A federal jury today convicted 2 former Acclarent executives for the distribution of adulterated and misbranded medical devices, but acquitted them of the felony charges leveled in the case.
Former CEO William Facteau and ex-sales vice president Patrick Fabian were convicted by a jury after a 6-week trial on 10 misdemeanor counts of “introducing adulterated and misbranded medical devices into interstate commerce.” Facteau is now chairman, president & CEO of EarLens, and Fabian was listed as the CCO of NxThera as of 2014.
The jury acquitted both defendants on 10 counts of felony adulteration and misbranding, 3 counts of wire fraud and 1 count of conspiracy. Four of the felony charge initially brought against the pair were dismissed before the case went to trial, according to Steptoe & Johnson, the law firm representing Facteau.
The remaining charges were related to the Relieva Stratus sinus dilation device. Prosecutors alleged that Facteau and Fabian launched the Relieva Stratus device intending it to be used as a steroid delivery device, even after the FDA had specifically refused Acclarent’s request to clear it as a drug-delivery device without further regulatory submissions.
“The evidence at trial demonstrated that Facteau and Fabian sought to quickly develop and market products, including the Stratus as a drug-delivery device, to create a projected revenue stream that would make Acclarent an attractive business for either an initial public offering or acquisition,” according to the office of the U.S. Attorney General’s Office, District of Massachusetts.
The jury acquitted Facteau and Fabian of 14 felony counts of fraud, finding them guilty of 10 counts which were misdemeanors related to the same conduct.
A charge of violating the Food, Drug & Cosmetics Act has a maximum sentence of 1 year in prison for each count, 1 year of supervised release and a fine of $100,000 or twice the gross gain or loss, according to the AG’s office.
Federal prosecutors originally brought the conspiracy and fraud charges against Facteau and Fabian last April, accused of seeking to “quickly develop and market products to create a projected revenue stream that would make Acclarent an attractive target for either an initial public offering or acquisition,” according to the U.S. Justice Dept. Johnson & Johnson (NYSE:JNJ) subsidiary Ethicon paid $785 million for Acclarent back in 2010.
Prosecutors said Facteau pulled down about $30 million from the Ethicon-Acclarent merger; Fabian’s take was about $4 million, they alleged.
“I am grateful that the jury exonerated Mr. Facteau of all charges requiring criminal intent and affirmatively concluded that the case did not involve false or misleading statements. It is difficult to understand how someone in America could be convicted of even misdemeanor crimes without a finding of intentional wrongdoing. We will fight vigorously to overturn these few remaining charges and will not rest until Mr. Facteau is completely vindicated,” Reid Weingarten, lead lawyer for Facteau, said in prepared remarks.
“After 5 years of investigation and a 6-week trial, the jury flatly rejected the government’s core fraud and conspiracy theories. We’re completely confident that, during the proceedings to come, the remaining ‘no wrongful intent’ misdemeanor counts of conviction will meet the same fate,” added lead Fabian attorney Frank Libby, of Libby Hoopes.
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