May 8, 2014: Two Plead Guilty in Prescription Drug Diversion Scheme
Food and Drug Administration
Office of Criminal Investigations
U.S. Department of Justice Press Release
For Immediate Release
May 8, 2014
United States Attorney
Middle District of Tennessee
Contact: AUSA Kathryn W. Booth,
AUSA Sandra G. Moses
NASHVILLE, Tenn. – May 8, 2014- Charles Jeffrey Edwards, 52, of Houston, Texas, and Brenda Elise Edwards, 43, of Houston, Texas, pleaded guilty yesterday, in U.S. District Court, to participating in a prescription drug diversion scheme, announced David Rivera, U.S. Attorney for the Middle District of Tennessee. Brenda Edwards pleaded guilty to one count of conspiracy, for which she faces up to five years in prison and a fine of $250,000. Charles Edwards pleaded guilty to one count of mail fraud and one count of money laundering. Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine and money laundering carries a maximum penalty of 10 years in prison and a $250,000 fine. Both defendants will be sentenced on November 24, 2014.
At the plea hearing yesterday before U.S. District Court Judge Aleta A. Trauger, both defendants admitted that, from approximately December 2006 through August 2009, Charles Edwards co-owned Cumberland Distribution, Inc., a business engaged in the wholesale distribution of prescription drugs to pharmacies throughout the United States and which maintained its headquarters in Houston, Texas. Cumberland Distribution maintained warehouses in Nashville, Tenn., located at 5425 Harding Place and at 1419 Donelson Pike and was licensed by the State of Tennessee as a wholesale distributor of prescription drugs. Brenda Elise Edwards was an employee of Cumberland Distribution.
Both defendants admitted that Cumberland Distribution purchased a portion of the prescription drugs it resold to pharmacies from individuals and entities that were not licensed to engage in the wholesale distribution of prescription drugs and were not otherwise authorized to distribute prescription drugs. The prescription drugs were acquired through various networks of "diverters" who obtained prescription drugs from other unlawful sources. As a result, Cumberland Distribution could not lawfully resell the drugs. The defendants used the Nashville warehouses to receive deliveries of prescription drugs, where they were sorted and repackaged and shipped to pharmacies that had made purchases from Cumberland. Generally, the diverted drugs included drugs used to combat HIV/ AIDS medication, antipsychotic, anti-depression, as well as acid reflux, blood pressure medication, and diabetes medication.
Charles Edwards further admitted that as part of the scheme, he created a layer of distribution between the diverted pharmaceuticals and Cumberland Distribution by incorporating or causing others to incorporate various separate businesses, and caused the pharmaceuticals to be shipped to Cumberland Distribution through intermediaries, further concealing the true origin of the drugs.
For example, Charles Edwards admitted that in January 2008, he and Jerrod Nichols Smith directed another individual to open a business in Texarkana, Arkansas, called Tristate Management Group. The purpose of Tristate Management was to make it appear as though the pharmaceuticals that Cumberland Distribution was selling had been purchased from a licensed wholesale distributor, when in fact the pharmaceuticals were purchased from unlicensed or unauthorized sources. When shipments were received at Tristate Management, the individual would place new shipping labels on the packages and send them to the Cumberland Distribution warehouse in Nashville, or he would inventory the packages before sending the contents of the shipment on to Cumberland Distribution.
Pharmacies throughout the United States purchased diverted prescription drugs from Cumberland Distribution under the premise that the prescription drugs being purchased had been in the custody of licensed wholesale distributors or other authorized distributors since being sold by the original manufacturer. Cumberland Distribution used Federal Express to ship diverted prescription drugs and inaccurate pedigree documents to the pharmacies.
Brenda Edwards further admitted that as part of the conspiracy she caused wire transfers to be made from Cumberland Distribution's bank account into bank accounts in various names that were under her and Charles Edwards' control, for her own use or for the use of members of her family.
On May 14, 2009, the U.S. Food and Drug Administration executed a federal search warrant at Cumberland Distribution's Nashville warehouse. Brenda Edwards admitted that on the day the search warrant was executed, in order to place the funds out of the reach of federal agents, she caused a wire transfer in the amount of $138,709.76 from a bank account she and Charles Edwards controlled, to a bank account in Mexico that was in the name of her mother.
According to the indictment, the scheme resulted in gross proceeds of over $58 million and the defendants gained over $14 million in profits.
The indictment also charged another individual, Jerrod Nichols Smith, with conspiracy, mail fraud, and making a false statement in a matter within the jurisdiction of the United States. A trial of Jerrod Nichols Smith is scheduled for October 7, 2014, before U.S. District Court Judge Aleta A. Trauger.
An indictment is merely an accusation of guilt. Jerrod Nichols Smith is presumed innocent unless and until proven guilty in a court of law.
This case was investigated by the United States Food and Drug Administration. Assistant United States Attorneys Kathryn Ward Booth and Sandra G. Moses represent the government.
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