Situate yourself as a CPA and consider the following:

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Review case 3.2 Amgen Corporation

Respond to the following:

Situate yourself as a CPA in your assigned Accounting firm. Amgen is now being considered for a client relationship. Your assigned Accounting firm seeks a solid review of the events and especially what happened to O'Brien.

Identify the areas where the allegations by Shawn O'Brien and the alleged retaliation seem to contradict the principles and practices embodied in the code. Support with appropriate resources a discussion of the merits, rewards, detriments, and moral hazard of whistleblowing as it relates specifically to this case and in general. Describe how your assigned Accounting firm's corporate code would discourage these types of events and how the assigned Accounting firm handles and promotes whistleblowing.

Analytical Requirements: Introduce the situation. Define or situate on the theme from the textbook (cite and reference). Step through the elements using facts, logical reasoning, and appropriate responses as a CPA and member of the AICPA. Conclude on the theme.

Scope: Your original response should be 350-500 words in length and meet the APA and writing standards as shown in the CWE for Masters Level II. Follow up responses should be 150 words in length (graded under participation).

Professional references (no third party): Required: Content from the textbook, AICPA Code of Professional Conduct, a professional Accountancy journal from the United States of America, Accounting technical guidance for any factual assertions. Recommended: Peer reviewed ethical websites (not professor in courses websites), Journal of Business Ethics, and related literature.

For assigned Accounting firm questions, specifically used and linked resources from the firm's website.

Post in a new thread your response in the discussion area by Saturday (recommended). Not as a file: post directly. Post the file to the assignment tab. Follow up throughout the week.

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Case 3-2 Amgen Whistleblowing Case Amgen, a Thousand Oaks, California–based company, has been dealing with lawsuits and whistle-blower claims for years over its marketing tactics. The following describes the lawsuits, language from the legal filings against Amgen, and a statement made by the company on October 24, 2012, about its settlements in its earnings announcement for the third quarter of 2012. Whistleblower Shawn O’Brien In 2009, the company was embroiled in lawsuits filed by 15 states alleging a Medicaid kickback scheme.i Two additional whistleblowing lawsuits were filed against the company in Ventura County. Former employees who said they had uncovered wrongdoing at the biotech giant and were terminated after they raised red flags to superiors brought the whistleblowing complaints, which don’t appear related to the fraud alleged by the group of states. One employee alleged the company violated federal law by under-reporting complaints and problems with the company’s drugs after they hit the market. The facts of that lawsuit are described below. Former Amgen employee Shawn O’Brien sued Amgen for wrongful termination on October 9, 2009, alleging he was laid off in October 2007 in retaliation for raising concerns about how the company reported complaints and problems with drugs already on the market. O’Brien worked as a senior project manager for Amgen’s “Ongoing Change Program,” according to the lawsuit filed in Ventura County Superior Court. His job was to improve Amgen’s “compliance processes with high inherent risk to public safety, major criminal and civil liability, or both,” according to the lawsuit. The lawsuit alleged that in April 2007, Amgen’s board of directors flagged the company’s process for dealing with post-market complaints about drugs as a potential problem. Federal law requires drug companies to track and report to the Food and Drug Administration any problems with their drugs after they hit the market. In June 2007, O’Brien was put on the case. He soon uncovered facts that Amgen was not adequately and consistently identifying phone calls or mail related to post-marketing adverse events of product complaints. That year, O’Brien warned the company about the seriousness of the issues but, he claims, the company would not take any action or offer any support. In August 2007, O’Brien took his complaint to a senior executive/corporate officer (unnamed) and warned that Amgen’s process for dealing with post-market problems wasn’t adequate. In early September of 2007, O’Brien’s managers instructed him to stop all work and not discuss the issues any further with anyone. Approximately four weeks later he was informed that he was being terminated as part of Amgen’s October 12, 2007, reduction in the work force. Ethical Obligations and Decision Making in Accounting, 4/e © 2017 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 Whistleblower Kassie Westmoreland On October 22, 2012, Amgen announced it had set aside $780 million to settle various federal and state investigations and whistle-blower lawsuits accusing it of illegal sales and marketing tactics. Amgen said it had reached an agreement in principle to settle criminal and civil investigations that had been under way for several years by the United States attorney offices in Brooklyn and Seattle. The company said a settlement, which it expected to be concluded in three to four months, would also resolve state Medicaid investigations and 10 whistle-blower lawsuits. It was not clear at the time if the company would plead guilty to any criminal charges. Most of the whistle-blower lawsuits remain under seal, but Amgen has said in regulatory filings that the lawsuits “allege that Amgen engaged in a wide variety of illegal marketing practices.” The federal investigations, according to Amgen, seem to involve marketing, pricing and dosing of its anemia drugs, Aranesp and Epogen, and its dissemination of information about clinical trials on the safety and efficacy of those drugs. Numerous current and former executives have received civil and grand jury subpoenas, the company has said. One whistle-blower lawsuit that was unsealed accuses the company of overfilling vials of Aranesp, essentially providing doctors with free amounts of the drug to give patients and then charge to Medicare, Medicaid or private insurers. The lawsuit said that Amgen tried to persuade doctors to use Aranesp, rather than Procrit, a rival drug sold by Johnson & Johnson, by pointing to the extra profits the doctors could make by using the overfill and billing for it. The lawsuit was filed by Kassie Westmoreland, a former Amgen sales representative and Aranesp product manager. The federal government declined to join the lawsuit, but more than a dozen states did join, including New York and California. Westmoreland would be entitled to part of any settlement under whistleblower statutes. In the past, Amgen has said the accusations were without merit. During depositions in the case, five former Amgen executives invoked the Fifth Amendment against self-incrimination, according to court documents. That case had been scheduled to go to trial in the U.S. District Court in Boston on Oct. 17, 2012 but the trial was then called off, apparently because a settlement was near. “We are very encouraged by the agreement in principle and will comment further at the appropriate time,” lawyers for Westmoreland said. Legal filings Ethical Obligations and Decision Making in Accounting, 4/e © 2017 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 2 The filing in the Kassie Moreland case includes the following statement by the court in response to how Amgen dealt with warnings of the Federal Drug Administration about the safety of its products: In addition to causing damage to programs such as Medicare, Defendants’ actions have also put patient safety and health at risk. The population of patients for whom Aranesp is indicated is especially vulnerable. Though Amgen was aware of issues earlier, beginning on or about March 9, 2007, the FDA issued a series of black box warnings for Aranesp when used in kidney and cancer patients, the most serious warning available on a drug’s label. The black box warned of increased risk of death, of serious cardiovascular or thromboembolic events, and more rapid tumor progressions. The new warnings cautioned physicians to administer the lowest dose possible in order to bring red blood cell counts to the lowest level necessary to avoid blood transfusions. Concerns that, rather than helping patients, Aranesp can increase the risk of tumor growth and shorten survival in patients with cancer, and increase the risk of heart attack, heart failure, stroke, and blood clots in other patients, led the FDA to impose a Risk Evaluation and Mitigation Strategy on Amgen for Aranesp in February 2010. One of Amgen’s responses to the black box warnings appears to have been to treat them as humorous. A script for a July 2007 meeting of Amgen’s Nephrology Business Unit from the files of Amgen Vice President of Sales Leslie Mirani included a joke about “black box warnings,” following up on the FDA’s February 2007 warning about potential harm from Aranesp. Amgen Earnings Report for third quarter of 2012 Amgen revealed the agreement in its earnings announcement for the third quarter of 2012. It said the charge for the settlement reduced its third-quarter earnings by 77 cents a share after taxes. What follows is and extract from the actual earnings announcement. “The Company has reached an agreement in principle to settle allegations relating to its sales and marketing practices arising out of the previously disclosed federal civil and criminal investigations pending in the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington (the Federal Investigations). In connection with the agreement in principle, the Company recorded a $780 million charge in the third quarter of 2011, which, after taxes, reduced the Company's EPS and net income in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2011 by $0.77 per share and $705 million, respectively. If the ongoing settlement discussions are successfully concluded, Amgen expects that the proposed settlement will resolve the Federal Investigations, the related state Medicaid claims and the claims in U.S. ex rel. Westmoreland v. Amgen, et al. and the other nine qui tam Ethical Obligations and Decision Making in Accounting, 4/e © 2017 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3 actions [under the U.S. False Claims Act] previously described in the Company's periodic filings with the U.S. Securities & Exchange Commission. The proposed settlement remains subject to continuing discussions regarding the components of the agreement and the completion and execution of all required documentation; until the proposed settlement becomes final, there can be no guarantee that these matters will be resolved by the agreement in principle.” Ethical Obligations and Decision Making in Accounting, 4/e © 2017 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 4
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Case 3.2 Amgen Corporation
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