Scandal-Palooza #6: Above The Law: Government Officials Engaged In Insider Trading In Medicare Stocks

Townhall has;

Above The Law: Government Officials Engaged In Insider Trading In Medicare Stocks
Katie Pavlich | Jun 10, 2013

If you haven't read Peter Schweizer's Throw Them All Out, I highly suggest you do. His book is all about how politicians in Washington D.C. engage in insider trading with zero consequences, something that is illegal for the rest of America.

One of the biggest scandals in American politics is waiting to explode: the full story of the inside game in Washington shows how the permanent political class enriches itself at the expense of the rest of us. Insider trading is illegal on Wall Street, yet it is routine among members of Congress. Normal individuals cannot get in on IPOs at the asking price, but politicians do so routinely. The Obama administration has been able to funnel hundreds of millions of dollars to its supporters, ensuring yet more campaign donations. An entire class of investors now makes all of its profits based on influence and access in Washington. Peter Schweizer has doggedly researched through mountains of financial records, tracking complicated deals and stock trades back to the timing of briefings, votes on bills, and every other point of leverage for politicians in Washington. The result is a manifesto for revolution: the Permanent Political Class must go

Why is this relevant? Because the Washington Post is out with a story today about Health and Human Services employees engaging in insider trading with stocks involved in Medicare.

Hundreds of federal employees were given advance word of a Medicare decision worth billions of dollars to private insurers in the weeks before the official announcement, a period when trading in the shares of those firms spiked.

The surge of trading in Humana’s and other private health insurers’ stock before the April 1 announcement already has prompted the Justice Department and the Securities and Exchange Commission to investigate whether Wall Street investors had advance access to inside information about the then-confidential Medicare funding plan.

Sen. Charles E. Grassley (R-Iowa) told The Washington Post late last week that his office reviewed the e-mail records of employees at the Department of Health and Human Services and found that 436 of them had early access to the Medicare decision as much as two weeks before it was made public.

The number of federal employees with advance knowledge is surely higher; the figures Grassley’s staff compiled did not include people at the White House’s Office of Management and Budget who also saw the information. The e-mail records of those employees have not been made available to Grassley.

More from Allahpundit on why this is a big deal: 

There are two potential scandals here. One is HHS tossing around what was supposed to be sensitive information to a huge swath of employees in-house. The other scandal is who actually leaked it, assuming anyone did. It might not have come from HHS at all but rather from some old-fashioned Beltway congressional/lobbyist incest. As with most of the other Obama scandals, this story is less about O himself than about the foreseeable abuses that result as the federal whale grows. You can have bigger government or you can have more accountable government. The guy who signed ObamaCare into law has made his choice

Big government equals big problems, people. Scandalpalooza is an understatement. Lets not forget about Health and Human Services Secretary Kathleen Sebelius practically extorting funds from private companies HHS regulates in order to fund ObamaCare. 

Thank You Townhall and Ms Pavlich.

SEC Fines J&J $70 Million: Bribing Foreign Doctors

The United States Securities and Exchange Commission has;

SEC Charges Johnson & Johnson With Foreign Bribery

J&J to Pay $70 Million to Settle Cases Brought by SEC and Criminal Authorities

FOR IMMEDIATE RELEASE
2011-87

Washington, D.C., April 7, 2011 – The Securities and Exchange Commission today charged Johnson and Johnson (J&J) with violating the Foreign Corrupt Practices Act (FCPA) by bribing public doctors in several European countries and paying kickbacks to Iraq to illegally obtain business.

The SEC alleges that since at least 1998, subsidiaries of the New Brunswick, N.J.-based pharmaceutical, consumer product, and medical device company paid bribes to public doctors in Greece who selected J&J surgical implants, public doctors and hospital administrators in Poland who awarded contracts to J&J, and public doctors in Romania to prescribe J&J pharmaceutical products. J&J subsidiaries also paid kickbacks to Iraq to obtain 19 contracts under the United Nations Oil for Food Program.

---

Additional Materials

• SEC Complaint
• Litigation Release No. 21922

---

J&J agreed to settle the SEC’s charges by paying more than $48.6 million in disgorgement and prejudgment interest. J&J also agreed to pay a $21.4 million fine to settle parallel criminal charges announced by the U.S. Department of Justice (DOJ) today. A resolution of a related investigation by the United Kingdom Serious Fraud Office is anticipated.

“The message in this and the SEC’s other FCPA cases is plain – any competitive advantage gained through corruption is a mirage,” said Robert Khuzami, Director of the SEC's Division of Enforcement. “J&J chose profit margins over compliance with the law by acquiring a private company for the purpose of paying bribes, and using sham contracts, off-shore companies, and slush funds to cover its tracks.”

Cheryl J. Scarboro, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit, added, “Bribes to public doctors can have a detrimental effect on the public health care systems that potentially pay more for products procured through greed and corruption.”

According to the SEC’s complaint filed in federal court in the District of Columbia, public doctors and administrators in Greece, Poland, and Romania who ordered or prescribed J&J products were rewarded in a variety of ways, including with cash and inappropriate travel. J&J subsidiaries, employees and agents used slush funds, sham civil contracts with doctors, and off-shore companies in the Isle of Man to carry out the bribery.

Without admitting or denying the SEC’s allegations, J&J has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934; ordering it to pay $38,227,826 in disgorgement and $10,438,490 in prejudgment interest; and ordering it to comply with certain undertakings regarding its FCPA compliance program. J&J voluntarily disclosed some of the violations by its employees and conducted a thorough internal investigation to determine the scope of the bribery and other violations, including proactive investigations in more than a dozen countries by both its internal auditors and outside counsel. J&J’s internal investigation and its ongoing compliance programs were essential in gathering facts regarding the full extent of J&J’s FCPA violations.

Kelly G. Kilroy and Tracy L. Price of the Enforcement Division’s FCPA Unit and Brent S. Mitchell and Reid A. Muoio conducted the SEC’s investigation. The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section; Federal Bureau of Investigation; Serious Fraud Office in the United Kingdom; and 5th Investigation Department of the Regional Prosecutor’s Office in Radom, Poland. The SEC's investigation is continuing.

# # #

For more information about this enforcement action, contact:

Cheryl J. Scarboro
Chief, Foreign Corrupt Practices Act Unit, Division of Enforcement
202-551-4403

http://www.sec.gov/news/press/2011/2011-87.htm

CNNMoney.com has J&J CEO Bill Weldon's response:

J&J CEO William Weldon said the company reported the improper payments to the government more than four years ago and has taken full responsibility.

"We are deeply disappointed by the unacceptable conduct that led to these violations," he said, adding that the company is committed to making sure this doesn't happen again."

That What doesn't happen again? J&J won't resort to Bribery again, or they won't get Caught at it again?