JONES DAY 4555 EXECUTIVE DRIVE - SLIITE IECI-ZJ - SAN DIEGO, CALIFORNIA 92 2 -3 34 TELEPHONE: - FACEIMILE: August 10, 2018 FOIA CONFIDENTIAL REQUESTED BY JONES DAY VIA ELECTRONIC Ho n. Brian Benczkowski Assistant Attomey General, Criminal Division US. Department ofJustice 950 Avenue, NW Washington, D.C. 20530-0001 Re: Walmart Inc. Dear Assistant Attorney General Benczkowski: Thank you for giving Walmart Inc. (??Walmart? or the ?Company?) the opportunity to provide this submission in connection with the criminal investigation of Walmart (the ?Investigation?) by the United States Attomey?s Office for the Eastern District of Texas related to certain controlled substance prescriptions ?lled at Walmart pharmacies.1 Walmart?s submission sets forth the many legal and factual reasons why the Department ofJustice should decline to prosecute Walmart. Simply put, the unprecedented criminal charges being contemplated by EDTX are without merit. EDTX has not demonstrated?and cannot demonstrate?criminal intent on behalf of any Walmart employee. As the Department has repeatedly acknowledged, corporations do not themselves have intent and only act through their employees. The lack of criminal intent by any Walmart employee forecloses any criminal case against the Company. In addition to setting forth the absence of legal or factual support for criminal charges in this matter, Walmart?s submission also addresses the Principles of Federal Prosecution of Business Organizations (commonly referred to as the ?Filip Factors?) under the United States Attorneys? Manual which weigh heavily against a corporate indictment ofWalmart. The Filip Factors discussion addresses the significant collateral consequences for millions of low-income and elderly citizens who rely on Walmart?s participation in federal govemment programs for food providing this written submission, Walmart and Jones Day do not intend to waive any applicable privileges, including, but not limited to, die attorney-client privilege and the work product doctrine. We request that the United States Department of Justice keep Walmart?s submission confidential, and ?u?ther request confidential treatment of Walmart?s submission under the Freedom of InformationAct pm?suant to 5 U.S.C. 552(b}(4} and (J), and under the Joint Stipulation and Agreed Order under Fed. R. Evid. SEEM) entered by United States District Judge Amos L. Mazzant on May T, 2013. ONFJDENTIAL SUBJECT TO FEE 4133 St. 41D AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS This document contains information exempt from disclosm?e under FOIA, 5 U.S.C. 552(b}. FOIA cou?deunal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 2 and medication that could result from the mere indictment of Walmart, much less a conviction. It also sets forth the remedial measures and enhancements that Walmart has made to its Health 8; Wellness Compliance program in an effort to more closely partner with the Drug Enforcement Administration and to serve as an industry leader in the Nation?s fight against the opioid crisis. Walmart?s submission further discusses the fact that there are adequate non-criminal alternative remedies available should DOJ ultimately be able to demonstrate that the Company violated the CSA. Lastly, we address the absence ofcriminal conduct at Walmart, much less any pervasive wrongdoing, which further weighs against an indictment of the Company. The law, the facts, the sound exercise of prosecutorial discretion, and basic notions of fairness all counsel strongly in favor of declining the criminal case against Walmart. I. Introduction Physicians and other medical practitioners must be licensed by their state medical board and authorized by the DEA before they can issue prescriptions for controlled substances. These practitioners have an obligation under the Controlled Substances Act to only issue controlled substance prescriptions for a legitimate medical purpose. Pharmacists have a corresponding responsibility to exercise their professional judgment and only dispense controlled substances for prescriptions that appear to be written for a legitimate medical need. EDTX now seeks to take the unprecedented step ofindicting a national chain pharmacy for filling controlled substance prescriptions issued by a physician licensed and in good standing with the state medical board and authorized by the DEA to write prescriptions for controlled substances. Dr. Howard Diamond is a pain management specialist based in Sherman, Texas, who was indicted in July 2017 for illegally distributing controlled substances in connection with seven of his patients who allegedly overdosed after receiving his prescriptions. EDTX intends to supersede Dr. Diamond?s indictment to add Walmart as a co-conspirator with Dr. Diamond in connection with two of the seven patients who happened to fill one or more of the last prescriptions they received from Dr. Diamond at aWalmart pharmacy. EDTX does not intend to charge any other pharmacy that filled Dr. Diamond?s prescriptions, including the pharmacies that filled the prescriptions for the five other individuals named in Dr. Diamond?s indictment. EDTX also does not intend to charge any individual pharmacist?at Walmart or at any other pharmacy?for filling Dr. Diamond?s prescriptions. Instead, EDTX intends to proceed under a novel legal theory of corporate liability that alleges Walmart somehow reached an agreement with Dr. Diamond to knowingly and intentionally illegally distribute controlled substances despite the absence of any conspiratorial communication between Dr. Diamond and any Walmart employee, and the fact that there was nothing unique or unusual about the way in which Walmart evaluated Dr. Diamond?s prescriptions, which were handled in the same mamer as the thousands of controlled substance prescriptions written by other prescribers across the country. Walmart conducted a thorough nationwide internal investigation and uncovered no evidence of criminal intent on behalf of any Walmart employee, much less an agreement to conspire with Dr. Diamond to illegally distribute narcotics. Instead, as Walmart has demonstrated ONPIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 3 to EDTX, the Company and its employees took many steps that are entirely inconsistent with the actions of a co-conspirator. First, Walmart and several of its pharmacists notified the DEA on numerous occasions about Dr. Diamond?s prescribing practices. Additionally, several Walmart pharmacies, including the two stores in Sherman, Texas, and the store in nearby Durant, Oklahoma, exercised their independent judgment and refused to fill Dr. Diamond?s prescriptions. Further, a Walmart pharmacist filed a complaint about Dr. Diamond with the Texas Medical Board, which later found that Dr. Diamond?s prescribing was ?appropriate and his rationale well- considered.? All of these steps were taken at least two years bigot-e Dr. Diamond was indicted or had his medical license and DEA registration suspended. In short, none of the indicia of criminality present in other cases brought by the DOJ against pharmacists are present here: no Walmart employee sought or received payment from Dr. Diamond to fill his prescriptions; no Walmart employee sought or entered into any agreement where Dr. Diamond agreed to steer his patients to Walmart; and no Walmart employee had a personal or business relationship with Dr. Diamond or his patients. During the relevant time period of the Investigation, Walmart consistently directed its pharmacists to analyze each and every controlled substance prescription written by Dr. Diamond (or any other prescriber), exercise their professional judgment, and refuse to fill any prescription they believed was issued for other than a legitimate need. EDTX appears motivated to pursue criminal charges against Walmart because the Company previously required its pharmacists to individually assess each prescription, and did not historically have a company-wide ?blanket re?Jsal? policy that would prohibit all of its pharmacists from ?lling all prescriptions from a particular prescriber. approach is misguided. It ignores the fact that?to this day?no state or federal statute or regulation mandates that a pharmacy implement a blanket refusal policy. Indeed, some states have laws expressly prohibiting apharmacy from taking any steps to interfere with its pharmacists? professional judgment to fill or not fill an individual prescription. Additionally, any reasonable examination of Walmart?s guidance to its pharmacists reveals that the Company?s policies and directives closely mirror the guidance disseminated by numerous state boards ofpharmacy and the DEA itself. Finally, there is no evidence to support any suggestion that Walmart?s prescription policies were somehow motivated by corporate greed or otherwise intended to incentivize its pharmacists to fill controlled substance prescriptions, much less illegitimate prescriptions. Controlled substance prescriptions make up a small fraction of 1% of Walmart?s overall operating income, with opioid prescriptions making up an even smaller percentage (liZUth of 1% in 2017). The notion that profits had any in?uence over Walmart?s prescription policies has no basis in fact. EDTX has continually shifted its theory of corporate criminal liability for Walmart. Despite its efforts to find a theory that fits the facts, EDTX remains unable to establish the single most critical element present in each of its charging theories: that Walmart entered into an agreement with Dr. Diamond with the specific intent to illegally distribute controlled substances. There is no evidence that Walmart as a corporate entity, which only acts through its employees and cannot itself have a mental state, had any intent to commit a crime. EDTX has been unable to identify a Walmart employee who knowingly and willfully filled illegitimate prescriptions from CONFIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2018 Page 4 Dr. Diamond, notwithstanding repeated requests from Walmart to identify such a person. Even if EDTX could identify a Walmart employee with the requisite criminal mental state, it would be improper to impute that employee?s actions to the Company itself. The USAM cautions against imposing vicarious liability on a corporation for the single isolated act ofa rogue employee. In light of the Principles ofProsecution of Business Organizations (the ?Filip Factors?), it would be particularly unfair and out of step with long-standing DOJ policy to indict Walmart. These factors include the significant collateral consequences that may result from an indictment, as well as the steps Walmart has taken to help combat the opioid crisis. Additionally, the fact that there are adequate non-criminal alternatives available to the DOJ, combined with the absence of pervasive criminal conduct within Walmart, weigh heavily against an indictment in this matter. We respect?Jlly request that DOJ formally decline the criminal case against Walmart. II. Procedural History Walmart and its outside counsel conducted a two-day meeting May 3-4, 2018, at the United States Attorney?s Office in Plano, Texas, with US. Attorney Joe Brown and the criminal and civil AUSAs assigned to this case (the ?May 2018 Meetings?). During the May 2018 Meetings, EDTX said that it would imminently indict the Company, stated that its aim was to ?embarrass? Walmart, and took the position that the Company should pay $1 billion to resolve the matter civilly because Walmart donates more than $1 billion to charity each year. Walmart felt compelled to bring the matter to the attention of the Office of the Deputy Attorney General one week later, on an expedited basis, because EDTX was threatening to indict the Company within days and appeared to be using the prospect of criminal charges to extract a large civil penalty?a practice inconsistent with long-standing DOJ practice and newly issued guidance under USAM 1-12.100. On June 6, 2018, Assistant Deputy Attorney General Iris Lan informed Walmart that Narcotics and Dangerous Drug Section was assigned as apartner on both the criminal and civil aspects of this case. ADAG Lan then referred Walmart back to EDTX because an appeal to ODAG would not be ripe until Walmart had engaged with the US. Attorney and the Assistant Attorney General for the Criminal Division after any final charging and civil settlement decisions. On July 2, 2018, US. Attorney Brown, AUSA Heather Rattan, and AUSA Maureen Smith traveled to Walmart?s Home Office in Bentonville, Arkansas, and provided a ?reverse proffer? of the criminal case against Walmart to inside and outside counsel for the Company, including counsel for Walmart?s Audit Committee (the ?Reverse Proffer?). During the Reverse Proffer, EDTX informed the Company that it intended to proceed with an indictment against Walmart nine days later, on July 11. US. Attorney Brown noted that the planned indictment should not come as a sulprise to Walmart as EDTX had stated its plans during the May 2018 Meetings. Outside counsel for Walmart then raised ADAG Lan?s instructions and asked whether NDDS was aware ofthe scheduled indictment and had formally approved of criminal charges against the Company. After further discussion, EDTX agreed to postpone the July indictment date to allow time for ONFTDENTIAL SUBJECT TO FRE 4133 410 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclosure under FOIA, 5 U.S.C. 552(b}. FOIA co n?d entlal treatment requested. RFL ,1 0?05 6 JONES DAY Hon. Brian Benczkowski August 10, 2018 Page 5 Walmart to make a presentation to EDTX on why it did not think an indictment was appropriate. Later, EDTX also agreed not to proceed with an indictment on August 8 to allow time for Walmart to pursue an appeal in the event EDTX still elected to proceed with criminal charges after Walmart?s rebuttal presentation. Walmart made its presentation to EDTX on July 26 at the USAO in Plano (the ?July 26 Meeting?). Trial Attomey Brett Reynolds attended the presentation on behalf of NDDS. At the conclusion of Walmart?s presentation, US. Attorney Brown stated that the presentation had given him and the other EDTX attomeys much to think about and that they needed time to consider the presentation and to potentially gather additional information. Nevertheless, US. Attomey Brown directed Walmart to proceed with preparing its appeal within a two-week time period. On August 7, counsel for Walmart discussed charging decision with US. Attomey Brown, Criminal Chief Matt Quinn, and AUSA Rattan. US. Attorney Brown stated he intends to indict Walmart. AUSA Rattan then said that her intention was to present an indictment to the grand jury on September 12. On August 10, ADAG Lan directed undersigned counsel to present Walmart?s submission to the Criminal Division. ED Evolving Theory of Criminal Liability On April 18, 2018, the grand jury in EDTX retumed a Second Superseding Indictment against Dr. Diamond, charging him with one count of conspiring to violate the CSA under 21 U.S.C. 846, and seven substantive violations under 21 U.S.C. 841 related to seven of his patients who allegedly overdosed after receiving one ofhis prescriptions.3 EDTX intends to supersede Dr. Diamond?s indictment to add Walmart as a co-conspirator and charge Walmart with two substantive violations under the CSA related to two of the seven patients listed in the Diamond indictment who filled prescriptions at the Company?s pharmacies near the time that they allegedly suffered a drug overdose. EDTX has repeatedly modified its theories ofWalmart?s corporate liability over the last several months. Despite these efforts to find a legal theory that fits the facts present here, all of theories suffer from the same fatal ?aw: the absence of criminal intent by Walmart as a corporate entity. AUSA Rattan notified Walmart on March 28, 2018, that she intended to present an indictment against Walmart and would proceed under a theory that the Company turned a blind to illegitimate prescriptions written by Dr. Diamond. Although EDTX agreed to delay that indictment date to allow time for an in-person meeting, ?deliberate ignorance? and accusations of ?criminal negligence? remained the only theories of criminal liability articulated by EDTX through the May 2018 Meetings and up to the time of the Reverse Proffer. During the Reverse Proffer, however, AUSA Rattan stated that she intended to pursue an ?indirect? theory of liability under 21 U.S.C. 846, under which the mere act of a Walmart 2 Tab 1, Indictment as to H. Diamond and J. Johnson, Um'taa' States v. Diamond, No. ECF No. 61 (Apr. 18, 2018). ONFIDENTIAL SUBJECT TO FRE 408 410 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt ?om disclostn?e under FOIA, 5 U.S.C. 552133}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 6 pharmacist ?lling the prescription ?completed the crime.? AUSA Rattan said that she intended to prove Walmart?s corporate criminal intent through theories of deliberate ignorance, aiding-and- abetting, or both. AUSA Rattan con?rmed that EDTX had concluded that it would not indict any Walmart employee, including any pharmacist who ?lled any prescription from Dr. Diamond or any employee from Walmart?s Home Of?ce who communicated with Walmart pharmacists about Dr. Diamond. AUSA Rattan described Walmart?s pharmacists as individuals who tried to do the right thing and acknowledged that no Walmart pharmacist had stated that he or she knowingly ?lled any illegitimate prescription for Dr. Diamond or for any other doctor. At the July 26 Meeting in Plano, EDTX broadened its legal theory after Walmart?s counsel explained why the ?indirect? theory of conspiracy had no support under the statute or applicable case law. As Walmart understands current charging theory, EDTX will assert that there is a ?direct agreement? between Dr. Diamond and certain unnamed pharmacists who ?lled his prescriptions. Under this ?direct agreement? theory, EDTX suggests that Walmart can be held vicariously liable based on the actions of these unnamed pharmacists, even though EDTX has concluded that it will not indict the pharmacists who took those actions, previously conceded that no Walmart pharmacist would testify that he or she knowingly ?lled any illegitimate prescriptions, and continues to describe these pharmacists as individuals who tried to do the right thing. EDTX will also continue to pursue its ?indirect agreement? conspiracy theory that is based upon employees at the Home Of?ce?whom EDTX has not and cannot identify?allegedly turning a blind to Dr. Diamond?s prescribing practices. These novel and evolving charging theories attempt to create a new legal construct to assess corporate liability, are contradicted by controlling case law, and ?nd no support in policies concerning the prosecution of business organizations. IV. Flaws in Legal Theories Before explaining why various legal theories of criminal liability are ?Jndamentally ?awed, it is worth setting forth a high-level overview of the facts in this matter that indicate on their face that neither Walmart nor its employees conspired with Dr. Diamond to violate the CSA. After an extensive nationwide internal investigation, Walmart has uncovered the following facts, none ofwhich has been rebutted to date by EDTX: 3 Ir No Walmart pharmacists will testify that they knowingly and intentionally ?lled an illegitimate prescription from Dr. Diamond; Ir No Walmart employee sought or received any improper payment from Dr. Diamond to ?ll his prescriptions; 3 Each of lhese facts, which are wholly inconsistent with EDTX's prosecution theory, are discussed in detail in Section V. ONFIDENTIAL SUBJECT TO FRE 4133 R: 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10; 2013 Page 7 Ir No Walmart employee sought or entered into any agreement with Dr. Diamond where Dr. Diamond agreed to steer his patients to Walmart; Ir No Walmart employee from Walmart?s Home Office in Bentonville ever communicated with Dr. Diamond; Ir Walmart repeatedly provided information about Dr. Diamond to the DEA years before the DEA arrested him in July 2017; including by submitting refusal to fill records to the DEA in 2014 and 2015; and by raising concerns to DEA agents about Dr. Diamond at a diversion conference in Oklahoma City in 2015; Ir At least three Sam?s Club and Walmart stores stopped filling Dr. Diamond?s controlled substance prescriptions more than two years before he was arrested; including Sam?s Club 6350 and Walmart Store 947 in Sherman; Texas; and Walmart Store 9?5 in Durant; Oklahoma; Ir On August 3; 2015; a pharmacist from Walmart Store 947 filed an official complaint about Dr. Diamond with the Texas Medical Board; Ir On August 28; 2015; the Texas Medical Board concluded that Dr. Diamond?s ?prescribing was appropriate and his rationale well-considered?; Ir Walmart?s policies and practices followed guidance from the DEA and various state boards of pharmacy regarding how pharmacists should review every prescription on an individual basis; Ir Walmart consistently instructed its pharmacists to refuse to fill questionable prescriptions, including any questionable prescriptions from Dr. Diamond; Ir Walmart supported the decisions made by its pharmacists to refuse to fill Dr. Diamond?s prescriptions and did not take adverse action against any pharmacist who refused to fill for Dr. Diamond; Ir Walmart does not provide compensation incentives to pharmacists that would encourage any pharmacist to fill controlled substance prescriptions, much less illegitimate ones; Ir Walmart?s profits from the sales of opioids in its stores are so minimal that there can be no allegation of corporate greed driving the Company?s prescription policies; and Ir All Walmart pharmacies stopped filling controlled substance prescriptions for Dr. Diamond four months before the DEA or the Texas Medical Board took action against him. ONFIDENTIAL SUBJECT TO FEE 4133 Sr. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 8 A. The Legal Standard For a. defendant to be found guilty of a. drug conspiracy under 21 U.S.C. 846, the govermnent must prove beyond a reasonable doubt that: (1) two or more persons, directly or indirectly, reached an agreement to possess with intent to distribute and distribute controlled substances, in violation of2l U.S.C. 841; (2) the defendant knew of the unlawful purpose of the agreement; and (3) the defendantjoined in the agreement will?Jlly, that is, with the intent to further its unlawful purpose. See Fifth Circuit Pattern Criminal Jury Instruction 2.95. The jury instruction defines a ?conspiracy? as ?an agreement between two or more persons tojoin together to accomplish some unlawful purpose? and ?a kind of?partnership in crime? in which each member becomes the agent ofevely other member.? Id. For a medical professional to be found guilty of violating 21 U.S.C. 841, which is the purported object of the Section 846 conspiracy, the government must prove beyond a reasonable doubt that: the defendant distributed or dispensed a. controlled substance; (2) the defendant acted knowingly and intentionally; and (3) the defendant did so other than for a legitimate medical purpose and in the usual course ofhis professional practice. See United States v. Norris, 780 F.2d 1207, 1209 (5th Cir. 1936). Both the conspiracy charge under Section 846 and the substantive charges under Section 841 require specific intent. United States v. Moore?eid, 62? F. App?x 301, 304 (5th Cir. 2017) (?It is undisputed that conspiracy to possess with intent to distribute a. controlled substance is a specific intent crime?) (internal quotation marks omitted). A corporation, however, cannot itself have a mental state. United States ex rei. anrd v. KeiioggBic-wn Root, inc, 843 F.3d 366, 372 (5th Cir. 2017} corporation cannot act or have a. mental state by EDIX must therefore identify an employee who acted with specific intent and then impute that intent to the Company. See Soninidnd See. Corp. v. INSpii-e Ins. Soiniions, inc, 365 P.3d 353, 367 (5th Cir. 2004) (?The knowledge necessary to form the requisite intent must be possessed by at least one agent and cannot be inferred and imputed to a. corporation based on disconnected facts known by different agents?) (quotation marks and citations omitted). EDTX has not identified any particular employee who acted with the requisite criminal intent. But even if could identify such an employee, it would be inappropriate in this context to hold the Company vicariously liable for that employee?s alleged actions. CONFIDENTIAL SUBJECT TO FRE 4H3 Si. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclosm?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hen. Brian Benczkewski August 10, 2013 Page 9 B. Walmart Did Net Enter an Unlawful Agreement with Dr. Diamcnd Walmart did net enter inte any agreement with Dr. Diamcnd, let alene an unlaw?Jl agreement te distribute centrelled substances. Because the ?crime ef cendemns the agreement itself,? and because ?[c]enspiraters de net enter inte an agreement by happenstance . . . an agreement te ccmmit a crime cannet be inferred.? United States v. Gmy'i, 380 F.3d 760, T68 (5th Cir. 2018). Walmart has net uncevered, ner has EDTX presented, any evidence establishing that any Walmart empleyee ever entered inte a ?partnership in crime? with Dr. Diamcnd te vielate the CSA. See United States v. Hefteway, 377 F. App?x 333, 388 [5th Cir. 2010) [reversing drug cenvictien where gcvernment failed te preve existence ef agreement and neting that ?transactiens alene de net censtitute a [queting United States v. White, 569 F.2d 263, 267-68 (5th Cir. 1978)). This is true at all levels ef the Cempany. Nene ef Walmart?s Heme Of?ce empleyees interacted with Dr. Diamcnd. Instead, the evidence shews that Walmart?s Heme Of?ce repeatedly instructed its pharmacists te refuse te ?ll any prescriptien that they felt was illegitimate (including prescripticns frem Dr. Diamcnd). Ner is there evidence that any Walmart pharmacist will?Jlly and intentienally entered inte a criminal agreement with Dr. Diamcnd. There is ne evidence ef any ccmmunicaticn between Walmart pharmacists and Dr. Diamcnd. There is ne evidence that any Walmart pharmacist requested er received any payment frem Dr. Diamcnd fer ?lling his prescripticns. And there is ne evidence that any Walma'rt pharmacist requested thatDr. Diamcnd steer his patients te Walmart te ?ll prescripticns. Instead, the evidence that Walmart phanuacists raised ccncerns abcut Dr. Diamcnd te the DEA en multiple eccasiens and repcrted him te the Texas Medical Beard years befere the DEA arrested him in July 2017. The evidence shews that Walmart treated Dr. Diamcnd like it did evely ether prescriber and required its pharmacists te evaluate his prescripticns befere dispensing any medicaticn. We have net feund any criminal case in which the gcvernment has met its burden ef preef against a pharmacist charged in a Sectien 346 where the pharmacist repeatedly ccntacted the authcrities te repert the alleged ce-censpirater years befere the authcrities arrested him. In evely case alleging er seme ether CSA criminal vielatien a pharmacist, ene ef the fellewing facters was present: payments; ccntinued ?lling efprescriptiens after actien by a state medical beard, DEA, er ether enfercement autherity; er seme ether inapprepriate relatienship between the prescriber and the pharmacist. Nene ef these facters is present here. EDTX lacks suf?cient evidence te establish an illegal agreement. See Gmy'i, 830 F.3d at T72 (reversing cenvictien when gcvernment ?enly presented evidence ef [ce-censpirater= s] illegal activity? and ne evidence ef an agreement with defendant er his ewn illegal activity). DNPIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This decumeut centains infermatien exempt from disclesm?e under FDIA, 5 U.S.C. 55 213:1}. FDIA cen?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 10 C. Walmart Did Not Have Criminal Intent EDTX has stated that it will pursue three theories to establish criminal intent on behalf of Walmart: (1) an ?indirect? theoly of liability under Section 846; (2) a ?deliberate ignorance? theoly; and (3) an ?aiding-and-abetting? theory. All three fail for the same reason: seeks to erase the specific intent requirement from the CSA. Case law makes clear that under all three theories, EDTX must still prove that Walmart acted with specific criminal intent to perform the alleged unlawful act. It cannot make that showing. EDTX has recently suggested that it may also seek to apply respondeat superior liability to Walmart. It cannot do so because no Walmart employee possessed the requisite criminal intent to enter into a conspiracy with Dr. Diamond or to violate the CSA. 1. EDTX Cannot Establish Criminal Intent Through an ?Indirect? Theory of Liability During the Reverse Proffer on July 2, 2013, AUSA Rattan explained that in her view a dispensing crime was not complete until a pharmacist decided to fill a doctor?s prescription. Thus, according to it can establish the illegal agreement ?indirectly? via the mere act of filling the prescription. In other words, according to EDTX, filling prescriptions for Dr. Diamond was per se illegal. It is true that the Fifth Circuit Pattern Jury Instruction for a Section 846 violation indicates that an agreement among conspirators can be established either by a direct or by an indirect agreement. PJI 2.95. But EDTX must still make out the remaining elements of the Section 846 charge by proving that Walmart ?joined in the agreement will?Jlly, that is, with the intent to further its unlawful purpose.? Id. An ?indirect? theoly of liability might be viable, for example, where an importer, distributor, and money launderer belonged to the same Section 346 conspiracy, but where the criminal boss designed the conspiracy so that the importer never communicated with the money launderer. But the criminal intent of the importer is not transferred to the money launderer simply because the government pursues an ?indirect? theory regarding the conspiracy. Rather, the government must show that the money launderer acted knowingly and willfully to further the unlawful purpose ofthe overall conspiracy. See United States v. Toier, 144 F.3d 1423, 1423 (11th ICir. 1998) [an ?agreement? requires ?concomitant knowledge ofthe general scope and purpose of the conspiracy and the defendant?s intent to participate in achieving its illegal ends? and each element of the conspiracy must also be proven as to each defendant beyond a reasonable doubt); United States v. Medina, 161 F.3d 867, 872 (5th Cir. 1998} establish a conspiracy under either 21 U.S.C. 846 or 963, the Govermnent must prove beyond a reasonable doubt (1) that an agreement existed between two or more persons to violate the applicable narcotics law a conspiracy existed), (2) that each alleged conspirator knew of the conspiracy and intended tojoin it and (3) that each alleged conspirator participated joined) voluntarily in the conspiracy?). Mere proof that a Walmart pharmacist filled a prescription does not suffice to prove an intent to further the purpose of a conspiracy. ONFIDENTIAL SUBJECT TO FRE 4133 St. 4113 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostn?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dent1al treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 11 2. ?Deliberate Ignorance? Is Inapplicable Here and in Any Event Does Not Satisfy the Willful Meus Rea Requirement EDTX has also suggested that it will request a ?deliberate ignorance? against Walmart to establish that Walmart possessed the requisite intent to violate Sections 341 and 346. Again, EDTX attempts to use a ?deliberate ignorance? theory to sidestep the intent requirements under the CSA, and its argument re?ects a misunderstanding about the applicability of a deliberate ignorance instruction. First, deliberate ignorance does not replace the specific intent requirements of Sections 841 and 846, because deliberate ignorance applies to knowledge, not will?ilness. A deliberate ignorance instruction ?is permissible to establish that a. defendant knew of the unlaw?il purpose of the conspiracy, but not to estnoiisii that he joined the conspiracy.? United States v. 795 F.3d 1297, 1315 (11th Cir. 2015) (citing other circuits that agree with the goverm'nent?s admission that deliberate ignorance applies only to knowledge, not will?il intent, to join the conspiracy) (emphasis added); see disc PJI 1.33, ?Willfully? To Act (??Willfully? connotes a higher degree ofcriminal intent than knowingly?). Additionally, the Fifth Circuit has explicitly cautioned district courts not to instructjuries on a. deliberate ignorance theory except in very limited circumstances, especially in the context of conspiracies, stating that the instruction ?should rarely be given.? United States v. Cartwright, 6 F.3d 294, 301 (5th ICir. 1993) (?Where the mens red required for conviction is that the defendant act ?knowingly? or ?will?illy,? a deliberate ignorance instruction creates a risk that thejury might convict for negligence or stupidity . . . The Fifth Circuit recently reiterated that the deliberate ignorance instruction should rarely be given because ?[t]he instruction is not a failsafe mechanism that the government can implement to relieve itself of proving the mens red requirement ofa crime.? United States v. Oti, 872 F.3d 678, 699 (5th Cir. 2017). This caution is warranted because of the inherent tension between the requirement that the defendant have specific intent to ?irther a conspiratorial agreement?s unlawful purpose and a theory of liability that relies on the defendant ?deliberately clos[ing] his eyes? to the existence of that same conspiracydeliberate ignorance instruction ?should be rarely given? for an individual defendant in the conspiracy context, a court should be even more reluctant to apply it in a trial of a corporate defendant, which requires the additional inferential step of attributing the alleged deliberate ignorance of individual employees to the corporation. We have found no cases indicating that a corporation can be found to have intentionally joined a drug conspiracy through the deliberate ignorance of its employees. Lastly, a deliberate ignorance instruction will not be given unless the evidence at trial raises two required inferences: ?that the defendant was subjectively aware ofa high probability ofthe existence of the illegal conduct, and purposely contrived to avoid learning of the illegal conduct.? United States v. Vasquez, 677 F.3d 685, 697 (5th ICir. 2012). The ?essential feature? of the deliberate ignorance theory ?is the coincions action of the defendant?the defendant consciousiy attempted to escape continuation of conditions or events he strongly suspected to exist.? Id. (quoting United States v. Mendoza?Medina, 346 F.3d 121, 133 (5th ICir. 2003)) (emphasis in original). CONFIDENTIAL SUBJECT TO FEE 4133 St. 4111 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS This document contains information exempt from disclosm?e under FOIA, 5 U.S.C. 552th}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 12 Here, EDTX has not identi?ed evidence establishing that Walmart or any ofits employees took any ?conscious action? to ?purposely contrive to avoid learning of? Dr. Diamond?s allegedly illegal conduct. Quite the contrary, Walmart?s Home Office asked its pharmacists to fill out refusal to fill forms and stated that the Home Office would send that information about Dr. Diamond to the DEA so that the DEA could follow up. Walmart pharmacists then submitted the RTFs and the Home Office sent those RTFs about Dr. Diamond to the DEA. We have not found any case where a court delivered a deliberate ignorance instruction on the theory that the defendant had taken conscious action to purposely avoid learning of the co-conspirator?s criminal conduct after notifying the authorities of the co-conspirator?s alleged criminal conduct. 3. EDTX Similarly Cannot Meet the Requirements of an Aiding-and- Abetting Theory of Intent EDTX also suggested that it will establish intent via an aiding-and-abetting theory. Aiding- and-abetting liability cannot be used, however, as a substitute for proving that the defendant had actual criminal intent. The govemment must show that aWalmart agent or employee (1) shared in the principal?s criminal intent and (2) took some affirmative steps to aid the venture or assist the perpetrator ofthe crime. See United States v. Turner, 674 F.3d 420, 442 (5th ICir. 2012}. Only then would it be appropriate to determine whether that employee?s crime could be attributed to Walmart. Thus, EDTX still must show that Walmart had specific criminal intent to willfully violate the CSA. For the reasons cited above, it cannot make that showing. 4. Respondeat Superior Liability Does Not Apply Finally, EDTX will not be able to meet the specific intent requirement here by invoking the respondeat superior doctrine. A corporation cannot itself have a mental state. United Stores at ref. Vovm v. Keiiogg Brown Root, foo, 848 F.3d 366, 3?2 (5th Cir. 2017) corporation cannot act or have a mental state by As a result, respondeat superior liability is inapplicable here because EDTX has not identified any Walmart employee who possessed the requisite criminal intent to impute criminal liability to Walmart. EDTX has repeatedly said that Walmart?s pharmacists are ?heroes? who wanted to do the right thing, and has acknowledged that no Walmart pharmacist will testify that he or she knowingly and willfully filled any illegitimate prescription. Further, the typical indicia of a criminal agreement between a prescriber and a pharmacist are missing here. There are no conspiratorial conversations between Walmart employees and Dr. Diamond; no improper payments from Dr. Diamond to any Walmart pharmacist; and no requests from any Walmart pharmacist to Dr. Diamond to steer patients to Walmart. In short, EDTX cannot establish criminal intent among the Walmart phannacists who filled Dr. Diamond?s prescriptions. EDTX has also not identified any Home Office employee who possessed criminal intent. No employee from the Home Office communicated with Dr. Diamond in any way. Instead, employees at the Home Office encouraged Walmart pharmacists to fill out RTFs when the phannacists did not think they should fill a prescription, which the Home Office employees then ONFIDENTIAL SUBJECT TO FRE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552th}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 13 sent to the DEA. And the Home O?ice did not take adverse action against any pharmacist who refused to fill any of Dr. Diamond?s prescriptions. Since Walmart cannot itself have a mental state, and EDTX cannot identify a specific Walmart employee who possessed the requisite criminal intent, respondeat superior does not apply here. Even if EDTX were able to identify a. Walmart employee with the requisite criminal intent, the USAM cautions that may not be appropriate to impose liability upon a corporation, particularly one with a robust compliance program in place, under a strict respondeat saperfar theory for the single isolated act of a rogue employee.? USAM 9-28.500. Thus, there is no sound basis in law or policy to attempt to hold Walmart criminally liable for the alleged actions of unidentified lower-level employees on a respondeat superior theory ofvicarious criminal liability, particularly where the Department lacks proofto charge any of those employees individually. 5. EDTX Cannot Rely on a Collective Knowledge Theory EDTX has not articulated a. theory of criminal liability based on collective lorowledge, but given the continual evolution of theories of criminal liability, and inability to identify a. single employee or agent with criminal intent, we address the collective corporate knowledge doctrine here to show its utter lack of viability in this context. In United States v. Bank afNew Engfand, the First Circuit seemingly strayed from the tenet that corporations are only liable for crimes based on a. respondeat superiortheory ofliability. 821 F.2d 844 (1st Cir. 1987). In that case, the First Circuit described the ability to amalgamate different parts of knowledge spread among multiple employees for purposes of imputing to a corporation the required mens rea for a crime. Bank afNew Engfand, 821 F.2d at 856. This collective corporate knowledge theory, however, has been roundly criticized by courts and commentators alike. Whatever the viability of the collective knowledge theory as abasis for holding a corporation criminally liable, at least two things are clear. First, the Fifth Circuit has explicitly rejected application ofa collective knowledge theory to prove that a. corporation possessed a specific intent. See Shatnfarrd See. Corp. v. INSpn-e Ins. .SbIaIfans, Inc, 365 F.3d 353, 366 (5th Cir. 2004). Rather ?where ?an essentially subjective state of mind is an element of a cause of action? [the Fifth Circuit has] declined to allow this element to be met by a corporation?s collective knowledge, instead requiring that the state of mind ?actually exist? in at least one individual and not be imputed on the basis of general principles of agency.? Chaney v. Dreyfas Serv. Corp, 595 F.3d 219, 241 (5th Cir. 2010) (quoting SaaInIand, 365 F.3d at 366). Second, even in cases like Bank of New England that have endorsed a version of the collective knowledge theory, liability was ultimately predicated on the actual, wrongful intent of individual employees. See Sana v. Campagnie Nationafe Air Fit, T8 F.3d 664, 670 n.6 (DC. Cir. 1996) [describing Bank afNew Engfand and stating that although the appellate court discussed collective knowledge, ?the proscribed intent [willfulness) depended on the wrongful intent of specific employees?). As shown above, no evidence exists to support the argument that Walmart was willfully blind. What is more, we are unaware ofany DOJ policy endorsing this contentious theory, and factually and legally ?awed case would be a poor vehicle for the United States to test the theory. ONFIDENTIAL SUBJECT TO FRE 4133 Sr. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostn?e under FOIA, 5 U.S.C. 55 2th}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 14 V. Errors in Factual Assertions EDTX has built its case on two fundamental premises that are factually inaccurate: (1) that Walmart never stepped ?lling Dr. Diamond?s prescriptions prior to his arrest while all other chain pharmacies had blanket refused his prescriptions; and (2) that Walmart?s historical decision not to blanket re?Jse prescribers on a company-wide basis was per se illegal and motivated by corporate greed. Walmart painstakingly refuted these core allegations at the July 26 meeting. This submission provides an overview of portions of that presentation to illustrate that the criminal case against Walmart is not only legally unsupported, but is also based on erroneous factual assumptionsf' A. Walmart Refused Many ofDr. Diamond?s Prescriptions and Ultimately Issued a Company-Wide Blanket Refusal of His Prescriptions While Other Chains Continued to Fill During the Reverse Proffer, AUSA Rattan stated that one of the reasons EDTX had decided to indict Walmart was because Walmart continued to fill prescriptions for Dr. Diamond until he was arrested in July 2017. The facts, however, demonstrate that: (1) Walmart notified the DEA about Dr. Diamond on numerous occasions in 2014 and 2015 when some ofits pharmacists refused to fill some ofDr. Diamond? prescriptions; (2) many Walmart pharmacists refused Dr. Diamond?s prescriptions without documenting the refusal; several Walmart and Sam? Club stores in Texas and Oklahoma blanket refused Dr. Diamond?s prescriptions in 2015; and (4) Walmart issued a company-wide blanket refusal of all of Dr. Diamond?s controlled substance prescriptions more than four months before the DEA arrested Dr. Diamond. 1. Walmart Notified the DEA About Dr. Diamond in 2014 and 2015 Between October 2014 and February 2015, various Walmart pharmacists refused to fill a number of Dr. Diamond?s prescriptions, and Walmart provided at least seven RTFs to the DEA re?ecting refusals to fill Dr. Diamond?s prescriptions. Notably, Walmart?s Home Office encouraged pharmacists to submit RTFs and promised its pharmacists that Walmart would send any RTF form regarding Dr. Diamond to the DEA. With respect to Dr. Diamond in particular, Brad Nelson from the Home Office encouraged the local pharmacists to use their professional judgment in refusing to fill any illegitimate prescription and explained to them the importance of documenting each refusal to fill: 4 During the Reverse Proffer, AUSA Rattan mentioned a number of additional prescribers EDTX may allege conspired with Walmart to violate the CSA, including Dr. Randall Wade. As with Dr. Diamond, there is no evidence that any Walmart employee conspired with any prescriber to violate the CSA, and there certainly is no support whatsoever that Walmart is somehow the central player in a conspiracy involving prescribers across the country with no connection to Walmart or to each other. Walmart is prepared to provide additional information concerning Dr. Wade, or any other prescriber, but concentrates its remarks in this submission on EDTX's stated theory lhat Walmart conspired with Dr. Diamond to violate the CSA. ONFIDENTIAL SUBJECT TO FRE 403 Sr. 410 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclosru?e under FOIA, 5 U.S.C. 55 213:1}. FOIA confidentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 15 These bad actors will continue to write for controlled substances and when they do if you send the RTF web forms then I personally report those to the DEA every moming. Without the refusal to fill documents there is no information going to the DEA in Dallas regarding this prescribers writing habits, I encourage you to fill out the refusal to fill web forms. . . . [Y]ou can help your situation the best by reporting the refusal to ?lls so that the information can be shared with the DEA. Emoiifrom B. Maison to D. Header (Feb. 8, 2015). One pharmacist thanked Mr. Nelson for explaining why submitting RTFs was so important. Mr. Nelson replied: Thanks for reaching out for assistance and guidance. We are happy to assist and support in any way we can. We have been successful in Georgia and Florida with having pain management offices either closed down or significant reductions in controlled substance prescriptions being written. In all of these cases the DEA has stepped in to educate the prescribers. Ilook forward [to] assisting your staff in this endeavon Id. Mr. Nelson also encouraged market directors responsible for the stores that raised concems about Dr. Diamond to make sure that the pharmacists submitted RTFs. Mr. Nelson wrote: If you have seen our response to the stores then you know that the stores are not reporting these refusals and therefore nothing is being sent to the DEA. Please let us know how we can assist, we simply need the stores to report their actions and Dr. Diamond will become a red flag with the Dallas DEA office in no time. We have a great relationship with that office and they would act ifthere is a concern. Emoiifrom B. Maison to C. Andrews (Feb. 6, 2015}. Walmart pharmacists responded by sending RTF forms about Dr. Diamond to the Home Office, and the Home Office did as itpromised by forwarding those RTF forms about Dr. Diamond to the DEA. 2. Walmart Pharmacists at Times Refused Dr. Diamond?s Prescriptions Without Always Documenting the Refusals Walmart pharmacists also refused to fill additional prescriptions from Dr. Diamond without always documenting the re?Jsals or even explicitly stating to the customer that they were refusing to fill the prescriptions. Walmart?s investigation revealed thatpharmacists at times stated that they did not have the prescribed medication in stock, or told the customer that it would take a number of days to fill the prescription, which caused the patients to take their prescriptions from ONFIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA. 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 16 Dr. Diamond elsewhere. It is clear that Mr. Nelsen understood that some pharmacists were net documenting their refusals of Dr. Diamond?s prescriptions: ?If you have seen our response to the stores then you know that the stores are not reporting these refusals and therefore nothing is being sent to the Emoiffrom B. Nefsoa to C. Andrews (Feb. 6, 2015). Although this practice was not consistent with Walmart?s policy of documenting each prescription refusal, some pharmacists have stated that they took this approach to avoid the con?ict that inevitably arises when a patient?s prescription is refused. 3. Walmart Stores and Sam?s Clubs in Texas and Oklahoma Blanket Refuse Dr. Diamond in 2015 In late 2014, Sam?s Club 6350 in Sherman, Texas, began receiving an in?ux of electronic prescriptions from Dr. Diamond. In February 2015, Dr. Diamond?s office manager apparently contacted Club 6350 to see ifthat pharmacy would agree to fill all ofDr. Diamond?s prescriptions. The Pharmacy Manager at Club 6350 contacted Dr. Diamond?s office manager to explain that Club 6350 maintained tight control over narcotic prescriptions and would not tolerate cutting any comers with respect to anti-diversion policies. Emoiffrom Fertigto W. Cowgar(Feb. 6, 2015). Although the Pharmacy Manager received assurances that Dr. Diamond?s practice was in strict compliance with all rules and regulations, the pharmacists at Club 6350 nevertheless decided in February 2015 to exercise their individual professionaljudgment and elected to refuse to fill all of Dr. Diamond?s prescriptions?that is, they blanket refused Dr. Diamond? prescriptions. Walmart phannacists submitted multiple RTFs for Dr. Diamond at this time, which Walmart provided to the DEA. In June 2015, Walmart pharmacists from Store 975 in Durant, Oklahoma, attended a DEA conference in Oklahoma City and specifically asked the DEA agents in attendance about Dr. Diamond. The agents told the Walmart pharmacists to use their professional judgment in filling for Dr. Diamond?the exact same guidance sent from Walmart headquarters?and promised to follow up with the pharmacists, but never did. Regardless, that same month the pharmacists at Store 925 exercised their professionaljudgment and also decided to no longer fill Dr. Diamond?s prescriptions. These pharmacists began deleting Dr. Diamond?s electronic prescriptions as soon as they came in to the pharmacy and telling Dr. Diamond?s patients that they were out of the prescribed medication. The pharmacists blanket refused Dr. Diamond?s prescriptions even though they were concemed that the Oklahoma Board of Pharmacy might investigate them for those refusals. Pharmacists at Store 947 in Sherman, Texas, also felt that Dr. Diamond?s prescription practices became problematic when he started e-prescribing. After an incident that caused one pharmacist to become uncomfortable with the relationship that a patient appeared to have with Dr. Diamond, all of the pharmacists at Store 975 decided to blanket refuse Dr. Diamond?s controlled substance prescriptions in August 2015. At the same time, the pharmacist initially concerned about Dr. Diamond?s relationship with one ofhis patients submitted a complaint about Dr. Diamond to the Texas Medical Board. ONFIDENTIAL SUBJECT TO FEE 403 St. 410 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552133}. FOIA con?dentlal treatment requested. WMTCO RFLJELDEB JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 17 Notably, Walmart did not reprimand or discipline any of these employees in any way for their decisions to blanket refuse Dr. Diamond?s prescriptions. Thus, even though Walmart did not have a formal blanket refusal process in 2015 [which was and continues to be true for certain other chain pharmacies), Walmart pharmacists nevertheless periodically blanket refused certain prescribers, including Dr. Diamond. 4. Walmart Issued a Company-Wide Blanket Refusal of Dr. Diamond?s Prescriptions in March In February 201?, Walmart changed its policies to explicitly allow for a company-wide blanket refusal of all prescriptions from a particular prescriber. By March 2017, Walmart instituted a formal blanket refusal on Dr. Diamond?s prescriptions across all Walmart and Sam?s Club locations nationwide. Thus, contrary to assertion that Walmartwould still be filling Dr. Diamond?s prescriptions if the DEA had not arrested him, Walmart stopped filling for Dr. Diamond at every store more than four months before his arrest in July 2017. At the time that Walmart stopped filling his prescriptions, the DEA still allowed Dr. Diamond to maintain his registration and prescribe opioid medication to his patients. 5. Other Retail Pharmacies Continued to Fill for Dr. Diamond EDTX contends that all other pharmacies stopped filling for Dr. Diamond ?long before he was indicted? in July 2017, and that Walmart alone continued to fill for Dr. Diamond because of its corporate greed. Whether other pharmacies stopped filling for Diamond before he was arrested is important because five of the seven individuals identified in the Diamond indictment as overdosing did not fill their prescriptions at Walmart. We have asked EDTX to provide the factual basis for its assertion that all other retail pharmacies stopped filling all Dr. Diamond prescriptions ?long before? he was indicted. To date, EDTX has only provided one letter from Kroger, a grocery store chain. EDTX has not provided any analysis ofprescriptionfill data that the DEA can readily access and review. Our investigation, by contrast, indicates that Walmart filled approximately 20% of Dr. Diamond?s prescriptions throughout the time he was authorized to prescribe controlled substances; that other chain pharmacies continued ?lling for Dr. Diamond after Walmart instituted its company-wide blanket refusal; and that Walmart filled approximately 5% of Dr. Diamond?s Schedule II controlled substance prescriptions in 2017, the year he was arrested. If all other chain pharmacies had blanket refused Dr. Diamond?s prescriptions long before he was indicted there would have been an increase in the percentage of Dr. Diamond?s prescriptions filled at Walmart over time. There is no such increase, and instead the data shows the opposite occurred in the months leading up to Dr. Diamond?s arrest in July 2017. Walmart should not be singled out forprosecution by EDTX when other similarly situated chain pharmacies continued to fill Dr. Diamond?s prescriptions long after Sam?s Club 6350, Walmart Store 975, Walmart Store 947, and the Company as a whole had stopped filling his controlled substance prescriptions. ONFIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostn?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentml treatment requested. WMTCO RFLJELDES JONES DAY Hon. Brian August 10, 2013 Page 18 B. Walmart?s Policies Were Not Illegal and Were Never Motivated by Greed Throughout the relevant time period, Walmart policy required its pharmacists to exercise their professional judgment and individually evaluate each prescription, not to hesitate to refuse to ?ll a prescription issued vvithout legitimate medical need, and to document any re?Jsal in the Company?s prescription records. EDTX has taken the positon that this policy was driven by a blind quest for pro?ts, and has pointed to this policy as grounds for indicting the Company. No evidence supports theory of corporate greed. Instead, the facts shovv that Walmart consistently directed its pharmacists to re?Jse to ?ll any illegitimate prescription; that Walmart?s requirement to document all such re?Jsals was consistent with its obligations to the and that Walmart?s guidance conceming the individual assessment of prescriptions mirrors the directives issued by state boards ofpharmacy and the DEA itself. 1. Profits Related to Prescriptions Did Not Drive Walmart?s Policies There is no evidence that Walmart and its pharmacists were driven by financial gain to enter into a conspiracy with Dr. Diamond. There were no material incentives for Walmart pharmacists to ?ll controlled substance prescriptions, and Walmart pharmacists have never been penalized for refusing to ?ll controlled substance prescriptions. On the contrary, any violation of lavv or Walmart?s Pharmacy Operations Manual is cause for termination. Historically, when the Company calculated performance incentive payments for pharmacists, it simply aggregated all the prescriptions ?lled by a store as one component of the incentive calculation. Controlled substances typically account for a small percentage of a store?s overall volume, and opioids account for an even smaller proportion still, so the marginal effect on a pharmacist?s bonus due to ?lling opioids vvas negligible.5 The exact formula evolved over time, but Walmart in 2013 and Sam?s Club in 2014 removed controlled substance prescription counts from consideration in pharmacists? bonus compensation. Even if this change had not been made, such an indirect and relatively insigni?cantportion ofaphannacist?s overall compensation would not create incentives for licensed professionals to jeopardize their careers and conspire with a corrupt prescriber. Similarly, any pharmacy productivity goal was one of many components of the pharmacists? overall job performance metrics and did not meaning?Jlly affect pharmacists? bonus compensation. Finally, Walmart?s sale of opioids nationvvide represents a tiny amount of its overall operating income?less than a fraction of 1% [1f20th of1% in FY17). There is simply no basis in fact to suggest that Walmart designed its prescription policies to incentivize opioid sales. 2. Walmart Was Required by the DEA to Have an RTF Process Based on the information provided during the Reverse Proffer, EDTX apparently believes that Walmart?s RIP process was somehow meant to incentivize pharmacists to ?ll illegitimate prescriptions. In other words, EDTX has suggested that Walmart designed its RIP reporting 5 For example, the annual bonus attributable to the volume of all opioid prescriptions at Club 6350 near Dr. Diamond?s of?ce were approximately $220 per line pharmacist in FY13FY12. Walmart's ?nancial year runs from Februaryr 1 to January.r 31 for the following calendar year. CONFIDENTIAL SUBJECT TO FRE 403 St. 410 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dennal treatment requested. WMTCO RFLJELDFD JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 19 process in a way that would encourage its pharmacists to fill illegitimate prescriptions rather than take the time to exercise their professional judgment and document a refusal to fill. This position distorts reality and ignores the fact that, pursuant to the Memorandum of Agreement that Walmart entered into with the DEA on March 17, 2011, the DEA reqat'red Walmart to document and report all RTFs to the EDTX cannot use a DEA-imposed obligation to establish that Walmart possessed criminal intent by following the very procedures the DEA directed Walmart to follow. 3. The Home Office Always Encouraged Pharmacists to Refuse to Fill Illegitimate Prescriptions Walmart?s Policies Section 1311 ofWalmart?s Pharmacy Operations Manual 1311?) has consistently directed all Walmart pharmacists to refuse to fill aprescription ifthey believed a valid prescriber- patient relationship does not exist. Beginning in 2011, POM 1311 stated: If the pharmacist does not reasonably believe that a valid prescriber-patient relationship exists, the pharmacist may not dispense the prescription and must notify Regulatoly Affairs immediately. The preferred fonu of notification is completion of the RXNOTIFY webform found on the WIRE. This webform provides important details of the transaction so that Regulatory Affairs may take appropriate follow up action. POM 1311 (2011). This language was added to the POM to comply with the 2011 MOA with the DEA. The 2015 version 1311 similarly stated, ?Under the Controlled Substances Act, a phannacist has a legal responsibility to only dispense controlled substance prescriptions that are written for a legitimate medical purpose.? POM 1311 (2015). This version ofthe POM provided a number of prescriber, patient, and prescription red ?ags for pharmacists to consider in determining whether to fill a prescription, and noted that ?[i]fa pharmacist determines that the controlled substance prescription should not be dispensed, the pharmacist must immediately complete the Refusal to Fill form.? Id. Practice Compliance Guidance Walmart?s consistent directive to its pharmacists was to consider each prescription individually, to not hesitate to refuse to fill any illegitimate prescription, and to document in the ICompany?s system all prescriptions that they re?Jsed. EDTX has taken excerpts ofa few emails 6 The MOA between Walmart and the DEA related to allegations at a single Walmart in San Diego, California that the DEA alleged improperly dispensed controlled substances. Walmart complied with the nationwide refusal to ?ll reporting obligations imposed under the MOA and submitted more than 65,000 RTFs to the DEA from March 2011 to March 2015, as required by the agreement. CONFIDENTIAL SUBJECT TO FEE 403 Sr. 410 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552(b}. FOIA con?denhal treatment requested. WMTCO RFLJELDH JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 20 from the Home Of?ce conveying this guidance and interprets those emails as Walmart encouraging its pharmacists to ?ll prescriptions to avoid the RIP process and meet productivity goals. EDTX claims that these emails instructed Walmart pharmacists to ?ll, A review of the emails at issue, however, reveals that they state just the opposite. Practice Compliance?s guidance to pharmacists in the ?eld was always consistent: Evaluate each prescription as it comes in; exercise professional judgment and corresponding responsibility; and re?lse to ?ll any prescription determined to be illegitimate. Brad Nelson communicated in email after email that ?even after the Pharmacist [has] established that there is a DrfPatient relationship, the Pharmacist is still allowed to refuse to ?ll a prescription on an individual prescription Emoiifmm B. Nelson to D. Hotelier (Feb. 8, 2015). Mr. Nelson and others in Practice Compliance also informed pharmacists who emailed about potentially problematic prescribers: Unfortunately there are many prescribers that write for large quantities of controlled substances, however, this does not mean the: you as a professional are required to ?ll these prescriptions. We encourage and support each Pharmacist in exercising hisfher professional judgment, we simply ask that you follow the policies and procedures outlined in the Pharmacy operations manual to protect you and the company from false claims of discrimination from the Prescriber or the patient. Id. (emphasis added). 4. Walmart?s Policy Was Consistent with Guidance from State Boards of Pharmacy Although EDTX has suggested that Walmart should be indicted because of its policy regarding company-wide blanket refusals to ?ll, no state board of pharmacy expressly requires retail pharmacies to institute blanket refusals. In fact, the Texas Board of Pharmacy?to this day? emphasizes pharmacists? professional assessment of patients? individual prescriptions and does not state that a pharmacist may take a blanket position that all prescriptions from a certain prescriber may be re?Jsed. Applicable statutes and regulations in Texas explicitly state: ?Notwithstanding any other law, apharmacist has the exeiusive authority to determine whether or not to dispense a drug?? Several states also have regulations that actually make it illegal for companies to initiate a blanket refusal on a particular prescriber because doing so would interfere with the judgment of line pharmacists and their ability to evaluate each prescription on its own merits. For example, Illinois may actually revoke a pharmacy?s license ifit ?interfere[s] with the professional judgment ofa pharmacist.?8 Likewise, Florida law states that ?neither aperson nor a licensee shall interfere l. Tab 2, Tex. Occ. Code? {2131?} (emphasis added}. 3 Tab 3, 225 Ill. Comp. Stat. Ann. 3513D(a)(23j. CONFIDENTIAL SUBJECT TO FRE 4133 S: 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostn?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentlal treatment requested. WMTCO RFLJELDFE JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 21 with the exercise of the pharmacist?s independent professional judgment.?9 Similarly, in Tennessee it is a criminal act for the owner of a pharmacy to interfere with a pharmacist?s professional judgment to dispense a medication to a patient: It shall be a Class A misdemeanor . . . for the owner, manager or operator ofa phannacy to knowingly restrict or interfere with, or knowingly require a protocol or procedure that restricts or interferes with . . . the exercise of pharmacist?s professional judgment as to whether it is appropriate to dispense a legend drug to a patientm A statement from the National Association of Boards of Pharmacy likewise encourages professional judgment and individual examination of prescriptions: ?Pharmacists, on a case-by- case basis, should always use their professional judgment and, when in doubt, exercise due diligence in determining the legitimacy ofa controlled substance prescription.?11 Walmart has asked EDTX to identify any regulation that required Walmart to institute a blanket refusal to fill policy. To date, EDTX has not identified any law, regulation, or guidance requiring such a policy in Texas or in any other state. 5. DEA Guidance Also Encourages Individual Consideration of Prescriptions by Pharmacists DEA policy on dispensing controlled substances also states that ?each case must be evaluated based on its own merits in view of the totality of circumstances particular to the physician and patient.?12 The DEA has recognized that ?nearly evely prescription issued by a physician inthe United States is for alegitimate medical purpose in the usual course ofprofessional practice,?13 and that ?each patient?s situation is unique and the nature and degree of physician oversight should be tailored accordingly, based on the physician?s sound medical judgment and consistent with established medical standards?? Nowhere in the published literature is there any guidance suggesting that a pharmacist or a pharmacy should?or even could?blanket refuse a prescriber. In fact, Special Agent Susannah Herkert, the lead DEA case agent who testified at Dr. Diamond?s detention hearing, reiterated guidance that pharmacists should individually evaluate each prescription. Agent Herkert testified that after Walmart had blanket refused Dr. 9 Tab 4, Fla. Admin. Code ll) Tab 5, Tenn. Food, Drugs and Cosmetics Code? 53-16-112 (July 1, 2613). Tab 6, National Association of Boards of Pharmacy, Stakeholders? Cimiienges and Red Fiog H?brning Signs Reinted to Prescribing and Dispensing Contreiied Substances at 1? (Mar. 2615). 12 Tab DEA Policy Statement: Dispensing Controlled Substances for the Treatment of Pain, 71 Fed. Reg. (Sept. 6, 2666). 13 Id.at52i'21 1? Id. at saves. CONFIDENTIAL SUBJECT TO FEE 463 Si. 416 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclosm?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO RFLJELDFB JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 22 Diamond?s prescriptions at all ofits stores, ?[Walmart] called in and asked us about it . . . . I told them that it?s a pharmacist?s corresponding responsibility to determine whether or not to they want to fill that prescription and that we do not tell them whether or not to fill it.?15 Again, EDTX is seeking to indict Walmart when Walmart followed the guidance. Agent Herkert chose not to instruct Walmart to blanket refuse all prescriptions from Dr. Diamond. EDTX should not be permitted to base its criminal case on a theory that Walmart should have blanket refused prescriptions for Dr. Diamond when the DEA?the agency that continued to allow Dr. Diamond to keep his registration active and to prescribe opioid medications throughout the alleged conspiracy period?did not tell Walmart to block Dr. Diamond. Finally, our review ofother DEA public statements regarding a pharmacist? corresponding responsibility con?rms that Walmart?s policies during the relevant period conform to what the DEA has always considered good corporate behavior. The DEA has repeatedly refused to instruct phannacies to block doctors and has consistently encouraged pharmacists to review each prescription on its individual merits. To take a few examples: Ir On January 29, 2015, the DEA issued a statement to a local news station in Orlando that said, ?The DEA is aware of legitimate patients not being able to get their prescription for pain medications filled at large retail phanuacies. We too are very concemed about this issue . . . . Ifapharmacy chooses not to fill aprescription for someone, that is their decision, not Phanuacists should use their professional judgment based on their training and experience and relationship with their patients and doctors.??3 Ir On August 10, 2015, DEA Special Agent Susan Langston spoke at a meeting of the Florida Board ofPharmacy regarding patients having to do a ?pharmacy crawl? to obtain their medication and stated, ?All patients should be assessed individually.?? Ir In June 2018, Jim Arnold, ChiefofLiaison and Policy for Diversion Control Division, confirmed that the DEA does not have any rules on when a pharmacist should decline to fill a prescription, and said, ?Whether or not they fill the prescription is strictly up to the pharmacist.?13 Ir DEA also continues to use at industry conferences opioid diversion training materials that cite William Winsley, the Chairman of the Executive Committee of the National Association of Boards of Pharmacy, who states, ?Dispensing 15 Tab 8, Excerpts of Agent Herkert?s Testimony, Diamond Detention Hearing, (ECF No. 21 at 63-64}. 1? Matt Grant, Special Report: Pharmacies Denying Legitimate Patients, WESH 2 NEWS, Jan. 29, EDIE, rmacies?d enying?legi tima te?prescriptionsf?l?l 393 66. 1? Tab 9, Controlled Substances Standards Comm, Fla. Bd. ofPharmacy (Minutes Aug. 16, EDIE). 1? Tab Rachel Balick, Your Best is 0!:ko with DEA, Agency D?icfoi Says, Pharmacy Today, June EDIE, at 46. ONFIDENTIAL SUBJECT TO FRE 463 R: 416' AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO RFLJELDN JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 23 pharmacists need to remember that they, not their district supervisors, have been assigned the ?corresponding responsibility? 6. Dr. Diamond Was Registered with the DEA and Licensed by the Texas Medical Board at All Times When Walmart Filled His Prescriptions Although pharmacists at several Walmart pharmacies exercised their individual professional judgment and elected to re?Jse to ?ll all of Dr. Diamond?s prescriptions, other pharmacists at Walmart (and at many other pharmacies throughout the region) did not encounter the same situation with Dr. Diamond?s prescriptions or his patients and ?lled those prescriptions appropriately. To be clear, this is not a situation where Walmart ?lled prescriptions for a prescriber who lost his DEA registration or had his medical license revoked. Dr. Diamond was authorized by the DEA and licensed by the Texas Medical Board during the entire time Walmart ?lled his prescriptions, and Walmart pharmacists assessed those prescriptions in the same manner as they did for other prescribers around the country. The DEA has the power to issue an ?immediate suspension? of a prescriber?s DEA registration through unilateral DEA action when the DEA believes ?there is imminent danger to the public health or safety.? 21 CPR. 1301 A valid DEA registration indicates that the DEA has made an of?cial determination that a registration is consistent with the public interest based on speci?c ?ndings by the DEA that the prescriber, among other things, was acting in ?compliance with applicable State, Federal, and local laws relating to controlled substances,? and has not engaged in any ?conduct which may threaten the public health and safety.? 21 U.S.C. At least through his arrest in July 2017, the DEA apparently determined that it was not against the public?s interest for Dr. Diamond to maintain his registration to prescribe controlled substances?:1 Dr. Diamond was also licensed by the Texas Medical Board during the entire time Company pharmacists ?lled prescriptions written by him. In fact, the Texas Medical Board endorsed Dr. Diamond?s prescribing decisions by issuing a written opinion stating that Dr. Diamond?s ?prescribing was appropriate and his rationale well-considered? in August 2015.31 The Board found ?no standard of care violations? in its investigation ofDr. Diamond, and noted that Dr. Diamond had no prior histoly with the Board.22 19 William Winsley, Former Exec. Dir., Oh. Bd. of Pharmacy, Drugs, Drugs, More Drugs, 28 (S ept. 2(116), n.usdoj sfco 20 See First Superseding Indictment as to H. Diamond and J. Johnson, miffed States v. Diamond, No. (ED. Tex. Jan. 113, EDIE), ECF No. 33 at 12?13 (seeking forfeitiu?e of Dr. Diamond?s DEA registration numbers}. 21 Tab 11, Tex. Med. Board Remedial Plan for Howard Gregg Diamond, Lic. No. H4233, at 1 (Aug. 23, EDIE). 33 Id. CONFIDENTIAL SUBJECT TO FEE 4133 A: 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document. contains information exempt from disclostn?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dentlal treatment requested. WMTCO RFLJELDFS JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 24 Walmart is not defending Dr. Diamond or his prescribing practices, and if he engaged in criminal conduct he should be held accountable. However, if the DEA and the Texas Medical Board, both of which have far more infomation conceming Dr. Diamond than a Walmart pharmacist, never took measures to prohibit Dr. Diamond from prescribing controlled substances prior to his arrest, Walmart should not be held to a higher standard. EDTX has built its prosecution of Walmart on numerous demonstrably false premises, which is an independent reason to decline this criminal case. This section has discussed a number of those false premises, but is not exhaustive in its examples. VI. The Principles of Federal Prosecution of Business Organizations Also Weigh Against a Corporate Prosecution of Walmart As described in our May 3, 2018, letter to US. Attomey Brown,23 the Filip Factors weigh heavily against a corporate criminal prosecution of Walmart, even if the Department were to determine that sufficient evidence exists to seek an indictment. In that letter, we addressed in detail each of the nonexclusive factors and discussed how they advise against a criminal indictment of Walmart.34 This submission will not repeat that entire analysis, but will instead focus on the significant collateral consequences that could result from a criminal indictment in this matter, the extensive remedial measures and enhancements that Walmart has made over the last two years to do its part to help combat the opioid crisis, the adequacy of non-criminal alternative resolutions for any alleged deficiency in the Company?s pharmacy practices, and the lack of pervasive wrongdoing within Walmart. While all factors militate against criminal prosecution, the factors discussed below particularly underscore the inappropriateness of proposed criminal prosecution of Walmart. A. Collateral Consequences An indictment of Walmart would risk significant collateral consequences, the most severe of which is suspension andt?or exclusion from a number of critical federal social and healthcare programs.25 Walmart?s inability to participate in these programs would jeopardize access to food, healthcare, and nutritional supplements for millions of Americans who rely on Walmart for these basic necessities of life. Charges against Walmart would also ?disproportionately punish innocent 23 Tab 12, Letter from Karen Hewitt to Deputy Attorney General Rod Rosenstein (May 1 1, 21313), Attachment C, Letter from Karen Hewitt to US Attorney Brown (May 3, 21313} (?May 3 Letter"). 3? Id. at 126. 25 Allhough not repeated in this submission, the May 3 Letter sets forth in detail the complex and onerous statutory scheme governing suspension and debarment. See Tab 12 at 9?11 CONFIDENTIAL SUBJECT TO FRE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO RFLJELDFE JONES DAY Hon. Brian August 10, 2013 Page 25 employees, shareholders, customers, and ether stakeholders,? the very thing that the Department has committed to avoiding in corporate criminal prosecutions?Er Millions ofAmericans rely on the ICompany?s participation in our Nation?s most critical social programs. In 2017, Walmart?s pharmacies served 8.3 million Medicare customers, 5.8 million Medicaid customers, and almost one million military families under TRICARE. Walmart ?lled tens of millions of prescriptions through these government health care programs in 2017. An indictment alone, much less a conviction, could result in the Company?s exclusion from these critical healthcare programs, denying millions of Americans access to the medications they need, and posing an existential threat to Walmart pharmacies. Additionally, a criminal conviction would risk harming millions who rely on Walmart to redeem their food and nutritional bene?ts under the Supplemental Nutrition Assistance Program and the Special Supplemental Nutrition Program for Woman, Infants, and Children Approximately one-fourth of our Nation?s SNAP and WIC bene?ciaries redeem their bene?ts at Walmart. The inability to participate in these two programs would jeopardize the best? and, in some circumstances, the only?source of fresh, affordable food and nutritional supplements for those most in need. Beyond the impact on these speci?c federal programs, suspension or exclusion could result in the cascading effect of similar actions by more than 150 state agencies that regulate some aspect of Walmart?s business, as suspension or exclusion by one agency can trigger similar actions by others. Finally, Walmart?s possible exclusion from these programs would also have a profound and negative impact on the lives and families ofthe Company?s 1.5 million US. employees and its innocent shareholders. The decision to indict Walmart could ultimately result in layoffs. It would also likely mean the loss of billions of dollars in the value of Walmart shares held in retirement savings accounts for millions of Americans and the pension ?Jnds of countless nonpro?ts and public employees. As the Nation?s largest private employer and retailer, the consequences of a decision by EDTX to charge Walmart could reverberate throughout all 50 states. The risk of such profound consequences warrants a non-criminal resolution of this matter. B. Walmart Has Taken Significant Efforts to Address the Opioid Crisis Walmart recognizes that the communities it serves are gripped by the Nation?s opioid crisis. Walmart has taken a number of steps to enhance its compliance programs and to educate customers about the risks of opioid dependence. Walmart has created a best-in-class opioid stewardship program that re?ects the ICompany?s prioritization of patient safety over any business metric. 26 Hon. Rod Rosenstein, Remarks to the 32nd Annual ABA National Institute of White Collar Crime, Mar. 2, EDIE, national?institute. ONPIDENTIAL SUBJECT TO FRE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt ?om disclosm?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO RFLJELDFF JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 26 1. Walmart Pharmacy Compliance Enhancements Walmart has implemented a number of improvements in its process and controls for dispensing controlled substances to combat opioid abuse. Walmart provides its pharmacists with many tools to assist them in determining whether a prescription is for a legitimate medical purpose and to exercise their corresponding responsibility. Walmart streamlined the process to refuse a prescription and has directed its pharmacists to fill an opioid prescription only after the pharmacist resolves any concerns about the prescription. Pharmacists are encouraged to blanket refuse to fill prescriptions from any prescriber who has concerning prescribing habits. Walmart also provides access to the Prescription Monitoring Program electronic database that helps pharmacists detect drug-seeking behavior available in each state. Although not legally required in most states, Walmart mandates PMP checks for all opioid prescriptions and encourages it for prescriptions for other controlled substances. Walmart also uses a service called Naerare that aggregates PMP data and uses algorithms to identify potential prescription pill abuse. Walmart is one of only a couple of national chain pharmacies to utilize Naerare at all, and does so in far more states than any other pharmacy. Walmart has also implemented systematic changes to limit controlled substance abuse. In January 2018, Walmart lamched nationwide a first-of-its-kind opioid product, DisposeRx, available at no cost, which enables patients to dispose of leftover medications easily and responsibly. Disposal ofsurplus opioid medication helps prevent future use or abuse by not only the patient, but also by a family member or guest. Walmart pharmacists are also able to dispense Naloxone, an opioid overdose rescue treatment that has saved thousands of lives. Pharmacists are required to recommend Naloxone for patients taking more than 50 MME (?Morphine Milligram Equivalent?? of opioids or when they are taking certain combinations of medications that present heightened safety concerns. This is a company-imposed requirement not mandated by any federal or state law. 2. Unilateral Restrictions on Opioid Sales and Advertising Walmart recently implemented strict limits on opioid prescriptions to treat an initial acute pain event, prohibiting pharmacies from dispensing more than a 7-day supply of opioids or dosages exceeding 50 MME per day.23 Walmart is the first national pharmacy chain to impose such a limit on supply and dosage strength.39 Walmart selected the limits based on CDC guidance for responsible opioid dispensing, as its research demonstrated that the likelihood of addiction 2? MME is a standardized measm?ement of the strength of a drug. 23 This policy limit does not apply to chronic conditions like cancer or end?of?life scenarios. 29 While third?party Pharmacy Bene?t Managers and even state Medicaid programs have imposed T?day and similar limitations as to what they will pay foron initial opioid and similar prescriptions. Walmart?s T?day limit is a ?hard stop" on dispensing opioids. In lhe absence ofa ?hard stop" on dispensing. a customer would still be able to obtain the prescription by choosing to pay cash when the FEM limits its payment to seven days. ONHDENTIAL SUBJECT TO FEE 4133 Sr. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclosm?e under F013, 5 U.S.C. 552(b}. FDIA con?dentlal treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 27 increases after seven days of usage and overdose risk doubles with a strength above 50 Furthermore, Walmart does not advertise opioid-based medications and, unlike many other large pharmacy chains, has asked that discount card companies and cease discounting and advertising discount cards for opioids. 3. Sophisticated Analytics Walmart?s Global Investigations team is a ?Jndamental component of the ICompany?s effective compliance program and provides an independent fact-finding unit anchored by advanced analytics. The Global Investigations team continues to improve its ability to identify, monitor, and investigate opioid-related fraud and abuse by adding specialized resources to protect Walmart?s customers. It also continues to strengthen its long-standing relationships with the and the DEA through close cooperation. Walmart?s Investigative Analytics and Intelligence team uses sophisticated analytical tools to identify potential suspicious transactions in its pharmacies by looking at key dispensing pattems the DEA identifies as ?red ?ags? for pharmacies, including doctors prescribing large numbers of opioids, unusual dosage or suspicious combinations of medications; patients receiving unusual amounts of opioids, travelling far distances from the doctor, or receiving suspicious combinations of medications; pharmacies dispensing unusually high amounts of opioids or certain dangerous combinations of medications; pharmacies dispensing unusual numbers of opioids relative to the population residing in that zip code or county; suspicious patterns of controlled substances purchased with cash; pharmacies with unusual numbers of RTFs or and prescriptions from suspicious doctors identified by news media or social media research. When ?red ?ags? are identified, Global Investigations takes a number of measures in response, including interviewing the pharmacists; reviewing records; conducting detailed research into the pharmacy, doctor, or patient; and providing law enforcement with relevant information. Walmart also maintains a committee that receives information from Walmart?s LAI and analyzes potentially problematic prescribers whom the Company may then subject to a ?corporate block.? A ?corporate block? prevents all Walmart pharmacies from filling any controlled substance prescription written by that prescriber. It is Walmart?s understanding that this sort of committee is unique to the industry, particularly in its reliance on cutting-edge analytics to identify potentially problematic prescribers for review. Walmart?s work in this regard, and capabilities in particular, go far beyond any requirement by the DEA or state board ofpharmacy, and enable the team to provide Walmart with deep insight into potential diversion ?red ?ags.? so The I?dayx?SD MME policy provides pharmacists a professional discretion exception, which is only for extraordinary circumstances where patient harm may occur and requires documentation. CONFIDENTIAL SUBJECT TO FEE 4133 St. 4113 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dent1al treatment requested. WMTCO JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 28 4. Customer and Community Outreach Walmart?s commitment to working with its customers, community groups, and policy makers to combat the opioid epidemic also includes Walmart?s prioritization of patient education at its pharmacies. For instance, Walmart pharmacists counsel patients using the CDC guidelines on pain management to ensure they have a su?icient understanding of the medication they take, and every customer who picks up a new acute opioid prescription receives an opioid safety information brochure. The Company also maintains an online tool available to the public that details its comprehensive opioid stewardship program and provides information and resources aimed at helping curb opioid abuse and misuse. See stewardship. Walmart educates the public on the safe and responsible use of opioids through various community partnerships. Walmart has partnered with the Mark Wahlberg Foundation and the Community 360 initiative, and has contributed $420,000 to the Wahlberg Foundation?s National Youth Summits on opioid awareness. Walmart co-sponsors these events in various markets across the country, targeting middle school students to raise awareness on the dangers of substance abuse. Walmart also contributed $150,000 to EverFi to bring the ?Prescription for Life? curriculum to high schools in Arizona, Arkansas, Colorado, Illinois, and Indiana. This program empowers students with information about prescription drug abuse and provides other skills to help them confront these issues in their community. Finally, Walmart will continue to support legislation at the state and national level seeking to curtail controlled substance abuse. For example, Walmart supports a national prescription drug tracking database, legislation to require a 7-day supply limit for initial prescriptions issued for acute pain, and a requirement that all controlled substance prescriptions be issued electronically. Walmart is fully committed to doing its part to help the country address the opioid crisis. C. The Adequacy of Other Non-Criminal Remedies The USAM states that ?[p]rosecutors should consider whether non-criminal alternatives would adequately deter, punish, and rehabilitate a corporation that has engaged in wrongful conduct.? 31 Walmart has conducted a thorough, nationwide intemal investigation into this matter and has not uncovered any evidence of criminal intent on behalf of any Walmart employee. Although we strongly believe that there is no justification for criminal charges against Walmart, to the extent the Department develops facts that demonstrate Walmart should be penalized for its pharmacy practices, there are adequate non-criminal alternatives that would allow the DOJ to hold Walmart accountable and maintain consistency with its prior enforcement actions in this area. Walmart is a responsible corporate citizen and stands ready to engage in a principled and reasoned dialogue concerning any potential conduct of its employees that merits a civil penalty under the CSA. Proceeding with a criminal indictment against the Company under these facts, however, 31 USAM 9?23.12oo. CONFIDENTIAL SUBJECT TO FRE 403 St. 410 AND FRCP ll FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostu?e under FOIA, 5 U.S.C. 55 213:1}. FOIA con?dent1al treatment requested. WMTCO RFLJELDBD JONES DAY Hon. Brian Benczkowski August 10, 2013 Page 29 appears to serve no other purpose than to achieve stated aim of ?embarrassing Walmart,? which is not an objective rooted in DOJ policy generally nor in the Filip Factors specifically. Two recent enforcement actions against other chain pharmacies further underscore the inequity of a criminal prosecution of Walmart in this matter. First, the Covered Conduct in Walgreens? 2013 Settlement Agreement with the DEA contained far more egregious conduct than alleged here, including the fact that corporate executives at Walgreens pushed Florida pharmacies to increase oxycodone sales. Additionally, between August 2010 and November 2011, local law enforcement documented 1? incidents of diversion taking place at a single Walgreens store involving controlled substances, resulting in the arrest of 35 individuals for controlled-substances- related charges. There were also a number of patient deaths related to Walgreens, as well as documented instances of a customer ?lling an oxycodone prescription, taking the medication to the bathroom and injecting it in a manner that caused an overdose, and still being allowed to fill the same prescription the following month. Despite these facts, Walgreens was not prosecuted for its conduct, but instead paid $80,000,000 to resolve the case civilly. Additionally, 2015 Settlement Agreement included the following covered conduct: Pharmacists in Charge for two CVS stores admitted to DEA investigators that CVS stores dispensed controlled substances where the pharmacy knew or should have known that the prescriptions were not issued in the usual course ofprofessional practice or for a legitimate medical purpose, including circumstances where the controlled substances were abused andfor diverted by the customer. The stores also dispensed controlled substance prescriptions issued by physicians without a valid DEA registration. Nevertheless, CVS was not prosecuted for its conduct, but instead paid $22,000,000 to settle the case civilly. CVS has had at least 10 civil settlements since 2010 totaling in excess of$130 million. By contrast, EDTX plans to bring the first criminal prosecution under the CSA against a national chain pharmacy by relying on a novel and unsupported theory of corporate liability. Absence of Pervasive Criminal Conduct at Walmart The USAM also require prosecutors to consider the pervasiveness of wrongdoing at a corporation before charging it criminally. 33 Prosecutors are required to consider whether charges against the individuals responsible for the corporation?s malfeasance will adequately satisfy the goals of federal prosecution when deciding whether to charge a corporation.33 Our extensive nationwide internal investigation uncovered no evidence that anyone, much less any corporate executive, suggested that any pharmacist fill a single illegitimate prescription. EDTX has also not to date identified a specific Walmart employee whom it believes committed a 33 USAM 9-23.5oo. 33 Sec Memorandum from Deputy Attorney General Sally Q. Yates, Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015) (?One of lhe most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing?). CONFIDENTIAL SUBJECT TO FEE 403 Sr. 410 AND FRCP 11 FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information exempt from disclostn?e under FOIA, 5 U.S.C. 552(b}. FOIA con?dentlal treatment requested. WMTCO JONES DAY Hon. rian nczkowski August 10, 2018 Page 30 crime. Nonetheless, if EDTX changed course and identified a rogue pharmacist who did in fact knowingly fill illegitimate controlled substance prescriptions, Walmart as a corporate entity should not be prosecuted for those actions. If such a circumstance occurred, it would have been in clear contravention of Walmart corporate policy and not for any meaningful benefit to Walmart. A corporate prosecution based on the alleged actions of even a handful of rogue pharmacists would run contrary to this Filip Factor. This is particularly true given the miniscule role that controlled substance prescriptions play in Walmart?s overall business model. A prosecution on these facts would not only rest on a tenuous legal foundation, but would also violate the basic notions of fairness articulated in the USAM due to the lack of any criminal wrongdoing by Walmart employees. VII. Conclusion The law, the facts, and the Department?s Principles of Federal Prosecution of Business Organizations all strongly weigh against a criminal indictment here. We respectfully request that DOJ formally decline the criminal prosecution ofWalmart. If a criminal declination is not granted based upon Walmart? submission, we respectfully request an in?person meeting with the Criminal Division. Walmart further requests the opportunity to appeal any adverse charging decision in this matter to ODAG before EDTX is authorized to proceed with any indictment. Thank you for taking the time to consider the issues raised in our submission. Very truly you rs, JONES DAY WM By: Karen P. Hewitt cc: Hon. Joseph D. Brown, United States Attorney for the Eastern District of Texas (via email) Kevin Dris coll, Acting Chief of Staff and Counselor to the Assistant Attorney General, Criminal Division [via email) Arthur Wyatt, Chief, Narcotics and Dangerous Drugs Section, Criminal Division (via email) Brett Reynolds, Trial Attorney, Narcotics and Dangerous Drugs Section, Criminal Division (via email and hand delivery) CONFIDENTIAL SUBJECT TO FRE 403 .3: 410 AND FRCP FOR PURPOSES OF SETTLEMENT DISCUSSIONS ONLY This document contains information esempt from disclosure underFOIA, 5 U.S.C. 552(b}. FOIA co11f1dent1al treatment requested. WWITCO RR, .332