Publications & Presentations
June 17, 2016
Together or Separate? When Paying for a Client Dinner Can Mean Federal Prison

By Jonathan N. Rosen and William D. Ezzell

Reservations at the local steakhouse. Dirty martini. Oysters on the half shell. Wedge salad. Porterhouse steak. A bottle of red. And cheesecake. Sound improper? How about a federal offense? The U.S. Attorney’s Office for the District of Massachusetts sure thinks so. Fortunately, today in Boston, a federal jury disagreed.

The case, United States v. W. Carl Reichel, which centered on an alleged conspiracy to pay doctors kickbacks in the form of dinners and speaking fees, was yet another showdown regarding the required intent in anti-kickback cases. It centered on Mr. Reichel’s role as CEO of Warner Chilcott, a pharmaceutical company, for allegedly conspiring to pay doctors kickbacks in the form of dinners and speaking fees. The dinners were supposedly intended – at least in part – to induce doctors to prescribe medications manufactured by Warner Chilcott.

Two weeks ago, the government asked the court to instruct the jury that “the inducement factor is met if any purpose of a payment is intended to induce an item, good, or service that is reimbursable by the federal government.”

This is commonly referred to as the “one purpose” test, although the government’s “any purpose” description better illustrates the reach of this standard. You most often see this issue phrased as “hope and expectation” (legal) versus “quid pro quo” (illegal). Federal courts are all over the spectrum on the AKS scienter test. The conduct in question here, at least in part, involved networking and business dinners, where, as explained the defense, “persuading and influencing the doctor to prescribe the representative’s drug is the entire point of his sales promotion effort.” The government argued that if the dinners were at all intended to induce prescriptions, a guilty verdict was warranted.

Business dinners are just that – business. Companies like health care providers are not meeting with potential business partners for fun. How is a juror supposed to distinguish between a legitimate sales dinner versus an intent to gain influence over the judgment of a physician?

What instructions the jury ultimately received remains unclear. And although the jury got it right in this case, the battle over the “one purpose” test will continue nationwide. In the meantime, be sure to ask for separate checks at dinner.

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