Court rejects whistleblower case against Wyeth
By Judith Burns, Market Watch, March 25, 2008
LINK

WASHINGTON (MarketWatch) -- A former Wyeth Inc. (WYE) training director is not entitled to whistleblower protections adopted by Congress in the aftermath of the Enron Corp. meltdown, a federal appellate court ruled Monday.
In a split decision, the Fourth Circuit U.S. Court of Appeals concluded that the former employee, Mark Livingston, had "no objectively reasonable basis" to believe Wyeth was violating U.S. securities laws. The majority opinion by a three-judge panel upheld a lower-court ruling by a federal district court in North Carolina.
Livingston was a training director at the Wyeth vaccine plant in Sanford, N.C. The company fired Livingston in December 2002, citing a long history of problems culminating in his threat to have police eject a Wyeth human-resources director from an off-site holiday luncheon. Livingston filed a whistleblower protection complaint with the Labor Dept., saying he wrongly fired because he was targeted for complaining about the firm's lack of progress in vaccine-manufacturing training for employees, as required by the Food and Drug Administration.
Michael Delicat, a partner at Orrick, Herrington & Sutcliffe in New York, who represented Wyeth, said the opinion is important because is the first to give a detailed view of what constitutes protected behavior under the whistleblower provisions of the 2002 Sarbanes-Oxley Act.
Delicat said whistleblower advocates "have been pushing the envelope" in regard to the law, and he predicted the new ruling should bring needed clarity to what is and isn't protected by the whistleblower provision.
Thad Guyer, an attorney who represented Livingston, indicated his client is likely to appeal the matter to the full circuit court. In a statement, Guyer said that in his 30 years of experience, he has never seen "such a profound disagreement over the facts" in a case before an appeals court.
"We, of course, agree with the dissenting opinion in concluding that Livingston had enough evidence for a trial on a Wyeth 'cover-up' of serious production problems for the Prevnar infant vaccine. We will likely ask the full court to decide if the dissenting judge had it right, and the majority of two judges had it wrong," said Guyer.
Wyeth, formerly known as American Home Products, was subject to an FDA consent agreement after the regulatory agency seized allegedly adulterated products made at Wyeth facilities in Pearl River, N.Y., and Marietta, Pa., in 2000. Under the agreement, Wyeth had to review quality control programs at all its manufacturing sites, including its Sanford facility, which made the Prevnar infant vaccine.
Livingston made a formal complaint to Wyeth's ethics office in July 2002, saying the firm was making little headway and that it had repeatedly postponed the FDA-ordered training. In the majority opinion, the appellate judges said Livingston's worst fears were not realized, as the Sanford facility met the FDA's training deadline.
Wyeth's investigation found no violations; Livingston was placed on a personal improvement plan in October 2002, and fired after the holiday luncheon incident. Wyeth said the event capped "a long history of abusive and insubordinate conduct" by Livingston, who had been formally warned about his "foul and abusive language and unprofessional behavior" toward his staff.
In his dissenting opinion, Judge M. Blane Michael said the majority erred and that Livingston had provided sufficient evidence that he had a reasonable basis to think Wyeth might lie to shareholders or omit key information from them. He also questioned whether Wyeth would have fired Livingston had he not complained about the slow progress in its FDA-ordered training program.
-Contact: 201-938-5400

Fired Worker's Suit Against Wyeth Is Test for Whistleblower Protections
Adam Geller, The Associated Press, 02-10-2006
LINK

Was Mark Livingston trying to blow the whistle on suspect corporate behavior and protect his company's shareholders? Or was he making trouble?

Next week, a judge in Greensboro, N.C., will parse through the story of Livingston and the company that fired him, pharmaceutical maker Wyeth, and weigh those questions. The answer could have implications for companies, workers and investors well beyond their bitter dispute.

Livingston, a former training director at a Wyeth vaccine plant, seeks to cast himself in the mold of whistleblowers like Sherron Watkins, who became a folk hero for trying to call attention to massive accounting fraud at Enron Corp.

But unlike Enron, the Wyeth case is noteworthy for what it is not. It has nothing to do with accounting or with allegations of financial fraud, at least not the way most people think about it.

After Enron and WorldCom Inc. imploded, lawmakers sought to prevent future scandals, adopting reforms including job protection for insiders who blow the whistle on suspected fraud. But it's not clear if the law -- known as Sarbanes-Oxley -- protects workers like Livingston who raise concerns beyond financial matters.

Lawmakers' effort to protect whistleblowers "intended a pretty broad sweep," said Robert Vaughn, a professor of law at American University who has examined Sarbanes-Oxley whistleblower cases. "The basic principle is this: Is the information something that investors and shareholders should know about?"

Yes, says Livingston, arguing his complaints of gaps in training and oversight pointed to potential problems with a production of a vaccine that is a major contributor to Wyeth's profits.

Wyeth disagrees. The company, based in Madison, N.J., has asked a federal judge to dismiss a 2003 lawsuit by Livingston demanding his job back. Livingston's complaints about the plant's operations are well beyond matters covered by the law, the company says. He was fired not in retaliation but because of what the company calls "repeated misconduct," culminating in a confrontation with a company executive at a holiday party.

If Livingston wins protection as a whistleblower "certainly we would say it would be an unwarranted expansion of what the law explicitly covers and what it was designed to cover," said Michael Delikat, a New York attorney representing Wyeth. "But that's going to be for the court to decide."

The dispute that raises these issues played out at a plant in Sanford, N.C., where Wyeth makes Prevnar, a vaccine to protect infants and young children against pneumococcal disease, which can cause meningitis, pneumonia and other illnesses.

When Livingston was hired in 2000 to develop and track employee training at the plant, Wyeth was still ramping up production of the vaccine. Even then, Prevnar's profit potential was obvious.

The Centers for Disease Control recommends the vaccine be administered to every infant and young child. The resulting demand outpaced the company's production, creating shortages not resolved until 2004.

In the five years since it was introduced, Prevnar has become one of Wyeth's biggest-selling products, with sales last year up 43 percent to $1.5 billion.

Wyeth hired a familiar face in Livingston, who had worked for the company as a manufacturing consultant. Tired of frequent business travel, Livingston, married and the father of two, saw the job as a chance to stay at home in Sanford, an outlying bedroom community for North Carolina's research triangle.

"Wow," he recalls thinking, "this is a place that I could grow for a good long while."

After six weeks, though, Livingston says he saw problems. Workers were signing off on federally required records and adopting procedures without proper training, his lawsuit says. Some records did not match production activity. Wyeth has denied the allegations.

Livingston says he raised concerns with the director of manufacturing in September 2000 and was warned to "back off."

But the following month, the Food and Drug Administration announced a consent decree with Wyeth after inspectors determined the company was not meeting manufacturing standards at plants in Pennsylvania and New York.

Wyeth agreed to pay $30 million, engage experts to do a comprehensive inspection at the plants and review and certify overall quality efforts.

That reassured him, Livingston said. His confidence was bolstered further when plant managers allowed him to organize worker focus groups to talk about whether the plant was meeting manufacturing requirements.

The good feelings didn't last.

Livingston alleges that in 2001 and 2002 he repeatedly pointed out problems to an outside auditor, the plant managing director and a quality council of managers. The company acknowledges some of these meetings, but denies his account of what took place.

In July 2002, Livingston wrote a memo to the plant's executives saying problems were so serious he could not sign off on the company's efforts to overhaul its compliance training.

"To indicate otherwise provides false and misleading information to outside auditors, including the FDA," Livingston wrote in his memo.

Soon after, Livingston was called into a meeting with the plant's top executive. Livingston says the man was livid, waving the memo and shouting at him. A few days later, Livingston filed a complaint with the company's ethics office, alleging harassment as well as problems in its training systems.

In October, the managing director and the plant's personnel director told Livingston his performance had to improve or he would be fired.

The end came in December 2002, when Livingston hosted a holiday lunch at a local restaurant for his staff. As they gathered, the personnel executive arrived uninvited and Livingston confronted him. The following Monday, Livingston was notified he'd been fired.

By then, Wyeth says it had looked into all the issues he raised.

"Wyeth had conducted an extensive investigation of Mr. Livingston's internal complaint, and we determined it was without merit," Wyeth spokesman Doug Petkus said.

Livingston filed a complaint with the Department of Labor -- where an initial investigation found the company had not violated the law -- then shifted his case to federal court.

When the two sides go to court Monday, they will be arguing whether Livingston's lawsuit should be dismissed or go to trial. The law says workers are protected if they report company actions they believe might constitute mail, wire or bank fraud, violate securities rules or fraud against shareholders. A decision is not expected for a few weeks.

"It is equally important to an investor to know that there's possibly huge deficiencies in the manufacturing regulations," said Joanne Royce, general counsel for the Government Accountability Project, a whistleblower advocacy group representing Livingston, "just as important as deficiencies in accounting."

Livingston says his motivation is broader, driven partly by his own misgivings.

He recounts one focus group held for plant workers during which a technician posed an open-ended question.

"What is it we're all about here? Are we about saving lives or making money?" Livingston recalled the woman asked.

"I sort of gave what I thought was the right answer, which is we're here to save lives," Livingston said. "But then I thought, what would the corporation want me to answer, and I said, 'Well, we're here to do both.'"

Livingston says he regretted that equivocation ever since.

Mark Livingston vs. Wyeth Pharmaceutical
LINK

Livingston vs. Wyeth Pharmaceutical was filed in U.S. District Court for the Middle District of North Carolina under the whistleblower provisions of the Sarbanes-Oxley Act. GAP represents Mr. Mark Livingston in this action, which was one of the first cases filed in federal court involving the Sarbanes-Oxley claims. This case will be an important case to test the scope of protected activity under the Act.

Livingston was hired by Wyeth Pharmaceuticals in August 2000 as Manager, Training and Continuous Improvement, at Wyeth’s Sanford (North Carolina) Vaccine Site. He was promoted to Associate Director of Training and Continuous Improvement in April 2001. Shortly after he was hired, Wyeth entered into a Consent Decree with the Justice Department and the Food and Drug Administration (FDA) on October 3, 2000 to settle ongoing violations of Good Manufacturing Practices (GMP).

Livingston’s principle job responsibility was to improve compliance with the GMP Training System at Wyeth Sanford and to assure adequate training measures were in place for the safe and compliant manufacture of pediatric vaccines, particularly the new infant vaccine, Prevnar. In effect, Livingston was hired by Wyeth to ensure Prevnar’s safety. Prevnar is one of several early childhood vaccines recommended for every newborn infant by physician organizations, the Centers for Disease Control, and the United States government.

In the course of his tenure at Wyeth, Livingston made repeated complaints relating to lack of compliance with regulatory GMP. He complained that the company did not compliantly train new employees in critical manufacturing and quality assurance positions fast enough in the years 1999-2002 to keep pace with production and sales goals of Prevnar.

According to Livingston, Wyeth repeatedly announced both internally and publicly, that failure to meet Consent Decree and Good Manufacturing Practices (GMP) mandates would negatively impact the company's future. Instead, Wyeth Sanford management kept the production pipeline flowing despite the lack of compliance, therefore materially misrepresenting the true state of operating and financial performance in this fastest growing division of the Wyeth enterprise. The plaintiff spent two years sounding the alarm that those mandates were not being met.

Mr. Livingston was fired in December, 2002 for blowing the whistle on noncompliant training system practices. Shortly thereafter, he filed a whistleblower complaint under the whistleblower provisions of the Sarbanes-Oxley Act.