, with no compliance monitor.

And, crucially, this agreement would be a so-called “C Plea,” where the judge can only accept or reject the agreement entirely. The judge cannot exert any other oversight for the case in question.

Which brings us back to Young’s ruling.

Of Pleas and Public Interest

Young begins by picking apart the proposed Aegerion plea agreement in painful detail, calling out all the details that might make sense, if he could only know the reasoning why..

• The plea agreement dispenses with the usual Pre-Sentencing Report that a judge can review: “Why? One can readily understand why Aegerion wants its plea and sentence to be a one-day story, soon forgotten. Why does the government agree? Isn’t it better to permit the court to obtain a thorough Pre-Sentencing Report… better to understand the case?”
• The proposed fine of $6.2 million is far less than the recommended range under the U.S. Sentencing Guidelines of $18.5 million to $30.9 million. “The parties justify the downward variance by pointing to the extraordinary cooperation of Aegerion’s new management and its present precarious financial condition. What is left unexplained is why the government does not simply let Aegerion collapse into disgrace.”
• The plea agreement does include a reformed compliance program to prevent future offenses, and Young does praise the proposed program as adequate. “The problem is that the proposed program is entirely internal. There is no provision for the court’s personnel (or some independent employee) independently to examine compliance much like an on-site bank examiner.”

Alas, Young says, he cannot know the answers to these questions. The details behind this particular plea deal are under seal (most likely because they’re relevant to other, ongoing criminal investigations), and since C Plea agreements don’t allow a judge to exercise independent inquiry, he’s stuck.

Still, Young did not go quietly into the good night. He lamented the proliferation of C Pleas in the last decade or so. He bemoaned the rise of deferred- and non-prosecution agreements. In particular, he blasted the rise of a double-standard: privately negotiated settlements for corporate misconduct, where cynics might say companies simply pay their way out of a messy trial; but full-bore prosecution for individual misconduct, where people have far fewer options.

“I am ashamed I had not recognized this glaring inequity until this case,” Young wrote. “Aegerion proves beyond peradventure that a forbidden two-tier system pervades our courts. Corporations routinely get C Pleas after closed-door negotiations with the executive branch while individual offenders but rarely are afforded the advantages of a C Plea. Instead, they plead guilty and face a truly independent judge. This is neither fair nor just; indeed it mocks our protestations of ‘equal justice under the law’.”

Of Protests and Enforcement Policy

Eloquent words from a thoughtful, no-nonsense judge. When Young calls out a problem in U.S. jurisprudence, it’s a problem in U.S. jurisprudence.

So, will his astute and entirely correct diatribe actually matter?

Probably not, except in one-off cases where a judge does reject a C Plea. (Young rejected this one, for the record.) We’ve already seen judges try to exercise more oversight of plea agreements, and they lost. Most notably, judge Jed Rakoff rejected a plea agreement between the Securities and Exchange Commission and Citigroup in 2011. The SEC appealed, and Rakoff’s ruling was overturned.

More broadly, Young’s entirely reasonable criticism of DPAs and NPAs runs counter to political reality. The Justice Department has neither the manpower, the budget, nor the appetite to prosecute complex cases of criminal misconduct. That was true under the Obama Administration, and is far more true under the Trump Administration today. The choice isn’t between vigorous enforcement of the law, or pay-your-way-out enforcement via DPAs and NPAs. The choice is between pay-your-way-out enforcement or less enforcement.

As to Young recognizing the disproportionate power corporations have to evade real accountability for wrongdoing—well, I’m glad he’s woke to the problem. The Bernie Sanders crowd has been talking about it for years, and it’s not news to anyone familiar with the criminal justice system who’s a minority or gets paid by the hour.

The plain truth is that the executive branch doesn’t want a strong judicial branch meddling in its priorities. Young, for example, takes a swipe at the Yates Memo and its offer of fewer penalties for greater cooperation with prosecutors. But after all, isn’t that the whole point of the Yates Memo? It’s a tool for the Justice Department to turn an opponent (the corporation) into an ally. It’s a tool to bring about certainty—and corporations are simply legal constructs to turn human labor into profit, after all. Certainty is what they want.

So we can praise Young for raising excellent points that any citizen of the United States should contemplate. He’s not wrong in anything he says. That doesn’t mean it will matter much to an executive branch determined to do what it wants, and a legislative branch that ignores its oversight duties.

America, 2017.