New Jersey Governor Chris Christie, blunt, aggressive, independent and, until just a few weeks ago, a favorite to run for President under the Republican banner, has stumbled into one fine mess called “Bridgegate.”
For a large number of executives and attorneys in the orthopedic industry the current allegations regarding Christie and “Bridgegate” have a familiar ring.
“Bridgegate” refers to actions by Chris Christie’s staff to create traffic gridlock in Fort Lee, New Jersey, after its Democratic Mayor Mark Sokolich refused to back Christie’s reelection bid. Lanes were closed for several days in September on the George Washington Bridge, the busiest bridge in the U.S. When state legislators held hearings and subpoenaed witnesses, emails were discovered which revealed that Christie’s deputy chief of staff, Bridget Anne Kelly, sent an email to a Christie appointee at the Port Authority, saying, “Time for some traffic problems in Fort Lee.”
The appointee, David Wildstein, responded with “Got it.” Bill Stepien, the strategist who managed Christie’s two gubernatorial campaigns, was implicated in the gridlock email chain describing the Fort Lee mayor as an “idiot.” Christie fired those three, but denied knowing anything about it, claiming he had been told it was simply a traffic study.
Later, a special New Jersey legislative panel issued 20 new subpoenas to try to get to the bottom of “Bridgegate.”
The issue is abuse of power by Christie.
Just as it was six and a half years ago.
U.S. Attorney Chris Christie and Kickbacks
On September 27, 2007, the office of U.S. Attorney Chris Christie in New Jersey filed criminal complaints against Zimmer, Inc., DePuy Orthopaedics, Biomet, Inc. and Smith & Nephew plc charging them with conspiring to violate the federal anti-kickback statute through surgeon consulting agreements. According to Christie, these surgeon consulting contracts and the payments that were made had the effect of inducing surgeons to buy the company’s products.
Stryker cut their own deal with the Justice Department, and, due to their cooperation were dealt with separately by the government.
The Federal anti-kickback statute makes it illegal for doctors or medical facilities to receive financial incentives to increase the use of devices, which in turn increases the number of implant procedures, in patients covered by public health care programs.
Christie said in a press release at the time, “This industry routinely violated the anti-kickback statute by paying physicians for the purpose of exclusively using their products. Surgeons who had agreements with the companies were typically paid tens to hundreds of thousands of dollars per year for consulting contracts and were often lavished with trips and other expensive perquisites.”
In private meetings with each company and their attorneys, Christie and his staff hammered on these organizations—at times threatening jail time, at other times financial ruin—until they agreed to a harsh and punitive settlement.
To put this in even more perspective, these orthopedic companies represent hundreds of thousands of employees and routinely serve more than one million patients annually with the best orthopedic products in the world.
Balanced against the flow of money to surgeons is the reality that these companies are both medically and economically valuable to the broader global society.
Christie’s proposed settlement to avoid prosecution was one the assembled companies could not refuse. The final price tag was $311 million and required each company to overhaul their surgeon consulting contract practices AND to agree to outside attorneys and monitors to scrutinize future contracts and behavior.
Specifically each company agreed to:
- Put in place federal monitors to review compliance and all new and existing consulting relationships
- Conduct a needs assessment to determine the reasonable needs for educational consulting services and new product-development consultants
- Require physicians to disclose their financial engagements to their patients and require the device makers to disclose on the company website the name of each consultant and what they have been paid
- Have outside attorneys review all current and future surgeon consulting contracts.
Then U.S. Attorney Chris Christie contacted his friends.
It Paid to be Christie’s Friend
In effect, the settlement agreements set up a series of multi-million dollar contracts and, because many of these went to Christie’s friends, it appeared that Christie used the settlement agreement as a form of patronage.
Debra Wong Yang, a former U.S. attorney in Los Angeles and Christie colleague with ties to former U.S. Attorney General Alberto Gonzales, landed the multi-million dollar contract to monitor DePuy Orthopaedics.
John Carley, former Cendant Corp. vice president and Federal Trade Commission lawyer under President Ronald Reagan and a Christie friend was awarded (no-bid contract) the contract to over-see the non-prosecution agreement with Stryker Orthopedics.
Christie’s ex-boss and good friend, former U.S. Attorney General John Ashcroft, was selected—again, on a no-bid contract—to monitor Zimmer. The contract was worth as much as a whopping $52 million for 18 months of work.
At one point Zimmer’s lawyers objected to the Ashcroft Consulting Group’s exorbitant charges. Ashcroft was planning to charge Zimmer $1.5 million to $2.9 million a month—with no receipts or invoices.
(By contrast, other independent monitors at other orthopedic companies were submitting 200-page bills. Ashcroft, however, sent a one-page note with no billable hours or expenses, just an amount due.)
When asked about the matter during a congressional hearing, Mr. Christie said that his office was too busy to regulate every aspect of an agreement, and that news reports indicated that Mr. Ashcroft’s fees were in line with what other firms charged to act as a monitor.
One Democratic New Jersey Representative, Frank Pallone, who was speaking at a New York University Law School forum characterized Ashcroft’s bill this way: “This is a ransom note, not a billing statement. There was no question that the poster child for abuse was Mr. Christie.”
Had Zimmer not paid the bill, theoretically Christie would have resumed prosecution of both the firm and its executives.
Another member of Congress who reviewed Christie’s no-bid contracts to monitor orthopedic companies, California Democrat Linda Sandhez, (who chaired the hearing where these issues were vetted) called Ashcroft’s contract “a backroom, sweetheart deal.”
Later in testimony to Congress, Christie acknowledged that one of the law firms that he had given a monitoring contract to had since made substantial donations to his campaign for governor.
Christie’s Legacy
The pharmaceutical company Bristol-Myers Squibb was also the subject of a Christie investigation and eventual deferred prosecution agreement. In that case, it has been alleged, Bristol-Myers Squibb was pressured to endow an ethics chair at Christie’s alma mater, Seton Hall University School of Law. The company had initially proposed to pay for ethics training at Rutgers but later switched to Seton Hall.
Then there was the $12 million monitor contract Christie gave to former federal prosecutor, David Kelley, who had decided two years earlier not to seek charges against Todd Christie, Mr. Christie’s brother, who had been accused of securities fraud.
Finally there is the case of Herbert Stern who was Christie’s mentor and recipient of a $10 million contract to monitor the University of Medicine and Dentistry of New Jersey, which had been accused of double-billing for services covered by Medicare. Members of Stern’s law firm later gave $23, 800 in donations to Christie’s campaign for governor. The donations were matched, 2-1, under New Jersey’s campaign finance laws, bringing the total amount to $71, 400.
Because of the appearance of impropriety and, frankly, the smell of cronyism and financial kick-backs for these lucrative monitoring contracts, the U.S. Justice Department subsequently issued guidelines barring requirements such as the Seton Hall endowment as part of out-of-court corporate crime settlements. Furthermore, the Justice Department now requires that all monitoring agreements to be approved by the number two official at the Justice department.
In Retrospect
In retrospect Christie’s investigation did a lot of good. It helped the major suppliers clean up their surgeon consulting contract practices. Because of Christie’s investigation, the normal competitive fervor that supported much of the abuses with regards to surgeon consulting contracts was put aside.
In fact, Christie later told Congress that he saved the American orthopedic device industry by keeping them from receiving the Medicare “Death Penalty.”
These investigations were a “come to Jesus” moment for the orthopedic industry. Today these five companies—Zimmer, Biomet, Smith & Nephew, DePuy and Stryker—appear to conduct their surgeon consulting practices at the highest ethical level. This year, due to requirements under the Affordable Care Act, these firms take this to an even higher level by posting for public view payments to surgeons.
The good news is that Christie made it possible for a level playing field so that ALL the firms could abandon the poor practices of the past without creating a competitive disadvantage.
But then Christie made that left hand turn which undermined much of the good he purported to represent. Christie’s decision to steer these lucrative no-bid contracts to his friends and accept campaign contributions from one of those firms just plain stinks.
So, as many orthopedic executives and attorneys who went through the crucible of Christie’s prosecution from 2005-2009 will say in their private moments, the current allegations regarding Christie and Bridgegate are depressingly familiar. For them, it’s déjà vu all over again.
