Will the health industry see a perp walk?

Johnson & Johnson, makers of Tylenol, has gotten a federal subpoena over investigations of its drug recalls. Would you like to see one of its executives subjected do a perp walk?

When regulation is corrupted, criminal courts become the only recourse the public has against powerful interests.

(Former Enron CEO Ken Lay, right from Softpedia, died of a heart attack six weeks after being convicted of fraud.)

If prosecution is shown to be impossible, or if no attempt is made to prosecute at all, people are apt to believe big businessmen are above the law. Anger over this may be taken out against the government, or the system of government that has failed.

In line with this I'm waiting to see if any health executive will be forced to do a "perp walk" and face criminal charges.

The last one to come close was Rick Scott, who left as CEO of Columbia-HCA just before that hospital company was charged with a major fraud against Medicare in the 1990s. He's now running for Governor of Florida. (Some would consider that a fitting sentence, were he to win.)

Last year, when a new Medicare fraud crackdown began, perp walks came back into fashion, encouraging CBS to feature the story.

But the final outcome in cases against corporations is still just a fine. True the HCA fine was for $30 million, but top executives were never held criminally liable. No one did a perp walk. Shareholders paid, not the people who committed the crime.

Thus crime becomes just another cost of doing business, and companies act with increasing contempt for the law and public safety.

I suggested here recently that the makers of Avandia might face criminal prosecution, but the decision not to take the drug off the market (although it will provide little help to the company) was so close any criminal prosecution is highly unlikely.

To prosecute someone for fraud or anything else, government must prove more than that a drug was bad. It must prove that an individual, at minimum, knew criminal acts were being committed, and acted with malice.

So attention now turns to Johnson & Johnson, the makers of Tylenol, which today received a federal subpoena concerning investigations of its over-the-counter drugs, which have been subject to repeated recalls.

A third manufacturing plant has now been examined by FDA investigators and shown to have problems, indicating this is a company-wide situation. There's a great distance between that and a criminal charge, but at least one prosecutor is taking a step in that direction.

So far the impact from all this has been strictly financial. Some analysts think it could have been worse. Others, heartened by having been warned things were bad, are calling the parent company's latest quarter in line with their estimates.

But all it takes is one ambitious U.S. Attorney to transform the story. With anger toward both government and business growing, the chances of one gaining the ambition to force a perp walk on a health industry CEO is only going to grow.

You don't have to be a convicted criminal to do a perp walk. (The phrase is credited to Rudy Giuliani, who used them to publicize his prosecutions of Wall Street and mafia figures in the 1980s.) Photos of such events can be legally used by the media even when some of those subjected to them, like former Credit Suisse executive Frank Quattrone, are later exonerated.

The Wall Street Journal has a whole gallery of perp walks on its Web site. Some observers feel such walks undermine the accused's presumption of innocence.

But it can be unusually effective against white collar defendants, according to The National Law Journal.  It has a unique deterrent effect, putting a CEO, in the public mind, permanently on the list you don't want to be on.

So the question occurs, will there be a health executive perp walk? Would you like to see one?

This post was originally published on Smartplanet.com

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