DOJ steers $52 million in fraud settlement $$ to Ashcroft

A few weeks back, you may have missed reports regarding settlement of a pretty significant fraud case regarding illegal kickbacks by artificial joint manufacturers to surgeons:

Four of the nation’s biggest makers of artificial hips and knees have agreed to pay a total of $311 million in penalties to settle federal accusations that they used fake consulting agreements and other tactics to get surgeons to use their products.

Under the settlements, which were announced by the United States Attorney in Newark, N.J., the four companies were charged with criminal conspiracy to violate anti-kickback laws. But they will not be prosecuted if they follow new compliance procedures under federal monitoring for the next 18 months.

"This industry routinely violated anti-kickback statutes by paying physicians for the purpose of exclusively using their products," said the Christopher J. Christie, the United States Attorney in Newark. "Prior to our investigation, many orthopedic surgeons in this country made decisions predicated on how much money they could make — choosing which device to implant by going to the highest bidder."

New York Times, 9/27/2007

It seemed pretty simple: replacement joint manufacturers illegally paid off doctors to use their products.  So a few doctors got a little richer, the guilty artificial joint manufacturers made illegal sales, and some patients got artificial joints chosen based on which manufacturer paid the highest kickback, not based on the merits of the product.

Frankly, you'd like to see someone do a couple months of time over a fraud worth over a quarter of a billion dollars.  But it's not the worst scandal we've seen, so $311 million of ill-gotten gains returned to the victims or the Treasury represents some justice, at least...

...except...

...except, do the $311 in penalties go to the Treasury?  Does that money all go to the victims who got a particular brand of hip joint because of a bribe paid to their surgeon?

Actually, no.  In fact, a good percentage of it will go to line the pockets of former Attorney General John Ashcroft and his lobbying firm.  We learned this last week, not from the U.S. Attorney, and not from Ashcroft, but from a SEC release from one of the companies, because the monitoring fees were so large that they may have a material affect on the company's financial situation.

Former U.S. Attorney General John Ashcroft was one of five private attorneys whom Christie hand-picked to monitor the implant makers. Now Ashcroft's D.C.-based firm is poised to collect more than $52 million in 18 months, among the biggest payouts reported for a federal monitor.

Disclosed in SEC filings, the arrangement calls for Zimmer Holdings of Indiana to pay Ashcroft Group Consulting Services an average monthly fee between $1.5 million and $2.9 million. The figure includes a flat payment of $750,000 to the firm's "senior leadership group," individual legal and consulting services billed at up to $895 an hour, and as much as $250,000 a month for expenses including private airfare, lodging and meals.

A spokesman for Ashcroft said yesterday the former attorney general was "uniquely qualified" for the role as monitor and more than 30 professionals at his firm were working on the matter. The spokesman, Mark Corallo, called the fee structure "consistent with any other large-scale monitoring circumstances," but could not immediately point to similar cases.

Newark Star-Ledger, 11/20/2007

Just so you understand here: John Ashcroft is being paid up to $52 million to "monitor" one company to help them not bribe surgeons.  The financial deals of the other monitors for the other companies were not included in the suit, but we can deduce that a large proportion of the $311 million settlement goes to these "monitoring" contracts.

The U.S. Attorney who selected Ashcroft for this lucrative gig says that Ashcroft's firm, a lobbying outfit, is "uniquely qualified" for this monitoring; just what these qualifications are is anybody's guess.  The main qualification seems to be that U.S. Attorney Christopher Christie worked for Ashcroft in the Justice Department, served on a special advisory panel for him, and knows him well. Two of the other monitors Christie chose are also former U.S. Attorneys.  

What a nice reward for departed Justice Department attorneys: no-bid contracts worth tens of millions of dollars, courtesy of their old buddies in the DOJ!  Of course, Christie claims it's all on the level:

"I certainly don't think it's a problem to hire somebody who used to be your boss but no longer is," said Christie. "What am I getting out of this exactly? I can tell you, I'm getting nothing, except the comfort in hiring people I know I can trust to do the job."

Ah, but what goes around, comes around, and Christie's generosity in steering lucrative business to Ashcroft and other former colleagues may be rewarded by a primo job offer when he leaves the DOJ.  Or perhaps he will start his own lobbying firm and one of his colleagues will steer him some of these lucrative "monitoring" contracts.  

If it looks like cronyism, and it smells like bullshit, it's probably more Bush Admin hacks lining their pockets while we the people get shafted.  Good luck limping around on that cheap replacement hip.