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Back to the future: Can Chinese doubling down and American muddling through fulfill 21st century needs for environmental governance?

Xiaofan Zhao(1) | Oran R. Young(2) | YeQi(1,5) | Dan Guttman(3,4)

Abstract
At the close of the last millennium, prominent thinkers projected that the political systems of leading economies would converge during the coming years. Yet, research has shown that China and the United States have developed distinctive institutionalized governance processes (IGPs) to address environmental issues. Can these distinctive processes persist in turbulent times? In reality, the two countries seem to be decoupling in their economic ties and diverging in political pursuit. Under the current circumstances, what can we say about the ability of the two systems to meet emerging environmental challenges of the 21st century? We argue that neither system is likely to experience fundamental change during the foreseeable future. Current developments are highlighting differences between goal-based governance strategies prominent in China and the rule-based strategies of the United States. As the urgency of solving transcendent problems like climate change rises and political tensions grow, it is essential to work with divergent systems to address common problems.

Outline
1 | INSTITUTIONALIZED GOVERNANCE PROCESSES IN CHINA AND THE UNITED STATES
2 | THE POWER OF INSTITUTIONALIZED GOVERNANCE PROCESSES
2.1 | China: The Xi administration doubles down on dominant environmental governance processes, while there is a parallel movement toward “socialist rule of law with Chinese characteristics”
2.2 | United States: Executive authority is not a substitute for law-centered practices; an emerging response features court action to reinterpret existing laws and citizen action to promote a “Green New Deal”
3 | GOAL-BASED AND RULE-BASED GOVERNANCE STRATEGIES IN CHINA AND THE UNITED STATES
3.1 | China: Hitting the targets
3.2 | United States: Making and implementing the rules
4 | STRENGTHS AND WEAKNESSES OF IGPS IN CHINA AND THE UNITED STATES
5 | CONCLUSIONS

__________________
Heading Footnotes:
1. School of Public Policy and Management, Tsinghua University, Beijing, China
2. Bren School of Environmental Science and Management, University of California (Santa Barbara), Santa Barbara, California, USA 3School of Law, Tianjin University, Tianjin, China
4. Institute of Global Public Policy, Fudan University, Shanghai, China
5. Division of Public Policy and Institute for Public Policy, Hong Kong University of Science and Technology, Kowloon, Hong Kong

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Shadowboxer: Dan Guttman, a lifetime investigating the government’s “shadow workforce” of contractors

Federal procurement is not a subject that makes for compelling television, but procurement scandals can be good drama, which is why on Nov. 30, 1980, the CBS newsmagazine 60 Minutes aired a story that suggested private contractors were running the Energy Department. Outside consultants, intoned correspondent Morley Safer, seemed to do everything for Energy. They assembled the department budget. They wrote congressional testimony for Energy officials. They were the “bureaucrats’ bureaucrats,” Safer said.

On the 1980 videotape, you see a parade of lawmakers press the case against Energy, including Sen. David Pryor, D-Ark. Then you meet Dan Guttman, a fast-talking investigator who works for Pryor. Guttman says Energy’s use of consultants portends a great shift in how government works. “The public is not aware who is making decisions in this country,” he tells Safer. “We find agencies delegating large chunks of [themselves] to one or more firms over a number of years and, in effect, saying, ‘Run this portion of the agency.’ “

The camera clearly likes Guttman. He tells jokes, he gestures wildly with his arms, he gets more airtime than his boss. At one point, Safer even turns the microphone over to Guttman and lets him interrogate John Hewitt, Energy’s chief financial officer. Guttman also gets the last word: “You name what government does and we have found contractors doing it,” he says. “You get up close, it looks like a conspiracy, but really it’s chaos.”

Guttman has spent his career in the middle of this chaos. In the early 1970s, fresh out of law school, he co-wrote The Shadow Government (Random House, 1976), an exposé of the federal consulting industry. Since 1980, he has been part of nearly every congressional effort to scrutinize the government’s use of contractors. Along the way, he became convinced that the government’s increasing reliance on private companies raises basic, even constitutional, questions of accountability. He believes that most agencies can no longer effectively oversee their contractors and that existing oversight tools-such as setting performance standards in contracts-often don’t work.

“There are two sets of tools that we have for [contractor] accountability,” Guttman says. “One is legal-the presumption that only governmental officials can do certain work. That tool isn’t working. And then we have management tools, such as performance contracting. My observation is that those tools aren’t working either. Neither one of them is working in prime time.”

Needless to say, not everyone agrees. “Look, this is not some kind of Wild West show where everyone is just running amok,” says Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based association that represents contractors. “I don’t believe there are very many examples of government procurement that raise the issues Guttman worries about,” says Steven Kelman, a professor at Harvard University’s Kennedy School of Government and former federal procurement administrator.

Although Guttman is not opposed to contracting in principle, he is associated with efforts to curb the use of contractors. Pryor cut agency budgets for consultants and waged an unsuccessful campaign to make federal contractors register all of their clients with Congress, just as lobbyists must do. Rick Goodman, a former Pryor staffer who worked with Guttman, remembers their icy relations with industry during a 1989 investigation. “The consulting industry thought we were a bunch of bomb throwers,” he says.

Professionally, Guttman defies easy description. A practicing attorney, he still represents whistleblowers and teaches graduate level courses in government at Johns Hopkins University. He is part lawyer, part historian, part gumshoe investigator. “We don’t have a discipline in law that [covers] what Dan does,” says Sallyanne Payton, a professor at the University of Michigan Law School, who met Guttman through the National Academy of Public Administration. “I think he’s more of an activist,” offers Jody Freeman, a professor at the UCLA Law School. In an e-mail, Guttman notes that many of his friends have started think tanks, and playfully wonders whether his interests could fit that mold: “How does the ‘Center for the Study of Public Functions by Nongovernmental Entities’ grab you?”

Guttman the person leaves a clear impression. With his unkempt hair and dark, darting eyes, he radiates intellectual intensity. When he wears his raincoat, he resembles television’s rumpled detective, Columbo. He is an incessant talker, the master of the marathon conversation. Spend some time with him and you realize he treats life as if it were a never-ending college seminar; every topic holds interest, every issue, no matter how obscure, must be wrestled to the ground. “Obscure and arcane is where Dan lives,” says Nancy Bekavec, a law school friend who is now president of Scripps College in Claremont, Calif. “If you gave him the choice of going to see a Mongolian rap artist, or Britney Spears, he would assume all the cool people were going to see the Mongolian rap artist.”

Guttman devours information. As staff director for the Presidential Commission on Human Radiation Experiments in the mid-1990s, he would literally wade into archival agency documents. “Every day we got a shipment of documents, and Dan would not wait for them to be processed. He would go in and start opening the cases and rifling through them,” remembers Gregg Herken, a Cold War historian who served on the commission.

Guttman’s investigations have made him a walking encyclopedia of government arcana, which he generously shares. “He helped me realize that the Library of Congress was basically run by contractors,” says 60 Minutes correspondent Andy Rooney. “It was a shocking revelation to me.” Rooney hired Guttman to do research for Mr. Rooney Goes to Washington, an award-winning CBS program broadcast in 1975.

Guttman seems genuinely indifferent to material things. In 1997, he left a job as a commissioner of the Occupational Safety and Health Review Commission partly because he felt guilty making a six-figure salary for a job that required little work. “It was an easy job, a good solid salary, and Dan was miserable,” says a friend.

Guttman has never held a management position in an agency, nor had any official authority over procurement rules. Yet he has found a way to influence contracting policy-or at least to be a thorn in the side of those making it-through his investigations and lawsuits. His work has helped set the parameters of the current debate over outsourcing federal operations. For example, the idea that certain jobs are “inherently governmental,” and must be performed by civil servants, dates to 1960s-era policies. But it only got legs-and a place in the 1998 Federal Activities Inventory Reform (FAIR) Act-after a 1989 investigation of federal contracting in which Pryor and Guttman pressed the General Accounting Office to define the limits of inherently governmental work: Should contractors be allowed to write official testimony? Or interpret regulations?

Now, in a new era, with no big lawsuits or congressional investigations on the horizon, Guttman is trying to focus attention on the government’s haphazard approach to outsourcing, which in his view raises constitutional questions. The framers sought to protect citizens from an overzealous government by enacting a Bill of Rights; the same concern led later generations to enact laws such as the 1887 Hatch Act and the 1974 Freedom of Information Act, which seek to control the behavior of federal officials. “The Constitution and all these statutes are directed at protecting us against the abuse of power by government actors,” Guttman says. “Well, what happens when private contractors, who aren’t covered by these laws, do much of the government’s work?”

Guttman’s arguments confound some procurement experts. Larry Wright, a senior vice president at consulting firm Booz Allen Hamilton, doesn’t see the constitutional link. “I’ve never heard these oversight issues characterized as constitutional issues before,” he says. “It’s the legal view,” says Chip Mather, a senior vice president with Acquisition Solutions Inc., a procurement firm based in Chantilly, Va.

Guttman carries a staggering amount of information in his head, and it can be overwhelming when unleashed on the uninitiated. His most recent congressional testimony included 49 endnotes in 15 pages. “Part of the challenge for Dan is for the world to know what he knows,” says Charles Lewis, director of the Center for Public Integrity, a Washington-based network of investigative journalists.

Guttman approaches contracting from the fields of history and law; his arguments hinge on a certain understanding of how contracting changed with the Cold War. They also grow out of his experience doing something very few other people have ever done-studying actual contracts.

CRACKING THE CODE

In the summer of 1971, Guttman walked into a contracts office at the old Health, Education and Welfare Department. He was searching for a report. “Help yourself,” said the man at the desk, and, over the next few weeks, he did. Poring over contract files, he discovered that most HEW contracts went to a few well-connected firms, often without competition. He read scathing letters from Lois Ellin Datta, head of evaluation for the Head Start program, to her contractor, the Stanford Research Institute. In its final report, Stanford had plagiarized papers she had published. “Can’t your staff think for itself?” she demanded. He found few contracts with performance standards. For example, a contract with RAND, a research organization, for an analysis of the distribution of doctors in rural areas simply declared, “As to the essential features of the performance, the best that can be bargained for is the contractor’s best effort.”

At the time, Guttman was one of “Nader’s Raiders,” the young progressives who churned out exposés of government and corporate America for consumer advocate Ralph Nader. This didn’t stop him from making friends with HEW staff. He joined them for coffee breaks. He answered the phone when they went to lunch. By the time someone questioned his presence in the office, he had already read through all the files. Guttman would have better moments as an investigator, but none that so vividly showed how contracting worked behind the scenes.

“It was like cracking the code,” he remembers. “When you get to the inside documents, you find too many cases where the light is on but nobody is home.”

Guttman was fascinated by the role of think tanks in setting public policy, not an unusual concern in the circles he traveled in. He grew up in White Plains, N.Y., the eldest of three brothers. A mediocre student in high school, he went to the University of Rochester, where he was a big fish in a small pond. Guttman was student body president, editor of the student newspaper, and an intramural wrestling champion. In 1968, his senior year, he helped lead student protests against Dow Chemical, the manufacturer of napalm, when the company came to recruit on campus.

In 1969, Guttman enrolled at Yale Law School-where it seemed that almost everyone was studying something besides law. Guttman’s friend Robert Peck studied architectural history; one student spent most of his time writing poetry. Guttman was no exception, quickly immersing himself in research on federal consultants.

Guttman loved to tell stories about the scandals he found. Peck remembers Guttman stopping him in the hall of their dorm. “‘Listen to this, isn’t it outrageous?'” he would say. But Peck and others wondered what the stories really proved. “I said, ‘Dan, it’s a lot of anecdotes, but what does it add up to?’ ” says Peck, a former commissioner of the General Services Administration’s Public Buildings Service, who is now president of the Greater Washington Board of Trade.

While still in law school, Guttman and Barry Willner, a fellow Nader researcher, decided to write a book about the consulting industry that had grown up around agencies, and to discuss the policy issues it raised. The result was The Shadow Government. “Barry and I could have easily shown that procurement rules weren’t followed,” says Guttman. “But we wanted to know how well the system was performing-whether it was providing successful results.”

They showed how the spread of management fads, such as the Defense Department’s Planning-Programming- Budgeting System, gave contractors entry into agencies. They also showed the role contractors played in bureaucratic turf wars. The book highlights the experience of Donald Rumsfeld, the young director of the Office of Economic Opportunity, who used contractors to gain leverage over a defiant career workforce. “Don found himself with a bureaucracy that hated him,” said Dick Cheney, then Rumsfeld’s assistant, now vice president, in an interview with Willner. In 1969, shortly after being appointed by President Nixon, Rumsfeld tapped Booz Allen Hamilton and Arthur Andersen to reorganize the agency. The new organization chart had no positions for 108 civil servants, who were left to wander the halls.

The book takes a stab at explaining the influx of contractors into government, a theme Guttman expanded on in later writings. He attributes the rise of the federal consulting industry-or the “contract bureaucracy,” as he calls it-to a group of mid-century reformers who believed government had to tap business and academia in order to carry out new missions given Americans’ aversion to big government. A pivotal text for him is The Scientific Estate (Harvard University Press, 1965) by Don Price, the first dean of Harvard’s Kennedy School of Government. Price argued that the then-emerging network of think tanks, universities and government created a “diffusion of sovereignty.” Guttman also points to Business in the Humane Society (McGraw-Hill, 1971), by John Corson, an influential McKinsey & Company executive, which heralds contracting out as a “new form of federalism” that enables the government to accomplish new tasks with help from industry.

The new approach came to life in organizations such as RAND, Aerospace Corp., and Mitre, nonprofits created during the Cold War to run Air Force weapons programs. It also took root in NASA and Energy, two agencies designed to be heavily dependent on contractors. Guttman believes government has not yet come to terms with the implications of these reforms.

THE WORK OF GOVERNMENT

Guttman doesn’t lose much sleep over the procurement of goods-the purchase of “ketchup and paper plates,” as he puts it. His interest lies in the government’s use of contractors to provide policy advice and management services, which he calls “the work of government.” The Shadow Government purports to reveal “the government’s multibillion-dollar giveaway of its decision-making powers to private management consultants, ‘experts,’ and think tanks.” Today, Guttman is less inclined to see wholesale contracting out as a scandal, but he is more critical of a federal culture that presumes agencies have the capacity to oversee contractors, despite evidence to the contrary.

Guttman says he’d prefer it if Office of Management and Budget Circular A-76, which governs federal outsourcing efforts, simply said, “If you want to contract out everything in the Defense Department, be our guest, but that may mean there’s no one left inside government who can monitor the contractors. Before you outsource, you should have to attest that there is adequate oversight capacity in place, or explain why it isn’t needed.”

That oversight, Guttman says, involves more than simply auditing to control cost overruns. His chief worry is that outsourcing will make government less accountable to the public. Contract employees are not listed in agency employee directories, and some contractors do not publicize their federal clients, making it hard to gauge their influence. Openness laws such as the Freedom of Information Act apply to civil servants, but not to for-profit contractors. Federal employees and contractors are both prohibited from acting in areas in which they would have conflicts of interest, but the rules for civil servants are much stricter and include criminal penalties.

Guttman believes these differences are anything but academic. He loves to cite a 1998 dispute in which the electric power industry came face to face with the rules governing the contractor workforce. Concerned about new clean air rules proposed by the Environmental Protection Agency, power companies tried to obtain the data underlying the rules. The EPA refused, noting the data was maintained by Harvard University, which had developed it under an EPA grant. So the companies took their concerns to Congress, which, over howls from nonprofit organizations and universities, amended FOIA to allow public access to their federally sponsored research. “Regulated industries urged openness in government, while nonprofits complained that the application of FOIA to them would be chilling to their activities,” says Guttman.

Because contractors and civil servants are governed by different rules, efforts to blur the boundaries between the two workforces are extremely troubling to Guttman. The notion that civil servants and contractors are interchangeable, except where “inherently governmental” work is involved, is a central premise of President Bush’s competitive sourcing initiative. It animated the Clinton administration’s “reinventing government” campaign as well. To Guttman, this argument ignores the essential differences between the public and private sectors. “Both the Clinton/Gore reinventing government [initiative] and the Bush management agenda aim to render civil servants more ‘contractor-like,’ but do so with little or no reflection on the fact that our long-standing laws do not now provide for the blurring of the boundaries between official and contractor status,” he says.

Critics reply that laws such as the Freedom of Information Act and the Hatch Act have little bearing on the kinds of jobs at stake in the push to subject federal work to competition in both the Bush and Clinton administrations. “By no stretch of the imagination does the question of contracting for laundry services at Veterans Health Administration hospitals raise any of the issues that [Guttman] most strongly worries about,” says Kelman. In theory, jobs that do raise these issues are protected from outsourcing by the principle of “inherently governmental” work.

But in practice, Guttman notes personnel ceilings often force agencies to hire contractors to perform new work, whether it is inherently governmental or not. And the principle says little about whether outsourcing will help an agency’s mission. The Defense Department now uses the concept of “core” and “noncore” jobs to guide its outsourcing decisions.

“People in Defense know ‘inherently governmental’ is not an adequate concept,” says Guttman. He notes that the principle has not stopped agencies from contracting out procurement oversight or military logistics work in Iraq-both tasks Guttman considers to be “the work of government.”

Guttman’s legal cases have left him deeply skeptical of government’s oversight ability. In 1993, Energy proudly unveiled a new strategy for the cleanup of nuclear weapons plants: The contractors running the plants would subcontract the cleanup to other private firms, bringing new expertise to the cleanup effort. Subcontracting allowed the firms to replace the longtime federal workforce at the plants, which was represented by the Oil, Chemical & Atomic Workers Union and its attorney, Guttman. When a subcontractor took control of the cleanup at Fernald, Ohio, the union filed suit in U.S. District Court to prevent layoffs.

During the discovery process, Guttman obtained contract documents suggesting Energy had little idea what its new subcontractors were up to. In its health and safety plan, the Fernald subcontractor instructed workers not to tell Energy inspectors about possible problems at the plant. These revelations grabbed Congress’ attention, and the subcontractor quickly settled the case with the union, retaining its workforce.

But some of Guttman’s adversaries say the world of federal procurement is different now than when he did the bulk of his research. Agencies today prefer to do business with a single integrator that oversees many firms, each of which has a specific role, making conflicts of interest easier to prevent, they argue. “It’s absolutely true that in the last 20 years, government has tightened up on a lot of things,” says Booz Allen Hamilton’s Wright.

When Peck went to the Public Buildings Service in 1995, he had few plans to hire outside contractors. But then he realized that his leasing staff lacked in-depth knowledge of the real estate market. And Congress was pressuring the agency to outsource. So Peck hired real estate firms to provide leasing advice to PBS offices in each region of the country. “That’s a pretty good way to use contractors,” he says. “If Dan had the chance to run a big agency, I think it would be really interesting to see where he would draw the line on contractors.”

GETTING AT THE TRUTH

It’s not easy to picture Guttman as an agency head. He is too iconoclastic to follow party orthodoxy, and seems physically unable to speak in sound bites. “You could never quite be sure what he might say or do,” says Bekavec. “Dan fiercely wants to get to the truth and he’s going to get there no matter what.”

When asked what he would do if he had a top management position-Kelman’s federal procurement administrator job, for instance-Guttman hesitates. “I wouldn’t know where to start,” he says. He imagines many of his ideas would face resistance from contractors, an assessment shared by his friends. “If my job is to contract out, do I really want to do less of it or do it more carefully?” asks a colleague.

Guttman believes he can have more of an effect on the outsourcing debate from his perch in academia. When he left government in 1997, he hoped to draw attention to the basic questions of accountability posed by outsourcing. He and an eclectic group of friends in academia and at nonprofit groups are studying how contractor accountability affects everything from warfare to Medicare.

He explores the same issues in the classroom. On Wednesday evenings, Guttman teaches a seminar at Johns Hopkins’ center in Washington. Its purpose is to explore the American tradition of harnessing private interests to serve the public interest, a theme that hopscotches from The Federalist Papers to present-day outsourcing arrangements. In the seminar’s second meeting this fall, Guttman paced across the front of the room, discussing Alexander Hamilton’s proposal for a national bank. The bank was designed to give the federal government a role in the nation’s economic development, while also helping the merchant class. “Today, we would call it a public-private partnership!” he exclaimed.

Guttman believes the time is right for another top-to-bottom look at the government’s use of contractors. “It’s a good time for someone to say, here are the bigger questions that aren’t getting attention,” he says. “And then you’ll see some congressmen asking questions. And once they do, they’ll see that federal officials are not completely in control of contractors.”

This is a remarkably timeless article from 2003 by JASON PECKENPAUGH, for Govexec.com, about Dan Guttman, of counsel, Guttman, Buschner & Brooks, PLLC.

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Mass Tort Deals: Must-Read Interviews for a Must-Read Book

In 1965, Ralph Nader published Unsafe at Any Speed, an exposé on automobile safety, and since its publication, consumer faith in product safety has never been the same.

The early efforts of Nader and his legion of young lawyers and researchers—who came to be known as Nader’s Raiders—spurred the growth of products liability litigation. Nader gave consumers and their counsel a reason to go to court: they challenged the safety of products from cars to cribs, and the courtroom provided the level playing field where even the little guy could be heard and get justice.

Now, 50 years later, a law professor at the University of Georgia is exposing impropriety in a system—known as multidistrict litigation, or MDL—that is designed to handle these types of cases.

In her 2019 book Mass Tort Deals: Backroom Bargaining in Multidistrict Litigation, Professor Elizabeth Chamblee Burch blows the whistle on MDL. She writes about a virtually unregulated system driven by deals between a limited group of plaintiff and defense lawyers involving tens of thousands of plaintiffs. Burch’s work is not just based on empirical data; she writes about victims of car accidents, misbranded drugs, and defective medical devices whose cases—purportedly consolidated only for pretrial proceedings—are resolved by court-appointed lead counsel through global settlements that give defendants finality and plaintiffs little choice but to accept the offer. Burch also raises concerns about a system that promotes, indeed at times coerces, settlements over the transparent litigation that has historically driven regulation and made products safer.

If one were to think her concerns involve only a small fraction of federal court litigation, think again. Burch writes that “from 2002 to 2017, MDL jumped from 16 to 37% of the federal court’s pending case load,” with 95 percent of those cases in the products liability arena.

The system that Burch writes about had its origins in the early 1960s, when the federal courts were flooded with nearly 2,000 lawsuits stemming from a nationwide conspiracy to fix the prices of equipment used in the transmission of electricity. With guidance from Chief Justice Earl Warren, who created a Coordinating Committee of Multidistrict Litigation, a process was created to drive efficiencies in the litigation of these cases. The work of Warren and the committee’s chair, Alfred P. Murrah—then Chief Judge of the Tenth Circuit—paved the way for the passage of the MDL statute, 28 U.S.C. § 1407, in 1968. That statute provides for the coordination for pretrial purposes of civil actions involving “one or more common questions of fact.” Cases filed anywhere in the federal court system can be transferred to a single district for pretrial purposes. The MDL statute is short and—in contrast to Federal Rule of Civil Procedure 23, which addresses class actions—provides no standards for the appointment of counsel, class representatives, or for the approval of settlements.

With Supreme Court rulings on class actions in the late 1990s making class certification more difficult for plaintiffs, mass tort actions—rolled up into the MDL system—became the go-to method for handling matters that in yesteryear might have been addressed through the more regulated class-action system. The big plaintiff firms could still litigate massive actions and the defense lawyers could still engineer settlements giving their clients global peace.

Yet, the MDL statute addresses only pretrial matters—not settlement; not global peace; not provisions for opting out; not the appointment of counsel, the compensation of counsel, or the confidentiality of and use of materials discovered in litigation. It is here that Burch does a masterful job of exposing the “Mass Tort Deals” that have evolved from an unregulated system.

To get a better sense of the problem, I posed questions to Professor Burch and Judge Nancy Gertner, who retired from the federal bench in 2011 and now teaches at Harvard Law. My interviews are below.

Judge Gertner, do we have a real problem with the MDL process and how do you view that problem from having been on the bench?

The problem is the classic one: rules and transparency. There were no clear rules with respect to who is assigned an MDL. There is no blind draw, no concrete set of procedures. After I complained about the asbestos MDL shortly after I got on the bench—late 1990s—I was never assigned a case again. My complaint was that the MDL judge, Judge [Charles] Weiner of Philadelphia, was simply dismissing the cases “subject to their being reopened by motion.” The dismissals were contrived, done for the purpose of showing that the cases were moving. I finally got an MDL when Judge Robert Keeton died and my court assigned me to one that had been assigned to him. In the last year I was on the bench, I drew a civil rights case that was headed for the MDL court. My case was the first filed, a second was in Chicago, a third in San Francisco. All of us were up to date, willing to take on the case. It was assigned to neither of us; it went to a judge in Memphis who was on the committee.

If the MDL process were “merely” procedural, it would be one thing. But the decisions made by the MDL judge profoundly affected the substantive outcomes of these cases. Under the circumstances, the failure to have a transparent judicial assignment process is critical to the fairness of the proceeding.

Professor Burch, your book raises ethical issues regarding the MDL process. Why has there not been more of an outcry?

All of the primary stakeholders—plaintiffs’ lawyers, corporate defendants, defense attorneys, and yes, judges—benefit from settlements. And it’s in aggregate settlements where ethical issues arise most prominently. To give corporate defendants the closure they demand, some “settlements” (deals between defendants and plaintiffs’ attorneys) require plaintiffs’ lawyers to recommend the settlement uniformly to all their clients and then some take the extraordinary step of requiring lawyers to withdraw from representing clients who refuse to settle. That doesn’t leave much room for genuine consent.

Those who are most impacted by ethical violations are the plaintiffs, many of whom are severely injured and have neither the time nor the resources to make a stink. In a world of repeat players, they are the one-shotters, the ones who need and deserve the most protection because their voices are so rarely heard. But therein lay the crux of the principal–agent problem: if it’s in the lawyer’s best interest to flout the rules and get the deal done, there will be no outcry, only silence.

Judge Gertner, from your vantage point, why has there not been more of an outcry about the problem?

The question is who is likely to complain and to whom? Judges are not complaining; the assignments are a plum for the Court, entitling the judge to attend a yearly conference in Palm Beach. And the skewed assignment process is usually not apparent. (It was in my case.) The lawyers are not complaining. Candidly, many of the lawyers in MDL case are competing for lead counsel; the last thing they want to do is rock the boat.

Professor Burch, many of the MDLs involve drugs or medical devices. Are the issues you raise in your book ultimately impacting healthcare standards?

The mass-torts plaintiffs’ bar is a last resort, a failsafe of sorts, for when medical drugs or devices come on the market that do more harm than good. So, yes, there is a feedback loop from the courts to healthcare and vice versa.

The FDA regulates everything from tainted spinach to cosmetics to pet food. It can’t and won’t catch everything. There will be drugs and devices on the market that shouldn’t be. We would hope that litigation opens a window into the processes that allowed that to happen so that drug and device companies would avoid those kinds of mistakes in the future. But, if the past is any indicator, the profit motive is a very strong one to overcome.

Judge Gertner, what is the process for fixing the problems?

The authorizing legislation and rules should be redone. There ought to be rules with respect to the assignment of judges—a random draw, a set of principles. And the rules along with judicial training need to make clear that some cases should not be settled; the premium in the MDL is not—as it was supposed to be—providing a mechanism for shared discovery, with a trial to follow in the jurisdictions from which the cases came. The premium is on resolving the case.

Professor Burch, who needs to read your book, and what needs to be done to begin to fix the problems you identify?

I hope the book will appeal broadly to policymakers, judges, lawyers, and plaintiffs alike. It’s empirically based, but not stodgy. I aimed to make it accessible to a diverse group—from insiders who operate in this world daily to those who are injured and experiencing the judicial system firsthand.

As for a fix, there is no single, silver bullet. But there are many things that can improve it and judges can implement the changes and reforms I suggest without waiting for rule changes or legislation. I devote an entire chapter to proposals, but I’ve boiled the key principles down to the following:

  • Appoint lead plaintiffs’ lawyers based on the same principles of adequate representation that we see in class actions. In doing so, judges should invite applications and think about building the best team by seeking cognitive diversity—people with a diverse set of tools and skills, who approach problems differently.
  • Value dissent among lawyers and create outlets for it. As plaintiffs’ aims and preferences differ, dissenters can challenge the status quo and inject undisclosed information into the discussion. Dissenters can thereby act as a failsafe (but not a substitute) for adequate representation on key motions.
  • Tie plaintiffs’ attorneys’ common-benefit fees (the fees they are paid for their work on behalf of the group as a whole rather than their individual clients) to plaintiffs’ actual outcome rather than to the “sticker price” of the settlement fund. Begin by subtracting litigation costs and administrative fees from the gross settlement amount so that lawyers don’t profit from added expense. Then tailor awards to groups of lawyers based on quantum meruit. If there’s a group of non-lead lawyers who do little but advertise and freeride on leaders’ efforts, then taxing them with a higher percentage common-benefit fee might be appropriate. Conversely, if lawyers develop and try state court cases on their own, judges should reduce common-benefit fees for those lawyers to incentivize them to develop cases on the merits.
  • Empower plaintiffs to weigh in on their settlement awards. Awarding fees on a quantum meruit basis gives judges the authority to hear about the benefits of any deal from those who are most affected. Many plaintiffs want an opportunity to be heard, even if it’s just a chance to submit a letter to the judge. Some feel victimized not only by the corporate defendant but by the litigation process itself. If plaintiffs are receiving less than 50% of a settlement award, that should be a huge red flag for the judge.
  • Remand cases episodically. When leaders decide which cases they’re going to develop and which ones they aren’t, the ones that won’t benefit from multidistrict litigation centralization shouldn’t be waylaid by the MDL process. Likewise, if discovery reveals that a block of cases is no longer benefitting from centralization or if there is a global settlement that clients don’t want to accept, judges shouldn’t be hesitant to remand those cases to the federal courts from which they came. This gives plaintiffs the ability to credibly threaten trial and the corporate defendant the opportunity to demand case-specific proof.

And now my take. Our rule of law is a work in progress. That’s what makes is special. It is a system that welcomes critique and improvement. For NITA lawyers and jurists who champion the rule of law, the Burch book is a must-read. It is a catalyst for an open dialogue and undoubtedly procedural changes in the way many of these mass tort cases are adjudicated.

Reuben Guttman is a founding partner of Guttman, Buschner & Brooks, PLLC, in Washington, D.C. Read more of his On the Rule of Law columns here.

By

Sentencing Insights From A Chat With Judge Nancy Gertner

By Alan Ellis |law360.com | February 2, 2020

In 1983, I asked the incoming president of the National Association of Criminal Defense Lawyers, the late Robert W. Richie of Knoxville, Tennessee, if I might chair a new committee that I was discussing with past president Gerald Goldstein, then of San Antonio, Texas, and now of Aspen, Colorado. Its task would be to represent and counsel criminal defense lawyers who were imperiled with risk of contempt, disqualification, subpoena or bar grievance arising out of their vigorous and ethical defense of their clients. It was to be called the NACDL Lawyers Assistance Strike Force.

The first client of the Strike Force was Nancy Gertner, then a prominent lawyer in Boston. Gertner and her co-counsel had been subpoenaed on the eve of trial in the U.S. District Court for the District of New Hampshire to turn over fee records from certain clients in order to show that if clients could afford top-notch lawyers, they couldn’t possibly be menial workers. (Gertner’s client was a parking attendant but had the funds to retain her.)

I flew to New Hampshire and testified on behalf of the NACDL Strike Force, which resulted in the judge’s quashing the subpoenas:

The use of the phrase chilling affect upon the role of an attorney engaged in criminal defense work by being served a subpoena in circumstances such as this is mild. To permit it would have an arctic effect with the non-salutary purpose of freezing criminal defense attorneys into inanimate ice floes, bereft of the succor of constitutional safeguards.

The monetary problems such as attorneys hiring attorneys (as we have in this case) can be better spent on pertinent matters (a lawyer’s time is his stock-in-trade). Also to be considered is the ever increasing specter of malpractice suits, the possible vindictiveness of prosecution counsel towards a successful, recalcitrant, obnoxious or obfuscating adversary, the jeopardizing of the attorney-client relationship, real or imaginary, the reluctance of capable attorneys to continue or to consider a full or partial career in the practice of criminal law and the further depletion in the paucity of capable trial lawyers because of a concatenation of events leading to abuse of process.[1]

The district court quashed the subpoenas, emphasizing the negative effect that it believed the subpoenas would have on the attorneys’ ability to defend their clients in the pending state criminal action. The court expressed concern that forced disclosure would jeopardize the attorney-client relationship at a crucial point in the defense preparation. The could also found that “[t]he actions of the U.S. Attorney are without doubt harassing” and noted that enforcement of the subpoenas in this context would deter attorneys from following a career in criminal law because of the personal and professional traumas resulting from the United States attorney’s investigatory tactics.

The government appealed, but the U.S. Court of Appeals for the First Circuit affirmed the decision.[2]

Gertner subsequently was nominated by President Bill Clinton to the U.S. District Court for the District of Massachusetts. Her nomination was strongly supported by the late Sen. Edward Kennedy, D-Mass. She served until 2011, during which time she issued numerous opinions on sentencing issues and was widely published in the area. She currently is a senior lecturer on law at Harvard Law School, where she teaches forensic science and sentencing. She is also writing a book titled “Incomplete Sentences: Gangs, Guidelines and Judges,” which is expected to be published by Beacon Press this year.

In the first of a few interviews with Judge Gertner, which took place between August and November of last year, I began by asking her why she resigned from the bench. She gave me several reasons, most of which boiled down to her frustration with the U.S. Sentencing Commission’s refusal to take any of her opinions into consideration when reworking the federal sentencing guidelines. She thought she could better contribute to ending mass incarceration by teaching law students, lawyers and federal judges at the Federal Judicial Center on sentencing. She has spoken at several NACDL continuing legal education programs, including the recent white collar program in Washington, D.C., in October 2019.

Following one of her presentations at an NACDL CLE program soon after she took the bench, I asked her what a lawyer can do when he has a serious drug client with a lengthy criminal record who was dealing significant amounts to inner city youths. “Tell me a story,” was her response. “Every client has a story.”

Many of the 30 judges whom I’ve interviewed for my Law360 series “Views From the Bench on Sentencing Representation” thought there isn’t much a lawyer can do at the sentencing hearing. [3] The judges came out on the bench with a tentative sentence already in mind. If they “moved the needle,” it was usually based on the defendant’s allocution. Judge Gertner told me she thought differently:

Whenever you have an opportunity to speak, take advantage of it. Make the sentencing hearing a public ceremony. Bring in family, friends, and supportive victims and law enforcement to the hearing. Sympathetic media also. Allocution can be very important if not written by the lawyer. On the other hand, defense counsel has to be very careful about prepping his or her client for allocution and, at a minimum, hearing what he’s going to say. Allocution can be dangerous unless the defendant is prepped.

She agreed with me that an offender’s stepping up to the plate and owning their mistake and demonstrating sincere remorse was very important. Any effort made toward restitution was one example of demonstrative remorse and carried a lot of weight with her.

Asked how she viewed mental health and substance abuse issues, Judge Gertner said that an individual who sought treatment — particularly before he or she knew he or she was under investigation — often made a positive impression on her. Mental health evaluations could be especially important when they showed what the defendant had done to make up for his or her offense. If an offender ceased criminal conduct before realizing he or she was under investigation, this also could have a huge impact on Judge Gertner’s thinking in regard to sentencing.

She entertained and welcomed reasonable sentencing recommendations by defense counsel, particularly from a lawyer who had credibility with her. Since the prosecutors generally recommended guidelines sentences, their recommendations counted for less.

When I asked her to address the government’s argument that a significant sentence should be imposed as general deterrence to others, she answered that many defendants, particularly drug offenders and gang members, know they are going to go to prison if caught. Having a felony record for others, especially white collar offenders, can be as worrisome to them as a long prison sentence.

Having taught and written on neuroscience and the law, Judge Gertner values the opinions of mental health professionals, particularly the clinicians who have treated the defendant. She agreed with me that it is a good idea to summarize the experts’ report in your sentencing memorandum and then make the experts available to the judge for questions during the sentencing hearing.

Judge Gertner also considered community service performed prior to sentencing, giving special weight to such activity if it was tailored to the crime — for example, older gang members working to dissuade younger ones from criminal activities.

Judge Gertner said she typically began focusing on the sentence she might impose as soon as she received the presentence report and sentencing memoranda of the parties, generally a week in advance of the sentencing. “Presentence memoranda were very important to me if they presented the full picture of the client, warts and all,” she explained. But 18 U.S.C. §3553 is an empty vessel to her. “It’s a nothing burger. It needs to be filled in in the sentencing memorandum.”

Character letters can be important unless they appear to have been written by the lawyer. “You should quote from the better ones in your sentencing memorandum and attach them as an exhibit. Attach others that are good that you are not quoting as a separate exhibit.”

If there were significant guidelines issues to be decided, she appreciated counsel who gave her as much time as possible to research these and other issues raised by the parties. She considered a latefiled sentencing memorandum if something came up at the last minute, although often these are submitted by bad lawyers. Sentencing videos were “ok” if not too slick.

Early and frequent contact with the probation officer can lead to a positive presentence report, Judge Gertner noted:

The PSR needs to be a megaphone for the offender. The lawyer should find out as much as possible from the probation officer assigned to the case including whether the probation officer talks to the judge prior to sentencing. … Find out if the judge meets with the probation officer and/or follows their recommendations. Learn how the judge feels about the U.S. Probation Officer or the office in general.

In the end, as with most of the judges whom I’ve interviewed, the “why” question was critically important for Judge Gertner: “Why did your client do what he or she did? I wanted to know what is going on here.”

Indeed, this was one of the reasons Judge Gertner was so vocal an outspoken critic of the guidelines:

They didn’t take into account why an offender did what he did. For example, why was a drug dealer selling his drugs? Was he doing it to support his addiction? Was he doing it to buy school supplies? Was he doing it because he was living on the street and supporting his younger siblings? The guy who is essentially living high on the hog from drug trafficking is a different offender than the guy who is selling cocaine for school supplies. Also, if this guy had an opportunity to make a living wage, perhaps he wouldn’t have had to sell drugs if this guy had neurological damage. If this is your argument, you needed to give me evidence of these mitigating factors. You couldn’t just argue it.

I asked her another “why” question: How can defense counsel can endeavor to show a judge why the defendant is unlikely to reoffender. “I found it very helpful when lawyers gave me a plan for their client’s rehabilitation. It can be even better if the defendant has embarked on rehabilitation prior to sentencing.”

The ultraconservative Charles Koch Institute, on the criminal justice reform section of its website, states that, “Jail should be reserved for people who pose a threat to public safety.” In other words, we should be sending people to prison who we are afraid of, not that we are just pissed at.

Judge Gertner agreed and suggested that’s a good point to make to a sentencing judge.

For most judges, the key questions they want answered are:

  1. Why did your client do what he did?
  2. What has he done to own his mistake and demonstrate sincere remorse?
  3. Why was the behavior out of character with an otherwise law-abiding life if it was?
  4. Why is he unlikely to do it again?
  5. Why should I cut him a break?

For Judge Gertner, it appeared that the key questions she wanted answered were: Why did your client do what he did, and why is he unlikely to do it again?

© 2020, Portfolio Media, Inc.
Original article available at law360.com .
Reprinted with permission.

[1] In re Grand Jury Matters , 593 F.Supp. 105 (D.NH. 1984).

[2] In Re Grand Jury , 751 F.2d 13 (1st Cir. 1984).

[3] See also, “What Federal Judges Want to Know at Sentencing,” The Federal Lawyer (September 2017) https://alanellis.com/views-bench-mistake-demonstrate-sincere-remorse/ and “Own the Mistake and Demonstrate Sincere Remorse,” The Federal Lawyer (September/October 2019) https://alanellis.com/news/blog/sentencing-tips/.

Alan Ellis, a past president of the National Association of Criminal Defense Lawyers and Fulbright Award winner, is a criminal defense lawyer with offices in San Francisco and New York. He is the co-author of “Federal Prison Guidebook: Sentencing and Post Conviction Remedies.”

By

Corporate Crime Reporter: Reuben Guttman on the Failure of Corporate Compliance

Corporate Crime Reporter, Volume 34, Number 3, Monday, January 20, 2020

REUBEN GUTTMAN ON THE FAILURE OF CORPORATE COMPLIANCE

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says.

“WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model,” Guttman told Corporate Crime Reporter in an interview last week.

“Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it,” Guttman said. “I have litigated against Abbott Labs. The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. It resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.”

“What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I s_aw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill.”

“Compliance programs in part are being used to assuage people and not make them second guess because they believe someone else is taking care of it.”

“When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal.”

“But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.”

“And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?”

“Our niche as a law finn is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice.”

“Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance? Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015. It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance.”

“I come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful. If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act.”

“In many respects you have compliance programs that are analogous to company dominated unions. Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do
with it.”

“Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation. For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.”

If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose? “I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.”

“I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?”

“The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not. At the least, you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.”

“Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?”

A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharnrnceutical industry – “Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing.

These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say – we have to take the 73 7 M AXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.”

“In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.”

Is there any evidence that the government corporate criminal enforcement program is deterring wrongdoing? “Based on the wrongdoing I’ve seen, no.”

“Each of the big phannaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.”

“The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact. What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.”

INTERVIEW WITH REUBEN GUTTMAN, GUTTMAN, BUSCHNER & BROOKS, WASHINGTON, D.C.

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says. We interviewed Guttman on January 13, 2020.

CCR: You graduated from Emory Law School in 1985. What have you been doing since?

GUTTMAN: I have been doing litigation against large corporations. Between 1985 and 1990, I was counsel to the Service Employees International Union.

I was the chief outside counsel to the Oil Chemical and Atomic Workers Union (OCA W). l represented OCA W in the nuclear weapons sector. I brought significant cases against the Department of Energy and environmental and safety and health issues.

I have had a corporate fraud practice under the False Claims Act and other statutes. I have been involved in cases against the major pharmaceutical companies – Pfizer, GlaxoSmithKline, Wyeth, Celgene, Abbott Labs. And collectively these cases have resulted in recoveries totaling $6 billion.

I have done lots of litigation under the Fair Labor Standards Act against the meatpacking industry involving meatpackers in the midwest.

Primarily my expertise is corporate fraud and mismanagement. I bring securities class actions based on breaches of fiduciary duties. I have litigated the issue of whether the Hershey Corporation had to make disclosures about records regarding its use of child labor in the Ivory Coast and Ghana.

I have had a pretty broad practice over 35 years. I have reinforced that through teaching at various law schools – including Rutgers and Emory.

I’m writing a book on pre-trial litigation which will be published by Walters Kluwer hopefully in the fall. My co-author is Jason Lore at Rutgers.

I do a regular blog for the National Institute of Trial Advocacy called The Rule of Law blog. I was on the board of directors of the American Constitution Society for six years – I’m now on the advisory board. It’s been 35 years of an eclectic practice.

CCR: What is the primary practice of your law firm?

GUTTMAN: It is complex litigation involving corporations.

CCR: Is your practice exclusively plaintiffs’ side?

GUTTMAN: Yes.

CCR: What percentage of your practice is False Claims Act?

GUTTMAN: Seventy percent.

CCR: Other than False Claims Act, what kind of cases do you bring?

GUTTMAN: We have a large class action under ERISA against the mortgage servicers. It’s a novel theory. The court has sustained our complaint. I’m sitting in South Carolina now.

We are settling a civil rights class action against the South Carolina prison system. The settlement will require the treatment of thousands of prisoners for Hepatitis C. It has partially settled already. It requires the state to test prisoners.

We are involved in derivative litigation in Delaware.

CCR: You are primarily a False Claims Act firm.

GUTTMAN: We actually litigate non-intervene cases. For Celgene, we settled on the eve of trial. We took tons of depositions. We are trial lawyers. We are not lawyers who put the case in play hoping the government will settle.

Right now we are suing Massachusetts General Hospital in a non intervene case. We are litigating against a urologist in New York City in a nonintervene case. We settled the intervene portion of it for $12.3 million in November.

We are always in discovery, we are always taking depositions.

CCR: Are you saying that the majority of your False Claims Act cases are non-intervene cases?

GUTTMAN: A decent percentage of them. We litigate more False Claims Act cases than anybody else in the country. That’s just my perspective.

CCR: How many False Claims Act cases do you have going at any one time?

GUTTMAN: We get anywhere between 500 and 1,000 knocks on the door a year. We will cull that down to four, five or six False Claims Act cases that we take a year.

We vet these cases so heavily that by the time they get to the government, the government is looking at a case that is strong on the merits.

CCR: You have a strong filter. Do you know pretty much know within the first couple of minutes of talking with a whistleblower whether or not it’s going to be a case for your or not?

GUTTMAN: We can tell from the first twenty or thirty minutes. Let me give you an anecdote. A number of years ago I had a case against Abbott Labs.

The case settled for $1.6 billion. 1 asked the government lawyer a little while after the case settled – when did you realize it was a good case? And the government lawyer said – about 30 minutes into the client interview. We can pretty much tell up front whether it has some heft, whether it’s a case that we are going to dig into and investigate. There are ways to eliminate cases quickly.

CCR: How many cases are you carrying at any one time?

GUTTMAN: Dozens.

CCR: How many cases do you settle a year?

GUTTMAN: In the last five years, we have been resolving four or five cases a year.

CCR: We posted a story on Twitter from the Wall Street Journal about an interview with a Justice Department official, Matt Miner. He was talking about how internal compliance programs can help prevent corporate crimes. You went onto our Twitter feed and wrote – “Internal compliance programs do nothing to address pervasive wrongdoing central to a company’s business model, as in Enron, Tyco and WorldCom. This I know from 30 years plus of litigation against corporate wrongdoers.”

I read that to Duke Law Professor Sam Buell. He told us this – “This guy is saying – I’ve seen companies spend lots of money on compliance and it didn’t make a difference because they were thoroughly corrupt and everyone in the company didn’t care about compliance. But other people will say- I’ve seen companies with good compliance who generally stayed away from enforcement actions. Or I’ve seen companies with bad compliance but they got better; and their problems with the government decreased. Everyone is talking anecdotes. Companies are enormously complex. They are the most complicated things we have in our society. They become extremely difficult to study empirically.”

GUTTMAN: I was at Milberg Weiss and Grant & Eisenhofer. At Milberg, we were part of the Enron litigation. Milberg was also part of the Worldcom litigation.

When I was at Grant & Eisenhofer, they were part of the Tyco litigation. WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model.

Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it. I have litigated against Abbott Labs.

The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. lt resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.

What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I saw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill. Compliance programs in part are being used to 14 CORPORATE CRIME REPORTER MONDAY JANUARY 20, 2020 assuage people and not make them second guess because they believe someone else is taking care of it.

When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal. But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.

And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?

Our niche as a law firm is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice. Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance?

Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015.

It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance. 1 come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful.

If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act. In many respects you have compliance programs that are analogous to company dominated unions.

Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do with it.

Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation.

For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.

We are now suing Massachusetts General Hospital for overlapping surgeries. The allegations are that they completely overlapped.

CCR: What do you mean by overlapped?

GUTTMAN: In the orthopedic area, you book patients whose~urgeries overlap. The surgeon is running from one surgery to another. We just settled such a case against another hospital in New York City. It’s a Medicare fraud case.

CCR: If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose?

GUTTMAN: I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.

I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?

The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not.

At the least you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.

Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?

CCR: A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharmaceutical industry –

GUTTMAN: Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing. These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say- we have to take the 737 MAXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.

In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.

CCR: Is there any evidence that the government corporate criminal enforcement program is detening wrongdoing?

GUTTMAN: Based on the wrongdoing I’ve seen, no.

Each of the big pharmaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.

The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact.

What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.

CCR: Of your practice, what part of the False Claims Act cases are FCPA or Medicare fraud or other?

GUTTMAN: There is overlap. You could have a situation where a company is unlawfully marketing a drug. And they are not making that disclosure to the public. In a large pharmaceutical fraud case, you are going to have a securities component. We have been involved in a number ofFCPA cases.

CCR: Has the plaintiffs bar moved over the years from primarily class actions to primarily False Claims Act cases now?

GUTTMAN: It’s a complicated question. Elizabeth Burch is a professor of law at the University of Georgia. She has just published a book titled Mass Torts. It would be worth interviewing her on this.

In 1965, Ralph Nader published Unsafe at Any Speed. Before that book, people thought – if you got into a car accident, it was your fault. Nader made people think – it could be a defect in the automobile. He was the impetus for plaintiffs’ class
actions.

In 1968, Congress passed the multi-district litigation (MDL) statute. The courts needed to figure out how to address the 3,000 price fixing cases in the electrical transmission industry. There was an informal mechanism to do that. And that was codified in 1968.

With the rise of the class actions, the defense bar organized and made it harder to certify a class action. I’m actually arguing a class action certification case tomorrow, so it’s on my mind.

By the 1990s, you had two Supreme Court asbestos cases. And with those cases, the Supreme Court made it more difficult to certify class actions. Because cases were not being certified, you had all of these mass tort cases being brought as individual cases. Lawyers on both sides sought to use the MDL process.

It’s not that people are moving into false claims as much as people are moving into these MDL mass tort cases.

Of course, some product liability attorneys want to get into the false claims area. But the reality is that the false claims bar, to some degree, is the impetus for a lot of these cases. We bring the big pharma false claims cases and other cases follow.

Another thing that has been happening is that the courts have been cracking down on access to the courts. The pleading standards have been toughened.

When I got out of law school, there was something called notice pleading. As long as you put the other side on notice about what the case was about, that was enough.

In 2007 or 2008, the Supreme Court came down with a couple of cases requiring the pleading of facts. You can’t just plead conclusions. If you plead conclusions, the court will strip out the conclusion. And then the court will apply a plausibility standard.

And a judge will look at a case and say – is this case plausible? In a false claims case, you have to plead fraud with particularity or specificity. These cases are front loaded in the sense that you have to do the investigation up front. You have to prove a case that the government thinks is a good case – not a case you think is a good case. All of those are filters that whittle down access.

CCR: There is a public debate over the role of the trial lawyer in society. A case can be made that big business has defeated the trial lawyers in the court of public opinion. Why did that happen?

GUTTMAN: I don’t think they have won the debate. Everything we have in this country that makes us safer is the result of transparency in the court system – the trial lawyers.

The trial lawyers brought us Brown v. Board of Education. The trial lawyers brought us Loving v. Virginia – the right to marry who you want to marry without regard to race.

The trial lawyers brought us safer automobiles, seat belts. They exposed the dangers of lead paint. The trial lawyers brought us safer food. We can live safer healthier lives because of trial lawyers.

CCR: You are making the argument. But regular people don’t like trial lawyers.

GUTTMAN: I haven’t done polling. I’m going to court tomorrow morning. I try cases. I have a comfort level because I know I’m saving people’s lives tomorrow morning when I am going to get Hepatitis treatment for thousands of pnsoners.

The state of South Carolina prison system is going to be testing 20,000 people and treating them. I know I’m having an impact.

I have brought cases that have saved people from drugs that are harmful to them. Maybe trial lawyers are not getting the message out. I teach and have a broader public policy perspective.

I try to take cases that have a broader impact. I want to leave the world a better place. I went to law school so that I could do things that make the world a better place.

Contact: Reuben Guttman, Guttman, Buschner & Brooks, 2000 P Street, NW. Suite 300, Washington, D.C. 20036. Phone: 202.800.3001. Email: rguttman@gbblegal.com