Agents of Risk

Agents of Risk

File this under the header, “What can happen when you tick an agency off.”

Laura Stevens is a former attorney for GlaxoSmithKline who was indicted last November on several charges in a case originated by the Food and Drug Administration. Dismissed in March on the grounds the U.S. attorneys failed to properly advise the grand jury about the advice of defense counsel, the case resurfaced when new charges were filed in April, and the trial is proceeding.

Regardless of the outcome, it illustrates the maxim that you never know how agencies will interpret facts, and that’s critical because their interpretation can result in serious consequences, even if the accused is vindicated.

The Stevens case originated with the FDA alleging the pharmaceutical company was marketing a drug for uses other than those approved. In this case, the FDA had approved Wellbutrin SR for treatment of depression, but Glaxo supposedly also was marketing it for use in weight loss. The FDA asked Glaxo to provide specific documentation.

Stevens, who headed the team charged with responding, withheld certain materials contradicting Glaxo’s case, the FDA alleges.

Following the dismissal of the original six counts — relating to obstruction of justice, falsification and concealment of documents, and false statements — prosecutors filed new charges, alleging obstruction of proceedings, aiding and abetting, and four counts of making false statements. Stevens’s defense is she worked with attorneys both inside and outside Glaxo, who guided her actions.

The dispute centers on the FDA’s demand for records regarding Glaxo’s marketing efforts for the drug, and its request for records about anyone who made presentations or speeches about it for Glaxo, copies of their presentations and the compensation they received. Stevens wrote a series of letters over time to the FDA, saying Glaxo didn’t engage in so-called off-label marketing.

The FDA, however, says she had documentation showing Glaxo’s two top speakers (and others) regularly touted the drug’s “off-label use” to other physicians, and that Glaxo compensated those speakers.

The documentation Stevens and her team decided not to provide included information others had added. In other words, to the extent a speaker added information to a presentation that had to do with the off-label uses of Wellbutrin SR, those materials were not turned over to the FDA. Stevens went so far as to write letters to the presenters saying off-label uses were not approved by Glaxo and violated their contracts with Glaxo. Those presentations were later revised.

Although there is other information the FDA said it didn’t get, the significant issue is what the agency now is trying to frame as an intentional decision to withhold information relevant to the demands it was making to enforce the laws under its jurisdiction.

Was that really a decision the defendant made? Did the agents act beyond their authority? They had contracts with Glaxo, which presumably limited them to making claims only for uses approved by the FDA. What is the consequence of the agent going beyond that authority and the principal knowing nothing about it? Should Glaxo have known what its agents were saying? If the agent does something contrary to the contract or your company’s stated authority, are you obligated to turn it over to the regulatory agency?

The information eventually came out when a Glaxo sales representative turned it over to the FDA, along with a memo outlining the legal pros and cons of disclosing the evidence. With information about the trial testimony leaking, it appears the government is seeking to establish that Glaxo was attempting to conceal its off-label marketing efforts.

In other words, because the motive was bad, the advice of defense counsel shouldn’t excuse what was done — or, more correctly, not done (turning over all the records). At this point, the only action taken has been against Stevens. What does that tell you?

The question this situation poses is just how closely you’re required to monitor your agents and what your obligations are when you discover they are saying or doing things that don’t comply with your corporate philosophy or procedures?

The case serves as a cautionary tale for all companies. How well do you oversee or manage the efforts of your agents? In this case, it’s the FDA that’s unhappy, but the same sort of agents going off and doing “their own thing” could just as easily arise in the context of making a deal in a foreign country, and running afoul of the Foreign Corrupt Practices Act; or double-invoicing, yielding undervaluation declarations to Customs; or wrongly describing goods, thereby leading to export license violations.

Have you reviewed or updated your internal controls lately? Have you reviewed the activities of your agents, including employees, to make sure they’re in compliance with the rules and regulations governing how your company operates? If not, a significant disagreement with a regulatory agency may be lurking in your future.

Take prompt action to avoid that. It’s less expensive now than it will be later.

Susan Kohn Ross is an international trade attorney with Mitchell Silberberg & Knupp in Los Angeles. Contact her at