The Government disagrees. Policy statements from the current administration regarding corporate officer liability have warned of a more aggressive stance in prosecution of corporate officers under the Responsible Corporate Office Doctrine. Though not used extensively in recent years, the Doctrine is well known as a result of the United States v. Park, 421 U.S. 658 (1975), in which the Supreme Court blessed the Government’s ability to prosecute individual corporate officers for violations of law, even if they were unaware of the violation, as long as they were in a position of authority to prevent or correct the violation and did not do so.
The push within the Administration to enforce this Doctrine has included amendments to the Federal Drug Administration’s (FDA) Regulatory Procedures Manual Section 6-5-3 recognizing that misdemeanor prosecutions under the Park doctrine are “a valuable enforcement tool” that can be used “even without proof that the defendant acted with the intent to defraud or mislead.” In fact, the Manual advises, “Knowledge of and actual participation in the violation are not a prerequisite to a misdemeanor prosecution.” But FDA believes, “Misdemeanor prosecutions, particularly those against responsible corporate officials, can have a strong deterrent effect on the defendants and other regulated entities.”
Once such case was brought in February of 2012 when the United States Attorney for the Northern District of Texas filed a two count criminal information against Gary D. Osborn and his company, Apothécure, Inc. United States v. Osborn, No. 3:12-CR-047-M (N.D. Tex. filed Feb. 10, 2012). Mr. Osborn was the owner and President of this company. Though not alleging that Mr. Osborn was involved or that he even knew about FDCA (Federal Food, Drug and Cosmetic Act) violations at his company before they occurred, the Government nevertheless charged Mr. Osborn for the company’s failures that were alleged to have contributed to the deaths of three patients at a medical center in Portland, Oregon. Though all of the details of the investigation are certainly not clear from the public record, prosecution of an officer/director for an offense that he had no knowledge of or role in performing should be understood as a shot across the bow of all corporate directors and officers regarding the Government’s discretion to prosecute them.
The prosecution of Mr. Osborn underscores the need for extra vigilance by officers in industries which are highly regulated and subject to criminal enforcement schemes.
William Powell is the attorney responsible for the content of this article