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U.S. Department of Health and Human Services

Inspections, Compliance, Enforcement, and Criminal Investigations

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Office of Criminal Investigation continued 2001

 

Chapter 6

 

Last Update: August 07, 2003

   

Center for Devices and Radiological Health

Medicare Billed for Unapproved Electro-Magnetic Therapy
Court Orders Magnetic Therapy Firm to Pay $4 Million to Reimburse Government

This investigation initiated from information received from the Federal Bureau of Investigation (FBI), New Haven, Connecticut. The FBI had been contacted by Medicare concerning complaints that they had received from Medicare beneficiaries about being billed for participating in a clinical study of an electro-magnetic therapy device. Investigation exposed conduct by Richard Markoll, Ernestine Binder Markoll, and Dr. David Trock involving their treating patients as part of a clinical study with an unapproved electro-magnetic device and without an approved Investigational Device Exemption in place. The Markolls then fraudulently billed Medicare, using billing codes that were approved for ultrasound and electrical stimulation treatments, to recoup the costs of the electro-magnetic treatments.

On May 18, 2001, in U.S. District Court, District of Connecticut, the Markolls were convicted of violations of the Food, Drug, and Cosmetic Act and mail fraud. Richard Markoll was convicted of felony violations of Title 18 U.S.C. § 371 - Conspiracy, and Title 21 U.S.C. § 331(q)(1)(A), 333(a)(2), 360j(g) - failure or refusal to comply (with the intent to defraud) with any requirement prescribed under Title 21 U.S.C. § 360j(g) [Exemption for Investigational Device].

Ernestine Binder Markoll was convicted of misdemeanor violations of Title 18 U.S.C. § 371 - Conspiracy, and Title 21 U.S.C. § 331(q)(1)(A), 333(a)(1), 360j(g) - failure or refusal to comply with any requirement prescribed under Title 21 U.S.C. § 360j(g) [Exemption for Investigational Device].

Richard Markoll, principle shareholder of Bio-Magnetic Therapy Systems, doing business as Magnetic Therapy Scovill Street, Incorporated, entered a guilty plea on behalf of the corporation to violations of Title 18 U.S.C. § 1341 - Mail Fraud, and Title 18 U.S.C. § 2 - Aiding and Abetting.

On June 20, 2001, Dr. Trock was sentenced in U. S. District Court, District of Connecticut, for a misdemeanor violation of the Investigational Device Exemption regulations. Dr. Trock was sentenced to six months probation and was ordered to reimburse the Government $35,250.00.

On August 14, 2001, Richard Markoll, Ernestine Binder Markoll, and Bio-Magnetic Therapy Systems, doing business as Magnetic Therapy Scovill Street, Incorporated, were sentenced in U.S. District Court, District of Connecticut.

Richard Markoll was sentenced to 3 years probation and ordered to pay a fine of $4,000.00. Binder Markoll was sentenced to 2 years probation and ordered to pay a fine of $1,000.00.

Bio-Magnetic Therapy Systems, doing business as Magnetic Therapy Scovill Street, Incorporated, was ordered to reimburse the Government $4,000,000.00.

This case was investigated jointly by the Federal Bureau of Investigation, the Department of Defense, Defense Criminal Investigative Service, the United States Postal Inspection Service, and FDA’s Office of Criminal Investigations.

 

Partial Shipment of Rejected Medical Gloves Entered into Interstate Commerce
Firms Falsely Documents Return of Medical Gloves Rejected by FDA

This case, investigated jointly by the U.S. Customs Service and FDA’s Office of Criminal Investigations, was initiated upon information provided by the FDA Cincinnati District Office. This information alleged that Tradex International, Inc., was shipping overseas only part of a shipment of medical gloves that had been determined to be adulterated and refused admission to the U.S.

On May 11, 2001, Saji Daniel and his company, Tradex International, Inc., appeared in U.S. District Court, Northern District of Ohio. Daniel was convicted of violating Title 49 U.S.C. §80116(2)(A) for causing a fraudulent bill of lading to be prepared which falsely documented the return of 2,213 cases of adulterated medical gloves that had been rejected by the Food and Drug Administration, knowing the shipment was only a partial return of the rejected gloves.

On August 24, 2001, Daniel was sentenced to 6 months home detention followed by six months supervised probation, and ordered to pay a $20,000.00 fine.

Tradex International, Inc., an Ohio corporation, was convicted of violating Title 21 U.S.C. Section 331(a) for knowingly introducing and delivering approximately 73 cases of rejected gloves into interstate commerce, having shipped the gloves to Pennsylvania, Florida, Wisconsin and Louisiana.

On August 24, 2001, Tradex International, Inc., was sentenced to 1 year probation and ordered to pay a $32,000.00 fine.

 

Mammograms Performed with Devices That Failed QC Tests
Hospital Agrees to Pay U.S. Government $65,000. In Civil Settlement

This case was initiated based on information received from FDA’s Southwest Regional Office that Harris Hospital, Newport, Arizona, was performing mammograms with devices that failed Quality Control (QC) tests. During this investigation, it was discovered that QC test strips had been altered. The dates on the QC strips were removed and new dates were inserted. Continued investigation revealed that additional records were falsified, such as mammography phantoms and QC charts.

In November 2001, the U.S. Attorney’s office, Eastern District of Arkansas, reached a civil settlement with Harris Hospital. The settlement states that Harris Hospital billed Medicare for mammograms that were performed during a time that no quality control was in place for the mammography equipment. Harris Hospital agreed to pay the U.S. government $65,000.00.

 

510(k) Applications Found to Contain False Documents
Director of Quality Assurance Sentenced to 10 Months in Prison for Submitting Fraudulent 510(k) Applications

This case was initiated based on the discovery that Micro Interventional Systems, Inc., (MIS) had submitted 510(k) applications to the FDA that contained materially false and fraudulent documents, in order to obtain approval for products, including catheters and other devices intended for coronary and neurological radiology procedures. On September 4, 2001, Maria Carrillo appeared in U.S. District Court, Northern District of California, where she was sentenced to serve 10 months in prison for her conviction of violating Title 18 U.S.C. § 371 - conspiracy to defraud the FDA, based on her role in submitting fraudulent 510(k) applications. Carrillo had served as the Director of Regulatory Affairs and Quality Assurance at MIS.

This case was the result of the joint investigative efforts of the FBI and FDA’s Office of Criminal Investigations.

 

Ultraviolet Blood Irradiation Device Used to Treat HIV/AIDS and Hepatitis
Firm President Sentenced for National and International Promotion of Fraudulent Medical Device

On October 23, 2001, William F. Eberlin, President of Innovative Medical Clinics (IMC) in Gaithersburg, Maryland, appeared in U.S. District Court for the District of Maryland, where he was sentenced to serve 2 years of probation and perform 200 hours of community service pursuant to his July 19, 2001 conviction of introducing an unapproved medical device into interstate commerce in violation of Title 21 U.S.C. § 331(a). This investigation was initiated based on a referral from FDA’s Center for Devices and Radiological Health (CDRH).

IMC was suspected of using an unapproved ultraviolet blood irradiation (UBI) device on patients to treat such diseases HIV/AIDS and hepatitis. In 1997, the U.S. Marshals Service seized a similar UBI device at the Clinical Technology Center in Rockville, Maryland. The clinic was owned and operated by Carl Schleicher, Dennis Cooper, Nicolas Smith, and William Eberlin. Based on this seizure, all related parties entered into a permanent injunction with the U.S. District of Maryland, to cease and desist the manufacture, sale, and use of the UBI device.

Subsequent investigation indicated the UBI device was produced by Precision Assembly Corp. (PAC) in New Jersey, and was shipped to the Foundation for Blood Irradiation (FBBI) in Maryland. The owner of FBBI (Schleicher) died in November 1999. A number of the devices were then traced to IMC. On August 4, 2000, a search warrant was executed at IMC, where documentary evidence was seized that substantiated the manufacture, promotion, and sale of UBI devices nationally and internationally.

 

Unapproved Hearing Aids
Defendant Sentenced to 5 Years in Prison for Manufacturing and Selling Unapproved Hearing Aids

This investigation involved the manufacturing and selling in interstate commerce, by Shahn Divorne and Ear-Tec, Inc., hearing aids that were not approved by the FDA. The State of Washington had received in excess of 2600 complaints through the Washington State Department of Labor. The FDA and CDRH did not regulate these hearing aids, considered a Class 1 “low Tier” device, exempt from routine inspection. Prosecution proceeded with the State of Washington on charges of fraud and theft of monies for unnecessary repairs and services. It was estimated that the State of Washington, Department of Labor and Industries, lost in excess of $24 million related to the aforementioned 2600 claimants.

On August 3, 2001, Shahn Divorne, d.b.a., Ear-Tec, Inc., was found guilty in Pearce County Superior Court, Tacoma, Washington and on August 4, 2001, was sentenced to serve five years in prison and ordered to pay $238,000.00 in restitution. In addition, the court issued a ten-year no contact order with any of the witnesses and the Department of Labor and Industries.