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The Smell of Favoritism, Political Interference, and Back-Room Dealing Alleged in Ortho Deferred Prosecution Deal in Jersey
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By Walter Eisner
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December 3, 2007
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Well, that didn't take long. After Zimmer’s disclosure in an SEC filing and subsequent reports by New Jersey’s leading paper, The Star-Ledger, that former U.S. Attorney General John Ashcroft’s firm stood to earn up to $52 million to monitor Zimmer for the next 18 months, the accusations started to fly in Jersey.
Congressional Hearings Sought Democratic Congressman Bill Pascrell, a member of the powerful House Ways and Means Committee and in the Democratic Whip leadership team, has a lot of clout.
U.S. Attorney’s Office Responds We asked U.S. Attorney Christie's spokesperson, Mike Drewniak, about the smell test accusation. Drewniak said, “the rhetoric of ‘smell test’ is an unfortunate and uninformed conclusion." Beyond that, said Drewniak, his office was precluded from commenting on any congressional inquiries and would refer any questions to the Executive Office for U.S. Attorneys at the Department of Justice. Christie told The Star-Ledger, "These companies visited this upon themselves with their criminal conduct. Given what these companies were costing the American taxpayers, the fees that these monitors charge for changing the industry's practices will be a real bargain at the end of the day." Christie also said that he had no role in negotiating monitoring contracts but that he had the right to review their bills. He declined to release those contracts, calling them "private," but said the companies had raised no objections to the fees. Of course not; raising objections could subject them to immediate prosecution! This is New Jersey, folks, and nothing should surprise anyone when powerful state politicians get into a brawl. We asked Gray if the congressman, a Democrat, and Christie, appointed by President Bush and a former employee of Ashcroft, had any prior political history in the state. Gray said politics played no part in the congressman's motivation and that Pascrell had great respect for the work Christie has done in exposing corruption in New Jersey. Really? Maybe politics had nothing to do with it, but Christie, a 45-year-old former securities attorney and GOP fundraiser, has reportedly emerged as the party's favorite in the 2009 race for governor. He has not disclosed his plans. Checking Abuse of Power Pascrell wrote that the deferred prosecution agreements with device companies "to hire a federal monitor, selected by the U.S. Attorney, which would ensure they comply with the law and a strict set of reforms...[Provides] little transparency within this provision of the agreement as it could allow the federal monitor to act with impunity while the manufacturers remain under the threat of prosecution." In other words, Christie, Ashcroft and other monitors have got the companies under duress, and with the threat of prosecution, they can do anything they want. "The U.S. Attorney's Office has the authority to bring the full weight of the federal government upon those individuals and parties whom they consider under suspicion of federal law. Therefore, it is clear that the necessary supervision must occur through the federal government, especially by the Congress, to ensure that no abuse of power can occur unchecked," wrote Pascrell. It gets better. Pascrell continued, “This agreement raises questions about the discretion of the U.S. Attorney's Office to select federal monitors. In this case, I understand that the U.S. Attorney selected Ashcroft Group Consulting Services, which according to reports stands to collect more than $52 million in 18 months for its monitoring of Zimmer Holdings of Indiana. Apparently, these compensation agreements for federal monitors are almost never known publicly and were only released in this instance because they were disclosed in the SEC filings for Zimmer Holdings of Indiana. Under the continued threat of prosecution, any party being investigated seemingly has little choice but to agree to the selection of these federal monitors and their exorbitant fees. Therein the selection of these federal monitors by the U.S. Attorney's Office could give the impression of impropriety and political favoritism." Pascrell wasn't the only New Jersey congressman getting on the posse. Inviting Favoritism, Political Interference and Back-Room Dealing Democrat Frank Pallone sent a letter, distributed by the state Democratic Party, directly to Christie on November 21. Pallone called for "more transparency and safeguards against abuse of deferred prosecution agreements." The congressman was not "enamored of the practice of using the threat of criminal prosecution as leverage to effectively allow corporations and other organizations to be managed by the Office of the United States Attorney or their designee. Where criminal activity has been uncovered, either by a public official or a corporation, it would seem that the appropriate response of your office would be to prosecute that actor and not simply allow them to continue to operate under your guidance and supervision." And Pallone continued, "The seemingly unfettered discretion that your office enjoys to frame the agreement and its terms, including choosing a firm or individual to monitor the agreement, invites the very sort of favoritism, political interference, and back-room dealing that your office has been so successful in combating throughout New Jersey." Pallone suggests that the potential for abuse of Christie's discretion in this case would make it "prudent to vest this authority in a disinterested third party, such as a judge or other group of individuals, to remove even the appearance of impropriety that is so easily created when such a large amount of money is being directed to a former employee or colleague." The Price Tag Christie’s spokesman, Drewniak, wanted OTW readers to know that the $52 million price tag was at the high end of a budget submitted by Ashcroft’s office. “Federal monitoring is a very front-end-loaded process,” said Drewniak. The investigative protocols have to be set up at the outset. “Once they’re set in place, things can ramp down quickly.” Drewniak likened the cost of monitoring to a divorce proceeding. He said that a divorce can get very expensive and the legal bills can skyrocket if the parties have a lot of disagreement and are uncooperative. But if the parties are realistic and practical, the end result is cheaper. Zimmer’s Dilemma Brad Bishop at Zimmer told us that Zimmer was going to continue with their practice of issuing a “no comment” comment on this matter. Bishop did explain why the company chose to disclose the contract in the SEC filing. He told the Star-Ledger that it was their judgment that “it was a large amount outside of our normal course of business. We've allowed that it could be greater than we anticipate." We’d tape our mouths shut, too. Their fine was a traffic ticket. If the deferred prosecution deal falls apart, the prosecutions could go forward again with a less tolerant prosecutor. None of the other companies have disclosed the terms of their agreements with their own monitors. The other monitors include David Kelley, former U.S. attorney in Manhattan; Debra Yang, former U.S. attorney in Los Angeles; David Samson, former New Jersey attorney general; and John Carley, a former attorney for the Federal Trade Commission and later Cendant Corp. The Zimmer Monitoring Fee Agreement At the center of the controversy is the agreement regarding fees and reimbursements entered into between Zimmer and the Ashcroft Group Consulting Services (AGCS) on October 25. Here are excerpts of the agreement from the SEC filing:
If Rep. Conyers agrees to the public hearings on deferred prosecution deals, we can expect to see the agreements with Zimmer, DePuy, Biomet, and Smith & Nephew put under a public microscope in Washington during an election year. There’s a place that knows about public smell tests.
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The fees, part of Zimmer’s deferred prosecution agreement with New Jersey U.S. Attorney Christopher Christie, led two congressmen from the state to call for a congressional investigation into the deal.
Pascrell fired off a letter to Representative John Conyers, the Chairman of the House Committee on the Judiciary, formally requesting that Chairman Conyers hold hearings on the issue of deferred prosecution agreements entered into by the U.S. Attorney's Office and whether there is a need for further oversight of these agreements. 
In his letter Pallone wrote, "I am troubled by recent news reports detailing the significant fees that may potentially be paid to Ashcroft Group Consulting Services as a result of the deferred prosecution agreements entered into by your office with Zimmer Holdings. Equally troubling to me is the increased use of deferred prosecution agreements generally and the lack of any apparent safeguards to protect against their abuse, particularly with regard to the way federal monitors are chosen."
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