White-Collar Crime

Cardiac Arrest, Part III: A Word From The Lawyers

Always, always, always prepare as if you're going to trial.

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This week marks the third and final installment in my three-part series on Cardiac Arrest: Five Heart-Stopping Years on the Feds’ Hit-List (affiliate link), by former Vascular Solutions, Inc. (VSI) CEO Howard Root and his co-author Stephen Saltarelli.

As I have previously mentioned, the book provides a rare and compelling look into what happens when prosecutors abuse their power — and a defendant with the means to do so decides to fight back. If you’re a law nerd looking for your summer beach read — or even if you’re just congenitally wary of government power — look no further. (The narration on the Audible version (affiliate link) is also terrific.)

And now it’s time to hear from the lawyers — King & Spalding’s Michael R. Pauzé and John C. Richter, the former federal prosecutors who led Mr. Root’s defense team to victory after taking over from two previous firms with whom, to put it mildly, Mr. Root was not pleased. (How Mr. Root articulates that displeasure makes for some of the most jaw-dropping and insightful parts of the book.)

Anyone interested in white-collar work, regardless of experience level, could learn something from what Pauzé and Richter did in this case. It is, quite simply, a master class in defense work. It’s also just a hell of a read.

Here is what they have to say.

I’m sure you’ve both read Mr. Root’s book. What do you think about his portrayal of the government’s actions in the case?

Mr. Root certainly doesn’t pull any punches, nor should he. The government has virtually unbridled discretion to initiate criminal investigations and prosecutions that can have devastating effects on individuals and companies long before the merits are tested before a judge or jury. Citing that reason among others, the book makes a powerful case for the government’s need to critically assess its actions in both success and failure, and raises important questions about the institutional appetite for such an effort historically.

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The need for such a self-assessment is particularly evident in this case, in which the jury unanimously rejected the government’s conspiracy and misbranding theories without hearing from a single VSI defense witness. The government’s misjudgment in prosecuting the case was exacerbated by the heavy-handed tactics in investigating it. One informs the other. When the government has to resort to brushing aside grand jury secrecy rules and threatening witnesses in an effort to shape their testimony, the conclusion becomes inescapable that the evidence doesn’t support the theory.

You were the third firm to come into this case. What was that like?

It was exciting. We were the first firm in the case that had, not only criminal and civil defense experience, but real regulatory expertise. That combination of experience and expertise allowed us to provide our client immediately with an accurate judgment about the merits of its factual and legal defenses.

For example, because we were very familiar with the FDA’s medical device clearance process, we immediately identified that VSI was innocent because the scope of the intended use statement that had been cleared by the FDA necessarily included the uses that the government was alleging were unlawful.

Generally, in our practice we judge our success on our ability to help the government understand vulnerabilities to its theories and finding appropriate pre-charging resolutions. In this case, however, the lateness of our entry into the investigation gave us few opportunities to do that. Our raising of these meritorious defenses to DOJ in meetings and letters on the eve of indictment fell on deaf ears.

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Our recognition of these weaknesses in the government’s theories, however, paid off fully at trial. We were able to elicit through government witness after government witness that the prosecutors had never actually shown the FDA-cleared intended use statement to them. Virtually all of the government’s witnesses, including the FDA Branch Chief and an interventional radiologist, testified, upon being shown the intended use statement, that the alleged unlawful use fell plainly within the FDA’s clearance.

Do you think someone without Mr. Root’s resources would have been able to win this trial?

Defending complex federal criminal charges at trial is a tremendously resource-intensive exercise, particularly where the allegations involve an arcane FDA regulatory structure, the actions of a nationwide sales force, experts in the fields of Medicare and Medicaid and vascular surgery, and millions of company documents. It’s difficult to imagine mounting a successful defense without the financial commitment that the company made here.

But the financial resources were just the beginning. It took the loyalty of VSI’s customers and employees, the leadership of the Howard Root, and the unwavering support of the VSI’s Board to fight this fight. We’ll never know how many companies have been leveraged into settlements regarding allegations that would not have withstood the test of our adversarial process.

Did you learn anything you didn’t already know from handling this case?

Of course. We learned many things. Among them, as described above, this case reinforced how important it is to figure out the facts and law and get in front of the government very early in a case. We’d like to believe that had we been able to enter the case at the outset of the investigation we would have been able to successfully convince the government to resolve the matter without criminal charges.

Likewise, this case reinforced for us that reality that enforcement authorities rely too much on agency guidance, rather than the actual laws and regulations, and that that reliance clouds their judgment about how juries will ultimately view the merits of a case.

For example, the government relied heavily on FDA guidance that essentially directed medical device companies to file a 510k anytime they wanted to make a change in the indication for use statement required. The applicable regulation, however, required the filing of a new 510k only if the change was major. In this case, the intended use at issue already fell within the existing intended use statement. We were able to prove to the jury that any change, therefore, would not have been major.

Has anything that you learned from handling this case changed how you interact with the government in your other white-collar matters?

Every investigation and trial informs how you handle the next one, and this one was no different. For example, we routinely engage in candid negotiations with government counsel, relying on not only Rule 408, but also the long-standing convention that the government will not use those negotiations against your client. A contrary practice serves nobody.

But in this case, to gain an advantage in pre-trial motions, the government freely disclosed to the court the content of plea negotiations with our predecessor counsel. While one bad apple shouldn’t spoil the bushel, this incident no doubt will guide our future practice.

Perhaps the most fundamental lesson coming out of this case is that we need to investigate and prepare each case as if it’s going to trial. Because only then will we be in a position to truly assess each side’s position, and determine the best path forward for our client.

What advice would you have for a young associate who has the opportunity to work on a trial team in a case like this?

Savor the experience, keep calm, and tackle hard.

The entire team, from partners to associates to project assistants, worked extraordinarily hard and effectively together. For young associates, having the chance to go to trial is rare. To have had a chance to do it in a case in which you were defending a publicly traded company facing potential destruction is almost unheard of.

The associates quickly became masters of the facts and were able to pivot effectively based on the events during the trial day. This paid off when, recognizing that they were stumbling following the opening and first few witnesses, the government attorneys sought to change the order of their witnesses in hopes we would be less effective in proving our defense through their witnesses.

Justin Dillon is a partner at KaiserDillon PLLC in Washington, DC, where he focuses on white-collar criminal defense and campus disciplinary matters. Before joining the firm, he worked as an Assistant United States Attorney in Washington, DC, and at the Civil Rights Division of the Justice Department. His email is [email protected].

 

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