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Shawn Vestal: Corporate ‘innocence’ a real steal at the price

The news release arrived, as they do arrive nearly every day, announcing the latest example of corporate justice.

A huge company is accused of breaking laws and regulations. The allegations rouse the corporation’s legal and PR teams. A sum of money is paid, a sum that may seem huge to you and me, but which is something like coins in the couch for the corporation.

And, crucially, the settlement accepts and reflects the corporation’s denial that it did anything wrong.

Case closed.

“The settlement is not an admission of wrongdoing or violation of any law or regulation,” the release read. “The company agreed to the settlement to resolve the concerns of the attorneys general under state consumer protection laws and to avoid unnecessary expense and a prolonged legal process. All parties have acknowledged that the payment is not a fine or penalty.”

That was the language in a news release announcing the settlement of claims that Janssen Pharmaceuticals Inc. had engaged in unfair and deceptive practices in marketing antipsychotic drugs to mentally ill senior citizens, among others.

These claims were serious. Thirty-six state attorneys general alleged that the company had engaged in a scheme to violate the law. Janssen sells antipsychotic drugs that have been approved for certain uses, but not others; doctors may approve them for “off-label” uses only in individual cases.

State AGs accused Janssen of pushing the drugs for nonapproved uses, targeting patients with Alzheimer’s disease, dementia, depression and other problems. According to the initial complaint, Janssen also encouraged its sales force to push those “off-label” uses; organized “sham” consulting sessions where doctors were paid to hear pitches for the off-label uses; rewarded doctors who used the drugs improperly with lucrative consulting deals; and misrepresented scientific data about its drug to minimize potentially fatal risks and to make unsubstantiated claims of safety.

Janssen paid $181 million to settle these claims that it denies, including $4.6 million to Washington and $2.5 million to Idaho.

That is a whole lot of money, and we should all feel good about the lesson it’s sending about the public trust, about corporate responsibility, about justice.

It is also, that $181 million, about 2 percent of the profits last year of its parent company, Johnson & Johnson. And to place this dispensing of justice for not doing anything wrong into an even larger context, the settlement and agreement to fix problems that Janssen does not admit exist come as part of what one court document calls “a tsunami of legal and regulatory difficulties overtaking J&J.”

Some of the waves in the tsunami, according to a complaint filed by shareholders against the company:

• In April 2010, regulators discovered that contaminated ingredients were used in children’s products at a Pennsylvania factory run by the same J&J subsidiary; nearly three-quarters of all the company’s children’s and infants products were recalled.

• During the second half of that year, a J&J subsidiary recalled 600,000 contact lenses that were burning people’s eyes because they’d been made with too much acid.

• Federal investigators alleged that Janssen had given kickbacks to a company to use its medications – the same ones involved in the most recent settlement – in nursing homes.

• Janssen and another J&J subsidiary paid $81 million – as well as entering a “corporate responsibility agreement” – to resolve criminal and civil charges involving the illegal promotion of an epilepsy drug for unapproved use in children.

• And finally, J&J faces a lawsuit from shareholders over all this, resulting in a variety of deck-chair-shuffling organizational moves, such as setting up committees and protocols for better central corporate oversight of the various subsidiaries who paid millions to settle claims that they absolutely, utterly deny.

Those are by no means every wave in the tsunami, but you get the idea. Layers of corporate relationships providing deniability; legally executed documents that obscure and complicate the allegations to a point of near incomprehensibility; bureaucratic justifications and bureaucratic “solutions”; promises to do better or to stop doing the thing that is being denied; payoffs that seem huge to regular people but are minuscule to people who are corporations; an agreement between the parties that no one is admitting a damned thing; and – crucially – no individual person, no human being – pays any price.

If this is a tsunami, then there is no meteorological metaphor large enough to describe what is happening more broadly in this country. This year, drug companies, military contractors, banks and other corporations have agreed to pay $8 billion to settle criminal and civil charges of defrauding the federal government, according to the New York Times. That’s double last year’s amount. Perhaps this is the regulatory burden that we hear so much about: the burden that comes with breaking the niggling law.

If so, it’s a nice, light burden. If your neighbor Bob sold bad aspirin to your daughter, or bribed someone to sell drugs to your grandma – well then he, personally, might bear a personal price.

If Bob Corp. does it, though, Bob goes free. For a pittance.

Shawn Vestal can be reached at (509) 459-5431 or Follow him on Twitter at @vestal13.