Morrison & Foerster Wins Acquittal for Healthcare Executive Charged in Federal Anti-Kickback Case

5/4/2007

Litigation, Securities Litigation, Securities Enforcement, and Investigations + White Collar Defense

Press Release

Washington white collar partner Adam Hoffinger leads trial team on behalf of former sales director of EMD Serono facing 15 years in prison and $750,000 fine; trial centered on whether doctors prescribing Serono’s anti-wasting AIDS drug received bribes


Boston (May 4, 2007) – A Morrison & Foerster trial team has won complete acquittal for a former biotechnology sales executive accused of conspiracy and two other counts under the federal Anti-Kickback law.

Following a two-week trial before Judge Joseph Tauro in U.S. District Court for the District of Massachusetts, in Boston, a 12-person jury took less than three hours to exonerate Melissa Vaughn and three former employees of EMD Serono, the U.S. division of Swiss-based life sciences company MerckSerono. (EMD Serono is headquartered in Rockland, Mass., southeast of Boston.)

Ms. Vaughn and John Bruens, Marc Sirockman and Mary Stewart were indicted in 2005 by the Justice Department, which alleged that the four former Serono sales executives promised lavish, expense-paid trips to a medical conference in Cannes, France, to doctors who wrote prescriptions for the company’s anti-AIDS medication Serostim.

Serostim, an artificial human growth hormone, was developed to fight “wasting,” the massive weight loss that historically befell AIDS patients. Federal prosecutors contended that protease inhibitors, or “AIDS cocktail” drugs, had greatly curtailed both AIDS and wasting by the time Serostim came to market in the mid-1990s, prompting desperate measures among Serono’s sales force, whose compensation was heavily based on commission.

Each of the four defendants faced charges of conspiracy and offering illegal remuneration, in violation of the federal Anti-Kickback Act.  For her part, Ms. Vaughn faced up to 15 years in prison and a $750,000 fine.

“This is a case that should never have been brought, and the speed with which the jury returned its verdict confirmed our belief,” said Adam Hoffinger, a partner in the Washington, DC, office of Morrison & Foerster, who represented Ms. Vaughn.

Mr. Hoffinger noted that another former Serono regional sales director, Adam Stupak, pled guilty to kickback charges in 2004. He added that in 2005 Serono agreed to pay $704 million, including more than $136 million in criminal penalties, to settle a Justice Department investigation into the company’s sales and pricing practices for Serostim. It is believed to be the one of the largest criminal and civil fines ever paid by a healthcare company.

“In our view, which the jury evidently shared, the government was overreaching in trying to pin its kickback charges on to these individuals,” Mr. Hoffinger said. “This case illustrates the intense pressure the government puts on regulated industries, such as pharmaceuticals, and their executives.”

In addition to Mr. Hoffinger, the Morrison & Foerster team representing Ms. Vaughn included James Sullivan, of counsel, and associate Demme Joannou, both of the Washington office.

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