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Criminal Sanctions against Companies for Defrauding the Government and Selling Adulterated Foods and Drugs

Federal law prohibits a company, its officers or its management from making false statements to the federal government or defrauding the government. In addition, various laws allow federal agencies to ask the U.S. Attorney General to bring criminal prosecutions against companies, their officers or their management.

Criminal Prosecutions for Fraud and False Statements

In 1996, a military supplier was sentenced to prison for fraud and making false statements after he sold the federal government substandard bolts for use in NASA equipment. A military contractor who provided defective missile launcher parts pled guilty to falsifying test results. The company paid fines and restitution for the parts. In another case, company executives were convicted of a scheme to defraud for failing to properly maintain safety equipment for airplanes, including Air Force One and Air Force Two, the presidential and vice presidential aircraft.

Criminal Prosecutions for Adulterated Foods and Drugs

The Food and Drug Administration (FDA) has regulatory authority over food, drugs, medical devices and cosmetics. The FDA has power to investigate suspected fraud and can pursue criminal prosecutions against anyone who introduces adulterated foods, drugs, medical devices or cosmetics into the market.

In 2002, the federal government prosecuted an individual who manufactured and gave away to several teenagers a homemade designer drug. One teenager died after taking the drug. The individual was convicted of manslaughter in state court and sentenced to prison. A federal court of appeals upheld an individual's misdemeanor conviction for failing to register with the FDA as required by law.

In 2001, a federal court of appeals upheld the convictions of two individuals and a laboratory for various violations of the Federal Food, Drug, and Cosmetic Act, including the failure to establish or maintain records.

In 2000, a large consumer product company pled guilty to charges it sold defective blood glucose meters. After the company became aware of the problem, it failed to notify the FDA, as required by law. The company was fined.

There have been numerous instances in which individuals or companies have been convicted for introducing adulterated foods into the market. In one case, several individuals were found guilty of causing the interstate shipment of adulterated foods. They had added preservatives to orange juice in order to extend its shelf life. In another case, a distributor and its president pled guilty to the fraudulent sale of Mexican grown strawberries in the U.S., which lead to a hepatitis outbreak in 1997. A fine was imposed on the company.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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