Law and ethics

October 2017 Legal Report: Record Keeping, Asset Seizures, and More

By Megan Gates

01 October 2017

Print Issue: October 2017

U.S. Regulations

RECORDKEEPING. In the first settlement of its magnitude, pharmaceutical manufacturer Mallinckrodt LLC will pay $35 million to settle allegations that it violated provisions of the U.S. Controlled Substances Act (CSA).

The U.S. Department of Justice (DOJ) alleged that Mallinckrodt, one of the largest manufacturers of generic oxycodone, failed to meet its obligation to detect and notify the U.S. Drug Enforcement Agency (DEA) of suspicious orders of controlled substances, including oxycodone.

For instance, the DOJ charged that Mallinckrodt failed to create and implement an effective system to detect and report suspicious orders of controlled substances—“orders that are unusual in their frequency, size, or other patterns,” according to the DOJ.

“From 2008 until 2011, the U.S. alleged, Mallinckrodt supplied distributors, and the distributors then supplied various U.S. pharmacies and pain clinics, an increasingly excessive quantity of oxycodone pills without notifying DEA of these suspicious orders,” the department explained in a press release.

The U.S. government began investigating Mallinckrodt, and found that manufacturers were offering discounts—called chargebacks—based on sales to some downstream customers. The DOJ also charged that Mallinckrodt violated record keeping requirements at its manufacturing facility by creating discrepancies between the number of tablets manufactured in a batch and the number of tablets it reported.

Along with the financial penalty, Mallinckrodt will analyze data it collects on orders from customers in its supply chain to identify suspicious sales, and will implement specific procedures to ensure the accuracy of its tablet batch records and protect loss of product during the manufacturing process.

“The resolution advances the DEA’s position that controlled substance manufacturers need to go beyond ‘know your customer’ to use otherwise available company data to ‘know your customer’s customer’ to protect those potentially dangerous pharmaceuticals from getting into the wrong hands,” the DOJ said.

ASSET SEIZURE. The U.S. Department of Justice (DOJ) issued new guidelines on U.S. federal adoptions of assets seized by state or local law enforcement.

The guidelines, formulated after consultation with the Task Force on Crime Reduction and Public Safety and stakeholders, are designed to strengthen civil asset forfeiture programs to “better protect victims of crime and innocent property owners, while streamlining the process to more easily dismantle criminal and terrorist organizations,” according to the DOJ.

Under the new guidelines, the DOJ will not take property seized by state and local law enforcement unless the agency provides information demonstrating that the property’s seizure was justified by probable cause. The DOJ will also only adopt small amounts of cash—between $5,000 and $10,000—if there is a level of criminality or “express concurrence” of the U.S. Attorney’s office.

Additionally, the guidelines require law enforcement agencies that want to participate in the DOJ’s Equitable Sharing Program to provide officers with enhanced training on asset forfeiture laws. They also urge U.S. attorneys to proceed with caution when handling forfeitures of vehicles and residences.

“We will continue to encourage civil asset forfeiture whenever appropriate in order to hit organized crime in the wallet,” said U.S. Attorney General Jeff Sessions in a statement. “At the same time, we must protect the rights of the people we serve. Law-abiding people whose property is used without their knowledge or without their consent should not be punished because of crimes that others have committed.”

The guidelines are a change in course from the policies of the Obama administration, which in 2015 prohibited local and state police from using U.S. federal law to seize most assets without warrants or criminal charges.

“With this new policy…the Justice Department is taking an important step to prohibit federal agency adoptions of state and local seizures, except for public safety reasons,” then Attorney General Eric Holder said in a statement.

Legislation

Canada

PUBLIC SAFETY. The U.S. Department of Justice (DOJ) issued new guidelines on U.S. federal adoptions of assets seized by state or local law enforcement.

El Salvador

VIOLENCE PREVENTION. The El Salvadoran government proposed a new bill that calls for the media to self-regulate to create “nonviolent” content and promote peace.

The bill, the Law on the National System for the Prevention of Violence, includes a variety of measures designed to reduce El Salvador’s murder rate—one of the highest in the world with an annual homicide rate of 80.94 per 100,000 inhabitants in 2016, according to the U.S. Department of State.

The bill calls for the press to “contribute to the promotion of the prevention of violence, tolerance, and the culture of peace…by seeking the ethical self-regulation of information and non-violent content.”

Critics, however, say the legislation is an attempt to censor the media. “Silence will not improve the situation suffered by the country,” tweeted Patty Valdivieso, an El Salvadoran opposition politician. “Hiding the reality and violating freedom of the press will not reduce homicides.”

New Jersey

DISCRIMINATION. New Jersey Governor Chris Christie signed into law an amendment that prohibits discrimination against members of the military and veterans.

The legislation amends the New Jersey Law Against Discrimination (NJLAD) to extend “full protection of the law against discrimination to persons having liability in for service in the armed forces of the United States, guaranteeing equal employment opportunity in state contracting to all veterans,” according to the amendment.

The NJLAD already prohibits discrimination on the basis of race, creed, color, national origin, ancestry, age, marital status, civil union status, pregnancy, sex, gender identity or expression, and a number of other factors.

The amendment went into effect in August, and also requires contractors with the New Jersey state government to guarantee equal employment opportunity to all veterans.

United States

AGRICULTURE. U.S. President Donald Trump signed into law legislation that creates a program to protect food, agriculture, and veterinary systems from acts of terrorism.

The law (P.L. 115-43) directs the assistant secretary for health affairs for the U.S. Department of Homeland Security (DHS) to create a program to coordinate DHS’s efforts to defend food, agriculture, and veterinary systems against terrorism and other high-consequence events that are a risk to homeland security.

The program will be designed to lead DHS initiatives to prepare for and respond to agricultural terrorism, and will be coordinated with U.S. Customs and Border Protection on activities related to food and agriculture security and screening procedures for domestic and imported products, according to the law.

IMMIGRATION. The U.S. House of Representatives passed a bill that creates punishments for individuals who have been forcibly removed from the United States or denied admission who enter—or attempt to enter—the country.

Dubbed Kate’s Law (H.R. 3004), the bill allows the United States to fine and/or imprison—for up to two years—non-U.S. citizens who enter, or attempt to enter, the country after being excluded, deported, removed, or denied admission.

The bill also introduces penalties for non-U.S. citizens who have been convicted of crimes before being removed from the country and who attempt to illegally reenter. For instance, noncitizens convicted of three or more misdemeanors, or a felony, may be fined and imprisoned up to 10 years for attempting to reenter the United States after being removed.

The bill is named for Kate Steinle, who was allegedly killed in San Francisco in 2015 by a Mexican national. The national might have been deported prior to the shooting after being released from a federal prison on a marijuana possession warrant if San Francisco had not been a sanctuary city.

“Countless families and communities have suffered as a result of these ‘sanctuary policies,’ which undermine federal law by safeguarding criminal illegal aliens from federal law enforcement,” said U.S. Attorney General Jeff Sessions, who supports passing the bill.

Critics, however, said the law will make crime more difficult to address.

“Despite claims to the contrary, Kate’s Law…will make our communities less safe by undermining the trust that law enforcement builds with its communities—citizen and immigrant alike,” said Lorella Praeli, director of immigration policy and campaigns at the ACLU, in a statement. “The true intent of these bills is to empower Trump’s deportation force and anti-immigrant agenda.”

U.S. Representative Bob Goodlatte (R-VA) introduced the bill, which has 17 Republican cosponsors. It has been received in the U.S. Senate.

Tennessee

SUBSTANCE ABUSE. A new law requires healthcare practitioner employers in Tennessee to tell the state when employees test positive for drug usage or refuse to submit to work-related or directed drug tests.

If an employee—or potential employee—tests positive for drug usage or refuses to submit to a test, he or she has three business days to produce a lawful prescription, provide a valid medical reason for drug use, or report the incident to the healthcare practitioner’s substance abuse peer assistance treatment program.

If the employee or potential employee fails to do this, the treatment program must report the confirmed test or refusal to take the test to the Tennessee Department of Health and the appropriate licensing board. Healthcare practitioner employers who fail to comply with this provision of law may have their licenses suspended.

Additionally, the law allows quality improvement committees in the state to share information about substance abuse—positive drug tests, test refusals, and violations of the law—by licensed employees with other quality improvement committees.

The law applies only to drug tests, not to alcohol test results or test refusals.

Elsewhere in the Courts

DISCRIMINATION. Nevada Health Centers (NHC) will pay $35,000 and other relief to resolve a sex discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC). The suit charged that NHC fired a male ultrasound technician shortly after his placement with the company due to his gender. Along with monetary relief, NHC will review and revise its antidiscrimination policy to ensure it prohibits discrimination and includes a process for handling discrimination complaints. NHC will also train management on nondiscriminatory recruitment strategies, report any gender discrimination complaints, and provide reports on its recruitment and hiring practices. (EEOC v. Nevada Health Centers, Inc., U.S. District Court for the District of Nevada, No. 2:16-cv-01495-JAD-PAL, 2017)

FRAUD. A U.S. federal appeals court upheld rules that allow the FBI to issue surveillance orders for customer data, known as National Security Letters (NSLs), to telecommunications firms that prevent them from disclosing the order. Judge Sandra Ikuta wrote that the gag orders do not violate the First Amendment, meet U.S. government interests, are narrow, and allow for judicial review. “Certain recipients of these NSLs claim that the nondisclosure requirement violates their First Amendment rights,” Ikuta wrote. “We hold that the nondisclosure requirement…is a content-based restriction on speech that is subject to strict scrutiny, and that the nondisclosure requirement withstands such scrutiny.” (Under Seal v. Jefferson B. Sessions, III, U.S. Court of Appeals for the Ninth Circuit, No. 16-16067, 2017)

SURVEILLANCE. A U.S. federal appeals court reversed a lower court ruling, allowing Wikimedia to continue to pursue its case against the National Security Agency (NSA) for allegedly spying on its users’ Internet communications. The appellate court found that Wikimedia could sue the NSA for violating its Fourth Amendment protections against unlawful searches, rejecting the U.S. government’s claim that Wikimedia was speculating about the damage that had been done. “There’s nothing speculative about it—the interception of Wikimedia’s communications is an actual injury that has already occurred,” wrote Judge Albert Diaz for the court. (Wikimedia v. NSA, U.S. Court of Appeals for the Fourth Circuit, No. 15-2560, 2017)