Published: Wednesday, 8 Aug 2012 | 10:03 AM ET
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By: Michael S. Schmidt and Edward Wyatt
The New York Times
The New York Times
Pharmaceutical companies, military contractors, banks and other corporations are on track to pay as much as $8 billion this year to resolve charges of defrauding the government, analysts say — a record sum and more than twice the amount assessed last year by the Justice Department.
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“We are putting more resources into these cases and better using the resources we have,” said Tony West, the acting associate attorney general.
The ballooning settlements are for civil charges of fraud against the government, criminal charges often related to the same conduct and, in the case of health care companies, recovery of money for states for Medicaid fraud.
But while the collections are a boon to the government and taxpayers, they are resurrecting questions about the relative lack of charges against executives at the companies that are getting the stiffest penalties.
“A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Senator Jack Reed, Democrat of Rhode Island and chairman of a subcommittee that oversees securities regulation, said at a recent hearing.
President Obama, lawmakers and government watchdog groups have called for holding more individuals responsible. The Justice Department has collected $8.6 billion over the last three years, more than in any similar period in history, but relatively few prosecutions of individuals have come from the biggest settlements.
The most recent cases involve wrongdoing at some of the largest and most prominent companies. Last month, for example, GlaxoSmithKline [GSK 47.18 
0.54 (+1.16%) 
] said it would pay $3 billion to settle criminal and civil accusations of drug marketing and pricing fraud. In April, the military contractor ATK Launch Systems [ATK 48.48 
-0.10 (-0.21%) ] agreed to a$37 million settlement for selling “dangerous and defective” flares to the military.
0.54 (+1.16%) ] said it would pay $3 billion to settle criminal and civil accusations of drug marketing and pricing fraud. In April, the military contractor ATK Launch Systems [ATK 48.48 -0.10 (-0.21%) ] agreed to a$37 million settlement for selling “dangerous and defective” flares to the military.In November, Merck [MRK 44.06 0.06 (+0.14%) ] settled charges of drug marketing and safety fraud for $950 million. A month earlier, Oracle [ORCL 31.16 -0.34 (-1.08%) ] agreed to pay $199.5 million after being accused of overbilling the government for software.
0.06 (+0.14%) ] settled charges of drug marketing and safety fraud for $950 million. A month earlier, Oracle [ORCL 31.16 -0.34 (-1.08%) ] agreed to pay $199.5 million after being accused of overbilling the government for software.The difficulties of prosecuting executives were highlighted last week in New York, where a federal jury acquitted a Citigroup [C 28.86 -0.03 (-0.1%) ] manager who had been involved in selling an exotic financial security involving residential mortgages. The manager, Brian H. Stoker, was charged with falsely describing Citigroup’s role in selecting the assets in the portfolio and failing to disclose that Citigroup was betting against the investment.
-0.03 (-0.1%) ] manager who had been involved in selling an exotic financial security involving residential mortgages. The manager, Brian H. Stoker, was charged with falsely describing Citigroup’s role in selecting the assets in the portfolio and failing to disclose that Citigroup was betting against the investment.The jury cleared Mr. Stoker in part because the bank had given investors fine-print materials that apparently warned them of the investment’s risks. In a rare move, though, the jury sent a note to the Securities and Exchange Commission after reaching its decision, urging the agency not to give up. “This verdict should not deter the S.E.C. from investigating the financial industry, to review current regulations and modify existing regulations as necessary,” the jury wrote.
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