Q&A: The root cause
Exonerated CEO Howard Root uses a long and ugly court ordeal to seek judicial reform. He is interviewed by Ron Eibensteiner, American Experiment’s chairman.
On February 26, 2016, about an hour after a federal jury in San Antonio unanimously exonerated Twin Cities-based Vascular Solutions and its CEO Howard Root of a criminal violation of FDA standards, a juror sent Root an email. “I turned 52 years old yesterday and in all my life I have never feared the government,” it said. “As a law abiding, tax contributing citizen, one should never 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.”
Root recently recounted his five-year legal ordeal before a sold-out audience of more than 400 people at an event sponsored by Center of the American Experiment at the Minneapolis Hilton Hotel. He described how in 1997 he left his legal career to found Vascular Solutions, a medical device developer that he grew from nothing to over $75 million in revenue by 2010. But at the end of that year, a disgruntled employee filed a “whistleblower” lawsuit with the U.S. Attorney in west Texas that spiraled into accusations of criminal violations for which Root could have been sentenced to five years in prison and his company and its 600 employees could have been barred from doing business with Medicare, tantamount to a corporate death sentence.
The verdict concluded a nightmare in which the company spent $25 million in legal expenses over five years for 121 lawyers at 14 law firms across the country to represent more than 50 employees and customers who became entangled in the prosecution. Ron Eibensteiner, the Center’s chairman, followed that up with this interview.
Eibensteiner: This ordeal all began with an allegation from a whistleblower. Explain that. What was in it for him?
Root: Virtually all these start with the whistleblower, who is usually a disgruntled former employee who’s trying to make money, and this case was no exception. A sales rep who does not get promoted, leaves the company, gets in trouble by violating his non-compete, then creates an allegation against the company in order for him to get 25 percent of whatever money the government gets from the company.
The whistleblower in this case made up a $20 million fable, so that he’d get 25 percent of that, or $5 million. The beauty for the whistleblower is that his lawyer doesn’t have to do anything other than file the complaint, give it to the U.S. Attorney and then feed the U.S. Attorney information that would support the government prosecuting the company. There’s a massive incentive for false statements, misstatements or inaccuracies to start the investigation, and the company gets no chance to respond at that time.
The whistleblower has so much financial incentive to make allegations with very little repercussion, if he’s wrong. Doesn’t that need to be changed?
Root: What needs to be changed is the U.S. Attorneys need to talk to the company immediately upon getting the whistleblower allegations. Instead they wait, in my case almost a year, before they let the company respond, and even then, they just request our documents and do not get our version of what really went on. The whistleblower is feeding information motivated by his side, which is to get money, and the U.S. Attorney is not listening to the other side and getting locked in on the case. The way to change that is to make the U.S. Attorney look at the other side and see what the company has to say before their prosecutors get locked in.
Is that why this civil case evolved so quickly into a criminal prosecution?
Root: It became a criminal investigation the day it was filed by the whistleblower because the policy of the Department of Justice [DOJ] under Sally Yates was that every corporate investigation is given to the criminal division to see if there’s a chance to prosecute the CEO. The whistleblower files the allegation, the civil division attorneys turn it over to their partners on the criminal side to see if they can make it into a criminal investigation, and the first subpoena we got was from the Criminal Division of the DOJ who were already investigating it as a crime.
How did you feel when you realized that the attorneys at the Department of Justice were not interested in getting at the truth, but rather about winning their case at all cost?
Root: It was exactly the opposite of what I expected. You expect someone working in the Department of Justice is interested in justice and trying to find the right answer. Instead, as we started having interactions with these prosecutors, they said things like, “We’ve invested our blood, sweat and tears into this investigation and at this point, we need a body.” Which stunned me because it means they needed an individual to plead guilty to a crime simply because they had done so much work on the case. That’s so far removed from justice that I was shocked that anyone in the Department of Justice would say that. But that’s the way they’re motivated, that’s the way they’re rewarded, and that’s the way they get promoted.
Your book describes some brutal behavior on the part of the Feds toward your employees, so much so that you filed a motion to dismiss the indictment for prosecutorial misconduct. What led to that motion, and what was the outcome?
Root: The prosecutors started off their investigation by threatening the company. They said, if you don’t plead guilty to a crime and give us the money and the compliance agreements that we want, we will take the company down. We will basically prosecute you until you can’t take it anymore. When we proved that we could defend ourselves, they went against individual employees to manufacture the evidence they needed to try to establish their false case. When the individual employees wouldn’t corroborate the prosecutors’ theory of the case, they started threatening the employees.
In the prosecutor’s mind, the conclusion was absolute—they thought we were guilty and the employees were covering up what we did. In reality, the prosecutor’s conclusion that we were guilty was false and the witnesses, the employees, were telling the truth. Because the prosecutors thought that the employees were lying, they started threatening them in gradually increasing levels of severity to try to get the answers they wanted. So it wasn’t that one day the prosecutor woke up and they said, “We’ll threaten the children of the employees.” Instead, it was something they finally did to try to get the employees to say that the company had done something wrong.
There is really nothing a defendant can do at that point except bring a motion to dismiss the indictment for prosecutorial misconduct. That’s what our lawyers did, but the odds of success on that are almost zero. No federal judge is going to believe that prosecutors are threatening the employees’ children over something so insignificant as our case. We didn’t even get a hearing by the judge. He just dismissed it out of hand, saying, I have no evidence of this, I don’t want to see any evidence of this, and even if they did it I wouldn’t dismiss the indictment.
Why didn’t you just settle?
Root: For this reason, I actually liked that the prosecutors were so out of control because in the normal business, and I’d say with every business, if it’s just an argument over money, the company will give up the money and not fight even if they’ve done nothing wrong.
It’s a little bit like extortion?
Root: It’s a lot like extortion. You would give any amount of money to the government in order to avoid getting indicted. That’s what companies do in almost all the cases. In this case though, the prosecutors were so unhinged in demanding that individuals plead guilty and their careers be destroyed, that there was no middle ground. They wanted four employees fired and destroyed, and say that the middle ground is two. We weren’t going to give up one. At that point, when the prosecutors were so adamant about individual destruction, it made it so easy for us to say no, that we could actually fight. But if they had said, “All we want is $10 million”, we would have given them the $10 million. Remember, we spent $25 million on our defense.
Because they added three other employees and me into the demands of the settlement, my board and I could say no and we could get on with the fight. When prosecutors face a good opponent, most of the time they lose. They’re just not that good at trial. But the problem is that most defendants cannot get to trial. They have to give up beforehand. They don’t have the money, they don’t have the legal talent, they don’t have the judgment, they don’t have the backbone, or they may not even have the family support. And then the prosecutors win.
I’ve served on many high technology boards over the years and I have to tell you, I’m really impressed with your board of directors. They supported you from start to finish. Tell me about that.
Root: Right, not only the board, but also the employees. We didn’t have a single officer of the company resign during this whole process. The board had been with me since the very beginning of the company. We had weathered many storms, survived and grew. They knew we were going to run the company the right way. They knew that we weren’t doing something underhanded or devious, and that gives them the confidence to stand up and say, “We’re not going to get rolled.”
The lawyers for the company explained the settlement offer to our board and explained that if we lost, the company would be destroyed. It would have been shut down, sold off for parts. That’s a big bet for the company. One of my board members said, “If we take the settlement offer, the company survives. If we don’t take the settlement offer, and we lose at trial, the company is destroyed.” Then he asked, “Do we have to accept something for the financial interest of the shareholder if we know that it’s wrong?” The lawyer said, “No, you don’t ever have to sign anything that’s wrong.” And he said, “Okay, this is an easy decision. What they’re asking us to admit is wrong. Case closed.”
Too many boards are the other way around. They start with what’s financially in the company’s best interest and try to meld that into what’s right.
What are the top two takeaways from this whole experience?
Root: The reason I wrote the book is to convince everyone in America that you could be indicted for absolutely nothing today, and it’s not just CEOs and it’s not just business people. Prosecutors have almost uncontrolled power to destroy anyone in America on false charges. That’s something we need to correct.
The second takeaway for me is that you can win, if you fight, but you have to think it all the way through to the end. I get calls from defendants probably once a month asking for advice. The first question I ask is how much money do you have? If they say $100 thousand or even a million dollars, I say, “I’m sorry. I don’t think you can fight because it’s going to cost way more than that to take on the federal government.” The best thing to do at that point is to make nice, take the lowest penalty that you’re going to get—which is going to be offered at the very beginning—and try to get back on your way. That’s a horrible message to deliver. I hate it, but it’s the best one for a defendant without money.
I was always taught that, in America, a person is innocent until proven guilty. Is that is still the case?
Root: I’d say this: if guilty means being punished, you can be punished even though you’re innocent, because the big punishment in these cases is the process. It took us five years from the time they started the investigation until we finally got to not guilty. During that period, we spent $25 million. We lived 15 months as an indicted company and an indicted CEO, and that is real punishment for a person, whether or not you win at trial. You’re not innocent until proven guilty in my view because you’re punished at the very beginning and all the way through to the not-guilty verdict.
The flip side is, you are innocent until proven guilty when you get into the courtroom, if you can survive the process to get to the courtroom. Once you’re there, the defendant has the advantage. The prosecution has the burden to prove their case beyond a reasonable doubt. The defendant can strike more potential jurors than the prosecutors can. The defendant gets to see all the evidence from the prosecutors before it is used in the trial, whereas, the prosecution only sees the defendant’s evidence when it’s presented.
The court system, the actual trial itself is still set up as innocent until proven guilty, but the process to get there is guilty right from the first investigation. And the punishment starts from day one.
Plus, the Department of Justice has a horrible practice of issuing press releases at the time of the indictment saying all kinds of bad things about the defendants as if the allegations in the indictment, are already proven. They say you are a money-motivated CEO, running a company that puts profits over people, don’t care about what the FDA says, and have endangered public safety. And then in the last paragraph of the press release they say an indictment is only an allegation and everyone is presumed innocent until proven guilty in a court of law. But that’s after a page and a half of allegations which read like they’re facts.
You started Vascular Solutions from scratch, here in Minnesota. You raised money, you hired people, and you worked hard for many, many years, and it did very well financially. How many people did you employ?
Root: 650 at the end. And we did all that without a dime of government money.
This was a real asset to the State of Minnesota. How many of our political leaders came to your aid when you were falsely indicted by the Department of Justice? I am specifically thinking of Senator Amy Klobuchar, who you’d known for a long time and who serves on the Judiciary Committee in the Senate.
Root: I’ve known Senator Klobuchar since 1985, when we started together at the law firm Dorsey & Whitney and worked together for five years. When I saw the investigation going off the rails, and the prosecutor threatening my employees, I sent an email to her staff saying, “Could Senator Klobuchar send a letter to the Department of Justice to get someone to look into this?” The response from the staff was, “It’s a longstanding rule of the Senate that senators cannot get involved in ongoing DOJ investigations.” That is 100 percent false. My lawyers used to work at DOJ and got letters from senators all the time, asking for an explanation about an ongoing investigation. But that response was a way for Senator Klobuchar to say “I can’t,” rather than “I won’t,” which is politically correct. She did not want to get involved in a company that had been accused of a crime because it could tarnish her political reputation.
Later on I sent another email to the staff describing the misconduct going on. Since Senator Klobuchar is on the Senate Judiciary Committee, and a former prosecutor, I thought she should know about this attack on our Minnesota medical device community. The response back from her staff was, “Thanks for the info. Have a great day.” My great day was the day I got indicted.
It took five years to get to trial. What did you feel like on the first day of the trial? Optimistic? Scared? Nervous?
Root: Every defendant’s nervous; if they’re not, they’re not awake. You’re sitting there waiting for a prosecutor, who’s been ginning up a case against you for five years. He’s going to give an opening statement to a jury of 12 people who don’t know you and you’re going to sit there and take it. That’s not a normal position for the CEO of a company to be in. You sit there and wonder how bad it’s going to get, where the attack will come from, and how they will dirty you up. You can guess, but you just don’t know. And then an hour and a half later, the opening statement is over and you know their whole theory of the case.
How did you react to their opening statement?
Root: I was relieved because it was so bad. Their big theory was that I was doing this to make money. The product they alleged we were illegally marketing made up 0.1 percent of our sales, never harmed a patient, had eight separate FDA clearances and didn’t make us a dime. I couldn’t believe that they were actually thinking that argument was going to win.
My biggest fear was there would be something they would say that I didn’t know. It’s what you don’t know that you don’t know that creates the big problems in life. I felt relieved because once I knew exactly what they were going to prosecute me for, they had nothing. If we just put on a good case, we were going to convince the jurors that this was not a crime. And we did, convincingly.
After the prosecution rested its case, your team decided not to call a single witness to testify in your defense. Which was very unusual, right?
Root: Unusual, unexpected, a little scary, and counter to my personality.
How did they react?
Root: I was watching the prosecutors when we said “the defense rests.” I expected them to express shock and panic because I knew they weren’t ready to give their closing argument. They were thinking they would have two more weeks of witnesses, but now they would have to give closing arguments the next day. If they were smart, they would have been panicked and shocked. Instead, they looked ecstatic, like they had suckered us into giving up. We weren’t giving up, we were just walking off the court winning 100 to 1. We didn’t want to bore the jury with more evidence when we already had the facts on our side, the law on our side and the emotion on our side.
All presented by their witnesses?
Root: Right, by us cross-examining their witnesses. If you can make your case by cross-examining the prosecution’s witness, you have the strongest case possible. Their only physician witness said that our product was safe and effective, had never harmed a patient and that any risk of a complication was purely hypothetical and never seen. We didn’t need to call anyone to say that again because we already had it from the prosecution’s own witness.
That’s how bad the government’s case was.
Because of our decision to rest without calling any witnesses, we went right to closing arguments. I knew that the prosecutors were not prepared and their argument was going to be a mess—and it was. We had four days to prepare our closing arguments because we knew we were going to rest without calling witnesses, and our closing arguments were well prepared, scripted and practiced.
What were you feeling when the jury left to start deliberation?
Root: I had a great view of the jury during the case. When the closing arguments were going on, the judge was trying to have a poker face, but the jurors don’t have to. I could tell that four or five of the jurors were very visibly upset at the prosecution and very supportive of us. One of the jurors started crying during the defense argument, which I thought was a pretty good sign.
But the challenge for jurors is that it has to be unanimous. The big risk is that one juror might hold out and then convince the other 11 to come along with a compromise verdict, which convicts you of one crime but lets the other allegations go away. The problem is that jurors don’t know the implications of the verdict that they return. They don’t know what’s a misdemeanor and what’s a felony and they don’t know what the penalty is for any of the crimes they’re deciding. The one verdict that the jurors probably thought was the least serious, which is conspiracy, is actually the worst crime to be convicted of. That’s the felony, the others are misdemeanors. That conspiracy conviction would have resulted in a minimum of three years in prison for me, where the other ones had a maximum of one year in prison.
But I did not think that was going to happen. We had a great consultant to help pick the jury, a guy who helped us write the jury questionnaire and pick the right jurors and exclude the wrong jurors. I thought that we had the right jury, and I was proven right. They came back after a day with not guilty on all counts.
OK, you’ve been acquitted. When did you know it was time to sell the company?
Root: I had decided it was time to sell the company before I was indicted, a year and a half earlier. It was when I realized that any business in America can get indicted and the CEO thrown in jail for a salesperson saying a wrong word. If an employee says the wrong word, the CEO could go to prison. I knew that we needed to fight all the way through to not guilty, but then it would be time for me to get out, for us to sell the company, rather than risk it again.
With those risks, why would anyone want to be a CEO these days?
Root: Either they don’t appreciate that level of risk, or they think they can just manage their way out of it. They can’t. I always say there’s three types of CEOs. First there are the ones who do it for the right reasons, to build a company, to grow a company, and to do good things for shareholders and employees alike. The second group wants to see their name in print and have that kind of power, and the third group wants to do it to make the most money they can. We’re chasing that first group out of business, and they are the ones who should be managing public companies. I think a lot of people are deciding not to be a CEO, especially of a medical device company that has that level of risk.
Now that you’ve sold the company, you’ve said that your “case is your cause.” Tell me about that.
Root: I want two things to happen, they’re both on the federal level, but they have implications for prosecutors on the local level as well. The first one is to rebalance the Yates Memo (written by former Deputy Attorney General Sally Yates), which says that every whistleblower investigation immediately becomes a criminal investigation of the CEO. We should rebalance that in the sense that prosecutors have to look at all sides of a case. They need to gather evidence from the company before they reach a conclusion, and only the most serious and worst offenses should be prosecuted on a criminal basis. There are people who commit corporate crimes. Bernie Madoff should be in prison for the rest of his life. But there are a lot of things being prosecuted as crimes that are not crimes and should not be prosecuted.
The second thing is that the lack of control over prosecutors is the single biggest danger to freedom in America. It’s not justice when prosecutors can pick out anyone in America and subject them to this criminal process and only the very wealthy can survive. The Department of Justice has to police their own misconduct, and if they won’t do it, the Senate Judiciary Committee has to have their own standing investigation of prosecutorial misconduct. When something as bad as what went on in my case occurs, the Department of Justice needs to take corrective action, discipline those prosecutors, fire them, and potentially even criminally indict them for obstruction of justice. I said in my press release after the verdict that if the U.S. Attorney in San Antonio wanted to indict someone for obstruction of justice in my case he wouldn’t even have to leave his own office to find the most suitable person to indict. That’s what I believe. What the prosecutors can do to obstruct justice is far worse than anything I’m seeing in America today.
After going through this unfortunate experience, have you considered running for public office?
Root: I’m certainly an advocate and it’s fun getting involved in politics in my now four months of retirement, but I’ll probably never be a candidate. I know what I’m going to do for the next year, which is talk about these issues and try to get something done within the Department of Justice. Hopefully I’ll find a way to help the Republican Party in Minnesota as well. After that, I’m a horrible golfer and I’m not a sit-at-the-beach guy. I’m sure I’ll find something to keep myself occupied, but I don’t know what that is yet.
I picked up your book on a Friday night and I think I finished it early Saturday afternoon. It’s a real page-turner. Any thoughts about making a movie ?
Root: My co-author, Stephen Saltarelli, is now a screen writer. He was a lawyer on our case and left the practice of law right after the case to become a screen writer. For that reason, we wrote Cardiac Arrest as almost like a screenplay. It’s three acts, it’s the symptoms, the diagnosis, and the treatment of the case. It has multiple small chapters with a lot of visual things happening in there. He really gave it the punch that you normally would find in a movie.
So who will play you in the movie?
Root: George Clooney would be the obvious choice (laughter)! Actually, I really like Kevin Spacey.
Root documented his cautionary experience along with co-author Stephen Saltarelli in the book Cardiac Arrest: Five Heart-Stopping Years as a CEO on the Feds’ Hit-List. It is available in all formats.
Howard Root started his career as a corporate lawyer but soon turned into an entrepreneur. He founded the Minnesota medical device company Vascular Solutions in 1997 and continued to run it for 20 years, inventing and launching over 100 new cardiovascular devices and creating more than 650 U.S. jobs along the way. In February 2017, after enduring a five-year legal nightmare, he sold the company to Teleflex for $1 billion.