U.S. prosecutors get guidance on corporate monitors
2008-03-10

Category Medical Instruments People John Ashcroft Company Blackstone Group Johnson & Johnson

The U.S. Department of Justice has issued guidelines to its prosecutors on selecting corporate monitors, who are hired to make sure companies abide by the deals they make with federal enforcers to avoid prosecution.

But the guidance did not address compensation, which became a major issue when it was revealed that a firm run by former U.S. Attorney General John Ashcroft could receive as much as $52 million for monitoring Zimmer Holdings, a medical devices company.

The guidance comes one day before Ashcroft is expected to testify before a House Congressional hearing about his contract to monitor Zimmer -- one of four medical device makers that have agreed to pay a total of $311 million to settle a kickback probe.

The Department of Justice memorandum, dated March 7 and made available to reporters on Monday, includes the principle that the monitor is an independent third party and not an agent of the corporation or of government.

The guidelines say the selection process must "avoid potential and actual conflicts of interests" and specifies that "United States Attorneys and Assistant Attorneys General may not make, accept, or veto the selection of monitor candidates unilaterally."

"These principles are about transparency, uniformity and consistency on the use of monitors. It relates to criminal matters only," said Alice Fisher, assistant attorney general in the Department of Justice's criminal division.

"It is the first time guidance is being given out to the department on this. It is binding."

When asked about the timing of the memo's release, on the eve of Ashcroft's expected testimony, Department of Justice spokesman Paul Bresson said: "We're not here to discuss cases in the past."

He added: "There's a hearing tomorrow. We're not trying to say anything to interfere with anything that's going to happen tomorrow."

Democratic lawmakers have questioned how Ashcroft's firm won the Zimmer contract and in general have been questioning how corporate monitors are chosen.

In September, Zimmer, Johnson & Johnson unit DePuy Orthopaedics, Smith & Nephew and Biomet, owned by a group of investment firms including Blackstone Group. agreed to pay civil settlements and avoid criminal prosecution by agreeing to reforms.

Prosecutors accused the companies of using consulting deals with orthopedic surgeons as inducements to use their products. Criminal complaints were filed against the four companies, accusing them of conspiring to violate federal anti-kickback law, but they will be dismissed if the reforms are carried out.

(Reporting by Rachelle Younglai and Randall Mikkelsen; Editing by Gary Hill)