Director and Officer Liability and Accountability
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First of Its Kind: Drug Wholesaler Accepts DPA and Two Executives Face Criminal Charges in SDNY For Illegal Distribution of Opioids

On April 23, 2019, the US Department of Justice (DOJ) announced it has entered into a deferred prosecution agreement with Rochester Drug Co-Operative, Inc. (RDC), one of the 10 largest wholesale distributors of pharmaceutical products in the US, and filed felony criminal charges against two of RDC’s former senior executives for unlawful distribution of controlled substances (oxycodone and fentanyl) and conspiring to defraud the US Drug Enforcement Agency (DEA). During the relevant time period (2012-2016), RDC’s sales of oxycodone increased by approximately 800 percent (from 4.7 million to 42.2 million tablets) and fentanyl increased by approximately 2,000 percent (from 63,000 to over 1.3 million dosages). The two charged executives are RDC’s former chief executive officer, Laurence F. Doud III, and the company’s former chief compliance officer, William Pietruszewski. Geoffrey S. Berman, the US Attorney for the Southern District of New York, noted in a press...

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Guidelines for Board Risk Management Oversight

An important new decision, In Re General Motors Company Derivative Litigation, decided by the Delaware Chancery Court on June 26, provides useful guidance on the board’s obligation to both assess corporate risks, and to act to prevent loss. On the one hand, the decision confirms the high burden of proof necessary to establish a derivative claim for breach of the board’s risk management duties. At the same time, it also highlights the type of conduct to which boards may strive in order to maintain effective risk oversight protocols. This may be particularly valuable for corporate boards operating in industries with complex risk and regulatory environments. Read the full article from NYSE Governance Series: Hot Topics in Board Governance.

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Practical Board Guidance based on Chief Justice Strine

Both “deal” and “governance” counsel will enjoy sharing with corporate clients the highly practical guidance provided by Chief Justice Leo E. Strine, Jr. in a newly published article in The Business Lawyer. In his article, the Chief Justice identifies several actions lawyers can recommend to improve the process by which boards review merger/acquisition proposals. These include promoting more effective decision making, mitigating the potential for conflicts of interest and more accurately recording the exercise of board judgment – all for the purpose of reducing transaction exposure to future litigation challenge. More broadly, these recommendations serve to underscore the various critical elements that support informed board decision-making and sustainable transactions. Read the full article from The CLS Blue Sky Blog.

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New Board Compliance Guidance Prompts General Counsel Focus

Health care general counsel should review and brief their internal clients on the new Practical Guidance for Health Care Governing Boards on Compliance Oversight (Guidance), released on April 20, 2015.  A joint effort by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS), the Association of Healthcare Internal Auditors, the American Health Lawyers Association (AHLA) and the Health Care Compliance Association, the Guidance is a useful and timely resource for both the general counsel and the board. Continue reading.

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The Benefits of Increased Board/GC Interaction

Governance effectiveness at any company will benefit from the board of directors’ expanded interaction with the general counsel. Ideally, this enhanced interaction would go beyond the traditional practice of general counsel attendance at board meetings, responding to questions and presenting reports on specific agenda matters; it also would go beyond the “best practice” of periodic executive sessions with the general counsel. Instead, communication between the board and general counsel should extend to greater, and more formal (e.g., quarterly reports), opportunities for the general counsel to share perspectives on a broader range of issues that do, or ought to, matter to the board. Read the full article from Corporate Counsel.

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‘Compliance 1.0’ Ain’t Dead Yet

In her recent “Compliance Strategist” column, the well-respected and knowledgeable Donna Boehme describes as “fatally flawed” a relationship in which the compliance officer reports, for hierarchy purposes, to the general counsel. She presents this model (Compliance 1.0) as antithetical to effective compliance programs, the byproduct of the self-interested, and suggests that those organizations that continue to apply such a model are “ridiculous.” She argues, in essence, that the only acceptable model is one in which “compliance is freed from the legal department” (e.g., Compliance 2.0). I don’t agree. There’s another perspective—one less extreme in its approach, one that is less corrosive to the compliance officer-general counsel relationship, one that accurately represents the totality of recent developments. Simply, the answer is just not as black and white as Boehme’s column contends, and I think it is misleading to suggest otherwise. Continue...

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