Misdemeanor Convictions in Medical Device Fraud Case

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By Adrianne Appel

July 20 — A federal jury in Boston acquitted two former executives of Johnson & Johnson's Acclarent Inc. unit of all felony counts related to distributing adulterated medical devices ( United States v. Facteau,, D. Mass., No. 1:15-cr-10076, verdict 7/20/16 ).

However, the jury did convict the two on several misdemeanor charges in a July 20 verdict.

William Facteau, former CEO of Acclarent, and Patrick Fabian, former vice president of sales, had faced 14 felony counts of fraud for the unlawful distribution of the Relieva Stratus Microflow Spacer, a device designed to keep a patient's sinus open.

Misdemeanor Charges

The jury instead convicted Facteau and Fabian of 10 misdemeanor counts for the same conduct. They face no more than a year in prison for violating the Federal Food, Drug and Cosmetic Act, one year of supervised release and a fine of $100,000 or twice the gross amount that they gained.

Acclarent had sought approval from the Food and Drug Administration for the product to be used to deliver steroids, but the FDA denied the request.

The crime began when Facteau and Fabian went ahead anyway and orchestrated the marketing of the Stratus as a device for delivering steroids, the U.S. Attorney's Office for the District of Massachusetts said.

Drive Up Stock Price

The pair engaged in the crime as a scheme to drive up the price of Acclarent stock, the U.S. Attorney's Office said.

“The evidence at trial demonstrated that Facteau and Fabian sought to quickly develop and market products, including the Stratus as a drug delivery device, to create a projected revenue stream that would make Acclarent an attractive business for either an initial public offering or acquisition,” the U.S. Attorney's Office said.

Seek Acquittal

Facteau and Fabian will ask the court to set aside the convictions on the misdemeanor counts, Frank Libby, principal with LibbyHoopes PC, who represents Patrick Fabian, told Bloomberg BNA in an interview July 20.

“The government was casting it as a felony, with fraud, lying and cheating and deceiving the FDA and others and the jury simply wasn't buying it and rejected it across the board,” Libby said.

The misdemeanor counts are a “concern of everyone in the medical device industry,” Libby said, because they don't require a showing of criminal intent for conviction.

No Criminal Intent

“The government can get a misdemeanor count against anyone without showing that the defendant had any criminal intent whatsoever,” Libby said.

A federal grand jury indicted Facteau and Fabian on April 10, 2015, on the medical device fraud charges and also conspiracy, wire fraud and securities fraud charges.

The charges related to securities fraud have been dismissed, Libby said.

To contact the reporter on this story: Adrianne Appel in Boston at mailto:aappel@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

Information on the case is at http://src.bna.com/gYr.

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