President, General Counsel, and Chief Medical Officer Fined $34.5 Million in Oxycontin Drug Case

As we continue to receive requests for clients for advice on potential civil and criminal liability for officers and directors under federal and state environmental laws, we continuously review reports of the filing of cases and the settlements or plea bargains in these cases.  Althought not prosecuted under environmental laws, the guilty plea and sentencing of Purdu Pharma provides an example of the potential liability officers of companies can face under US laws.

Purdue manufacturers Oxycontin, a trade name for a long-acting form of the painkiller oxycodone, that produces a heroin-like high if ground and swallowed or snorted.  It is also highly addictive.  Many deaths have occurred from overdoses of this drug. From 1996 to 2001, the number of deaths related to oxycodone nationwide increased fivefold while the annual number of OxyContin prescriptions increased by nearly 20 times, according to a report by the Drug Enforcement Administration.

The company and its president Michael Friedman, who retired in June, its general counsel Howard Udell, and its former chief medical officer Paul Goldenheim plead guilty in May to a misdemeanor count of misbranding the drug for claiming that OxyContin was less addictive and less subject to abuse than other pain medications.

The company and the three officers were fined in total $634.5 million.  The three officers must pay $34.5 million.

The case demonstrates the potential liablity of officers in the United States for actions they take with respect to the company's operations and activities.  While not arising under environmental laws, cases like this demonstrate that participation in civil or criminal activities of a corporation may lead to significant liability.  In this case, the officers escaped any prison sentence and were only put on probation for three years.  This decision by the federal district judge was, however, highly controversial, with victims and victims relatives decrying what they believed was a very light sentence.