Dr. Christopher Joseph Devine, President, Devine Guidance International
Devine Guidance

Surprise – Chief Jailable Officers Get Put in Jail

By Dr. Christopher Joseph Devine
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Dr. Christopher Joseph Devine, President, Devine Guidance International

The only takeaway the doctor is going to leave with the readers for this edition of DG is eloquent in its simplicity; “always do the right thing!” 

Although the memory of their comedic talents is slowly fading away with time, almost everyone over the age 40 still has some memories of the three stooges, actually there were four stooges; Moe Howard, Curly Howard, Shemp Howard, and Larry Fine.

However, recently four individuals attempted to become stooges in their own right; Michael Baker, Michael Gluk, John Raffle, and David Applegate, all former ArthoCare executives.. Unfortunately, the joke was on these four gentlemen as a Federal Judge in Texas sentenced these men to lengthy prison terms. Collectively, these stooges received 41-years and eight-months of prison time and fined over $1 million dollars.

Reading the facts pertaining to this case it was obvious the Chief Jailable Officer (CJO) exhibited a significant amount of “oleaginous” (look-it-up) demeanor and as a result of exhibiting no remorse; the judge threw the proverbial book at Michael Baker, including an orange jumpsuit and a pair of shiny silver bracelets. Enjoy.

Crime does not pay, so what happened?

By now some of you are probably asking, Dr. D what does this have to do with quality assurance and regulations for the medical device industry? Indirectly, it has everything to do with industry. If the CJO and his merry band of men have what the doctor views as broken moral compasses, then how in the heck are these gentlemen going to provide ethical oversight for the day-to-day challenges facing a medical device establishment? In fact, where does the exhibiting of unethical behavior stop? Once the management team, of any device establishment, makes a conscious decision that meeting the forecasts of Wall Street analysts is more important then leading by example and impeccable moral behavior, then all bets are off the table.

Essentially, these stooges developed a scheme for shipping products to distributors and having the distributors hold onto the product until a specific quarter came to an end. These shipments were then treated as sales and the additional revenue garnered to inflate quarterly and annual earnings, when in fact, no sales were occurring. This was a classic example of the infamous game; “what shell is the tiny little ball under.”

In return, for their participation, distributors were granted:

(a) upfront cash commissions;

(b) extended payment terms;

(c) the ability to quickly return product (after the books for a fiscal quarter were closed); and

(d) other special fringe benefits.

The end result was the artificial inflation of ArthoCare’s revenues by millions of dollars.

To make matters worse, these fine industry leaders lied to Federal investigators, including the U.S. Securities and Exchange Commission.

Takeaways

The only takeaway the doctor is going to leave with the readers for this edition of DG is eloquent in its simplicity; “always do the right thing!” Once an individual’s ethical and moral behavior, or lack of, compromises their ability to work in the device industry, then all is lost. Reputation is everything and once a reputation is tarnished, it is a difficult task indeed to recover.

In closing, thank you again for joining Dr. D and I hope you find value in the guidance provided. Until the next installment of DG – cheers from Dr. D. and best wishes for continued professional success.

References:

  1. Code of Federal Regulation. (2013, April) Title 21 Part 820: Quality system regulation. Washington, D.C.: U.S. Government Printing Office.
  2. Devine, C. (2011). Devine guidance for complying with the FDA’s quality system regulation – 21 CFR, Part 820. Charleston, SC: Amazon.
  3. Devine, C. (2013). Devine guidance for managing key attributes of a FDA-compliant quality management system – 21 CFR, Part 820 Compliance. Charleston, SC: Amazon.
  4. Enriquez, J. (2014, September). Former ArthroCare execs receive hefty sentences for fraud. Retrieved September 9, 2014, from http://www.meddeviceonline.com.
  5. United States v. Michael Baker and Michael Gluk Court Docket Number: 1:13-CR-00346-SS. (2014, August). Retrieved September 9, 2014, from http://www.justice.gov/criminal/vns/caseup/baker-gluk.html.

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Dr. Christopher Joseph Devine, President, Devine Guidance International

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