Federal district judge rejects corporate plea deal

This New York Times story, which is headlined "Judge Rejects Plea Deal on Guidant Heart Device," reports on an interesting development in a notable federal corporate prosecution. Here are the basics:

A federal judge in Minnesota on Tuesday rejected a plea agreement between the federal government and the Guidant Corporation, saying that the deal did not hold the company sufficiently accountable for an episode in which it sold potentially flawed heart defibrillators.

The ruling was a setback for the Justice Department, which had characterized the agreement as a demonstration of its get-tough approach to corporate crime. The deal called on Guidant to plead guilty to two misdemeanors and pay a $296 million fine, described as the largest by a medical device company.

But in his opinion, the judge, Donovan W. Frank of United States District Court said the provisions of the agreement were “not in the best interest of justice and do not serve the public’s interest because they do not adequately address Guidant’s history and the criminal conduct at issue.”

The case results from disclosures in 2005 that Guidant did not alert doctors and patients that some of its defibrillators had a defect that might cause them to fail when needed to interrupt an erratic and possibly fatal heart rhythm. At least six patients who got the devices died.

Judge Frank said that prosecutors should have sought probation for Guidant and its parent, Boston Scientific. Probation would have required the companies to take certain steps, like helping to rebuild public confidence in the safety of heart devices, in addition to paying a fine.

The judge also outlined other provisions that might be suitable in a new plea deal, including charitable activities by Guidant to improve heart device safety and improve medical care among minority patients.

After a hearing this month, several doctors and patients wrote to Judge Frank urging him to reject the deal and arguing that former Guidant executives should be criminally charged in the case. But Judge Frank noted in his ruling that it was up to prosecutors, not a court, to decide who should be prosecuted....

At the hearing this month before Judge Frank, both government prosecutors and a Guidant lawyer testified that the deal was fair. Also, under questioning by Judge Frank, prosecutors defended their decision not to seek probation, saying it was not necessary because, among other things, the company created to enter Guidant’s plea, Guidant LLC, existed only on paper.

In his ruling, Judge Frank took direct aim at that argument, suggesting it contradicted the Justice Department’s own public statements about the case. He noted that a department news release said Guidant’s plea deal was “about accountability.” Judge Frank wrote, “The interests of justice are not served by allowing a company to avoid probation simply by changing their corporate form.”

The judge also noted complaints by others, including Dr. Hauser and Dr. Maron, that Guidant had violated the law in the past without much consequence and that Boston Scientific, while not responsible for Guidant’s behavior, could still be held accountable. “The court believes that a period of probation would likely benefit, rather than harm, Guidant and Boston Scientific’s public image,” he wrote.