Never before in our history has our government tried to dictate to a privately-owned company who they shall seat as their Chief Executive Office.  What’s even worse, is that not only is the Department of Health and Human Services trying to dictate the operations of a private corporation, but they’re doing it through economic blackmail.  If this attempt by the Obama administration stands, private enterprise in the U.S. will never be the same.

Obama’s HHS is insisting on the ouster of Forest Laboratories CEO Howard Solomon, and if it fails to comply the Obama administration will exclude the corporation from government contracts, which represents over 80% of the company’s business.  Failing to follow the dictates of HHS would sink Forest Labs in short order.

The move has sent chills up and down Wall Street, as this move signals the most dramatic expansion of the federal government into the corporate world in the history of our country.

Forest Laboratories was fined by HHS last September, to the tune of $313 million, for it’s marketing practices of its big-selling antidepressants Celexa and Lexapro.  Once the settlement was reached and the fine was paid, Forest Laboratories should’ve been off-the-hook, but the Obama administration wasn’t done with Mr. Solomon.  This month HHS notified Howard Solomon that it intends to exclude him from doing business with the federal government. As the CEO of the company, precluding him from doing business with the federal government stops Forest cold from selling its drugs to Medicare, Medicaid and the Veterans Administration. In order to escape the ban, Forest must terminate Mr. Solomon, now 83 years old, to protect its corporate revenue and survival.

This effort is part of a larger campaign against drug-companies to pursue individual executives blamed for wrongdoing rather than simply punishing the companies. While the government tried to prosecute Wall Street executives in connection with the 2008 financial crisis, it met with limited success.  In the case of Forest, it was clear from the evidence that Mr. Solomon had no knowledge nor information as to the issues related to the improper marketing practices and the settlement was accepted by the administration without any charges being issued against Mr. Solomon.

Just last year the Obama administration shocked drug makers when HHS said it would start invoking a little-used administrative policy under the Social Security Act against pharmaceutical executives. This policy allows officials to bar corporate leaders from health-industry companies doing business with the government, if a drug company is guilty of criminal misconduct. The agency said a chief executive or other leader can be banned even if he or she had no knowledge of a company’s criminal actions. Retaining a banned executive can trigger a company’s exclusion from government business.

In an interview with the Wall Street Journal, Richard Westling, a corporate defense attorney stated, the “action against the CEO of Forest Labs is a game changer. It would be a mistake to see this as solely a health-care industry issue. The use of sanctions such as exclusion and debarment to punish individuals where the government is unable to prove a direct legal or regulatory violation could have wide-ranging impact.”

A federal court made the settlement with Forest Labs  final in March. Representatives of the company said they were shocked when the intent-to-ban notice was received a few weeks later, because Mr. Solomon wasn’t accused by the government of any personal misconduct.

Forest is sticking by its chief. “No one has ever alleged that Mr. Solomon did anything wrong, and excluding him is unjustified,” said general counsel Herschel Weinstein. “It would also set an extremely troubling precedent that would create uncertainty throughout the industry and discourage regulatory settlements.”

The pharmaceutical industry has paid billions of dollars in civil and criminal penalties over the past decade, but the government believes they no longer have much deterrent effect. The new use of exclusion is meant to “alter the cost-benefit calculus of the corporate executives,” said Lew Morris, chief counsel for the Department of Health and Human Services inspector general, in congressional testimony last month.

Last October the Department of Health and Human Services announced how it might invoke the exclusion clause of the Social Security Act on individuals without proof of personal misconduct. The first application involved the CEO of a smaller pharmaceutical maker in St. Louis. The executive stepped down. He has since pleaded guilty to a misdemeanor marketing violation and was sentenced to prison and fined.  No such direct involvement of Forest CEO Solomon was ever indicated nor filed.  The corporation pleaded guilty to a misdemeanor in connection with its marketing of Celexa as a treatment for children and adolescents before the drug won approval for pediatric use from the Food and Drug Administration. The company also paid fines over civil accusations.

Never before has the U.S. government attempted to force the dismissal of a non-indicted individual through the use of disbarment or exclusion.  It is unlikely that this attempt to control a private corporation will pass muster in the legal system, however with the right judicial activist ruling it could present a landmark challenge to corporate independence.

The concept of the federal government attempting to control the operation of a private business screams of socialism.  If the government felt that Mr. Solomon did something illegal they should’ve prosecuted him, however they chose instead to accept a $313 million dollar settlement.  For the love of God, is there anyone in the Obama administration that doesn’t hate everything remotely capitalistic?  Do they just hate everyone that makes money, even though it’s tax revenues from private corporations, and, in this case, a tidy little fine, that funds their misguided and flagrant attempts to control every aspect of the economy.  Ayn Rand couldn’t have scripted the story any better.  This really is just plain scary.

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