Inspections, Compliance, Enforcement, and Criminal Investigations
November 22, 2010: Co-conspirators Sentenced in $11.9 Million Dietary Supplement Fraud Scheme
SPRINGFIELD BUSINESS OWNER, MICHIGAN ASSOCIATE SENTENCED FOR $11.9 MILLION FRAUD SCHEME
SOLD DIETARY SUPPLEMENTS OVER THE INTERNET WITH FALSE CLAIMS TO PREVENT, CURE DISEASES
Springfield, Mo. - Beth Phillips, United States Attorney for the Western District of Missouri, announced that a Springfield, Mo., business owner and his associate in Michigan were sentenced in federal court today for their roles in a conspiracy to fraudulently market dietary supplements over the Internet with illegal claims that these supplements could prevent, treat or cure a number of diseases. Several Web sites were used to sell more than $11.9 million worth of products in 2005 and 2006.
“These defendants deceived thousands of unwary consumers and profited from an Internet marketing scam,” Phillips said. “Federal protection against fraudulent health claims extends to cyberspace, and today they are being held accountable for their criminal conspiracy.”
“Unapproved and misbranded drugs marketed and distributed in contravention of FDA’s regulatory requirements may subject American consumers to the risk of serious harm,” said Special Agent in Charge Patrick J. Holland of FDA’s Office of Criminal Investigations. “We will continue to aggressively pursue those who create and ignore this threat to the public health for their own personal profit, and we commend the United States Attorney’s Office for their prosecution of this matter.”
Charles Thao, 43, of Springfield, and Tony T. Pham, 43, of Grand Rapids, Mich., were sentenced in separate hearings before U.S. District Judge Richard E. Dorr. Thao was sentenced to eight years and one month in federal prison without parole. Pham was sentenced to three years in federal prison without parole. The court will finalize at a later date a money judgment against Thao and Pham of $11,954,648 (for which the co-defendants are jointly and severally liable), which represents the amount of proceeds obtained as a result of the offenses, and the forfeiture by Thao of real estate properties, vehicles and the funds credited to various bank accounts.
On Feb. 8, 2010, Thao pleaded guilty to his role in conspiracies to violate the Food, Drug and Cosmetic Act, to defraud the United States, to commit wire fraud, to commit mail fraud and to commit money laundering.
Thao has dissolved his business, Nutrapha Research, LLC, and agreed not to reorganize that company under any name for similar business purposes. Nutrapha and an earlier company owned by Thao, Medycinex, purchased dietary supplements and sold them over the Internet.
Thao and his wife, co-defendant Mai Lor, 25, also of Springfield, contracted with Pham to market and distribute the dietary supplements. Co-conspirators claimed that six products sold over the Internet had been proven reliable through clinical testing for the treatment and prevention of diabetes, irritable bowel syndrome, gout, high cholesterol, high blood pressure, heartburn and diarrhea. In reality, no clinical testing had been performed.
Lor pleaded guilty to her role in the conspiracy to commit wire fraud was sentenced to three years of probation. Lor was co-owner of Medycinex. At Thao’s direction, Lor also formed Bio Nutrasource, LLC, located in Springfield, to carry on the business previously conducted by Medycinex.
Pham pleaded guilty on July 2, 2009, to his role in the conspiracy to violate the Food, Drug and Cosmetic Act and to conspiracy to commit money laundering. Pham owned and operated Techmedica Health, Inc., located in Grand Rapids. Pham admitted that he used Techmedica to repackage, sell, market, and distribute unapproved new drugs and misbranded drugs over the Internet. Web sites used by Techmedica contained materially false testimonials, product information, and identification of medical professionals.
Techmedica fabricated fraudulent customer identities using photographs purchased from Istockphoto.com. Testimonials attributed to these fraudulent identities touted the effectiveness of the unapproved new drugs and misbranded drugs. Techmedica also posted one of the Istockphoto.com photographs on their Web sites to fabricate a non-existent physician, Dr. Judy Hamilton, for the purpose of lending authenticity to and endorsing product claims about Diabeticine for customers with Type I and Type II diabetes. The person identified as Dr. Hamilton was in fact a model from California. This same model’s photograph was also used by Pham on another Web site to fabricate a non-existent nurse, Bethany Hunt, RN, to tout the effectiveness of the unapproved new drugs and misbranded drugs.
Techmedica, through Pham, operated several Web sites using mirror image technology. When each of these Web sites was accessed from an FDA network computer, they displayed a “sanitized” version of the Web site containing medical claims that attempted to comply with the federal Food, Drug, and Cosmetic Act. However, when each of these Web sites was accessed from a computer whose IP address could not be traced to the FDA, they displayed claims that the dietary supplements could cure, mitigate, treat, and prevent diseases, so that these supplements were sold as unapproved new drugs and misbranded drugs.
Under federal law, a dietary supplement may not claim to treat, cure or prevent a specific disease or class of diseases. None of the dietary supplements sold by Thao and his co-conspirators are generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under any of the conditions recommended in their labeling. Therefore, each of these dietary supplements is a new drug. None of them were approved by the FDA, and their labels do not bear adequate directions for use; therefore, they are also categorized as unapproved drugs and misbranded drugs. The dietary supplements that were marketed as unapproved new drugs and misbranded drugs included Diabeticine (later renamed Diamaxol, and also known as Glucolex), Digestrol (also known as Digesticine), Uricinex (also known as Uricaid), Cholestasys Rx (later renamed Cholestasys), Hyperexol and Prolipamy.
This is being prosecuted by Supervisory Assistant U.S. Attorney Michael S. Oliver. It was investigated by the Food and Drug Administration – Office of Criminal Investigation.
This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available on-line at