A big payday for Ashcroft — from a former employee

Former AG John Ashcroft and his 2-year-old consulting firm are due to make as much as $52 million to monitor a settlement of $311 million with manufacturers makers of hip and knee replacements.

No, Ashcroft did not actually negotiate the settlement with the five implant manufacturers — Zimmer Holdings of Indiana, Stryker Corp., Biomet Inc., Smith and Nephew PLC and Depuy, Inc, a Johnson & Johnson subsidiary — that would be U.S. Attorney Christopher Christie of NJ who worked out the deal. Not coincidentally, Ashcroft was Christie’s former boss at the Dept. of Justice.

And the approximately 16.7 percent that the Ashcroft firm will make is not the only money that will be paid out for monitoring services of this settlement — there are four other individuals handpicked by Christie for the job.

Besides Ashcroft, the other monitors tapped by Christie are David Kelley, former U.S. attorney in Manhattan; Debra Yang, former U.S. attorney in Los Angeles; David Samson, former New Jersey attorney general, and John Carley, a former attorney for the Federal Trade Commission and later Cendant Corp. http://www.truthout.org/docs_2006/112507Y.shtml

The only reason we know about the millions that Ashcroft stands to make out of this no-bid contract is because Zimmer Holdings felt it had to include a mention in its SEC filings.

Zimmer spokesman Brad Bishop said the company decided to disclose Ashcroft’s contract because “it was our judgment that it was a large amount outside of our normal course of business.” Bishop added, “We’ve allowed that it could be greater than we anticipate.”

The dollar amounts involved in the other contracts remain shrouded in mystery. At a guess, none of the contracts are likely to be has high as the Zimmer contract with Ashcroft since Zimmer’s settlement was more than double any other company.

Spokespersons for the other four companies – Stryker Corp., Biomet Inc., Smith and Nephew PLC, and Depuy Inc., a Johnson & Johnson subsidiary – declined to discuss their contracts. Christie said he would not release copies of the agreements because they involved “private” contracts.

How is it that these are “private” contracts? Because current rules and custom do not require disclosure. Taxpayer dollars are used to negotiate a settlement — and then private firms are hired so-called monitors can rake in sky’s-the-limit fees to oversee the administration of the settlement.

Experts say companies rarely are in a position to choose their monitors or haggle over their costs. “The federal government is coming in saying, ‘You shall hire this monitor,'” said Jim Cotterman, a principal with Altman Weil, a legal consulting firm in Pennsylvania. “You are not going to negotiate much on fees or get a competitive bid.”

Why aren’t these contracts publicly disclosed? It would be in the public interest to have full disclosure of such contracts, especially since there is no competitive bidding process.

Furthermore, why isn’t a competitive bidding process used? No-bid contracts reek of corruption and cronyism and deals made behind closed doors. Sunshine is an excellent disinfectant that should be applied in liberal doses to this murky process.

At least one member of Congress agrees with this point of view and has announced plans to draft legislation to limit the ability of U.S. Attorneys to dole out no-bid contracts. Rep. Frank Pallone (D-NJ) wrote a letter to U.S. Attorney Christie expressing his concerns:

In his letter, Pallone questioned the growing use of deferred prosecution agreements as a way to settle cases, saying a company or an individual accused of criminal activity simply should be prosecuted. “In addition, the seemingly unfettered discretion that your office enjoys to frame the agreement and its terms, including charging a firm or individual to monitor the agreement, invites the very sort of favoritism, political interference, and backroom dealing that your office has been so successful in confronting throughout New Jersey,” Pallone wrote.

“Given the significant potential for this discretion to be abused it would seem prudent to vest this authority with a disinterested third party, such as a judge or other group of individuals, to remove even the appearance of impropriety that is so easily created when such a large amount of money is being directed to a former employer or colleague,” Pallone wrote.

In my opinion, Pallone’s legislation can’t be written and enacted soon enough. The somewhat lame explanation that Christie gave for picking a former boss and other people in his circle of acquaintance was simply a variation on “Trust me because I trust them”:

“I picked these five people because I have worked with them and I trust them and I know that they will approach their job in a responsible way both in terms of the fees they charge and the effort that they put in,”

I wonder what Christie’s definition of “responsible” is when he mentions fees — is it in the range of 16.7 percent of the entire settlement for just one contract?   This is, after all, the same John Ashcroft who spent $8,000 taxpayer dollars for blue drapes to cover the bare breast of the statue of Justice so he wouldn’t be be photographed the  semi-nude figure behind him — fiscal responsibility is not the first word that springs to mind when Ashcroft is mentioned.

As far as Christopher Christie is concerned, one wonders whether he skipped the law school class on conflict of interest and appearance of impropriety.  He certainly is acting as if he is not familiar with those concepts.  Perhaps he needs a refresher course, courtesy of France Pallone.


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2 Comments on “A big payday for Ashcroft — from a former employee”

  1. Charles Silver Says:

    These contracts are only nominally private. Rather than pay Ashcroft $52M, Zimmer could have increased its payment to the gov’t by the same amount and let the government hire a monitor at its own expense. This is simply corrupt. Every tort reformer who condemned the states’ contracts with private attorneys in their tobacco cases should condemn Ashcrofts’ dea (and other deals like it) LOUDLY.

  2. dharveyd Says:

    So what fox is guarding the hen house in the other cases (Stryker, et al?) We can thank the New York times for breaking the Zimmer-Ashcroft case. Are the newspapers in the other states up to the task? Stryker is in Michigan, by the way …


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