Obama administration attempting to force out CEO over marketing violations
posted at 1:35 pm on April 26, 2011 by Ed Morrissey
According to the Wall Street Journal, the Obama administration has launched an effort to remove a CEO in a private-sector pharmaceutical firm as punishment for violations in marketing laws. The Department of Health and Human Services notified Forest Laboratories that it plans to blacklist CEO Howard Solomon from doing any business with the federal government, a status that would effectively lock out Forest from any government contracting:
A government attempt to oust a longtime drug-company chief executive over his company’s marketing violations is raising alarms in that industry and beyond about a potential expansion of federal involvement in the business world.
The Department of Health and Human Services this month notified Howard Solomon of Forest Laboratories Inc. that it intends to exclude him from doing business with the federal government. This, in turn, could prevent Forest from selling its drugs to Medicare, Medicaid and the Veterans Administration. If the government implements its ban, Forest would have to dump Mr. Solomon, now 83 years old, in order to protect its corporate revenue. No drug company, large or small, can afford to lose out on sales to the federal government, a major customer.
The campaign against drug-company CEOs is part of a larger Obama administration effort to pursue individual executives blamed for wrongdoing rather than simply punishing companies. The government has tried to prosecute Wall Street executives in connection with the 2008 financial crisis, but with limited success.
The Health and Human Services department startled drug makers last year when the agency said it would start invoking a little-used administrative policy under the Social Security Act against pharmaceutical executives. This policy allows officials to bar corporate leaders from health-industry companies doing business with the government, if a drug company is guilty of criminal misconduct. The agency said a chief executive or other leader can be banned even if he or she had no knowledge of a company’s criminal actions. Retaining a banned executive can trigger a company’s exclusion from government business.
In other words, the government has decided to arbitrarily decide on punishment without any due process in regard to the individuals involved. The Obama administration wants the power to dictate to the private sector who can and cannot run firms that do business with Washington. I’m not sure even Ayn Rand predicted that in Atlas Shrugged.
It’s not difficult to see where this will lead. Firms of insufficient political correctness — or insufficiently supportive of the President and his political cronies — can expect to get the Solomon treatment. Those that pay homage to the agenda of the ruling class, or pay cash to its campaigns, will almost certainly get a pass.
Think that’s an exaggeration? Contrast the HHS treatment of Howard Solomon to that of Sacramento Mayor Kevin Johnson, who was found personally liable for fraudulent handling of federal funds. Did the Obama administration cut off the city of Sacramento from further federal aid because of that status? Not exactly, as Byron York explained at the time:
Johnson, now the mayor of Sacramento, California, started a non-profit organization called St. Hope. The group’s mission, according to its website, is “to revitalize inner-city communities through public education, civic leadership, economic development and the arts.” As part of its work, St. Hope received a grant of about $850,000 from AmeriCorps.
Last year, Walpin began an investigation of how Johnson’s group spent the money. According to the Associated Press, “[Walpin] found that Johnson, a former all-star point guard for the Phoenix Suns, had used AmeriCorps grants to pay volunteers to engage in school-board political activities, run personal errands for Johnson and even wash his car.” Walpin asked federal prosecutors to investigate. In April, the U.S. attorney in Sacramento, a Bush holdover, declined to file any criminal charges in the matter and also criticized Walpin’s investigation.
That might suggest that St. HOPE was OK, and it was Walpin who was in the wrong. But at the same time prosecutors decided not to file any charges against St. HOPE, the U.S. attorney’s office also entered into a settlement with St. HOPE in which the group also agreed to pay back about half of the $850,000 it had received from AmeriCorps.
In his letter to the president, Grassley defended Walpin’s performance. “There have been no negative findings against Mr. Walpin by the Integrity Committee of the Council of the Inspectors General on Integrity and Efficiency (CIGIE), and he has identified millions of dollars in AmeriCorps funds either wasted outright or spent in violation of established guidelines,” Grassley wrote. “In other words, it appears he has been doing his job. ”
The bottom line is that the AmeriCorps IG accused a prominent Obama supporter of misusing AmeriCorps grant money. After an investigation, the prominent Obama supporter had to pay back more than $400,000 of that grant money. And Obama fired the AmeriCorps IG.
This administration follows the rule of whim, not of law. Congress needs to look into this thuggish attempt to bully Solomon out of his job — and they should take another look at the Johnson/Walpin case while they’re at it.