Kaplan Marino Founding Partner Nina Marino quoted in Chris Villani’s story, “Insys Verdict Flip Is A Check On Aggressive Feds,” published November 27th in Law360.

Law360
Insys Verdict Flip Is A Check On Aggressive Feds
Chris Villani
November 27, 2019

Law360 (November 27, 2019, 5:54 PM EST) -- Insys Therapeutics Inc. executives got part of the landmark opioid verdict against them thrown out, showing overreach by Boston federal prosecutors as well as the high bar of evidence needed to prove a conspiracy to distribute legal drugs, experts told Law360.

U.S. District Judge Allison Burroughs on Tuesday knocked down the Controlled Substances Act predicate of the Racketeer Influenced and Corrupt Organizations Act conviction of Insys founder John Kapoor and four other former executives. Judge Burroughs had seemed skeptical of the CSA charge all along, though prosecutors convinced a jury in May that Kapoor and his cohorts conspired to bribe doctors to prescribe a powerful opioid to patients who didn't need it.

The judge ruled that while Insys brass wanted to sell as much of the drug as possible, the government could not prove the executives knew or that there was an implication of the drug being prescribed improperly. Yet she declined to overturn the entire RICO conviction or grant the executives a new trial.

Her ruling set forth parameters that make clear it won't be easy for prosecutors to go after pharmaceutical executives like they're drug dealers. And experts believe Judge Burroughs' ruling is a check against a Boston U.S. attorney's office that is taking big swings in headline-grabbing cases.

"The impact, I hope, is that the office realizes that maybe they are trying to go too big on some of these high-profile issues coming up in their criminal prosecutions," said Michelle Peirce, co-chair of the litigation practice at Barrett & Singal PC.

I think charging murder in NECC, calling Aunt Becky part of a racketeering operation and likewise trying to call these folks drug dealers, they are aiming too big and I think tripping themselves up in the process.

Peirce referenced other cases like the murder prosecution of the leaders of the New England Compounding Center, which resulted in acquittals on the top count but convictions on a host of other charges, as well as the ongoing "Varsity Blues" case against former "Full House" actress Lori Loughlin and dozens of others.

"I think charging murder in NECC, calling Aunt Becky part of a racketeering operation and likewise trying to call these folks drug dealers, they are aiming too big and I think tripping themselves up in the process," she said. "I hope it will rein them in. I think it should."

It's relatively novel to see a RICO charge in a white collar case, Nina Marino of Kaplan Marino, an attorney for a college administrator in the Varsity Blues case, said.

"RICO was designed and implemented to combat organized crime amongst the mafia," Marino said. "It is hard to reconcile this use of the statute in Insys and other matters given its origins. "

And though the prosecutors showed an "understandable zeal to address the opioid crisis," they relied on an "aggressive" theory to try to prove the executives conspired with doctors to prescribe the drug, said Richard Hartunian, the former U.S. Attorney for the Northern District of New York, now a partner at Manatt Phelps & Phillips LLP.

"The government failed to show, however, that the defendants intended to do business with 'drug dealing' doctors, who are more than just bad or negligent ones — their actions must go beyond the legitimate practice of medicine," Hartunian said. "Sometimes the government's aggressive theories, even with strong facts, don't withstand close legal scrutiny."

A spokeswoman for the U.S. attorney's office declined to comment Wednesday.

Martin G. Weinberg of the Law Offices of Martin G. Weinberg PC said rulings like the one Judge Burroughs issued could have the effect of pushing prosecutors to exercise self-restraint in their charging decisions.

"Prosecutors run enormous risks when they seek creative applications of statutes outside of their heartland," Weinberg said. "The Controlled Substances Act was clearly intended by Congress for drug distributors and it's not shocking that courts scrutinize creative applications of statutes."

As other prosecutors around the country seek to bring similar charges, such as the New York federal case against the former head of Rochester Drug Co-Operative Inc., Weinberg said Judge Burroughs has "illuminated up until now what has not been clear."

"She has kind of defined the requirements of this creative application of the CSA to drug companies, rather than rogue doctors or paradigm drug dealers," he said.

The requirements highlighted in Judge Burroughs' decision show how hard it is for the government to charge top executives as if they were street-level drug dealers.

"Just the desire to sell the drug isn't enough; there has to be some evidence that the pharmaceutical reps or the company intended that the doctors would violate their duty to their patients," said Daniel J. Cloherty of Todd & Weld LLP's government investigations practice. "That's a challenging standard for the government to meet."

Prosecutors in the Insys case tried to clear the bar by showing there was a "tacit understanding" that Subsys, the company's fentanyl spray, would wind up in the wrong hands. In one dramatic moment during closing arguments, Assistant U.S. Attorney Fred Wyshak even mimed firing a gun into the gallery and compared that to the allegation that the executives bribed doctors to sell as much Subsys as possible.

We all knew the government was attempting to make the trial equivalent of the first ascent of Everest. The judge told them to go back and get some ropes.

"When the defendants armed these doctors with all these bribes and all these incentives, they were creating a loaded gun," Wyshak said.

But the government then had to prove that unspoken understanding clearly existed. Judge Burroughs said the evidence may have shown a tacit agreement, or it may not have, which isn't enough to convict.

"If the court believed the government did not prove beyond a reasonable doubt that the tacit understanding was that medical providers would be prescribing to patients that didn't really need the drug, it is not surprising that defendants' motion on that issue was granted," said Dan Rabinovitz, a former prosecutor and current shareholder at Murphy & King PC.

Attorneys for the convicted executives also said they were not surprised, especially since Judge Burroughs said at various points during the case that she was unsure of the CSA charge.

"It was clear to everyone the problems with the theory, and it was somewhat inevitable that the law was going to be applied and the lack of evidence was going to kill the charges," said Mike Kendall of White & Case LLP, who represented former Insys VP Joe Rowan. "It's a very good decision, we are very happy about it, but it's just a straight application of the law."

Kapoor's lead attorney, Beth Wilkinson of Wilkinson Walsh Eskovitz, said, "We have always believed that the government brought charges it could not sustain."

Pete Horstmann of the Law Offices of Peter Charles Horstmann, who represented former Insys executive Sunrise Lee, agreed that Judge Burroughs provided a check against a novel prosecution theory, but suggested prosecutors would be undeterred moving forward.

"We all knew the government was attempting to make the trial equivalent of the first ascent of Everest. The judge told them to go back and get some ropes," he said, adding, "They will try again."

Counsel for former executive Rich Simon, who also saw the CSA charge in his conviction wiped out, declined to comment.

The case is U.S. v. Babich et al., case number 1:16-cr-10343, in the U.S. District Court for the District of Massachusetts.

--Editing by Breda Lund.

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