CSL invokes a mobster motion in fight over plasma cartel accusations
But this is a modern day tale being played out in the corporate world involving one of Australia's most respected healthcare companies, CSL, and, although a long way from the mean streets of 1920s Chicago, the two worlds have now strangely coalesced.
For more than four years CSL, which produces and supplies blood plasma around the world, has faced allegations from a handful of hospitals that it orchestrated a cartel along with its major competitors to fix the price of plasma in the North American market. CSL has consistently said the claims are baseless and that it intends to vigorously defend the civil action.
CSL has linked arms with its competitor and alleged co-conspirator, Baxter International, to compel the powerful US Food and Drug Administration to present a star witness whose testimony they believe will prove their innocence.
The witness, named as Dr Mark Weinstein in US court documents obtained by Business Day, is a high-ranking official at the FDA in charge of regulating blood suppliers since the 1990s and is therefore, CSL and Baxter argue in their 188-page motion, able to provide first-hand evidence that could see the billion dollar lawsuit collapse.
"Plaintiffs are seeking in excess of a billion dollars from [CSL and Baxter], alleging that defendants conspired to reduce the supply of two [blood products] - immune globulin and albumin - over a seven-year period in violation of antitrust laws," lawyers for CSL and Baxter say in their documents.
"Many of the plaintiffs' allegations directly involve conduct by the FDA. Indeed, plaintiffs reference the FDA 17 times in their consolidated complaint."
But up until now the FDA has refused to allow Dr Weinstein to testify, placing CSL in the position of believing evidence exists that will prove its case but which they are unable to produce in court.
Enter 1920s Irish-American mobster and former Al Capone rival Roger Touhy. A bootlegger in the 1920s, Roger "The Terrible" Touhy and his brothers sold illegal beer and liquor in Chicago, ran a loan shark business and supplied beer to notorious Chicago mob boss Al Capone.
Touhy soon became a problem for Capone, and following running gun battles the mobster was eventually framed by corrupt cops loyal to Capone for the kidnapping of John "Jake the Barber" Factor, a brother of cosmetics manufacturer Max Factor.
From his cell, Touhy served a subpoena upon an FBI agent seeking the production of various Department of Justice files, which he claimed would prove his conviction was secured by fraud. When an FBI agent refused to hand over the evidence he was jailed for contempt.
Since then companies or individual seeking crucial information from US government departments, often to help in court cases, have used a procedure nicknamed a "Touhy request" to compel the release of information or testimony. And it is this mobster move that CSL has also now used.
CSL and Baxter served a detailed Touhy request on the FDA in April seeking Dr Weinstein's testimony regarding seven narrow topics that revolve around the allegations of the companies being involved in a blood plasma cartel.
"Despite defendants' [CSL and Baxter] offers to compromise, the FDA denied defendants' request on May 2 2013, objecting that producing the requested testimony would be unduly burdensome and not in the public's interest," lawyers say in the court documents. "Due to the importance of the issues in this high stakes lawsuit, and because the FDA's position is contrary to law, defendants are left with no choice but to move to compel."
The motion to compel it hopes will see Dr Weinstein emerge from the FDA bunker and offer up his knowledge of CSL's activity when the conspiracy to limit plasma supplies and push up prices allegedly occurred. Critically for CSL, it believes Dr Weinstein can testify to four key allegations aimed at it by the billion dollar lawsuit.
Namely, that an FDA data reporting system to monitor blood supplies was not used to "police the conspiracy" as claimed by the class action but rather implemented at the request of the FDA.
The class action claims CSL and Baxter misled the FDA by denying there was a plasma shortage in 2005-06. However CSL says documents show will the FDA performed independent analysis and concluded no shortage existed.
Hopefully CSL will have a better outcome than Roger Touhy. He spent 25 years in jail before the courts ruled the kidnapping was a hoax. A few weeks after his release he was cut down by five shotgun blasts by unknown killers.
Frequently Asked Questions about this Article…
The lawsuit alleges that CSL and its major competitors conspired to fix prices and reduce the supply of blood plasma products in the North American market. Plaintiffs — a group of hospitals — claim the defendants restricted supply of immune globulin and albumin over a seven-year period, violating antitrust laws and seeking in excess of US$1 billion in damages. CSL says the claims are baseless and that it will vigorously defend the civil action.
Baxter International is named as a co‑defendant alongside CSL. The plaintiffs are a handful of hospitals. The US Food and Drug Administration (FDA) is also central to the case because plaintiffs reference the FDA multiple times and CSL and Baxter are seeking testimony from an FDA official, Dr Mark Weinstein.
A Touhy request is a legal procedure used to compel testimony or documents from US government departments, named after a historical court case involving Roger Touhy. CSL and Baxter served a detailed Touhy request on the FDA in April asking the agency to produce Dr Mark Weinstein to testify about seven narrow topics related to the plasma cartel allegations.
According to court documents, Dr Mark Weinstein is a high‑ranking FDA official who has regulated blood suppliers since the 1990s. CSL and Baxter say his first‑hand knowledge could address critical points in the case — including how the FDA monitored plasma supplies — and potentially undermine the plaintiffs' claims.
The FDA denied CSL and Baxter’s Touhy request on May 2, 2013, saying producing the requested testimony would be unduly burdensome and not in the public’s interest. In response, CSL and Baxter filed a lengthy (188‑page) motion to compel the FDA to allow the testimony.
CSL and Baxter say Dr Weinstein could testify on several key points, including that an FDA data‑reporting system used to monitor blood supplies was implemented at the FDA’s request (not as a mechanism to police a conspiracy), and that the FDA conducted independent analysis and concluded there was no plasma shortage in 2005–06 — countering a plaintiff allegation that the companies misled the agency.
The plaintiffs are seeking in excess of US$1 billion in damages, alleging a multi‑year conspiracy to limit supplies of immune globulin and albumin and to inflate prices in violation of antitrust laws.
This is an ongoing, high‑stakes legal dispute focused on alleged price‑fixing in the plasma market. CSL has consistently denied the claims and is actively seeking FDA testimony it believes will support its defence. Everyday investors should monitor court developments, including the outcome of the motion to compel FDA testimony and any major rulings, while keeping in mind that the article reports facts about the case rather than investment advice.
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