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Ex-FDA Chief Pleads Guilty to Conflict Of Interest Charges

October 18, 2006

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Lester M. Crawford, a former commissioner of the Food and Drug Administration (FDA), has pleaded guilty to a conflict of interest charge and making false financial disclosures to the U.S. Senate and the Executive Branch, according to U.S. Attorney Jeffrey A. Taylor of the District of Columbia and Inspector General Daniel Levinson of the U.S. Department of Health and Human Services.

Crawford entered his guilty plea to the two misdemeanor charges in the U.S. District Court for the District of Columbia before U.S. Magistrate Judge Deborah Robinson. Crawford is scheduled to be sentenced on Jan. 22, 2007. He faces a sentence of up to one year in prison on each charge.

"One of the most important principles of our ethics laws is that public officials cannot have a financial interest in any decision that they make," stated U.S. Attorney Taylor. "Lester Crawford, who held one of the most important jobs in government, blatantly violated these principles. Today, he is being held accountable for his actions."

"Any government official's disregard of the conflict of interest laws undermines the integrity of the rules of conduct established for all those in government," stated Inspector General Levinson. "Taxpayers must have confidence that administrators of government programs will be objective and free from improper influences in carrying out their official duties."

Crawford, 68, of Chevy Chase, Md., held some of the most senior positions in the FDA. He served as Deputy Commissioner between Feb. 25, 2002 and March 26, 2004, when he became acting commissioner. On Feb. 15, 2005, Crawford was nominated to become commissioner. On July 18, 2005, the U.S. Senate confirmed Crawford, who remained commissioner until Sept. 30, 2005.

As a senior FDA employee, Crawford was required to file regular Public Financial Disclosure Reports, known as Standard Form (SF) 278s. Schedule A of the SF 278 required the filer to list all investment assets having a value exceeding $1,000 that were held by the filer or the filer's spouse, as well as sources of income exceeding $200 earned by the filer during the applicable reporting period.

Each year, ethics officials at the Department of Health and Human Services reviewed Crawford's SF 278s to ensure that he and his wife were not holding stocks or stock options of companies that were "significantly regulated organizations," which federal regulations defined as organizations for which the sales of products regulated by the FDA constitute 10 percent or more of annual gross sales in the organization's previous fiscal year.

Any FDA employee who was required to file an SF 278 could not hold a "financial interest," such as stock or stock options, in a significantly regulated organization.

Crawford's nomination as Commissioner required confirmation by the U.S. Senate and was considered by the Senate Committee on Health, Education, Labor, and Pensions. As a nominee, Crawford was required to submit two financial disclosure documents to the committee: an SF 278 and a Statement for Completion by Presidential Nominees. Crawford filed both forms in February 2005.

Crawford's plea to making false writings is based on his failure to disclose his and his wife's ownership of stock in "significantly regulated organizations" to the Senate Committee and to the Executive Branch.

During the relevant time periods, Crawford and/or his wife owned forbidden stocks in the following "significantly regulated organizations": Pepsico, Sysco, Kimberly-Clark and Embrex.

Crawford filed a number of disclosure forms and other false writings in which he did not declare his and his wife's ownership of forbidden stocks and stock options. Specifically:

• July 1, 2004: In this SF 278, Crawford disclosed ownership of Sysco and Kimberly-Clark stock. When an HHS ethics official inquired about Crawford's ownership of this stock, Crawford responded in a Dec. 28, 2004 email that the stocks in "Sysco and Kimberly-Clark have in fact been sold." That statement was false.

• Feb. 23, 2005: Crawford did not disclose on this SF 278 his income from a Nov. 17, 2004, exercise of Embrex stock options or the Crawfords' ownership of Kimberly-Clark or Sysco stock.

• Feb. 25, 2005: Crawford failed to disclose in his nominee statement to the Senate Committee his income from the exercise of Embrex stock options in October 2003 and November 2004. Crawford also did not disclose his remaining Embrex stock options.

Crawford's ownership of Sysco and Pepsico stock and his role as chairman of the FDA's Obesity Working Group (OWG) gave rise to the conflict of interest charge, to which he has also pleaded guilty.

On Feb. 11, 2004, Crawford and the OWG's vice chairman submitted the OWG's final report and recommendations, entitled "Calories Count: Report of the Working Group on Obesity," to then-FDA Commissioner Mark McClellan.

The report contained many recommendations, including encouraging manufacturers to re-label serving sizes, noting as an example that "a 20 oz bottle of soda that currently states 110 calories per serving and 2.5 servings per bottle could be labeled as 275 calories per bottle." The FDA publicly released "Calories Count" on March 12, 2004.

On June 3, 2004, Crawford testified before the House of Representatives Committee on Government Reform about the government's role in combating obesity. In his testimony, Crawford outlined the OWG's recommendations and again stressed the importance of re-labeling serving sizes for sodas.

During the entire period from the formation of the OWG to the date of Crawford's congressional testimony, Crawford and his wife owned 1,400 shares of Pepsico stock, worth a minimum of about $62,000, and 2,500 shares of Sysco stock, worth a minimum of about $78,000.

Pepsico, a leading manufacturer of soft drinks and snack foods, and its shareholders had a financial interest in the OWG's conclusions and recommendations. Sysco, a leading manufacturer of food products, and its shareholders had a financial interest in the OWG's conclusions and recommendations.

There is no evidence that the OWG's conclusions were altered because of the Crawfords' ownership of Pepsico or Sysco stock

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