could get burned -- again -- in the Sunshine State.
The company has sent a well-placed Florida official on expensive trips that may have violated the state's rigid ethics code, according to a lawsuit against Caremark. The company paid for Richard Barnum, the bureau chief over Florida's Division of State Group Insurance, to make three business trips as a member of its select advisory committee, court papers filed on Thursday claim. Barnum stayed at fancy hotels -- including the Ritz-Carlton and Four Seasons -- during the all-expense-paid junkets, the filing adds.
John Kuczwanski, a spokesman for the agency where Barnum works, told
on Thursday that the department is "taking a close look" at the situation to determine whether Barnum violated any rules. He admitted that the state's official ethics code "goes much further" than most ethics laws actually do. But he also stressed that Barnum's trips were "definitely work-related" and, therefore, beneficial to the state.
The governor's office, which implemented the ethics code five years ago, said it had just learned of Barnum's trips but plans to investigate whether they violated the state's "very strict" ethics policy.
To be sure, Caremark critics see a possible conflict. Thursday's filing describes Caremark's actions as "an apparent attempt to curry favor with the state of Florida" through an official who "possessed and exercised certain policy, supervision and administrative functions with respect to the approximately one-half billion dollar contract" between the two parties. It seeks to unseal the entire deposition of the division head as part of a big whistleblower lawsuit against the company.
"The only conceivable reason
why Caremark would not want this testimony to be disclosed is to shield Caremark from public scrutiny and criticism," states the filing, prepared by Chicago attorney Michael Leonard. "That is not the function of the judicial system."
Caremark spokesman Gerard Carney described as "preposterous" any allegations that the company offered Barnum an advisory seat to win favors from the state of Florida. He said the special board, populated by representatives of just 12 of its many customers, is instead designed to provide "valuable feedback and information" so that Caremark can meet the clinical and financial needs of its clients. He also portrayed the advisory board meetings as "intensive working sessions" instead of mere vacations.
Meanwhile, the company has already portrayed the entire whistleblower lawsuit as baseless and denied any wrongdoing.
Caremark's stock, a favorite among analysts despite the company's legal woes, inched up 4 cents to $32 on Thursday.
The lawsuit -- made public just days after one of Barnum's alleged trips -- accuses Caremark of defrauding and endangering state customers by, among other things, selling them drugs that were returned through the mail by others but never tested for possible damage. It now claims that Florida prosecutors originally declined to join the case at Barnum's suggestion. Moreover, it says that Barnum never told the attorney general's office about his ties to Caremark when offering his advice.
Florida's official code of ethics requires agency officials to refuse and disclose any gifts valued at more than $25 from influential parties. Just this month, the
St. Petersburg Times
reported, Florida suspended two other government employees after it learned they had taken trips funded by companies that conduct business with the state. Caremark, which acts as the pharmacy benefit manager for Florida's 200,000-plus state customers, has a far larger contract than those other vendors.
Kuczwanski described the two incidents as "completely separate," involving different circumstances, although he is unfamiliar with details surrounding the earlier suspensions. He also told
earlier this week that Barnum could not personally comment on the matter because of pending litigation between Caremark and the state of Florida.
Recently, the state reversed its stand -- at the company's request -- and filed a motion to assume control of the whistleblower lawsuit. The state portrayed itself as better-suited to handle the case than current plaintiffs Michael and Peppi Fowler, who could soon face an administrative hearing for alleged misconduct.
In its own legal documents also filed on Thursday, Caremark elaborated by saying that Peppi Fowler had displayed a "long pattern of deceit and disloyalty" and "materially breached her confidentiality agreement with Caremark" by obtaining thousands of pages worth of patient information that are now being used in the whistleblower lawsuit. Caremark also claims that both Fowlers defrauded the company and violated multiple laws by illegally obtaining huge quantities of highly addictive painkillers at the company's expense for a relative.
Looking ahead, Caremark hopes to depose Peppi Fowler a second time because the company claims that Leonard earlier hindered the discovery process by issuing "frivolous and lengthy objections" and restricting his client from answering some highly relevant questions. It still wants a response to, among other things, whether the plaintiff was aware that her attorneys "offered Caremark the chance to keep the lawsuit under seal if they would pay multi million dollars to settle it." It also wants to know what the plaintiff said when she met with the attorney general's office.
Critics now suspect that the attorney general is actually more interested in derailing the whistleblower lawsuit than pursuing Caremark. They point out that companies don't normally invite prosecution. And they are particularly troubled by the fact that the law firm now representing Caremark until last year employed the very prosecutor who is now seeking control of the case. Barnum's ties to the company make them more suspicious than ever.
Meanwhile, Caremark is apparently trying to keep more than Barnum's deposition from the public.
"Caremark has filed an injunction action ... attempting to stop the Florida A.G.'s office from producing the documents that Caremark provided to that office," Leonard said. "Looks like they are trying to play it both ways -- using their relationship with the A.G.'s office while trying to shield what they gave" to that same office.
For now, the latest motion alone probably exposes more than Caremark would like. In addition to potential conflicts with Barnum, it includes allegations that the state failed to protect customers after Caremark sold "drugs from an unknown origin" to Florida customers two years ago.
The state "did not further investigate Caremark's buying practices with respect to the purchase and sale of drugs ...
and allowed Caremark to handle that occurrence wholly internally," the filing states.
Several sources, including a state attorney who helped oversee the Caremark contract, have confirmed that the incident did in fact take place. Mallory Harrell, the former deputy secretary of the Florida Department of Management Services, says that state investigators were "looking into the potential sale of drugs on the black market in Miami, and Caremark's name came up" in April 2002.
She says the state worried that Caremark may have purchased some sensitive autoimmune medications from First Choice Pharmaceutical that were not properly tracked and, therefore, suspect. But she says that Caremark speedily contacted state customers who might have been impacted, and handled the entire situation quite admirably.
She went on to say that the state was "obviously worried" about the situation -- and even informed the governor's office -- but "didn't want to throw everyone into a panic."
Since then, the lawsuit claims, Caremark has gone on to put other people in danger. It points to yet another deposition, this one by former Caremark employee Cidone Saint Vil, as evidence.
"Despite the fact that Ms. Saint Vil was not a pharmacist or otherwise licensed or certified, she was called upon by Caremark to assist in determining which returned drugs Caremark would destroy and which returned drugs Caremark would ship on to Mount Prospect, Ill., to be re-stocked and re-sold to unsuspecting customers," the complaint says. "Ms. Saint Vil's deposition testimony describes ... her observations, based upon her own firsthand knowledge, that such processes and practices were unsafe."
The motion argues that the depositions of both Barnum and Saint Vil contain "nothing remotely proprietary, confidential, trade secret or private" and, therefore, should be unsealed.
"In the present circumstances," it states, "where the actions of Caremark are alleged to have a direct and fraudulent impact upon the state of Florida and its more than 200,000 plan members, the citizens of Florida not only have an interest in the content and substance of these deposition transcripts but a right to view them."