Inspections, Compliance, Enforcement, and Criminal Investigations
Office of Criminal Investigation 2002
Office of Criminal Investigation
Five Sentenced in Methamphetamine Case
Investigation Uncovers Conspiracy to Possess Methamphetamine with the Intent to Distribute
This OCI investigation involved the purchase of pharmaceuticals by Northland Providers, a closed door pharmacy, opened and financed by Peter Fenton, Tom Fenton and Jim Bottineau. The partners, upon receiving the pharmaceuticals, would transfer them to their wholesale business, Lakeside Medical Supply, for sale to secondary wholesalers in Michigan and Nevada. The parties collaborated with Candi Creamer and Robert Christy.
The scope of this investigation included historical witness interviews, information from industry sources, trash covers, pen register/toll record/trap and trace analysis, and physical surveillance provided probable cause for the Title III in captioned investigation during December 1998 -- February 1999. Agents executed search warrants simultaneously in 5 states and 31 forfeiture seizure warrants, executed in Minnesota and California, lead to the seizure of approximately $1 million in cash, $350,000 in vehicles, approximately $850,000 in pharmaceutical inventory, and bond default of $100,000.
October 6, 1999, Peter Fenton was convicted of four felony charges in the District of Minnesota, including conspiracy to commit mail fraud and wire fraud, money laundering, felon in possession of a firearm, and conspiracy to possess methamphetamine with the intent to distribute.
On November 18, 1999, Candi Creamer was convicted of two felony charges, including conspiracy to commit mail and wire fraud and money laundering.
On February 4, 2000, Robert Christy was convicted of one felony count of possession of methamphetamine with intent to distribute and distribution of methamphetamine to Peter Fenton and Candi Creamer.
Sentencing was as follows:
- On August 23, 2000, Peter Fenton was sentenced to 87 months incarceration and victim restitution of $4,750,000.
- On August 24, 2000, Candi Creamer was sentenced to 30 months incarceration.
- On August 25, 2000, Robert Christy was sentenced to 30 months incarceration.
- On August 28, 2001, James Bottineau was sentenced to 27 months' incarceration and victim restitution in the amount of $4,750,000.
- On September 30, 2002, Tom Fenton was sentenced to 24 months incarceration and victim restitution of $513,432.12.
The sentencing of Tom Fenton concluded the investigation.
Unapproved Drug Promoted for Treatment of Cancer
"Cancer" Drug Found to Contain Fungal Contaminants
This case involved that manufacturing and distribution of an unapproved drug, LK-200, by Private Biologicals Corporation (PBC), Woburn, Massachusetts. LK-200 is an injectable drug that was purported to treat cancer and to help ease the pain for patients suffering from cancer. It has not been approved for use in the United States. PBC was manufacturing LK-200 in its research facility in Woburn, Massachusetts, and was distributing it to cancer patients in the United States and the Bahamas.
Between 1993 and 1995, both Tom Rodgers and T. Ronald Theodore solicited approximately $2 million from numerous investors, by claiming that they had invented a promising new drug for treating cancer. Investors were told that because the drug had not been approved by the FDA, PBC would manufacture the LK-200 overseas using a highly proprietary method of production. Theodore was also holding himself out as an "M.D." to investors, employees and doctors, when he did not have a college degree, a medical degree from a recognized medical school nor was he licensed to practice medicine in the United States.
In reality, the LK-200 was not a result of any discovery by Theodore, but instead was a new name for a preparation that was identified in the 1970's for use in cancer research, which was produced through well known and widely published techniques.
Theodore was manufacturing the LK-200 and packaging it with disregard for good manufacturing practices as required. PBC, in manufacturing the LK-200, maintained a continuous cell culture and made no attempt to control mutation in the cell line being used. As a result, a series of mutations in the cell line occurred while PBC was making the LK-200, with no method in place to determine whether those mutations affected the safety or potency of the product. PBC also failed to maintain proper sterility controls in the final packaging for the product, which was shipped in syringes for injection into end stage cancer patients. In 1995, retained samples were sent for laboratory testing for contamination. Ten of sixty-two samples tested, showed a growth of fungal contaminants.
On May 4, 2000, Tom Rodgers appeared in U.S. District Court, Boston, Massachusetts, and was convicted of three FDA misdemeanor charges as follows: 21 U.S.C. § 331(p) - Unregistered Drug Manufacturing Facility; 21 U.S.C. § 331 (d) -- Unapproved New Drug, and 21 U.S.C. § 331(a) - Adulteration. Rodgers received a sentence of one year supervised probation and a $10,000 fine.
On February 12, 2001, defendant T. Ronald Theodore went to trial in U.S. District Court, Boston, Massachusetts. On March 1, 2002, the jury returned a verdict of guilty on all counts as follows:
- 9 felony counts of 18 U.S.C. §1341 - Mail Fraud;
- 1 misdemeanor count each of 21 U.S.C. § 331(p) - Unregistered Drug Manufacturing Facility;
- 1 count of 21 U.S.C. § 331 (d) Unapproved New Drug; and
- 1 count of 21 U.S.C. § 331(a) Adulteration.
On March 1, 2002, Theodore was sentenced to 121 months incarceration, followed by 3 years probation and ordered Theodore to pay $1.5 million in restitution to his victims.
Illegal Sale of Pediatric Vaccines
Search Warrant Uncovers Records
OCI received information from the State of Wisconsin, Department of Regulation and Licensing, Division of Enforcement (Attorney Arthur Thexton). The initial information indicated that Roger J. Moraga, d/b/a The Clinic Pharmacy of Muskego, Wisconsin, was illegally selling various prescription drugs (pediatric vaccines) to client pediatricians in the greater Milwaukee area.
OCI, in conjunction with the New Berlin police Department, and the Wauwatosa, Wisconsin Police Department, conducted numerous witness interviews and surveillances which eventually led to a State of Wisconsin Search Warrant being executed at Moragas's Muskego, Wisconsin residence on April 19, 2000. Evidence seized consisted of prescription drugs (pediatric vaccines), product sales records and financial business records of the Clinic Pharmacy, and yearly filings of Federal Income Tax Returns. Review of those records confirmed the five year sales of $661,993.00 worth of prescription drugs (pediatric vaccines) to numerous pediatricians.
A Moraga proffer statement and corresponding polygraph examination, in conjunction with attorney deliberations led to an October 25, 2001 filing of a Criminal Information in the Eastern District of Wisconsin, Milwaukee, Wisconsin, charging Moraga with one count of 21 U.S.C. § 331(t) - Introduction into Interstate Commerce of Misbranded Drugs and one count of 26 U.S.C. § 7201 - Filing False Income Tax Returns.
On May 9, 2002, Defendant Roger J. Moraga appeared before a U.S. District Court Judge, Eastern District of Wisconsin, at which time he was convicted and sentenced to 21 months incarceration. Moraga surrendered to Federal prison authorities on September 3, 2002.
Tampering With Prescription Drug
OCI Investigation Discloses Nurse
OCI initiated this investigation based upon allegations concerning suspected tampering of the prescription drug, Roxanol (Morphine Sulfate), at the Minnesota Veteran's Nursing Home (MVH), Minneapolis, Minnesota. Specifically, the MVH alleged that they had found 6 bottles of Roxanol that they believed were tampered with. Subsequent investigation revealed that Thomas Maloney, a pool nurse from the nursing service, the Nurse Connection, was present on or about the time of each alleged tampering.
It was determined that Maloney was a suspect in an ongoing OCI/CGI investigation involving the theft of prescription drugs and tampering. Specifically, Maloney had placed an order to an offsite pharmacy for morphine for a deceased patient while Maloney was employed at the Park Care Baptist Care Center, Minneapolis, Minnesota. Also, Maloney had placed an order for morphine for another deceased patient while employed at Maranatha Care Center, Brooklyn Center, Minnesota. Obviously, the patients never received the morphine and on both occasions the morphine was never recovered.
Based on the information, a criminal complaint was drafted alleging that on three occasions Maloney obtained controlled substances (Roxanol and Tylenol 3) by misrepresentation in violation of 21 U.S.C. § 843(a)(3). Maloney was subsequently arrested. On September 10, 2001, a Federal Grand Jury in the District of Minnesota handed down a six count indictment against Maloney charging Maloney with violations of 18 U.S.C. § 1035 and 21 U.S.C. § 843 (a)(3).
On November 5, 2001, Maloney was convicted of one count of making false statements in health care matters in violation of 18 U.S.C. § 1035 and one count of obtaining a controlled substance through fraud in violation of 21 U.S.C. § 843(a)(3).
On February 21, 2002, Maloney was sentenced to 12 months incarceration.
Prescription Drug Marketing Act
Prescription Drug Marketing Act
The Prescription Drug Marketing Act, which was signed by the President on April 22, 1988, was enacted to ensure that prescription drug products purchased by consumers would be safe and effective and to avoid an unacceptable risk that counterfeit, adulterated, misbranded, subpotent, or expired drugs were being sold to the American public. Congress decided that legislation was necessary because there were insufficient safeguards in the prescription drug distribution system to prevent the introduction and retail sale of substandard, ineffective, or counterfeit drugs and that a wholesale drug diversion submarket had developed that prevented effective control over, or even routine knowledge of, the true sources of drugs. 1/
Illegal Sale of Prescription Drugs
OCI Investigation Results in Convictions For Selling Prescription Drug Samples
In June 2000, the FDA’s Center for Drug Evaluation and Research (CDER) was alerted of a possible drug diversion at AstraZeneca Pharmaceutical Company. Jeffrey S. Pague was allegedly stealing drug samples from various physicians’ offices and selling the stolen product to multiple pharmacies. CDER referred this information to OCI.
Following his receipt of a target letter from the United States Attorney's Office, Pague admitted to improperly diverting and selling samples of the prescription drug Prilosec. Pague cooperated with the government's investigation concerning additional suspects involved in the trading/selling of prescription drug samples. During the investigation, investigators determined that Anthony Manos, M.D., a physician practicing in West Chester, Pennsylvania, sold approximately 10,000 samples of Prilosec to Pague.
On January 10, 2002, Jeffery Pague appeared in U.S. District Court for the Eastern District of Pennsylvania and was convicted of one felony count of trading and selling prescription drug samples in violation of 21 U.S.C. § 331(t) and 333 (b)(1)(B).
On April 12, 2002, Pague was sentenced to serve three years of supervised probation, attend Narcotics Anonymous meetings during the probation period, perform 250 hours of community service and pay a fine of $15,000.00.
On February 12, 2002, Anthony Manos, M.D., appeared in U.S. District Court for the Eastern District of Pennsylvania and was convicted of one felony count of trading and selling prescription drug samples in violation of 21 U.S.C. §§ 331(t) and 333(b)(1)(B).
On May 8, 2002, Manos was sentenced to six months of home confinement (electronic monitoring), three years supervised probation and pay a fine of $10,000.
Pharmaceutical Diversion Scheme
Pharmacist Involved in the Purchase and Sale of Physician Samples and Misbranded Prescription Drugs
The Los Angeles Field Office of OCI initiated this investigation as part of an undercover "sting" investigation. Preliminary information regarding a criminal conspiracy to divert pharmaceuticals was forwarded to the Kansas City Field Office for follow up.
Ronald Shaffer, a Pharmacist, recruited Sheryl Monbarren to manage the day to day operation of an illicit business that obtained prescription pharmaceuticals in Alabama and California, "laundered" them through a storefront warehouse in Colorado, and eventually sold the drugs to wholesalers nationwide. Shaffer remained behind the scenes in the operation but received a major cut of the profits. Shaffer's take of the profits was paid to a shell company operated in his wife's name.
Donald Wyatt was recruited by Shafer and Monbarren to set up a "closed door pharmacy" in Mobile, Alabama, called Professional IV Services. That entity certified in written contracts with pharmaceutical manufacturers that all prescription pharmaceutical products purchased from the manufacturers at prices substantially below wholesale would be sold only to nursing home patients. However, at the direction of Monbarren, the drugs were shipped to a Colorado co conspirator Ralph Kopald.
Ralph Kopald operated a Fort Collins, Colorado warehouse known as Arjay Distributors. Kopald received the drugs from Professional IV Services and other "closed door pharmacy" operators and immediately shipped the drugs to wholesale operations designated by Ronald Shaffer and Sheryl Monbarren. By transshipping through the Colorado operation rather than directly from the pharmacy, Shaffer and Monbarren made certain the pharmacy owners did not become aware of the ultimate buyer. This eliminated the possibility that the "closed door" operator would cut Shaffer and Monbarren out of the business. It also gave the wholesale customer plausible deniability in that the wholesaler could deny knowledge of the fraudulent means used to obtain discounted pharmaceuticals.
Wyatt, Kopland, and Shaffer were sentenced for their part in the operation in 2000. On February 11, 2002, Sheryl Monbarren was convicted of a violation of 18 U.S.C. § 1341, Mail Fraud and 18 U.S.C. § 2 -- Aiding and Abetting. She received a 10 month sentence, with 5 months incarceration and 5 months of home detention.
On September 30, 2002, Monbarren was sentenced in the United States District Court for the Central District of California, Los Angeles, California, for her part in the pharmaceutical diversion scheme. Monbarren's sentencing capped an investigation of the diversion market that began in 1996.
This investigation was a joint effort of OCI's Kansas City Field Office and the FBI's Denver Division.
Conspiracy to Buy and Sell Prescription Samples
OCI initiated this investigation when investigators received information from United States Attorney's Office (USAO) for the District of New Jersey (DNJ), the State of New Jersey, Division of Criminal Justice, Office of the Attorney General (NJAG) and the Avon By The Sea Police Department (AVON PD), Avon, New Jersey. This information indicated that a pharmacist, Michael Stavitski, was involved in the purchase and sale of physician samples and misbranded prescription drugs. These diverted prescription samples and prescription drugs were being sold in zip lock bags.
Nicholas Denucci, a Schering Plough Pharmaceutical Sales Representative, had on numerous occasions sold prescription samples to Stavitski. As a result of his participation in the conspiracy to buy and sell prescription samples, Denucci made a profit of $40,000.00.
Stavitski purchased prescription samples from Denucci and a medical doctor. Stavitski then sold these samples to the public as prescription drugs at the Avon Pharmacy. As a result of his participation in the conspiracy to buy and sell Prescription samples, Stavitski received approximately between $5,000 and $10,000 in revenues from the sale of these prescription samples at the Avon Pharmacy.
On September 25, 2001, Nichols Denucci surrendered and appeared in front of District of New Jersey. Denucci was convicted of the following:
- One count of 18 U.S.C. § 371, Conspiracy to Defraud the United States and the FDA by Knowingly and Willfully Buying and Selling Prescription Samples in violation of 21 U.S.C. §§ 331(t), 353(c)(1), 353(d)(1), 353 (d)(2)(A) and 333(b)(1)(B).
On January 14, 2002, Denucci was sentenced in District of New Jersey, Newark, New Jersey, for his participation in a conspiracy to buy and sell Prescription samples. Denucci was sentenced and ordered by the court to the following: 6 months of house arrest; 4 years probation; pay the U.S. Government a fine of $40,000.00; an occupational restriction regarding employment in the pharmaceutical industry; full financial disclosure to include tax returns.
On September 28, 2001, Stavitski, owner/operator/pharmacist of the Avon Pharmacy, Avon, New Jersey, the Wall Pharmacy, Wall, New Jersey, the Belmar Hometown Pharmacy, Belmar, New Jersey, and the Spring Lake Heights Super Pharmacy, Spring Lake Heights, New Jersey, surrendered. Stavitski was convicted of the following:
- One count of 18 U.S.C. § 371, Conspiracy to Defraud the United States and the FDA by Knowingly and Willfully Buying and Selling Prescription Samples in violation of 21 U.S.C. §§ 331(t), 353(c) (1), 353(d)(1), 353(d)(2)(A) and 333(b)(1)(B).
On March 25, 2002, Stavitski was sentenced in District of New Jersey, Newark, New Jersey, for his participation in a conspiracy to buy and sell prescription samples. Stavitski was sentenced and ordered by the court to 3 years probation and a fine of $10,000.
Pharmacist Convicted of Stealing Prescription Drugs
OCI Investigation Discloses Pharmacy Technician Stealing Prescription Drugs
OCI initiated this investigation following receipt of information from the U.S. Veterans Administration, Office of the Inspector General (VA OIG). The VA OIG and the OCI's Boston Resident Office conducted a joint investigation into Stephan Basden, a pharmacy technician at the Veterans Administration Medical Center, Bedford, Massachusetts. The investigation revealed that Stephan Basden was stealing prescription drugs from the Virginia facility.
On December 5, 2001, Stephan Basden appeared before a U.S. District Court Judge and was convicted of one count of violating 21 U.S.C. § 331(k) Causing the misbranding of a drug and one count of violating 21 U.S.C. § 844(a) - Possession of a controlled substance.
On March 18, 2002, Stephan Basden appeared in U.S. District Court to be sentenced on the above described charges. Basden was placed on probation for a period of one year.
Pharmacist Substitutes Brand Drugs with Compounded Substitutes
The Texas Attorney General's Office, Medicaid Fraud Control Unit (MFCU), Austin, Texas, requested FDA/OCI assistance in this investigation. Richard Daniel, a registered pharmacist, and the owner and operator of Trinity Pharmacy, Carrollton, Texas, was convicted of billing Medicaid for name brand drugs while providing patients with compounded substitutes.
On August 23, 2001, Richard Daniel, Registered Pharmacist, appeared before the District Court in the Eastern District of Texas, Sherman, Texas. Daniel was convicted of a violation of 21 U.S.C. § 331(i)(3), and 333(a) -- Introduction or delivery of counterfeit drugs; and 21 U.S.C. § 331(k) and 333(a) (1) Introduction or delivery of misbranded drugs.
Daniel agreed to pay approximately $148,000 to the Medicaid program for civil recovery which resulted in his billing the Medicaid program for compounded drugs that he had substituted for trade name or generic prescriptions.
Clinical Investigator Sentenced
FDA Inspection Discloses Falsification of Documents and Health Care Fraud
OCI initiated this case following a referral from the FDA's San Francisco District Office alleging fraud in relation to clinical investigations conducted by Dr. William H. Ziering. FDA conducted a regulatory inspection and investigation of Dr. William H. Ziering and the Central California Research Institute (CCRI) in April and May 1995. This investigation focused on five investigational new drug (IND) studies. The results of this investigation revealed falsification of documents and statements and possible health care fraud. This was a joint investigation with the Department of Health and Human Services, Office of the Inspector General, and the Department of Justice, Medi Cal Fraud Unit, and the State of California.
On May 25, 2000, a Federal Grand Jury in the Eastern District of California, returned a one count indictment charging Ziering with Mail Fraud [18 U.S.C. § 1341] and Aiding and Abetting [18 U.S.C. § 2].
The specific charge involved a Rhone Poulenc Rorer Pharmaceuticals, Inc., (RPR) study of pediatric patients with spring grass seasonal allergic rhinitis. Ziering provided a letter to RPR verifying that he had personally examined study subjects as required by the study protocol, when in fact he had not actually examined all of the research subjects.
On August 25, 2000, a Federal Grand Jury in the Eastern District of California, returned a fourteen count superseding indictment charging Ziering with fourteen counts of mail fraud, concerning fraudulent Medicare and Medi Cal billing and clinical research practices.
On August 30, 2000, Ziering appeared in the U.S. District Court, Eastern District of California, and was arraigned on fourteen counts of mail fraud.
On January 11, 2002, in the Eastern District of California, Ziering was convicted of one felony count of Mail Fraud [18 U.S.C. § 1341] and Aiding and Abetting [18 U.S.C. § 2]. Further agreements made by Ziering included the following
- voluntary surrender of his medical license, with the stipulation that he not seek reinstatement of his medical license at any time;
- permanent exclusion as a provider from the Medicare and Medicaid/MediCal programs;
- permanent exclusion from participation in any manner in any drug studies, intended or required for submission to FDA;
- restitution of $21,660; and waiver of right to appeal.
On June 3, 2002, in the Eastern District of California, Ziering was sentenced to 6 months incarceration and 24 months supervised release following the completion of his term.
Manipulation of Clinical Trials
This investigation involves the manipulation/falsification of clinical trials for Psoriasis and Cutaneous T/Cell Lymphoma. These clinical trials were being sponsored by BioCryst Pharmaceuticals, Inc., Birmingham, Alabama. Based on the investigation and the indictment, Snyder and Peugeot conspired to make false statements that were ultimately mailed to the Center for Drug Evaluation and Research. (Snyder and Peugeot were convicted in Federal Court on all charges listed in the indictment).
On May 21, 2002, the United States Court of Appeals for the 11th Circuit affirmed the conviction of Harry Snyder and Renee Peugeot stemming from their falsification of data in connection with a clinical trial designed to study effectiveness of the drug on psoriasis and cutaneous T Cell Lymphoma. Synder and Peugeot, husband and wife, were convicted of 18 U.S.C.§371, Conspiracy; 18 U.S.C. §1341, Mail Fraud; 18 U.S.C. §1001, Providing False Statements to the FDA.
At sentencing, the trial court refused the government’s request to base the sentence on the $34.5 million loss sustained by investors, (the sponsor, Biocryst, was a publicly held company) as a result of the defendants’ release of fraudulent data indicating that the drug was effective. The court instead based the sentence on the perceived gain of the defendants, approximately $250,000. In reversing the trial court’s sentencing determination and remanding the case for resentencing, the court held that the trial court should have used loss as the measure of the fraud, and improperly used gain as a proxy for loss.
Prison Sentence for Illegal Promotion of Dietary Supplements
Dietary Supplements Promoted as Cure for Cancer, Alzheimer's, Multiple Sclerosis, Parkinson's Disease, Lupus, Rheumatoid Arthritis, Diabetes, and Heart Disease
OCI initiated this investigation based upon a referral from FDA's San Francisco District Office. The information was originally provided by the California State Food and Drug Branch (CAFDB). Since approximately 1992, various local, state and federal law enforcement agencies have conducted investigations involving different fraud issues (welfare, food stamp, Medi Cal, investment scheme) against Doris Ekker and Eddy Jo Ekker.
In 1996, Diane Eckert Kunick, in conjunction with her parents, Doris and Eddy Jo Ekker, formed New Gaia Products (hereafter referred to as NGP), a company which purportedly manufactured, sold and distributed dietary supplements, including, but not limited to, colloidal gold, colloidal silver, and colloidal titanium, to customers nationwide. According to the CAFDB, Diane Eckert Kunick had also distributed corresponding NGP promotional literature, which identified specific medical claims relative to the NGP products, including, but not limited to cures for cancer, rheumatoid arthritis and heart disease.
Eckert Kunick introduced unapproved new drugs between November 1998 and May 2000 through NGP distribution. The unapproved new drugs distributed included the following NGP products: "GAIACOL", "GAIA CU 29", "AQUAGAIA", "GAIAGOLD", "GAIADHEA", "GAIATI 22" and "GAIACLEANSE". The products were marketed as treatments or cures for many illnesses, including cancer, Alzheimer's disease, multiple Sclerosis, Parkinson's disease, lupus, rheumatoid arthritis, diabetes, and heart disease.
In July 2000, federal search warrants were executed at locations identified as NGP manufacturing and distribution sites within Southern California and Southern Nevada in conjunction with law enforcement personnel from the Los Angeles Field Office of OCI, United States Postal Inspection Service, CAFDB and Kern County Sheriff Department.
On April 8, 2002, Diane Eckert Kunick appeared in U.S. District Court, Eastern District of California, Fresno, California, and was convicted of 21 U.S.C. § 331(d) & 333(a) (1) - Introduction of Unapproved New Drug Into Interstate Commerce. On July 1, 2002, Diane Eckert Kunick received a sentence of 4 months incarceration in the community correctional center.
False Claim of Tampering Results in Prison Sentence
Investigation Discloses Father Falsely Claimed His Son was Injured by "Fruitopia" Soft Drink
On November 27, 2000, the FDA's Baltimore District Office notified OCI of the receipt of a possible tampering complaint that may have resulted in an injury to a three year old boy. A hospital emergency room physician reported that the child's father, Larry Wellington, brought his son in on November 26, 2000, for treatment after he had consumed a "Fruitopia" soft drink which caused him to vomit and complain of a burning sensation in his mouth. Wellington advised that he tried the product himself and felt his mouth burn as well.
Testing by the FDA's Forensic Chemistry Center confirmed that the product in the Fruitopia bottle was a substance used to freshen toilets of traveling buses and airplanes. The investigation revealed that Wellington supplemented his income by working part time at a bus company which used this same formaldehyde and methanol based toilet freshener to reduce odors on bus toilets. Drivers and cleaners at the company stored small quantities of the toilet freshener in used soda bottles, including used Fruitopia bottles.
Wellington told emergency personnel, doctors, and repeated to FDA investigators his story that the bottle had been unopened, that he had cracked open the tamper resistant bottle cap, that his son had consumed the liquid, and that his son had experienced abdominal pain and vomiting. Responding emergency personnel stated that the child had not been injured or vomited.
On February 25, 2002, Wellington was indicted by a Grand Jury for making a false claim of consumer product tampering in violation of 18 U.S.C. § 1365(c)(1) and making False Statements to the FDA in violation of 18 U.S.C. § 1001.
18 U.S.C § 1365(c)(1): Whoever knowingly communicates false information that a consumer product has been tainted, if such product or the results of such communication affect interstate or foreign commerce, and if such tainting, had it occurred, would create a risk of death or bodily injury to another person, shall be fined not more than $25,000 or imprisoned not more than five years, or both.
On March 25, 2002, Wellington entered a plea of not guilty. On May 29 through June 4, 2002, a jury trial was held in the U.S. District Court, Greenbelt, Maryland. A mistrial was declared after the jury reported an inability to render a unanimous verdict.
On June 12, 2002, a superceding indictment was obtained charging Wellington with one count of Communicating false information regarding Tampering of a Consumer Product [18 U.S.C. § 1365(c)(1)]; two counts of False statements [18 U.S.C. § 1001]; and one count of Obstruction of an FDA investigation [18 U.S.C. § 1505]. The retrial was held in U.S. District Court in Greenbelt, Maryland, on August 27-30, 2002.
On August 30, 2002, the jury returned a verdict of guilty on all four counts. On November 25, 2002, Wellington was sentenced to 27 months incarceration and supervised release for three years following his prison sentence.
This case was investigated by the FDA's Baltimore District Office and the FDA Office of Criminal Investigations.
Pharmaceutical Drug Diversion
Defendant Falsely Claimed Firm was Eligible for Preferential Drug Pricing
This investigation was initiated based on information provided by the Federal Bureau of Investigation, Kalamazoo, Michigan. This is a pharmaceutical drug diversion investigation involving Requirements, Inc., Alpharetta, Georgia, and Cypress Resources, Inc., North Las Vegas, Nevada. Cypress Resources, Inc., placed orders for pharmaceuticals manufactured by Pharmacia & Upjohn Corporation, Kalamazoo, Michigan, through Requirements Inc. Cypress Resources, Inc. falsely represented to Requirements, Inc., and Pharmacia & Upjohn Corporation that it was servicing government and Indian reservation hospitals, which qualified Cypress Resources, Inc. for preferential drug pricing. Storrs is the former owner of Cypress Resources, Inc., and was originally indicted on 62 counts of mail and wire fraud.
On August 12, 2002, Bruce Storrs was convicted of one count of Wire Fraud [18 U.S.C. § 1343], in the Federal Court in the Western District of Michigan.
OCI And New York City Investigate Medicaid Fraud
In April 2001, OCI jointly initiated an investigation with the New York City Human Resources Administration Bureau Of Fraud Investigations. The Bureau of Fraud Investigations stated that a confidential informant came forward with information about that twin brothers, Anthony Garcia and Robert Garcia, who were engaged in the diversion of prescription drugs.
The subjects were alleged to have obtained valid Medicaid numbers and/or cards and then used those to obtain pharmaceuticals from different pharmacies. The Garcia brothers were also alleged to have forged prescription slips to obtain the pharmaceuticals. The confidential informant stated that these individuals operated throughout the New York City area.
During the course of this investigation, the confidential informant introduced an investigator from the Bureau of Fraud Investigations in an undercover capacity. The undercover investigator would >rent' to the subjects a controlled Medicaid card. The usage of this card would then be tracked to learn the type of medications and the locations where the medications were obtained. Multiple undercover operations of this type were completed from April 2001 to July 2001. Also during these operations, three additional subjects were identified as part of this diversion scheme. The new subjects were Luis Merced, William Merced and Roger Herb.
On January 23, 2002, subjects Anthony Garcia and Roger Herb were arrested as they were attempting to purchase prescription medications using forged prescriptions. Anthony Garcia was charged with violation of New York State Penal Law: PL §178.15 - Criminal Diversion of Prescription Drugs, 2nd Degree, PL §170.25 - Criminal Possession of Forged Instrument and PL §110/155.25 - Petit Larceny.
Roger Herb was charged with violation of New York State Penal Law: PL §170.25 – Criminal Possession of a Forged Instrument, 2nd Degree, and PL §110/155.25 Petit Larceny.
On this same date, the subjects Anthony Garcia, Robert Garcia, Luis Merced and William Merced were all indicted by a Grand Jury in violation of New York State Penal Law §170.10 - Forgery; 2nd Degree and Penal Law §170.25 Criminal Possession of a Forged Instrument; 2nd Degree.
On January 24, 2002, Roger Herb was indicted by a Grand Jury on violation of New York State Penal Law §170.25 Criminal Possession of a Forged Instrument; 2nd Degree and Penal Law §110/155.25-Petit Larceny.
Convictions and Sentencing were as follows:
- On April 10, 2002, Anthony Garcia was convicted of Penal Law §170.25 and Penal Law §170.10 and later sentenced to 28 to 84 months incarceration in State Prison.
- On April 10, 2002, Robert Garcia was convicted of Penal Law §170.10 and sentenced to 18 to 36 months incarceration in State Prison.
- On April 10, 2002, Luis Merced was convicted of Penal Law §170.10 and sentenced to 18 to 36 months incarceration in State Prison.
- April 10, 2002, William Merced was convicted of Penal Law §170.10 and sentenced to 18 to 36 months incarceration in State Prison.
- On April 17, 2002, Roger Herb was convicted of Penal Law §170.25 and sentenced to 12 months incarceration in State Prison.
The defendants in this case refused to cooperate with OCI or other law enforcement agencies.
OCI Investigation Discloses Illegal Drug Sales
OCI Aids Local Police in Undercover Investigation of Local Drug Ring
OCI initiated this investigation based upon information provided in September 2001, from Sgt. Michael Riley, Task Force Commander, Northeast Merrimack Valley Drug Task Force. Sgt. Riley advised that the Merrimack Valley Drug Task Force had an undercover officer who was preparing to conduct a series of undercover purchases of "rave" type drugs from local drug dealers. Riley requested that OCI provide background information to the task force and assist in the investigation.
OCI agents subsequently met with members of the task force and provided numerous briefings on several drugs including Ketamine, OxyContin and ecstasy. An undercover task force officer made numerous undercover purchases of illegal drugs from over 17 local drug dealers, six of which included purchases of various prescription drugs, FDA unapproved drugs and controlled substances. In December 2001, Sgt. Riley advised OCI that he was seeking to conduct a "sweep" of those individuals identified in the investigation and requested OCI assistance in conducting the arrests and performing post arrest interviews.
On December 19, 2001, as a result of successful undercover purchases, three individuals, Susanna Snodgrass, Naomi Mills and Deanna Rogers were arrested on criminal complaint warrants obtained from the Newburyport, Massachusetts District Court. Snodgrass, Mills and Rogers were charged with violating Massachusetts penal code 94C §40, Conspiracy to distribute a controlled substance. Rogers was charged with distributing the prescription drug Trazadone, Mills was charged with distributing Ecstasy, and Snodgrass was charged with distributing the prescription drug Diazapam.
On December 28, 2001, three additional individuals B Kira Fiatrone, Mary Ryan and a juvenile were arrested by members of the Merrimack Drug Taskforce and OCI, on criminal complaints obtained in Newburyport, Massachusetts District Court, based on several successful undercover purchases of Ketamine from each of the individuals.
- Ryan was charged with two counts of violating Massachusetts penal code 94C §31 - Possession of a controlled substance (Ketamine) and one count of possession of a controlled substance (ecstasy).
- The juvenile was charged with violating Massachusetts Penal code 94C §40 - Conspiracy to distribute a controlled substance (Ketamine).
- Fiatrone was charged with one count of violating Massachusetts penal code 94C §32(a) - Distribution of a controlled substance (Ketamine) in a school zone and one count of violating Massachusetts Penal code 94C §40 - Conspiracy to distribute a controlled substance (Ketamine).
On February, 6, 2002, defendant Kira Fiatrone pled guilty to one count of violating MA penal code 94C §40 in Newburyport District Court. Fiatrone was sentenced to twelve months probation.
On May 1, 2002, defendant Mary Ryan pled guilty to two counts of violating Massachusetts penal code 94C §31 possession of a controlled substance (Ketamine) and one count of possession of a controlled substance (ecstasy) in Newburyport District Court. Ryan was sentenced to six months incarceration, suspended and eighteen months probation.
On May 15, 2002, defendant Susanna Snodgrass appeared Newburyport District Court where the Newburyport District Attorney's Office filed a Nolo Pros against defendant Snodgrass.
On July 31, 2002, at the Newburyport District Court, Newburyport, Massachusetts, defendant Deanna Rogers pled guilty to one count of Massachusetts General Law 94C §40 distribution of a controlled substance (Ketamine). Subsequent to accepting Roger's plea, the Judge sentenced Rogers to 18 months incarceration with 8 months to serve, with the balance suspended and 2 years probation upon release.
On October 3, 2002, at the Newburyport District Court, Newburyport, Massachusetts, subject Naomi Mills pled guilty to one count of Massachusetts General Law 94C § 40 - Distribution of a controlled substance (Ecstasy). Subsequent to accepting the guilty plea, the Judge sentenced Mills to 18 months incarceration with 14 days to be served, with the balance suspended and two (2) years probation upon release.
The juvenile case was removed from the adult criminal court system to the Newburyport Juvenile Court where the disposition of the case remains sealed.
Illegal Compounding of Brand Name Drugs
FDA's Forensic Chemistry Center Analyzes Compounded Drugs - Finds Drugs are Ineffective
This investigation was initiated based on information that James Spalding, Owner, The Medicine Shoppe, Cambridge City, Indiana, was counterfeiting trade name drugs. On June 27, 1997, and July 29, 1997, the Office of Criminal Investigations (OCI), Drug Enforcement Administration (DEA) and the Richmond Police Department (RPD) executed State of Indiana search warrants at The Medicine Shoppe. On both occasions, numerous bottles of illegal compounded drugs and containers of bulk raw powders, used to compound/manufacture prescription drugs (controlled and non controlled) were seized.
During the course of this investigation numerous interviews were conducted of patients who received illegally compounded/manufactured prescription drugs, and their physicians who had not authorized the compounding/manufacturing of these drugs. Numerous laboratory analyses of these drugs were conducted by the FDA's Forensic Chemistry Center (FCC). The FCC determined that these prescription drugs were ineffective.
On December 19, 2001, the Federal Grand Jury, U.S. District Court, Southern District of Indiana, Indianapolis, Indiana, returned a 13 count Indictment charging Spalding as follows:
- 10 counts of violating Title 21 U.S.C. § 841(a)(1) - Manufacturing a Schedule II Controlled Substance, without a prescription calling for the compounding of said substance for a legitimate medical purpose;
- 2 counts of violating Title 21 U.S.C. §§ 331(k), 351(b), 352(a) and 333(a)(2) - Misbranding/Adulterating drugs which were held for sale; and
- 1 count of violating Title 18 U.S.C. § 1347 - Healthcare Fraud.
On July 15, 2002, Spalding was convicted in U.S. District Court, Southern District of Indiana, of the following:
- 3 counts of violating 21 U.S.C. § 841(a)(1) - Manufacturing a Schedule II, Controlled Substance, without a prescription calling for the compounding of said substance for a legitimate medical purpose;
- 2 counts of violating 21 U.S.C. §§ 331(k), 351(b), 352(a) & 333(a)(2) - Misbranding/Adulterating drugs which were held for sale, and
- 1 count of violating 18 U.S.C. § 1347 - Healthcare Fraud (Spalding defrauded the Indiana Medicaid program of $114,210.50.)
On December 11, 2002, Spalding appeared in U.S. District Court, Southern District of Indiana, and was sentenced to serve 48 months incarceration, 3 years supervised probation upon release, 200 hours community service, and restitution in the amount of $114,210.50.
Pharmacist Sentenced for Dilution of Chemotherapy Drugs
Pharmacist Diluted Numerous Chemotherapy Drugs - Some Drugs Found to Contain Less than 10% of Prescribed Dose
U.S. v. Robert Courtney, et al. (D. Mo.). On February 26, 2002, Robert Ray Courtney, of Kansas City, Mo., and Courtney Pharmacy, Inc., d/b/a Research Medical Tower Pharmacy, pleaded guilty to eight counts of tampering with consumer products, as well as six counts of adulterating, and six counts of misbranding, a drug. Courtney is the former owner, president, and chief executive of Courtney Pharmacy, Inc. In entering their guilty pleas, Courtney and his corporation admitted that, on eight occasions in 2001, the defendants prepared intravenous drug mixtures that did not contain the prescribed amounts of the chemotherapy drugs Taxol or Gemzar. In addition, on six occasions in 2001, the defendants adulterated and misbranded drugs by preparing intravenous drug mixtures that did not contain the amounts of Taxol or Gemzar that were ordered by the treating physician and for which those mixtures were labeled.
Between March and August of 2001, Courtney, among other things, diluted numerous chemotherapy drugs that were ordered from his pharmacy and misrepresented the strength of those drugs to physicians. More than 50 patients were originally identified as having been victims of this scheme; it eventually was determined that more than 4,000 patients may have had their prescriptions diluted over a ten year period. In many cases, patients received drugs that were less than 10% of the prescribed strength; several of those patients died.
As part of the plea agreement, Courtney acknowledged that, in addition to the tampering, adulteration, and misbranding of Taxol and Gemzar identified in the indictment, he and his corporation diluted and tampered with additional Taxol and Gemzar preparations.
Through the plea agreement, Courtney and his corporation acknowledged that they also diluted and tampered the drugs Platinol and Paraplatin; that they conspired to traffic in stolen drugs including Taxol and Gemzar which they purchased and dispensed to pharmacy customers; and that they caused the filing of false Medicare claims by not disclosing the dilution to the physician.
On December 5, 2002, Robert Courtney, was sentenced to 30 years in prison, and required to pay a $25,000 fine as well as $10.4 million in restitution because of his sale of diluted drugs.
In a related matter, on January 10, Walter J. Accurso consented to the filing of a complaint alleging that he violated the Federal Food, Drug, and Cosmetic Act during the years 2000 and 2001 by causing the misbranding of various drugs. The drugs included Paraplatin, Lupron, Zofran, Taxol, Gemzar, Zocor, and Lipitor. Accurso acknowledged that he acquired the drugs knowing they had been stolen from a hospital; he then sold them at a discount to various pharmacists. Accurso paid a $25,000 civil judgment and forfeited to the United States an additional $8,650 in cash proceeds.
In addition, Stuart Smith (a hospital employee) and Gary Ravis (a pharmacist) pled to related charges, based on the sale of drugs stolen from a hospital. Ravis entered a plea to one count of receipt of stolen property; he received a probationary sentence, a $250,000 fine, and 2,500 hours of community service. Smith likewise entered a plea to a charge of the unlawful sale of drugs and he received a sentence of 6 months in home detention, $50,000 in restitution to the hospital, a $25,000 fine, and 1,000 hours of community service.
A former pharmaceutical sales representative, Aran Paraghamian, also entered a plea to a one count of interstate transportation of stolen property and received a sentence of 3 years probation, a fine of $60,000, and 600 hours of community service for participation in this scheme.
Illegal Internet Sales of Prescription Drugs
Investigation by OCI/Local Police/ Romanian and Australian Police) uncover Illegal Sale of Prescription Drugs Via the Internet
This case originated on September 15, 1999, based on information received from Detective Shane Fulmer, Chilton County Sheriff's Office, Clanton, Alabama, in conjunction with the Investigative Analysis Branch (IAB), HQ, FDA/OCI. Detective Fulmer reported that credible information was received which indicated that Anita Yates, who resided in Clanton, Alabama, was selling pharmaceuticals via the Internet. According to the information, Yates owned and operated a business by the name of Norfolk Men's Clinic. This clinic was the location where the prescription drug orders were processed and distributed.
It was further determined that Yates and an Australian citizen identified as Anton Pusztai were operating an Internet website by the name of Viagra.au.com. With this website, a customer could order via the Internet Viagra, Celebrex, Xenical, Propecia, and Claritin-D. A joint investigation was conducted with the Chilton County Sheriff's Department with the assistance of the Alabama Board of Medical Examiners.
During September 1999, several FDA/OCI offices made undercover purchases through the aforementioned website resulting in the receipt of Viagra which was being distributed from Clanton, Alabama. Based on the undercover purchases, a search warrant was executed, not only on the business, but also Yates' residence. During the search, numerous prescription drug orders, empty prescription bottles along with several cases of prescription drugs were seized.
During the course of the investigation, investigators determined that customers were ordering the prescription drugs via the Internet which resulted in Yates and Pusztai generating fictitious prescriptions and having those prescription presented to Dr. Eiland, a local physician in Clanton, Alabama. Dr. Eiland would rewrite the prescriptions and present them to a local pharmacy to be filled. Once the prescriptions were filled, they would be picked up by employees of Norfolk Men's Clinic, repackaged into plastic type envelopes, and mailed via Federal Express to the customer.
Based on the evidence seized from the residence and business, it was determined that Yates and Pusztai were obtaining wholesale supplies of pharmaceuticals from All International, Inc., which was owned and operated by Yvan Degomme. Degomme was sending wholesale volumes of prescription drugs to Yates and Pusztai even though they did not have a wholesale, pharmacy, and/or medical license.
Subsequent to the initial search, Yates and Pusztai moved their operation to Weirton, West Virginia, where they continued to generate bogus prescriptions and have those prescriptions filled by their own established pharmacy.
On July 27, 2000, Yates, Pusztai, Eiland, All International, Inc., and Yvan Degomme were indicted by a Federal Grand Jury. The charges consisted of money laundering, mail fraud, obstruction of justice, conspiracy, and violating the Federal Food, Drug, and Cosmetic Act.
On August 6, 2000, search warrants were executed at the business site in Clanton, Alabama, and two locations in Weirton, West Virginia. During the search numerous prescription drug orders bearing the names of foreign physicians along with numerous cases of prescription drugs were seized. Subsequent to these searches, coordination was conducted with the Bucharest Organized Crime Division, Bucharest, Romania, the Australian Federal Police, and Therapeutic Goods Administration. With their assistance, the foreign physicians were interviewed which resulted in confirming the fact the physicians were not involved in this Internet operation.
On November 9, 2001, representatives for the corporation of All International, Inc., appeared before Judge DeMent at which time the company pled guilty to one count of violating Title 18 U.S.C. § 1505 Obstructing Justice. The company admitted to misleading FDA/OCI on how many shipments of prescription drugs were sent to Yates and Pusztai. Degomme pled guilty to 5 counts of violating Title 21 U.S.C. § 331(k).
On February 16, 2002, Yates and Pusztai were convicted in Federal Court for mail fraud, money laundering, conspiracy, and violating the FD&C act. Degomme was sentenced to 12 months probation and fined $1,500.
Eiland was acquitted of all charges. He was earlier sanctioned by the Alabama Board of Medical Examiners in which he was fined $5,000 and suspended for 90 days.
On June 5, 2002, All International, Inc., the company was fined $125,000. The company agreed as part of the plea agreement to relinquish all wholesale licenses.
On June 18, 2002, Pusztai, being earlier found guilty of 1 count of conspiracy, 1 count of conspiracy to commit money laundering, 10 counts of mail fraud, 10 counts of misbranding, and 1 count of Operation of an Unregistered Drug Facility was sentenced to 188 months incarceration, 36 months supervised probation, and ordered to forfeit $373,000.00 in assets that were frozen when the case was indicted.
Yates was sentenced to 78 months incarceration, 36 months probation, and ordered to forfeit $373,000 in assets. The assets were forfeited as a joint forfeiture agreement between Pusztai and Yates.
As a result of the forfeiture, the following agencies shared in the assets: Chilton County Sheriff's Office, Clanton, Alabama; Alabama Board of Medical Examiners; and Weirton Drug Task Force, Weirton, West Virginia.
Smuggling of Prescription Drugs
U.S. Customs Detains Defendant Attempting to Smuggle $140,000 Worth of Prescription Drugs Manufactured in Canada into U.S.
On July 25, 2001, the U. S. Customs Service (USCS) advised OCI that Christopher Gervasi was detained at the Rainbow International Bridge, Niagara Falls, New York, after he attempted to smuggle over $140,000.00 worth of Canadian manufactured prescription drugs into the USA. On the same evening Gervasi was arrested for violations of 18 U.S.C. §1001 (Making a False Statement to a Federal Officer) and was held overnight at the Erie County Holding Center.
On July 26, 2001, Gervasi made an initial appearance in U.S. Magistrate's Court in the Western District of New York (WDNY) in Buffalo. He was released on a $1,000 signature bond.
Further investigation conducted with the Royal Canadian Mounted Police (RCMP), the Federal Bureau of Investigation, and the USCS disclosed Canadian and American organized crime were involved in the illegal smuggling of the above described prescription drugs. However, Gervasi refused to cooperate regarding this investigation.
On July 18, 2002, Gervasi pled guilty as charged in Federal District Court W.D.N.Y. in Buffalo. On October 4, 2002, he was sentenced to 3 years probation with the stipulation that he continue with periodic drug/alcohol testing.