EXHIBIT 10.1
May 27, 1997
Xxxxxxx X. Xxxxxx, Esquire
Xxxxxxxx and Xxxxxxxx
000 00xx Xxxxxx, X. X.
Xxxxxxxxxx, D. C. 20005-5901
Re: Xxxxxx Pharmaceutical, Inc.
Dear Xx. Xxxxxx:
This letter sets forth the agreement entered into by and among the United
States of America, acting through its Department of Justice and the United
States Attorney for the District of Massachusetts (collectively referred to
as "the United States") and your client, Xxxxxx Pharmaceutical, Inc.
("Xxxxxx"), as follows:
A. PLEA
On or before May 29, 1997, or on such date as the Court may determine,
Xxxxxx shall waive indictment and plead guilty to the attached one count
Information, charging a violation of Xxxxx 00, Xxxxxx Xxxxxx Code, Section
371, a conspiracy to defraud the United States and one of its agencies, the
Food and Drug Administration ("FDA") through, among other things, its: (1)
manufacture of drugs subject to abbreviated new drug approval by the FDA,
including prescription drugs, using manufacturing processes different from
those approved by the FDA; (2) falsification of manufacturing batch records
for FDA-approved drugs; and (3) submission of false annual reports to the
FDA. Xxxxxx admits that it is in fact guilty of this offense and will so
advise the Court.
B. PENALTIES
For the count set forth in the attached information, Xxxxxx faces a
maximum penalty of $500,000 or, as an alternative fine, the greater of twice
the gross pecuniary gain or twice the gross pecuniary loss resulting from the
offense, pursuant to Xxxxx 00, Xxxxxx Xxxxxx Code, Section 3571 (c).
C. SENTENCE RECOMMENDATION
The United States and Xxxxxx agree that, pursuant to Chapter Eight of the
United States Sentencing Commission Guidelines Manual, the following sentence
is the appropriate disposition of the case:
1. a fine in the amount of ten million, six hundred fifty
thousand dollars ($10,650,000) to be paid in three
installments of three million, five hundred fifty thousand
dollars ($3,550,000) each (plus payment of all applicable
interest, on the second and third installments, as set
forth in 18 U. S. C. Section 3612 (f)), the first installment
of which is due within one week of the date on which the
sentence is imposed by the Court, the second installment
($3,550,000 plus interest ) of which is due one year after
the date on which the sentence is imposed by the Court, and
the third installment ($3,550,000 plus interest) of which
is due two years after the date on which the sentence is
imposed by the Court; and
2. a mandatory special assessment of $400 pursuant to 18 U.S.C.
Section 3013 (a)(2)(B), which shall be paid at the time of
disposition.
The United States and Xxxxxx agree that the payments described above
constitute an appropriate monetary penalty taking into account the United
States Sentencing Guidelines and the nature and extent of the violations.
D. AGREEMENT IS CONDITIONAL
The United States and Xxxxxx shall submit this plea agreement to the
Court pursuant to Federal Rule of Criminal Procedure 11 (e) (1) (C). In the
event that the Court rejects this plea agreement for any reason, Xxxxxx shall
be afforded the opportunity to withdraw its guilty plea pursuant to Federal
Rule of Criminal Procedure 11 (e) (4), and either party may elect to declare
this agreement null and void, except that, under any circumstances, the
waiver of Xxxxxx'x rights as to defenses under any statute of limitations or
the Speedy Trial Act, as set forth in paragraph 8 below, shall remain in full
force and effect. Further, if Xxxxxx shall withdraw its guilty plea at any
time, the United States may elect to declare this agreement null and void,
except that under any circumstances the waiver of Xxxxxx'x right as to
defenses under any statute of limitations or the Speedy Trial Act, as set
forth in paragraph 8 below, shall remain in full force and effect. If
Xxxxxx'x guilty plea is rejected and /or withdrawn, Xxxxxx shall have the
benefit of Federal Rule of Criminal Procedure 11 (e) (6).
E. CRIMINAL LIABILITY
The United States and Xxxxxx agree the $ 10,650,000 payment described
above is the appropriate monetary disposition of all criminal liability of
Xxxxxx to the United States with respect to all conduct by Xxxxxx:
1. that occurred between May, 1988 and July, 1994 which
relates to the alteration of product formulation or
manufacturing processes for the four FDA-approved drugs
which are the subject of the attached Information, without
FDA notification or approval; and the submission to the FDA
of any annual report which falsely represented that there
were no changes made to approved procedures for manufacturing
those same drugs; or
2. that was otherwise under investigation by the grand jury
convened by the United States Attorney for the District of
Massachusetts; or
3. that was known to the Office of the United States Attorney
for the District of Massachusetts as of the date of this
agreement; or
4. as to which the FDA had notified Xxxxxx in writing, prior
to the date of this agreement, of a possible or apparent
violation of a regulation or statute; or
5. was the subject of a recommendation to or within the
Center for Drug Evaluation and research or the New
England District Office of the FDA or the Office of General
Counsel of FDA for a criminal referral to the United States
Department of Justice as of the date of this agreement; or
6. was otherwise known to the FDA as of the date of this
agreement.
In particular, the grand jury investigation has concerned principally:
(1) allegations that Xxxxxx, in the manufacturing of a number of prescription
and over-the-counter drugs, including Albuterol Solution for Inhalation,
Brompheril Sustained Action Tablets, Hydrocortisone Pramoxine, Potassium
Chloride Extended Release Tablets, and Procainamide Sustained Release Tablets,
did not follow the method of production for those drugs as approved by the
FDA, and did engage in certain conduct to hide those manufacturing deviations,
including the filing of false annual reports and the preparation of false
batch records; and (2) whether there was fraud, including false statements,
withholding of material information, or theft from anyone else, of trade
secret information, in the abbreviated new drug applications submitted by
Xxxxxx to the FDA for each of those drugs.
The United States and Xxxxxx further agree that the $10,650,000 fine, and
any applicable interest referred to in paragraph C above, constitutes full
satisfaction by Xxxxxx of all sums that Xxxxxx might be required to pay
pursuant to a sentence or other order of the Court in any criminal proceeding
-- whether for fine, interest, forfeiture, restitution, disgorgement, or
reimbursement for the costs of the investigation by the United States for the
offenses charged in the attached Information.
This payment is not intended to, and does not satisfy or affect, the
criminal liability of any employee, agent or representative of Xxxxxx or any
other individual.
F. CIVIL LIABILITY
1. Subject only to the conditions specified in this paragraph,
and to the acceptance by the United States District Court for the District of
Massachusetts of Xxxxxx'x guilty plea and the sentence set forth in paragraphs
A and C above, the United States hereby releases Copley from any civil or
administrative monetary claims that the United States has or may have under
the False Claims Act, 31 U.S.C. Section 3801, et seq., or common law, for the
conduct described in paragraphs A and E-1, E-2, and E-3 above. This civil
release specifically does not include subparagraphs E-4, E-5 and E-6.
2. Notwithstanding any other provision in this Agreement, the
United States specifically does not release Copley, its parents, affiliates,
divisions, subsidiaries, successors, assigns and its current directors and
officers from: (a) any potential criminal, civil or administrative claims
arising under Xxxxx 00, Xxxxxx Xxxxxx Code (Internal Revenue Code); (b) any
obligations created by this Agreement; (c) any claims for defective or
deficient services or products; or (d) any administrative suspension or
debarment remedy or action by a federal agency which may arise from the
subject matter of this Agreement.
3. Nothing in this Agreement is intended to affect: (a) any
third-party liability of Xxxxxx to the United States in a civil action brought
against the United States for a personal injury due to a Xxxxxx product (i)
that is deficient or effective or (ii) as to which Xxxxxx breached any
express or implied warranty; or (b) liability of Xxxxxx for failure to
deliver items due under any contract with any agency or department of the
federal government.
4. The parties agree that all costs (as defined by the Federal
Acquisition Regulation 31.205-47) incurred by or on behalf of Xxxxxx and/or
its officers, directors, shareholders, successors, in connection with (a)
the matters covered by this Agreement; (b) the government investigation of
the matters covered by this Agreement; (c) Xxxxxx'x investigation, defense
of the matters and corrective actions; (d) the negotiation of this
Agreement; and (e) the payments made to the United States pursuant to this
Agreement shall be unallowable costs for government contract accounting
purposes. These amounts shall be separately estimated and accounted for by
Xxxxxx and Xxxxxx will not charge such costs directly or indirectly to any
contracts with the United States.
G. WAIVER OF DEFENSES
In the event that Xxxxxx'x guilty plea is not accepted by the Court for
whatever reason, or is later withdrawn for whatever reason, Xxxxxx hereby
waives any defense to any charges which it might otherwise have as of the date
of this agreement under any statute of limitations or the Speedy Trial Act,
except any such defense that Xxxxxx may already have for conduct occurring
before April 1, 1992.
H. COOPERATION
Xxxxxx shall cooperate completely and truthfully in any trial or other
proceeding arising out of the federal grand jury investigation of Xxxxxx and
some of its employees, officers, former employees and former officers. Xxxxxx
shall, to the extent that it is able, make its officers and employees
available for interviews by law enforcement agents, upon request and
reasonable notice, and shall furnish to law enforcement agents, upon request,
all non-privileged documents and records in its possession, custody or control
relating to the conduct that is within the scope of any grand jury
investigation, trial or other criminal proceeding arising out of the conduct
which is the subject of this plea agreement.
Xxxxxx shall also take reasonable measures to insure that its officers
and employees testify truthfully and completely before any grand jury, and at
any trial or other hearing, at which they are requested to do so by any
government entity.
The United States Attorney believes that the disposition of the criminal
investigation of Xxxxxx reflected in the attached Information and the
provisions of this Agreement constitute an appropriate resolution of Xxxxxx'x
criminal liability for its past conduct within the scope of the investigation
of Xxxxxx'x conduct by the United States Attorney's Office and any other
conduct by Xxxxxx otherwise known to the United States Attorney's Office. If
Copley complies with all the terms of this agreement, the United States
Attorney will, upon request by Xxxxxx, advise federal, state or local
governmental agency of that belief and of the nature and extent of any
cooperation provided by Copley.
I. BREACH OF AGREEMENT
If the United States determines that Copley has materially failed to
comply with any provision of this agreement, the United States shall be
released from its commitments under both such agreements and shall so notify
Xxxxxx in writing. Xxxxxx recognizes that no such material breach by Xxxxxx of
any obligation under this agreement shall give rise to grounds for withdrawal
of its guilty plea.
J. LIMITS ON FURTHER PROSECUTIONS
Other than the charges in the attached Information, the United States
shall not prosecute Copley for any of the conduct described in paragraph E
above.
The United States expressly reserves the right to prosecute any
individual with respect to the conduct encompassed by this agreement,
including, but not limited to, employees, present and former employees,
agents, and representatives of Xxxxxx.
K. WHO IS BOUND BY AGREEMENT
This plea agreement is binding upon the United States Department of
Justice, including all United States Attorney's Offices, except that this
agreement does not bind the Tax Division of the United States Department of
Justice.
It is expressly understood that this plea agreement will have no effect
on state or local prosecuting authorities, except as provided in paragraphs E
and F. This plea agreement does not bind the Internal Revenue Service of the
United States Department of Treasury.
L. COMPLETE AGREEMENT
This agreement and the attachments referred to herein are the complete
and only agreement between the parties. No promises, agreements or conditions
have been entered into other than those set forth or referred to in this
letter. This agreement supersedes prior understandings, if any, of the
parties, whether written or oral. This agreement cannot be modified other than
in a written memorandum signed by the parties on the record in court.
If this letter accurately reflects the agreement entered into between the
United States and your client, Xxxxxx Pharmaceutical, Inc., and if the Board
of Directors of Xxxxxx Pharmaceutical, Inc., has authorized you to enter into
this agreement and to enter a plea of guilty to the count of the attached
Information, please sign below and return the original of this letter to
Assistant United States Attorney Xxxxx Cabo Xxxxxxxx.
Very truly yours,
/s/ Xxxxxx X. Xxxxx /s/ Xxxxx X. Hunger
------------------- -------------------
XXXXXX X. XXXXX XXXXX X. HUNGER
United States Attorney Assistant Attorney General
District of Massachusetts Civil Division
Department of Justice
By:
/s/ Xxxxxx X. Xxxxxxx
---------------------
XXXXXX X. XXXXXXX
Director, Office of Consumer
Litigation
CONSENTED TO AND AGREED BY
AUTHORIZATION OF THE BOARD
OF DIRECTORS OF XXXXXX
PHARMACEUTICAL, INC.
/s/ Xxxxxxx X. Xxxxxx, Esquire
------------------------------
XXXXXXX X. XXXXXX, ESQUIRE
COUNSEL FOR XXXXXX
PHARMACEUTICAL, INC.
