There's Probably At Least One Person Who Thinks Michael Astrue Shouldn't Be Confirmed As COSS

Michael Astrue, President Bush's nominee to become the next Commissioner of Social Security, was employed from 2000 to 2005 by Transkaryotic Therapies, a company that developed biotech pharmaceuticals, first as Vice President and Legal Counsel and later as CEO. The circumstances surrounding his elevation to CEO of Transkaryotic are explained a bit in this article from Forbes.com of September 2, 2005, which may also explain why at least one person probably thinks Astrue should not be confirmed as Commissioner of Social Security:

There are good doctors and mediocre doctors. But according to the U.S. SEC, Dr. Richard Selden is in a class by himself. Selden, the former chief executive of Transkaryotic Therapies (TKT) [where Michael Astrue, the nominee to become Commissioner of Social Security, used to work], was charged by the SEC with allegedly hoodwinking investors about failed drug trials to artificially inflate the stock price--then selling off his own shares. According to the civil complaint filed Thursday by the SEC, Selden sent positive press releases even after the U.S. Food and Drug Administration had said in 2001 that trials of TKT's company's flagship drug Replagal, had failed.

By selling his shares before disclosing the negative data about Replagal, Selden "unjustly enriched" himself by $1.66 million, the SEC alleged in the complaint filed in U.S. District Court in Boston. The agency is seeking that money along with the $1.1 million in salary and bonuses Selden earned in 2001 and 2002. According to an Associated Press report, Selden in 2001 sold 90,000 shares of TKT stock--well before Oct. 3, 2002, when TKT finally disclosed the problems with its FDA application. The next day, its shares plunged 61%, to $12.75.

Through his attorney Thomas J. Dougherty, Selden maintained TKT lawyers, who advised him wrongly, bore responsibility for his actions. "He deserves and expects to prevail at any trial of the issues," Dougherty told The Boston Globe.

Who were these TKT lawyers whom Dr. Selden alleges advised him wrongly? Michael Astrue was TKT's Legal Counsel at the time, so he is almost certainly one of them. On the face of it, we have a simple situation. Astrue was the chief legal officer at TKT. He was responsible for making sure that the company stayed in compliance with SEC rules. His CEO apparently violated SEC rules in a spectacular way that nearly destroys the company. Why did Astrue not prevent this? Is he in some way culpable for what happened?

Exactly what Dr. Selden did, when he did it and why are probably much more murky than this article indicates. If it were this simple, Selden would probably be facing criminal charges. Of course, Selden is trying to save his own skin and may say anything, so we should not take his statements too seriously. No one other than Selden is accusing Astrue of doing anything improper. Maybe other attorneys within TKT or at an outside law firm were advising Selden on SEC matters. For all we know, the key incidents in this case happened suddenly without Astrue's prior knowlege. Perhaps, Astrue bluntly warned Selden and the TKT board of directors about what was happening and they ignored him. We do know that TKT's board of directors selected Astrue to replace Dr. Selden as CEO after this happened, which strongly suggests that they did not blame Astrue for what happened. Astrue was selected for several boards of directors and became an interim CEO after this happened. All of this suggests that within the Boston biotech community that Astrue was not blamed for what happened.

Despite all of the signs that no one other than Dr. Selden blames Astrue for what happened, it remains a fact that what appears to have been a preventable legal problem happened on Astrue's watch and that the legal problem nearly destroyed his company. The legal problem has certainly destroyed the career of the CEO who was Astrue's primary client. The SEC charges against Dr. Selden have not been resolved, as best I can tell, meaning that this matter could come back to haunt Astrue. The FBI must have investigated Astrue before this nomination was announced. Astrue's role in the Selden debacle had to have come up during the investigation, so the Senators considering Astrue's nomination should have access to much more information about this matter than is available on the public record. There are legitimate questions to ask Michael Astrue about what happened at TKT. That there may be good answers for these questions is no reason not to ask them.

Background Information On Nominee To Be Social Security Commissioner

Michael Astrue

Educational Background

• October 1, 1956 Born, Fort Dix NJ
• Grew up in Boston area
• Attended Roxbury Latin School (Founded in 1645, in the reign of King Charles the First, Roxbury Latin is the oldest school in continuous existence in North America.)(Astrue sounds like a Boston blueblood.)
• 1978 B.A. Magna Cum Laude Yale University
  
• 1983 J.D. Cum Laude Harvard University
  

Work History

• 1983-1984 Law Clerk to U.S. District Court Judge Walter Skinner
  
• 1984-1985 Associate Attorney, Ropes and Gray
  
• 1985-1986 Acting Deputy Assistant Secretary for Human Services Legislation, Department of Health and Human Services
  
• 1986? Legal Counsel to the Deputy Commissioner for Programs, Social Security Administration
• 1986-1988 Counselor to Commissioner of Social Security
  
• 1988-1989 Associate Counsel to the President, Reagan Administration --served briefly as White House Ethics Officer
• 1989? Counsel to the President (Bush?)
  
• 1989-1992 General Counsel, Department of Health and Human Services (Note that at age 33, only six years after graduating from law school he is the head of a general counsel's office directing the work of hundreds of attorneys.)
  
• 1992-1993 Partner, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston (with the end of the first Bush Administration he moves back to his home town of Boston)
  
• 1993-1999 General Counsel, Vice President and Secretary, Biogen (He seems to not like working in law firms. Biogen is a biotech company. General counsels are even more important at biotech companies than at most companies. Biotech companies are involved in much litigation, particularly high stakes patent litigation, much of it international litigation and are also involved in FDA applications. The results of either patent litigation or FDA applications can make and break biotech companies.)
  
• 2000-2003 Senior Vice President and Legal Counsel, Transkaryotic Therapies (This seems to be a downward move. Biogen is a much bigger company that Transkaryotic.)
  
• 2001 Name floated as possible appointment to head Food and Drug Administration -- Never formally nominated due to opposition of Senator Edward Kennedy and six other Democratic Senators who did not like Astrue's close association with the pharmaceutical industry. Astrue later quoted as saying "Ted [Kennedy] never said it was anything personal ..."
  
• 2003-2005 CEO Transkaryotic Therapies -- Hired to clean up a scandal caused by the previous CEO. He resigned when the company's board agreed to sell the company to Shire Pharmaceuticals PLC against his recommendation. (Note that even as CEO he could not prevent his board of directors from taking what he considered to be an extremely unwise sale of the company. Clearly, he did not have the board of directors where most CEOs keep them -- in their back pockets.)
  
• 2005 to date(?) Hudson Institute Adjunct Fellow (conservative think tank) (He seems to want to make a career change. Almost certainly, he could have gotten another good job in biotech or at some law firm that serves the needs to biotech companies.)
  
• For a few months in 2006, Interim CEO Epix Pharmaceuticals, which he sold to Predix Pharmaceuticals
  

Other Associations

• Chairman Massachusetts Biotechnology Council (dates?)
• Treasurer and Vice Chairman Massachusetts High Technology Council (dates?)
• Board of Directors, Tercica August 2005 to date?
• Board of Directors ArQule April 8, 2005 to date?
• Board of Directors, CaraGen June 13, 2005 to date? (Note that after he quits Transkaryotic in protest over what he considers an ill-advised sale of the company he is in great demand as a board member at other biotech companies.)
  
• Board of Directors Kenneth B. Schwartz Center (non-profit) (dates?)
• Adjunct Instructor, Emerson College (dates?)
• Adjunct Instructor Boston University Law School (dates?)
• Advisory Board, Journal of Science and Technology, Boston University Law School (dates?)
• Council Member Administrative and Regulatory Law Section, American Bar Association 1998

Personal

There is virtually no personal information available on the internet about Astrue. Some years ago it was mentioned that he was married and had one child. Apparently, he is known for preferring informal clothing.

Websites consulted:
Bizjournals.com
Goliath
Reagan Library
Forbes.com
Bush Library
ADVFN News
Journal of Science and Technology Law
American Bar Association
New England Legal Search
GovExec.com
Mass High Tech
Hudson Institute
Roxbury Latin School

Max Baucus Comments On Astrue

Max Baucus, the senior Democrat on the Senate Finance Committee that will consider Michael Astrue's nomination to become Social Security Commissioner, has issued the following statement:

The country had a big debate last year about Social Security, and the American people made their views plain: they do not support the President’s proposals to privatize Social Security and to deeply cut benefits. As he moves through the nomination process, I hope that Michael Astrue will be responsive to the Americans he wishes to serve. He should commit to maintaining the critical role that the Social Security program currently plays in providing income security for retirees, disabled workers, survivors, and their families. He will also need a plan to speed and improve service to the public, particularly those applying for disability benefits.

I look forward to learning more about Mr. Astrue and his views on managing the Social Security Administration.

I will also add that Current Commissioner Jo Anne Barnhart has done a good job leading this important agency in difficult times. Her dedication and expertise will be missed when she leaves, and she has my appreciation for her service.

This can be read to mean that Baucus will oppose Astrue's nomination unless Astrue repudiates President Bush's plans to privatize Social Security, or at least pledges not to try to advance it. There is a big reason why Astrue's nomination may fail anyway. If confirmed Astrue will serve throughout the term of the next president. Democrats in the Senate may prefer to prevent anyone from being confirmed rather than forcing the next president, who may be a Democrat, from having to cope with a Social Security Commissioner chosen by President Bush.

Astrue's Nomination Widely Ignored

Michael Astrue's nomination to be Commissioner of Social Security has been almost completely ignored by traditional news media. Neither the New York Times, nor the Washington Post, nor even the Baltimore Sun has an article on this development. The Associated Press and Reuters have not carried this information. The Social Security Administration has almost 60,000 employees and pays benefits to almost one American in five, but the appointment of a new head for the agency is not worthy of even a brief article, even in Baltimore, where Social Security has its headquarters. Social Security may be the largest employer in Baltimore, but the major Baltimore newspaper did not even notice the appointment of a new head for the agency.

CMS And SSA Heads Bite Dust In One Week -- Coincidence?

The following is an excerpt from The Hill:

Members of the Senate Finance Committee are keeping the pressure on the Medicare and Social Security agencies to fix a glitch that caused hundreds of thousands of beneficiaries to pay the wrong premiums.

The heads of both agencies met with the Finance Committee behind closed doors last week to go over their plans to rectify billing discrepancies that led to many Medicare enrollees owing unpaid premiums to the health-insurance companies providing their drug benefits.

Since meeting with Centers for Medicare and Medicaid Services (CMS) Administrator Mark McClellan and Social Security Administration (SSA) Commissioner JoAnne Barnhart last Thursday, several senators have expressed concern that the plans from agencies might be too harsh, especially for poorer beneficiaries.

These billing errors have brought renewed attention to the pitfalls inherent in rolling out the massive new Part D prescription-drug benefit, which has required the coordination of federal agencies and health insurers.

The administration has disclosed two separate billing problems in recent weeks that together affected an estimated 700,000 Medicare beneficiaries.

First, the administration revealed that 230,000 beneficiaries were accidentally sent refund checks that would have to be returned or repaid.

Later, the administration said that the wrong Medicare premiums had been deducted from Social Security checks sent to 400,000 to 500,000 beneficiaries throughout the year, and that in some cases no premiums at all had been paid for months.

The health plans that administer the drug benefit likewise have not been paid the premiums that CMS and the SSA should have been collecting and passing along. These health plans also will ultimately be responsible for recouping unpaid premiums.

The agency already has contacted the beneficiaries who received accidental refunds and is working individually to establish installment plans for those who may have spent the money already....

Earlier this week, Mark McClelland, the CMS Director, resigned. Now a replacement is named for Jo Anne Barnhart, the Commissioner of Social Security, with almost four months left on her term. All of this happens within a week at a time when frustration with the poor implementation of the Medicare prescription drug benefit is at its peak. Coincidence? While it may be obvious to those familiar with Social Security that the Medicare prescription drug benefit problems lie almost completely with CMS, this may not be at all obvious to Congress and the White House. Perhaps it was already clear that Barnhart was not going to be reappointed and this was merely a question of timing, but there is a strong possibility that Medicare Part D has something to do with what happened this week to McClelland and Barnhart.

More On Astrue

From a Silicon Investor article of February 26, 2003:

Career U-turn brings ex-counsel back to TKT

On Jan. 28, with considerable effort, Michael J. Astrue shaved and put on a tie. It was the first time he had attempted either task in 11 days.

Astrue, the former general counsel at Transkaryotic Therapies Inc. of Cambridge, hadn't been taking his legendary casual-dress philosophy to an extreme. On Jan. 17, he had slipped on the ice while walking from his front door to his car. His left arm was pinned beneath him and he fractured his elbow.

But Astrue had a reason to make himself presentable: There was a reception that afternoon for people who had served on Governor-elect Mitt Romney's transition team.

Moreover, just that morning he had received an invitation to attend a board meeting at TKT's Main Street headquarters. Astrue had resigned from the firm just five weeks earlier. The directors wanted to hear his advice for righting TKT, a 15-year-old biotech firm that had just suffered a series of severe regulatory setbacks that had crushed the near-term prospects for the company's Replagal drug and in four months slashed TKT's share price by 85 percent.

Astrue was planning to spend the new year doing research at the Hudson Institute, a conservative think tank based in Indianapolis, and teaching at the Boston University School of Law, while he sought an appointment somewhere in the Bush administration. But he accepted the invitation to meet the directors for two reasons.

''When provided with an opportunity to offer my opinions in detail, I usually take advantage of it,'' Astrue said. The 46-year-old also had a hunch TKT's board wanted more than to just pick his brain. In fact, Dr. Richard F. Selden, TKT's founder and chief executive, had asked Astrue whether he would consider the chief executive's job in November, just weeks before he left the
company.

''I knew they might be thinking about trying to bring me back,'' said Astrue, who took a taxi and arrived at the company at 2 p.m. Astrue ate a chicken salad sandwich, and talked for about two hours, after which Rodman W. Moorhead III, the chairman, asked him, ''Would you consider coming back as CEO?''

Astrue's return to TKT was announced Feb. 11. For the Milton native, it was another in a series of unexpected career U-turns. In 1985, while serving as a staff attorney at the Department of Health and Human Services, he was asked to interview for a position in the White House counsel's office. ''I was stunned,'' recalled Astrue, who advised presidents Reagan and Bush, ''but when the White House calls and asks you for your resume, you say yes.''

In just a few years, Astrue has become one of the more influential players in Massachusetts' biotechnology industry. After serving as associate counsel to the president, he was general counsel for the Department of Health and Human Services, overseeing an army of hundreds of lawyers. He later was a partner at Mintz Levin Cohn Ferris Glovsky and Popeo PC of Boston, and served as general counsel for Biogen, the Cambridge biotech giant, starting in 1993. He left Biogen for TKT in 2000, and was chairman of the Massachusetts Biotechnology Council in 2001.

For Astrue, the return to TKT is more than just another serendipitous career move. After nearly 20 years spent in supporting roles - overseeing law departments, advising chief executives, handling patent litigation - Astrue is finally the leading man. If he achieves success running TKT, it is likely to be the defining episode of what has already been a high-profile career in the biotechnology industry.

''Mike is an incredibly moral guy,'' said Dr. Burt Adelman, executive vice president of research and development for Biogen Inc., where Astrue served as general counsel. ''I suspect they got him back because he wasn't going to leave something he was committed to when they were having a problem. He doesn't walk away from a fight.'' ...

It is abundantly clear that Astrue has his work cut out for him. Next month, the company will announce a major layoff affecting about 100 employees, or more than 20 percent of its work force. Major changes are also forthcoming in TKT's senior management, according to a former TKT executive.

In a gesture to employees, Astrue said he would forgo his salary for three months. He also said he asked the board to pay him less than Selden earned last year, but declined to specify what his compensation will be. In 2001, the most recent reported year, Selden earned a salary of $400,000 and a bonus of $150,000, according to company documents. ...

Astrue left TKT convinced his future lay in Washington, with an appointment to some sort of government post. That ambition had been thwarted in 2001. President Bush was poised to nominate Astrue to head the FDA, and Astrue had been interviewed by White House officials. But Massachusetts Senator Edward M. Kennedy and other Senate Democrats blocked the nomination, saying it would be a conflict of interest for the drug industry's top watchdog to come from the industry the agency regulates. ...

''Mike is way too smart to be pigeonholed as a lawyer,'' said one TKT executive who worked closely with Astrue. ''He's a strategic thinker and a leader, as well as a lawyer. He wants to prove that he can do it all.''...

Nominee For Commissioner Of Social Security

From the White House Press Office:

The President intends to nominate Michael J. Astrue, of Massachusetts, to be Commissioner of Social Security, for a six year term beginning January 20, 2007. Mr. Astrue previously served as Chief Executive Officer of Transkaryotic Therapies. Earlier in his career, he served as General Counsel at the U.S. Department of Health and Human Services. Previously, he served as Counselor to the Commissioner of Social Security at the U.S. Department of Health and Human Services. He also served as Acting Deputy Assistant Secretary for Legislation at the Department of Health and Human Services. Mr. Astrue received his bachelor's degree from Yale University and his JD from Harvard University.

DSI In Serious Trouble?

Social Security's Disability Service Improvement (DSI) plan may be in serious trouble. The statement below is an anonymous report from the ALJ Improvement Board, supposedly quoting from some communication received from the National Treasury Employees Union.

DSI is underway. Last month training began in Falls Church for the new FedROs. Management has not released much information about the new FedROs but it appears that the Agency was only able to find about 30 (it wanted 70) individuals willing to accept their offer of appointment to the FedRO position in Falls Church. In response to our request for information, the Agency reported that 11 ODAR hearing office GS-12 attorneys accepted the FedRO appointment, but not one single GS-13. I do not know whether that is because no GS-13 accepted an offer or if no offers were made. About 20 agency attorneys have opted to become FedROs and five management personnel have accepted the GS-15 supervisor position. Additionally, about 10 attorneys were hired from the outside.

If true, DSI is in very, very serious trouble and may fail before it even has a chance to get off the ground. The Federal Reviewing (FedRO) job is the centerpiece of DSI. If Social Security is unable to hire enough FedROs the plan cannot possibly be implemented even in Social Security's small Boston Region.

Why might Social Security have trouble hiring Federal Reviewing Officers? The answer is fairly simple -- fear that the program will not last after Jo Anne Barnhart's term as Social Security Commissioner ends in January 2007. If DSI ends after Barnhart leaves SSA, the career of anyone hired as a FedRO may be in jeopardy. Many federal employees are attracted to government employment by the promise of extremely stable employment. Federal employees are on average vastly more frightened of any danger of becoming unemployed than their counterparts in private employment. Few Social Security employees are going to be willing to move to the Washington-Baltimore area to take a job if there is any threat that the job will not last.

Can any Social Security employee in a position to know confirm this report on the ALJ Improvement Board? You may e-mail me at charles[@]charleshallfirm.com.