Email to J&J Chief Compliance Officer

From: RDShatt@aol.com
To: kcurry@its.jnj.com
CC: pat@ethics.org, KDarcy@theecoa.org, roy.snell@corporatecompliance.org
Sent: 12/13/2013 8:11:59 P.M. Central Standard Time
Subj: J&J $2.2B fine; Health Care Compliance and Ethics

Ms. Kris Curry
Vice President, Health Care Compliance
Pharmaceuticals Group
Johnson & Johnson

Dear Ms. Curry,

I wish to use the recent $2.2 billion fine that the Justice Department imposed on Johnson & Johnson (see Wall Street Journal article here) as a case example that is supportive of my contention that there is a serious shortcoming in how the mainstream corporate ethics and compliance community has been pursuing and implementing its mission program for the past twenty years.

The foregoing contention is set out in numerous entries in my blog How To Combat Plaintiffs' Lawyers. Recent entries I would particularly call to your attention are Are Ethics & Compliance Sidelined? and this email I sent to the Ethics Resource Center a month ago. Additional relevant entries in my blog can be easily found by clicking on links to other entries you encounter and otherwise through my blog's organization.

I have started my discussion of the Johnson & Johnson case here. I am very interested in conversing with you about the case if you would care to indulge me. If not, I will understand.

Thank you for your attention to this email.

Sincerely,

Robert Shattuck
Birmingham, AL

Johnson & Johnson case study

The below is the Health Care Compliance and Ethics section from the Johnson & Johnson 2012 Citizenship & Sustainability Report.

Alleged wrongdoing of Johnson & Johnson has resulted in a $2.2 billion fine, as reported in the November 4, 2013 Wall Street Journal article posted here.

This is a candidate for a case study by the ethics and compliance community.

I have written this email to the J&J Chief Compliance Officer.





Health Care Compliance and Ethics

The ethical principles embodied in Our Credo are the lenses
through which our employees make thousands of business
decisions each day. To help ensure that we conduct business
according to these principles, we have an extensive list of
policies and procedures that define what we expect of our
people and our business partners throughout the world. Our
well-established policies and procedures cover all major
categories of corporate conduct and are consistent with the
legal requirements of all locations and constituents where
the Company conducts business. Policies and procedures are
supported by training and communication plans. Compliance
is achieved through controls, audits, reviews and certifications
ranging from company self-assessments to independent audits.
Policies related to codes of conduct are established at the
Corporate Headquarters and are communicated and executed
at all of the Company’s global business units. Policies and
procedures most often have established preventative controls
(policies, reviews and approval requirements) and detective
controls (after-the-fact reviews) with the requirement to escalate
to the Corporate Headquarters (Escalation Policy) violations that
may require investigation, potential disclosure and disciplinary
action.
The Company has an extensive Credo Hotline system where
access (by phone or website) is communicated to employees
annually and readily available to all employees, vendors,
distributors and customers. The Credo Hotline is anonymous
and executed through an independent third-party provider. A
well-documented process exists to ensure that all Credo Hotline
calls are reviewed, investigated (when needed) and responded
to according to protocol.
Codes of Conduct: Our primary policies and codes of conduct
include Our Credo, our Policy on Business Conduct and our
Health Care Business Integrity Guide. They are supported by
our Credo Hotline and in-person resources, and failures are
addressed with disciplinary actions.
Our Credo: This document defines the ethical values required
of all employees and business partners of the Company. The
annual and biannual anonymous Credo Survey, open to all
employees, gauges employee attitudes toward the Company’s
and their individual obligations to the Credo. Survey results are
reviewed at all levels (from individual operating unit departments
to the Executive Committee) and action teams are often formed
to address opportunities to improve Company culture.
Policy on Business Conduct: The principles of Our Credo
and requirements of the law are embedded in the Policy on
Business Conduct. The policy is communicated across the
enterprise and training on compliance is made available to
all employees. Compliance with communication, training and
execution of specific aspects of the policy are assessed by
Internal Audit. Each business unit and approximately 400 senior
executives are required to certify compliance with the Policy
on Business Conduct annually. Exceptions reported during the
certification process are independently reviewed, investigated
and documented by the Law and Audit departments; the results
of the certification are reviewed with the Regulatory, Compliance
and Government Affairs (RCGA) Committee of the Board of
Directors.
Health Care Business Integrity Guide: Legal requirements
of Health Care Compliance and the Foreign Corrupt Practices
Act are embodied in the Health Care Business Integrity Guide
(HCBIG). The HCBIG is available to all employees on the
Company’s website; training is required and documented for
all employees in health care–related positions. Adherence
is verified through ongoing independent audits and operations
testing conducted by Internal Audit and Health Care Compliance
& Privacy. Information on reviews are part of regular updates
to the RCGA Committee of the Board of Directors. Where
process reviews identify questionable activities, these issues are
escalated to the Triage Committee and for-cause investigations
commence.
Johnson & Johnson has a system for annual certification by
senior management on compliance with its anticorruption
policies and procedures. The results of this certification process
are also shared with the U.S. Department of Justice as part
of Company’s commitments under its Deferred Prosecution
Agreement.
Credo Hotline: Beyond the controls built into various policies
that define the Company’s code of conduct, all employees,
vendors, distributors and customers have the opportunity to
anonymously report potential violations of policy or law through
the Company Credo Hotline, available by telephone or website.
Additionally, anyone can report allegations through other methods
(phone calls, emails, etc.) within their local business unit or to
the Audit, Law and Security or Human Resource organizations.
All Credo Hotline reports are routed by the external vendor to
Corporate Internal Audit, which triages the reports to corporate,
business unit or operating company personnel on the basis of an
established algorithm for follow-up investigation and action. In
addition, a Triage Committee comprised of the Chief Compliance
Officer, Internal Audit, the Law Department, Worldwide Security
and Human Resources reviews the serious allegations to
determine the best means to investigate.

In-Person Resources: Each substantial operating company
has its own health care compliance officer, part of whose job is
to help ensure compliance with, and provide guidance on, the
Company’s policies. In addition, the Company’s Law Department
also provides direct guidance and training on the Company’s
policies.
Disciplinary Actions: Failure to comply with the Company’s
policies can and does result in disciplinary action, including, but
not limited to, warning letters, impact on annual performance
and/or compensation, and termination of employment.
Compliance with the Company’s policies is also embedded
within leadership imperatives for all senior leaders.
Anticorruption Training
Bribery of any form, including contributions and donations,
are part of the key elements of the Health Care Business
Integrity Guide.
Johnson & Johnson policies require anticorruption training for
employees who may present a compliance risk to the Company
and places a significant emphasis on the training requirement
to ensure compliance. In 2012, two courses were combined
into one and given to meet the requirement: “Health Care
Business Integrity for J&J Employees” and “Understanding
the U.S. Foreign Corrupt Practices Act (FCPA).” This training
emphasizes U.S. and international anticorruption and anti-bribery
laws and describes how to identify health care professionals
(HCPs), governmental organizations (GOs) and HCPs who are
deemed GOs. The training covers all aspects of the Health Care
Business Integrity Guide, including charitable contributions,
donations, third-party intermediary (e.g. distributors) and
cross-border interactions, all of which are deemed as high-risk
activities.
In 2012, Johnson & Johnson operating companies met the
training goal, as tracked by an online training application,
with training completed for more than 79,000 employees.
In addition to our own employees, we also hold many of
our critical third-party intermediaries, such as distributors,
accountable to the Company’s policies. Due diligence
and background checks are regularly conducted on sales
intermediaries to help ensure compliance with our policies. In
addition, the Company requires that its sales intermediaries
be trained in the requirements of the HCBIG, and that
contracts include specific contractual commitments to abide
by all applicable anticorruption laws, comply with our HCBIG
policies when interacting with customers on our behalf and
allow for auditing of their activities. Training is also provided
to third-party intermediaries to help ensure understanding of
the Company’s policies. Regulatory compliance of suppliers
and vendors is monitored and audited by our Regulatory
Compliance and Procurement organizations. Internal Audit
performs annual contract reviews of a number of key vendors
to ensure compliance with agreed upon contract provisions and
requirements. Any allegations of impropriety raised regarding

business dealings with third parties are documented and
investigated by Internal Audit, the Law Department or other
appropriate organizations within the Company.
Reporting Breaches: Information is reported up internally
within the organization to senior management and, as
appropriate, also shared with the Executive Committee, the
Board of Directors and/or the external auditors. Many breaches
are subject to confidentiality, legal, privacy or other similar
restrictions and, therefore, are not publicly disclosed. However,
this information is reported externally in our public filings if it
meets the criteria for requiring public disclosure.

SAC and J&J wrongdoing stories

The Wall Street Journal

REVIEW & OUTLOOK

It's Only Money

SAC Capital pays a record penalty but nobody admits anything.

Updated Nov. 5, 2013 11:39 p.m. ET

Preet Bharara, U.S. Attorney for the Southern District of New York, announced on Monday that SAC Capital Advisors and related companies had agreed to pay record penalties and to plead guilty to criminal insider-trading charges. SAC has also agreed to shut down its business of managing other people's money.

But in this settlement, assuming it is approved by a judge, no individuals will plead guilty to anything. SAC will pay $1.8 billion, including more than $600 million it agreed to pay in a related settlement earlier this year with the Securities and Exchange Commission. Few people expect criminal charges to be filed against SAC founder and CEO Stephen A. Cohen.

Therefore, after a multiyear investigation, the legal conclusion seems to be that Mr. Cohen is a noncriminal running a criminal enterprise. In a Monday statement, Mr. Bharara claimed that "individual guilt is not the whole of our mission. Sometimes, blameworthy institutions need to be held accountable too. No institution should rest easy in the belief that it is too big to jail."

Enlarge Image

U.S. Attorney for the Southern District of New York, Preet Bharara Getty Images

But institutions don't rest, don't believe and certainly don't go to jail. People do. And if—without much in the way of cooperating witnesses or wiretaps—Mr. Bharara has decided he can't make a case against Mr. Cohen, will he now slap the cuffs and an orange jumpsuit on SAC's Stamford, Connecticut headquarters?

On Monday George Venizelos, Assistant Director-in-Charge of the FBI's New York field office, employed the passive voice to describe this phenomenon of crimes without criminals: "What SAC Capital's plea demonstrates is that cheating and breaking the law were not only permitted but allowed to persist." But who allowed them to persist?

It's true that six former SAC employees have pleaded guilty to insider trading and two more criminal trials of individuals are on the horizon. But as far as who allowed crimes to occur in a firm of roughly 1,000 employees, that question will apparently remain unresolved.

The SEC has a pending civil case against Mr. Cohen for a failure to supervise. No trial date has been set, and if one ever occurs, it might shed some light on how he managed the firm. But the SEC would only have to prove negligence, not intent, so even a finding of liability wouldn't answer the question of whether this outlaw organization was actually run by an outlaw.

Whether there are any victims to SAC's crimes may be an even harder question to answer. Mr. Bharara couldn't name any at his Monday press conference, because they are theoretical. The prosecutor spoke of people who believe the markets are fair and that investors all play by the same rules. Others would argue that investors view as most fair a market in which prices reflect all available information and are therefore more accurate, or perhaps one in which investors, not regulators, decide what kind of disclosure they require.

Perhaps hazier still is the public understanding of what exactly insider trading is. After his recent win in a civil insider-trading case against the SEC, billionaire Mark Cuban noted that there are "no bright-line rules" and added of the SEC, "They regulate through litigation."

Illegal insider trading is generally understood to be trading securities on material nonpublic information by a fiduciary or someone in a position of trust, but it's never been precisely defined. The Securities and Exchange Commission notes that "Insider trading violations may also include 'tipping' such information, securities trading by the person 'tipped,' and securities trading by those who misappropriate such information."

The SAC case centered on this gray area of tips, and of course Monday's settlement involved the Department of Justice and criminal charges, where the government must clear a much higher bar than in the SEC's civil cases. At trial Mr. Bharara would have had to prove guilt beyond a reasonable doubt, rather than simply having to demonstrate a preponderance of the evidence as the SEC does. Had the Justice case gone to trial, however, there's no guarantee that SAC could have capped its payouts at even $1.8 billion.

So we have the unsatisfying result of Mr. Cohen, who remains a multibillionaire, going on his way after agreeing to a hefty fee. And we have $1.8 billion flowing from the private economy to Washington, though prosecutors haven't proven that the government deserves a single dollar.

Johnson & Johnson to Pay $2.2 Billion to Settle U.S. Probes

Deal with Justice Department Regards Drug Maker's Selling of Antipsychotic Risperdal

By JONATHAN D. ROCKOFF

Updated Nov. 4, 2013 8:27 p.m. ET

Johnson & Johnson agreed to pay a total of $2.2 billion and plead guilty to a misdemeanor in a deal that would settle U.S. Department of Justice investigations into the marketing of antipsychotic Risperdal and other drugs.

The deal resolves probes that prosecutors had pursued for nearly a decade into allegations that J&J had promoted drugs in the late 1990s and early 2000s for unapproved and sometimes harmful uses. The settlement ends years of often-difficult negotiations that at one point even pitted prosecutors in Washington, D.C., against federal prosecutors in Philadelphia.
Enlarge Image

J&J 'displayed a reckless indifference to the safety of the American people,' Attorney General Eric Holder said at a news conference on Monday. Associated Press

Prosecutors accused J&J of encouraging Risperdal's use in elderly nursing-home patients suffering from dementia, even though such a use wasn't approved by health regulators and could prove life-threatening. The company was also accused of marketing Risperdal to certain boys, despite a risk it could stimulate development of breasts.

J&J "displayed a reckless indifference to the safety of the American people," U.S. Attorney General Eric Holder said at a news conference on Monday announcing the settlement. "And it constitutes a clear abuse of the public trust, showing a blatant disregard for systems and laws designed to protect public health."

J&J, of New Brunswick, N.J., said it had already set aside funds to cover the full cost of the settlement, and it had already paid out $200 million of the $2.2 billion as part of agreements reached in previous years. The company disputed many of the government's claims and said its settlement of civil allegations wasn't an admission of wrongdoing or liability.

"We do not agree with all of the government's allegations and strongly believe some of them are not supported by the facts," J&J general counsel Michael Ullmann wrote to employees. The company settled, he said, "because it resolves complex and lengthy legal matters, allowing us to continue focusing our full attention on delivering innovative health-care solutions for patients and their families."

Under the terms of the settlement announced Monday, J&J's payment included a criminal fine of $334 million and forfeiture of $66 million. The company pleaded guilty to introducing a misbranded drug into interstate commerce, a plea that preserves J&J's ability to sell its products to Medicare and other government health programs.

The settlement would also resolve investigations into the promotion of Invega, another schizophrenia agent like Risperdal, and the heart-failure drug Natrecor.

The company also agreed to upgrade its compliance practices and submit to five years of monitoring by the Department of Health and Human Services' Office of Inspector General.

The J&J deal is among the biggest reached between the Justice Department and a pharmaceutical company accused of promoting medicines in ways that lead to unnecessary spending by government health programs. Federal and state prosecutors have been pursuing the cases for several years, aided by company whistleblowers.

Last year, GlaxoSmithKline PLC agreed to pay $3 billion and plead guilty to criminal charges involving the antidepressants Paxil and Wellbutrin and the diabetes drug Avandia. In 2009, Pfizer Inc. agreed to pay $2.3 billion to resolve a drug-promotion criminal investigation.

Under federal law, drug makers can market medicines only for uses approved by the U.S. Food and Drug Administration, though doctors can prescribe drugs for unapproved, or off-label, uses.

Risperdal is a pill treating the symptoms of mental illnesses such as schizophrenia, bipolar mania and irritability in autistic patients. The medicine had been J&J's top-selling drug with $2.2 billion in sales in 2007, the year before it lost U.S. patent protection.

Prosecutors alleged that J&J's Janssen Pharmaceuticals unit promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use. Prosecutors also alleged that J&J's "ElderCare" sales force pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use.

In 2005, the FDA required the label warn that elderly patients suffering from dementia-related psychosis were at a higher risk of death.

Prosecutors also alleged that J&J promoted Risperdal for use by boys suffering from mental disabilities despite knowing that use could raise levels of a hormone stimulating breast development.

J&J faces more than 160 personal-injury lawsuits in state courts in Philadelphia filed by users of Risperdal alleging it caused their breasts to grow, according to Stephen Sheller, one of the lead lawyers in the Risperdal whistleblower and breast litigation.

The company is fighting most of the lawsuits but has settled some others.

Executives at J&J recognize that the federal settlement "represents solid ammunition for all the litigants in the civil cases out there,'' one person familiar with the situation said Monday.

J&J had been negotiating for years to resolve the government investigations. At one point, J&J and prosecutors in Philadelphia had tentatively agreed to a $1 billion settlement of the Risperdal claims, but prosecutors in Washington, D.C., scuttled the proposal as too small, The Wall Street Journal has reported. The rejection prompted the sides to fold in other probes into the deal.

—Devlin Barrett and Joann S. Lublin contributed to this article.

Write to Jonathan D. Rockoff at jonathan.rockoff@wsj.com

Letter to Jamie Dimon

December 12, 2013

Mr. Jamie Dimon
Chairman, President & CEO
JPMorgan Chase & Co
270 Park Avenue
New York, NY 10017

Re: Cindy Armine and Nat'l Assoc. of Corp. Directors, Leading The Way initiative

Dear Mr. Dimon,

I hope Ms. Armine is in a position to share her views with the ethics and compliance community and also possibly to provide input to the National Association of Corporate Directors regarding its Leading The Way national initiative to restore public and investor confidence, as per the below letter I sent to Mrs. Armine a couple of weeks ago.

Thank you for your attention to this letter.

Sincerely,
Robert Shattuck
Birmingham, AL 35223
Email Rdshatt@aol.com



From: RDShatt@aol.com
To: JPMCinvestorrelations@jpmchase.com, brian.j.marchiony@jpmorgan.com
CC: inboardroom@nacdonline.org, KDarcy@theecoa.org, pat@ethics.org, roy.snell@corporatecompliance.org
Sent: 11/30/2013 8:29:46 A.M. Central Standard Time
Subj: For Cindy Armine: re Nat'l Assoc. of Corp. Directors, Leading The Way initiative
(via email per the above addresses and via US mail) 
Ms. Cindy Armine 
Chief Compliance Officer 
JPMorgan Chase & Co 
270 Park Avenue 
New York, NY 10017 
Dear Ms. Armine,
I doubt you will be able to respond to this letter, but merely making this communication will advance my purpose. 
This letter is prompted by the November 24th USA Today article entitled: JPMorgan settlement could pose legal risk. The legal risk in question is that possibly flowing from "admissions" made by JPMorgan in the settlement with the Department of Justice. 
I have been pursuing the subject of "settlement admissions" with the ethics and compliance community, and more recently I have contacted the National Association of Corporate Directors relative to its Leading The Way national initiative to restore public and investor confidence. For more information about what I have been doing, please read this blog entry of mine and links to other blog entries you find in and through the first blog entry.
Getting corporations to admit wrongdoing, or their being able to avoid admitting wrongdoing, has the attention of regulators, prosecutors, management, judges and the public. There is a related, and perhaps more important, interest concerning holding individual officers and employees personally accountable for corporate wrongdoing. 
You have a high profile in the ethics and compliance community, and JPMorgan's legal travails (and settlements) are a big 2013 news story. 
I hope you are in a position to share your views with others in the ethics and compliance community, and further you think the community can and should have something to offer to the National Association of Corporate Directors, relative to its Leading The Way initiative to restore public and investor conficence. 
I hope this letter encourages you in that vein. 
Thank you. 
Sincerely, 
Robert Shattuck 
Birmingham, AL.

JPMorgan Chase settlement

From: RDShatt@aol.com
To: JPMCinvestorrelations@jpmchase.com, brian.j.marchiony@jpmorgan.com
CC: inboardroom@nacdonline.org, KDarcy@theecoa.org, pat@ethics.org, roy.snell@corporatecompliance.org
Sent: 11/30/2013 8:29:46 A.M. Central Standard Time
Subj: For Cindy Armine: re Nat'l Assoc. of Corp. Directors, Leading The Way initiative
(via email per the above addresses and via US mail)
Ms. Cindy Armine
Chief Compliance Officer
JPMorgan Chase & Co
270 Park Avenue
New York, NY 10017
Dear Ms. Armine,
I doubt you will be able to respond to this letter, but merely making this communication will advance my purpose.
This letter is prompted by the November 24th USA Today article entitled: JPMorgan settlement could pose legal risk. The legal risk in question is that possibly flowing from "admissions" made by JPMorgan in the settlement with the Department of Justice.
I have been pursuing the subject of "settlement admissions" with the ethics and compliance community, and more recently I have contacted the National Association of Corporate Directors relative to its Leading The Way national initiative to restore public and investor confidence. For more information about what I have been doing, please read this blog entry of mine and links to other blog entries you find in and through the first blog entry.
Getting corporations to admit wrongdoing, or their being able to avoid admitting wrongdoing, has the attention of regulators, prosecutors, management, judges and the public. There is a related, and perhaps more important, interest concerning holding individual officers and employees personally accountable for corporate wrongdoing.
You have a high profile in the ethics and compliance community, and JPMorgan's legal travails (and settlements) are a big 2013 news story.
I hope you are in a position to share your views with others in the ethics and compliance community, and further you think the community can and should have something to offer to the National Association of Corporate Directors, relative to its Leading The Way initiative to restore public and investor conficence.
I hope this letter encourages you in that vein.
Thank you.
Sincerely,
Robert Shattuck
Birmingham, AL.

BEQ authors and NACD Leading The Way initiative

From: RDShatt@aol.com
To:
Sent: 11/23/2013 9:36:03 A.M. Central Standard Time
Subj: BEQ authors and NACD Leading The Way initiative
Dear Professors,
I wish to refer you to this email I have sent to the National Association of Corporate Directors, regarding its Leading The Way national initiative to restore public and investor confidence.
I have no idea what input the Initiative has had from the ethics and compliance community. I have no idea what input anyone in the ethics and compliance community has offered or would desire to offer to the National Association of Corporate Directors concerning its Initiative.
If there is no interface between the NACD and the ethics and compliance community, I don't think it is untoward to suggest that there should be interface.
If any of you would care to support me in pushing for such interface, please email me and we can try to figure out what we can do.
Thank you.
Sincerely,
Rob Shattuck
Birmingham, AL

National Association of Corporate Directors, Leading The Way initiative

From: RDShatt@aol.com
To: inBoardroom@NACDonline.org
Sent: 11/17/2013 8:07:00 A.M. Central Standard Time
Subj: NACD Leading The Way-- shortcoming of corporate ethics & compliance
Dear Sir,
I wish to offer the following for consideration by the National Association of Corporate Directors, relative to its Leading The Way national initiative to restore public and investor confidence.
I think there is a serious shortcoming in how the mainstream corporate ethics and compliance community has been pursuing and implementing its mission program for the past twenty years. I have been endeavoring to explore this with that community, but I have not been able to make any headway. You can obtain an exposition of my work by reading this email I sent to the Ethics Resource Center a week ago and by clicking through various links you encounter.
I can appreciate that your Leading The Way initiative is large in scope, that it has already been developed to a substantial, if not complete, extent, and that delving into an esoteric debate about how the corporate ethics and compliance community has been pursuing and implementing its mission program for the past twenty years is beyond the purview of the NACD's Leading The Way initiative.
On the other hand, if you think the Initiative should investigate further what I say in this email, please consider me at your disposal to help you out.
Thank you.
Sincerely,
Rob Shattuck
Birmingham, AL