Implausible Deniability

Tuesday, October 26, 2010

This week is the RAPS conference, a great opportunity to rub shoulders with the many talented and interesting people who do regulatory. It's also an opportunity to meet people who travel in different circles than I do and hear what life is like here or there.

I've now heard a story, however, that I have to hope isn't true. A colleague in the therapeutic medical device industry was telling me that they have chosen to recall one of the products they manufacture. She has approached the corporate VP with responsibility for this area to coordinate strategy, but the VP has indicated that they don't want to know about the recall.

This wasn't a principled urge to avoid micromanagement, however. The VP didn't indicate that they trusted the manager to work out the details... rather, the take-home message was "Don't tell me this, I need to maintain plausible deniability."

I have no independent way of verifying this story, but it would be a heck of a thing to make up.

If this story is true, there are at least two critical errors in the VP's thinking. Let's start with the VP's error in perceiving the legal environment with regards to management responsibility.

Ever since 1943, it's been established law that a "responsible corporate officer" can be held liable for violations of the FD&C Act. This ruling was affirmed and expanded in 1975 with United States v. Park, the genesis of the Park Doctrine.

Taken together, these cases establish a pretty clear set of legal expectations:

  • Individual corporate officers can be held liable for thier company's violations of the FD&C Act
  • Prosecutors and juries get to decide who the "responsible corporate officer" is
  • Delegation is not a defense, officers can be held liable for the illegal acts of their subordinates
  • Officers have an affimative responsibility to find and correct violations; lack of information is no defense

The Park Doctrine was established law before the 510(k) process was established; by now this should just be common knowledge. Delegation is not a defense. Ignorance does not negate liability.

Several recent accounts suggest that Park-type prosecutions will rise, but the fact is, not that many executives in our industry go to jail. Historically, you pretty much have to fake a large-scale clinical trial or lie to your investors to qualify for the orange jumpsuit. FDA, for the most part, wants you to focus on executing your responsibilities, not managing your legal defense strategy.

This reveals another, more basic, flaw in the VP's thinking, however. Telling your subordinate that you plan to evade responsibility sends a clear message that they should plan to do the same. And what, exactly, will they do to cover their own rear? They're going to blame you.

I guarantee that the people who have been told they're being groomed as scapegoats are not interested in the position. They're documenting conversations, they're printing out emails and they're making notes in manufacturing records. In short, they're doing everything possible to make this VP's deniability implausible.

In our system of justice, the attempt to cover up misdeeds is sometimes judged more harshly than the misdeed itself. Just ask Martha Stewart. Wouldn't it be ironic if this VP's efforts to build a wall of deniability was, itself, the act that attracted the attention of an inspector?


Tags: Best Practices, Enforcement, Executive Responsibility, Industry, Recalls

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