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Howard Root, CEO & Defendant June 1, 2016

5 Lessons in 5 Minutes from a

5 Year Criminal Prosecution

For the Full Story . . .

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Available in time for

Christmas!

First -- Suspend Your Disbelief

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Lesson #1

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In the eyes of federal prosecutors,every commercial medical device company in America and its CEO commits at least one

crime every year punishable by prison.

Mechanism = Park Doctrine

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The law does not require a defendant to know about or have actively engaged in wrongdoing in order to be held responsible for his company’s distribution of adulterated or misbranded devices. All that the law requires is that the defendant held such a position of responsibility within the company that he had sufficient authority to prevent or correct the violation.

Motivation = HHS Public Comments

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The government “hand-picked” this case to go “on the offensive” because it was “such a strong case.”

October 15, 2015

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A. That's one of the first things that we look for in my squad, is we're a small squad and the cases that we want to

invest our time and resources in arecases in which the conduct is top down.

What we don't want – we just don't have the ability to spend our investigative resources on our cases where we're talking about a rogue rep . . . .

George ScavdisFDA Special Agent

Investigator

Motivation = FDA “Investigation”

Motivation = FDA “Investigation”

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Q. You didn’t think it was important to actually put in front of her the words of what the FDA has actually cleared and walk through her understanding?

A. . . . when I’m interviewing these people, I’m not there to make the defense’s arguments . . . .

George ScavdisFDA Special Agent

Investigator

Department of Justice Building

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Lesson #2

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Before making the first sale of a medical device, a company must have a full compliance program

and a full-time dedicated Compliance Officer.

Compliance Programs in the Crosshairs

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“The grim reality is that it’s almost impossible to be certain that an institution of any size has not violated one or more of these laws.”

“The Yates Memorandum makes it clear that . . . it is in the company’s interest to disclose facts that implicate an individual in wrongdoing.”

“You’re thinking, ‘But our compliance officer didn’t do anything wrong.’ . . . It wasn’t what he did; it was what he didn’t do. He failed to establish and maintain an effective compliance program.”

Norman Tabler, Esq.Faegre Baker Daniels

Law360, April 16, 2016

Lesson #3

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You can win easily, but onlyif you are able to survive the entire process.

Corollary: If you are unable to fight to the end,give up right at the start.

What Does it Take to Fight to the End?

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• $25 million in legal expenses to pay 121 lawyers at 14 law firms to comply with 5 years of a criminal investigation & prosecution

• Prosecutors warning your employee that if she did not change her testimony, “things will get much worse for you.”

• Prosecutors threatening your employees that if they did not “cooperate,” they would be “fired and never again work in healthcare.”

• Prosecutors calling your employee “a poor f***er” who needed to return “on bended knee” to “fix” his testimony.

• Prosecutors telling a female employee: “If you do not deliver us with the answers we want to hear today, it should be made known that we have the power to withhold rights and privileges provided to your natural born son.”

DOJ Publicity

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• This was “a deceptive sales campaign led by the CEO of a public company . . . that persisted in the face of FDA warnings, a whistleblower’s complaint to the CEO and a failed clinical trial” Assistant AG Joyce Branda, Nov. 13, 2014

• Vascular Solutions was a company that “put profits over patient safety.” Assistant AG Stuart Delery, July 28, 2014

• VSI “knowingly promote[d] medical devices for unapproved uses.” U.S. Attorney Robert Pitman, July 28, 2014

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Newspaper Publicity

Why Give Up at the Start?

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“We’ve invested our blood, sweat and tears into this investigation. At this point we need a body.”

Assistant U.S. Attorney Comments to VSI’s Defense Lawyers

Neil Ogden

Winning at Trial, Easily

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Q: But under the guidance, if there’s any change in the indications for use statement, the guidance says “submit a notification,” correct?

A: That’s what it says.

Q: Okay. And that’s FDA’s advice to companies, right”

A: Yes.

Q: So you'll agree that, [just] because a company submits a premarket notification, it doesn't mean that the law required them to do it, correct?

A. Correct.

Neil Ogden

Winning at Trial, Easily

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Q. [T]he indications for use statement that was cleared . . . [i]t refers to varicose veins, correct?

A. Yes.Q. [V]aricose veins can include the great saphenous

vein, right?A. Yes.Q. Short saphenous vein, correct?A. Yes.Q. And perforator veins, correct?A. It could, yes.

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The Court:

Winning at Trial, Easily

Jury Verdict

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Juror Email Post-Verdict

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I turned 52 years old yesterday and in all my life I have never feared the government. As a law abiding, tax contributing citizen one should not have to fear our federal government. Unfortunately, I will never feel that way again. What the federal government did to you, your company and your employees is nothing short of criminal.

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Newspaper (15 Months After Indictment)

Lesson #4

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If you get accused of a “crime,” almost no one will publicly support you.

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Medical Device Industry Public Comments

My 1986 Party

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Future U.S. Senator Amy Klobuchar

Future Assistant U.S. Attorney Greg Brooker

Future CEOHoward Root

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Response from Staff of Sen. Klobuchar

Thanks for reaching out, and I will be sure to pass this along.Have a great day.

August 14, 2015

VSI’s Criminal Defense Motto

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Lesson #5

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Criminalization is the #1 issue in our industry, which everyone needs to publicize and fight, or else.

Hedge Fund Manager Nelson Obus

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• SEC accusations of insider trading• 10 years + $9 million = not guilty on May 30, 2014• “What I see happening here is a totally

unaccountable organization – run by a group of anonymous legal underperformers probably incentivized simply by putting scalps on the wall, with no concerns about getting to the truth – being able to attack the growth fountain of our whole economy, which is small business.”

Bank Push-Back on “Criminalization”

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“The largest, most well-capitalized lenders in the country have been systematically targeted by the DOJ. And they go in and take a look and threaten and they shame... and try to put pressure on people to settle.”

“For us, that’s not something we can even begin to stomach.”

Bill EmersonQuicken Loans CEOCNBC May 9, 2016

Bank Push-Back on “Criminalization”

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“Overlapping efforts by U.S. regulators place banks under assault.”

“You should all ask the question about how American that is. And how fair that is. And how complex that is for companies.”

Jamie DimonJP Morgan CEO

Q4 2014 Call

Why Does This Matter?

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0%

5%

10%

15%

20%

25%

1978 1988 1995 1997 2005

% of Patients Who Die . . .

From a Heart Attack From a Stroke

Why Does This Matter?

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VSI Device for Blood Clot Extraction

In development for removal of massive intravascular clot

My Friend Steve WortsHemorrhagic Stroke – Feb. 12, 2016

VSI’s Freeze-Dried Plasma

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“From one old, retired Army physician and Colonel, thank you for your interest in freeze dried plasma and your agreement with the Army Medical Department to bring FDP to our military forces.”

“After 34 years of service, I cannot identify a more important medical product needed by our military today.”

Unsolicited email received from Colonel (Retired), Medical Corps, United States Army, M.D.

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. . . or Else

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Howard Root, CEO and Defendant June 1, 2016

5 Lessons in 5 Minutes from a

5 Year Criminal Prosecution

Means = Explosion of Federal “Crimes”

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• Originally, 3 federal crimes = treason, counterfeiting, piracy

• In 2008, >4,500 federal crimes by statute

• In 2015, >81,000 new pages of federal regulations added

• 25% of new federal “crimes” have no mens rea requirement

Motivation = Prosecutors’ Incentive

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Attorney General Loretta E. Lynch recognized 279 department employees for their distinguished public service today at the 63rd Annual Attorney General’s Awards Ceremony.

FCPA New Pilot Program - April 5, 2016

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• 50% increase in number of FCPA prosecutors, with “three new squads of special agents devoted to FCPA”

• Declination of criminal charges against a corporation only if it provides “full cooperation” and “remediation”

• “Cooperation comes in many forms”• “[T]his pilot program is intended to encourage companies

to disclose FCPA misconduct to permit the prosecution of individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement.”

“The GuideLiner allows me to successfully complete previously unimaginable interventions.”*

* Unsolicited physician comments

“The GuideLiner makes impossible cases possible.”*