FDA/OCI
cases 4th Quarter, 2002:
January 2003
Addressees,
The following information relates to recent OCI cases that have received
convictions or related judicial action during the fourth quarter of
2002. The information is considered unrestricted.
Chicago Field Office
Convictions/Sentencing
This investigation involves the purchase of pharmaceuticals by Northland
Providers, a closed-door pharmacy, opened and financed by Peter FENTON,
Tom FENTON and Jim BOTTINEAU. Upon receiving the pharmaceuticals, the
partners would transfer them to their wholesale business (Lakeside Medical
Supply) for sale to secondary wholesalers in Michigan and Nevada.
The investigation began in the fall of 1997, and included witness interviews,
information from industry sources, trash covers, pen register/toll record/trap
& trace analysis, and physical surveillance. The investigation led to
a court authorized wiretap, which was conducted from December 1998 through
February 1999. Subsequent search warrants executed 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.
On September 30, 2002, U.S. District Court Judge David Doty sentenced
Tom FENTON to 24 months incarceration and victim restitution of $513,432.12.
The sentencing of Tom FENTON concludes this investigation.
Chicago Field Office
Convictions/Sentencing
This investigation was initiated based upon information received from
the State of Wisconsin, Department of Regulation and Licensing, Division
of Enforcement. The initial information was that Roger J. MORAGA, dba:
The Clinic Pharmacy of Muskego, Wisconsin, was illegally selling various
prescription drugs (pediatric vaccines) to client pediatricians in the
greater Milwaukee area. In conjunction with the New Berlin and Wauwatosa,
Wisconsin Police Departments, numerous witness interviews and surveillances
eventually led to a State of Wisconsin search warrant being executed
at his 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 worth of prescription drugs (pediatric
vaccines) to numerous pediatricians.
Following a proffer statement and corresponding polygraph examination,
MORAGA was charged on October 25, 2001 in the Eastern District of Wisconsin
with one (1) count of Title 21, U.S.C. ß 331(t) ñ Introduction into
Interstate Commerce of Misbranded Drugs and one (1) count of Title 26,
U.S.C. ß 7201- Filing False Income Tax Returns.
On May 9, 2002, defendant Roger J. MORAGA appeared before U.S. District
Court Judge Joseph Stadtmiller, at which time he was sentenced to twenty-one
(21) months incarceration. MORAGA surrendered to federal prison authorities
on September 3, 2002.
Chicago Field Office
Convictions/Sentencing
This case involves allegations concerning suspected tampering of the
prescription drug, Roxanol (Morphine Sulfate), at the Minnesota Veteranís
Nursing Home (MVH), Minneapolis, MN. Specifically, the MVM alleged that
they had found 6 bottles of Roxanol that they believed to have been
tampered with.
Subsequent investigation revealed that Thomas MALONEY, a pool nurse
from the nursing service 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 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 employed
at the Park Care Baptist Care Center, Minneapolis, MN. Also, MALONEY
had placed an order for morphine for another deceased patient while
employed at Maranatha Care Center, Brooklyn Center, MN. Obviously, the
patients never received the morphine and on both occasions the morphine
was never recovered.
On November 5, 2001, MALONEY was convicted of one (1) count of Title
18, U.S.C. ß 1035 - Making False Statements in Health Care Matters and
one (1) count of Title 21, U.S.C. ß 843(a)(3) ñ Obtaining a Controlled
Substance through Fraud.
On February 21, 2002, the Honorable David S. Doty, Senior United States
District Judge, District of Minnesota, sentenced MALONEY to 12 months
incarceration.
Chicago Field Office
Convictions/Sentencing
This investigation was initiated based on information that James SPALDING,
owner of THE MEDICINE SHOPPE, Cambridge City, IN, 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 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, conducted
by the FDA, Forensic Chemistry Center, determined that these prescription
drugs were ineffective.
On December 19, 2001, the Federal Grand Jury, US District Court, Southern
District of IN, Indianapolis, IN, returned a 13 count Indictment charging
SPALDING with ten (10) counts of violating Title 21, U.S.C. ß 841 (a)
(1) - Manufacturing a Schedule II, Controlled Substance, without a prescription
calling for the compounding of said substance for a legitimate medical
purpose; two (2) counts of violating Title 21, U.S.C. ß 331 (k), 351
(b), 352 (a) & 333(a)(2) ñ Misbranding/Adulterating drugs which were
held for sale; and one (1) count of violating Title 18, U.S.C. ß 1347
ñ Healthcare Fraud.
On July 15, 2002, SPALDING was convicted in US District Court, Southern
District of IN, of three (3) counts of violating Title 21, U.S.C. ß
841 (a) (1) - Manufacturing a Schedule II, Controlled Substance, without
a prescription calling for the compounding of said substance for a legitimate
medical purpose; two (2) counts of violating Title 21, U.S.C. ß 331
(k), 351 (b), 352 (a) & 333(a)(2) ñ Misbranding/Adulterating drugs which
were held for sale; and one (1) count of violating Title 18, U.S.C.
ß 1347 ñ Healthcare Fraud.
On December 11, 2002, SPALDING appeared in US District Court, Southern
District of IN and was sentenced to serve 48 months incarceration, three
years supervised probation upon release, 200 hours community service,
and restitution in the amount of $114,210.
Kansas City Field Office
Conviction/Sentencing
This case originated based on information received from an oncologist
in private practice.
On May 15, 2001, a sales representative for the Eli Lilly Corporation
visited an oncologist in private practice. The sales representative
advised the doctor that he was aware their office was obtaining its
chemotherapy medications from RESEARCH MEDICAL TOWER PHARMACY (RMTP).
The chemotherapy medication the doctor was obtaining from RMTP included
the drug, Gemzar (gemcitabine). Gemzar is manufactured and distributed
solely by the Eli Lilly Corporation. According to Eli Lilly sales records,
RMTP had only purchased about one third of the Gemzar provided and billed
to the oncologistís office by RMTP.
Based upon this information, the oncologist sent a sample of the drugs
to an independent laboratory. The lab results indicated the drugs were
sub-potent; meaning the amount of active ingredient was less than the
amount ordered on the prescription. In fact, the tests reflected the
presence of less than one third of the active ingredient.
As a result of the lab reports, the oncologist informed the Office of
Criminal Investigations (OCI), that RMTP was providing sub-potent IV
treatment bags to the clinic. Seven (7) sample vials were provided to
OCI which had been extracted from different IV bags that had been mixed
by the RMTP. Those vials were tested by the FDA Forensic Chemistry Center
(FCC) and were shown to contain substantially less of the drug prescribed
and less than what appeared on the IV bag label (anywhere from 15% -
50% less).
At the direction of OCI and the FBI, two (2) undercover orders were
placed to RMTP by the oncologist. The first undercover order was for
three (3) chemotherapy IV bags. Two (2) of the IV bags contained Gemzar
and one (1) contained Taxol. All three (3) were tested at the FCC. Test
results indicated all three (3) contained substantially less of the
drugs than prescribed and indicated on the labels on the bags. The second
undercover purchase was for three (3) chemotherapy IV bags. Two (2)
of the IV bags contained Gemzar and one (1) contained Taxol. All three
(3) were tested at the FCC. Test results indicated all three (3) contained
substantially less of the drugs than prescribed and indicated on the
labels on the bags. Subsequent tests of the drugs Platinol and Paraplatin,
also contained in the bags, showed those drugs were diluted as well.
Tests also revealed that the cheaper anti-nausea medication, Anzimat,
was substituted for Zofran.
On August 13, 2001, a federal search warrant was executed at RMTP. Robert
R. COURTNEY, owner of RMTP, denied any knowledge of the dilutions, but
admitted that he mixed most of the IV bags for chemotherapy treatments
that left his pharmacy.
On August 14, 2001, a criminal complaint was filed against COURTNEY,
in the Western District of Missouri, charging him with one count of
Title 21, U.S.C. ß 331 (a), (b), (c), and (k) ñ Misbranding/Adulterating
Drugs which were Held for Sale, as well as Title 18, U.S.C. ß 2 ñ Aiding
and Abetting.
On August 15, 2001, COURTNEY appeared voluntarily with his attorney,
to answer questions related to the investigation. COURTNEY admitted
to putting less of the active ingredients in the drugs Gemzar, Taxol,
Platinol (Cisplatin), and Paraplatin (Carboplatin) into chemotherapy
IV bags. COURTNEY knowingly reduced the potency, strength, and concentration
of the drugs out of greed in order to make more money
On August 23, 2001, a grand jury indictment was returned charging COURTNEY
with eight (8) counts of Title 18, U.S.C. ß 1365 - Consumer Tampering;
six (6) counts of Title 21, U.S.C. ß 331(k) and 333(a)(2) - Adulterating
Drugs; and six (6) counts of Title 21, U.S.C. ß 331(k) and 333(a)(2)
- Misbranding Drugs.
On August 24, 2001, a Seizure Order was entered for approximately $10,000,000
of COURTNEYíS assets.
Subsequent investigation revealed that COURTNEY had diluted additional
drugs for other health care providers. In some cases, lab results indicted
the drugs contained no active ingredients.
On February 26, 2002, COURTNEY pleaded guilty to all twenty (20) counts
of the indictment.
On December 5, 2002, Robert Ray COURTNEY appeared before Judge Ortrie
Smith, in the Western Judicial District of Missouri, for sentencing.
COURTNEY was sentenced to 30 years incarceration, ordered to pay $10,452,109.67
(plus any accrued interest) in victim restitution and fined $25,000.
He was also ordered to pay a special assessment of $2,000.00. The corporation,
RESEARCH MEDICAL TOWER PHARMACY, was fined $1.00 and ordered to pay
a special assessment of $ 8,000.00. The corporation was also made party
to the $10,452,109.67 victim restitution order. During the December
5 sentencing hearing, ten victims (or family members of deceased victims)
were allowed to address the court regarding how COURTNEYíS crime had
impacted them.
Kansas City Field Office
Conviction/Sentencing
This investigation was initiated by the Los Angeles Field Office of
OCI as part of an undercover ìstingî investigation regarding a criminal
conspiracy to divert prescription drugs. The defendants obtained prescription
pharmaceuticals in Alabama and California, ìlaunderedî them through
a storefront warehouse in Colorado, and eventually sold the drugs to
wholesalers nationwide.
On February 11, 2002, Sheryl J. MONBARREN was convicted of a violation
of Title 18, U.S.C. ß 1341 - Mail Fraud and Title 18, U.S.C. ß 2 ñ Aiding
and Abetting.
On September 30, 2002, MONBARREN was sentenced in the United States
District Court for the Central District of California, Los Angeles,
CA for her part in a pharmaceutical diversion scheme. MONBARREN was
sentenced to five months incarceration, five months home detention and
24 months probation. This sentencing capped an investigation of the
diversion market that began in 1996. Three other defendants were convicted
and sentenced in 2000 for their part in the conspiracy.
Kansas City Field Office
Conviction/Sentencing
This case was directed at the use of silicon and mineral oil injections
for cosmetic purposes by a Mexican physician practicing medicine in
the United States. This investigation was a joint investigation between
OCI and the Federal Bureau of Investigation, in McAllen, TX.
The investigation determined that Dr. Rosa NUNEZ, a physician licensed
only in Mexico, was traveling from her home in Mexico to the United
States to perform cosmetic procedures on a number of women. NUNEZ was
performing injections for fuller lips, buttocks and calves. As a result
of the injections, many of the women experienced disfiguration at the
injection sites and swollen ankles that had hardened.
As part of the investigation, several undercover meetings were set up
between a female FBI agent and NUNEZ. During these meetings, NUNEZ agreed
to inject the calves and lips of the undercover agent and her friend
with silicon. NUNEZ was charging between $3,000 and $5,000 for these
treatments.
Incident to a meeting at a hotel room, NUNEZ and her two assistants
were arrested and several vials of a biopolymer (silicon) solution were
seized along with two large unmarked bottles which analysis confirmed
to contain mineral oil.
This case went to trial and the witnesses/victims and both of NUNEZíS
assistants testified that NUNEZ was using the biopolymer (silicon) in
the lips, but injecting substances from the bottles identified as mineral
oil into the calves and buttocks. A witness from the FDA Forensic Chemistry
Center testified to the identity of the substances and a witness from
the FDA Center for Device Evaluation and Research (CDRH) testified that
the use of mineral oil and silicon are not approved by the FDA for cosmetic
purposes, and that the injection of these substances was considered
to be adulterated devices. At the conclusion of the trial NUNEZ was
convicted of Title 18, U.S.C. ß 1343 - Wire Fraud, and Title 18, U.S.C.
ß 371 - Conspiracy.
On July 1, 2002, Maria FLORES (an assistant of NUNEZ), was convicted
of one (1) count of Title 21, U.S.C. ß 331(a) - Introduction into Interstate
Commerce of an Adulterated Device.
On July 5, 2002, FLORES was sentenced to 60 days incarceration.
On October 15, 2002, NUNEZ was sentenced in McAllen, TX. She was ordered
to serve 22 months incarceration and ordered to pay $17,000 in restitution
to her victims.
Los Angeles Field Office
Conviction/Sentencing
This case was initiated based on a referral from the San Francisco District
Office alleging fraud in relation to clinical investigations conducted
by DR. WILLIAM H. ZIERING. A regulatory inspection and investigation
was conducted on ZIERING and CENTRAL CALIFORNIA RESEARCH INSTITUTE (CCRI)
in April and May of 1995. This investigation focused on five investigational
new drug (IND) studies. The results of this investigation revealed falsification
of documents/ 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, State of California.
On May 25, 2000, a Federal Grand Jury in the Eastern District of CA
returned a one (1) count indictment charging ZIERING with Title 18,
U.S.C. ß1341 and 2 - Mail Fraud and Aiding and Abetting.
On August 25, 2000, a Federal Grand Jury in the Eastern District of
CA 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 January 11, 2002,
in the Eastern District of CA, ZIERING was convicted of one (1) felony
count of Title 18, USC ß1341 and 2 - Mail Fraud and Aiding and Abetting.
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.
Incident to his conviction ZIERING agreed to the voluntary surrender
of his medical license, with the stipulation that he not seek reinstatement
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 his right to appeal.
On June 3, 2002, in the Eastern District of CA, ZIERING was sentenced
to six (6) months incarceration and 24 months supervised release following
the completion of his term.
Los Angeles Field Office
Conviction/Sentencing
This investigation into the counterfeiting of Similac brand infant formula
was initiated in February 1995 after consumer complaints were received
by Ross Products Division, the maker of Similac brand infant formula.
Ross was able to examine product being returned by some of the complainants
and immediately determined the Similac in question was counterfeit.
A large quantity of counterfeit Similac was isolated at Safeway stores
in the northern California. Investigation by the Office of Criminal
Investigations (OCI) revealed the counterfeit Similac had been purchased
by Safeway through a secondary grocery wholesaler in Palm Springs, CA
who had purchased the counterfeit Similac from MOHAMAD MOSTAFA WHOLESALE
in Orange County, CA.
The OCI investigation revealed that Mohamad MOSTAFA, the owner and operator
of MOHAMDA MOSTAFA WHOLESALE, was an infant formula diverter who hired
IVY ONG to help him procure items MOSTAFA would need to produce the
counterfeit product. Through ONG, MOSTAFA was able to obtain cans, scoops,
can sealers, and an ink jet printer that was used for printing lot numbers
on the bottom of the cans. In addition, ONG was able to find a source
to supply a generic powdered infant formula for MOSTAFA. MOSTAFA entered
into a one million dollar contract with this source for 500,000 pounds
of generic powdered infant formula. MOSTAFA told ONG and this source
that the infant formula was going to be exported to the Middle East.
MOSTAFA even had several hundred labels printed in Arabic as part of
his cover story and scheme and while he had 50,000 counterfeit Similac
labels printed by a printer in Maryland. MOSTAFA was able to get an
initial shipment of 8,000 pounds of the powdered infant formula delivered
to a warehouse in Santa Ana, CA. There he had day laborers package it
into cans for distribution. Had this initial contract been fulfilled,
MOSTAFA would have realized illegal proceeds and profits in excess of
$4.3 million dollars. OCI was able to take down this counterfeiting
operation as an additional 38,000 pounds of formula was being readied
for delivery to MOSTAFA.
Following the execution of numerous search warrants served by the OCI,
ONG was arrested in February 1995. In August 1995, ONG was convicted
of three (3) counts of Title 21, U.S.C. U.S.C. ß 331(k) - Misbranding
a Food after Shipment in Interstate Commerce. In August 2000, ONG was
sentenced in federal court to four months home detention followed by
one year supervised release.
An arrest warrant was issued for MOSTAFA who fled the United States
and remained a fugitive for six years. Investigation and information
regarding MOSTAFAís whereabouts surfaced in Australia, Jordan, South
Korea and Malaysia. In June 2000, a Grand Jury in Santa Ana, CA returned
an indictment charging Mohamad MOSTAFA with one (1) count of Title 18,
U.S.C. ß 371 - Conspiracy; one (1) count of Title 21, U.S.C. ß 331 (k)
- Misbranding Food while Held for Sale after Shipment in Interstate
Commerce; and two (2) counts of Title 18, U.S.C. ß 2320 - Trafficking
in Counterfeit Goods.
MOSTAFA remained in fugitive status until October 2001 when he was arrested
following the events of September 11, 2001. The Royal Canadian Mounted
Police took MOSTAFA into custody at Fort McMurray, Alberta, Canada on
Canadian immigration violations. MOSTAFA waived extradition and was
brought to the United States in March 2002.
In August 2002, after a three day bench trial, U.S. District Court Judge
Stotler, Central District of CA, Santa Ana, CA found MOSTAFA guilty
of all four counts charged in the June 2000 indictment.
On December 16, 2002, Judge Stotler sentenced MOSTAFA to 3 years and
8 months incarceration followed by 3 years probation.
Los Angeles Field Office
Conviction/Sentencing
This investigation concerns the allegation that Jack WATKINS, President,
Sharon GROSS, Chief Financial Officer, and Lyndon DELLIS, Operation
Manager, of CAP-TAB conspired and knowingly substituted lower price
ingredients in lieu of the ingredients listed on the label of their
dietary supplements (encapsulated vegetable powders). This activity
caused the products to be misbranded (mislabeled), and adulterated (substitution
of ingredients). Further investigation revealed that CAP-TAB INC. and
its officers forged organic certifications and an insurance certificate.
These forged documents were submitted to various customers. GROSS and
DELLIS were previously sentenced in 2002.
On June 28, 2002, AUSA Pierson filed a superceding information that
charged WATKINS and CAP-TAB with three (3) counts of Title 21, U.S.C.
ß 331(a) and 333(a) (1) ñ Introduction into Interstate Commerce of a
Misbranded Food and Title 18, U.S.C. ß 2 - Aiding and Abetting.
On June 28, 2002, WATKINS was convicted of one (1) count of Title 21,
U.S.C. ß 331(a) and 333(a) (1), Introduction into Interstate Commerce
of a Misbranded Food. On this same date, the corporation was convicted
of three (3) counts of Title 21, U.S.C. ß 331(a) and 333(a) (1), Introduction
into Interstate Commerce of a Misbranded Food. Both WATKINS and the
corporation were sentenced to one year probation.
Los Angeles Field Office
Conviction/Sentencing
This investigation was initiated upon a referral from the Los Angeles
District Office (LOS-DO), United States Food and Drug Administration.
The LOS-DO received information from the Los Angeles County Department
of Health Services, Radiation Management (FDA contract inspectors utilized
to certify facilities under the MQSA, Title 42, U.S.C. ß 262), that
an inspection conducted at Medical Diagnostic Incorporated, Huntington
Park, California, identified quality assurance issues and suspected
fraudulent documentation submitted to substantiate Terry Alan DICHTER,
M.D. as being qualified to continue to interpret mammography by his
education, background and experience. The information provided by DICHTER
to Radiation Management included a list of mammography cases he purportedly
interpreted, and a letter of verification with the signature of DICHTERís
former employer for the number of mammography cases interpreted. Also
included were copies of certificates for purported continuing medical
education courses attended by DICHTER at the University of Southern
California (USC) School of Medicine. The investigation revealed the
list of mammography cases interpreted and the USC School of Medicine
continuing medical education certificates were fraudulent. A forensic
document examination of the letter of verification and signature conducted
by the United States Secret Service determined DICHTER authored the
fraudulent document and signature.
On October 21, 2001, DICHTER was convicted of a one (1) count Information
that charged him with violation of Title 18, U.S.C., ß 1001- False Statements.
The specific charge involved DICHTER knowingly providing false written
statements to support the false claims he made to FDA relative to his
education, experience and background. DICHTERís California Medical License
was revoked.
On June 11, 2002, in the Central District of CA, DICHTER was sentenced
to ten (10) months incarceration five (5) months in a Bureau of Prison
facility/ five (5) months home detention with electronic monitoring)
and 36 months supervised release following the completion of his term.
Los Angeles Field Office
Conviction/Sentencing
This investigation was initiated based upon a referral from the FDA
San Francisco District Office (SAN-DO), concerning information 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.
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, ECKERT-KUNICK appeared before United States District
Judge Dennis L. Beck, United States District Court, Eastern District
of California, Fresno, CA, and was convicted of Title 21, U.S.C. ß 331(d)
& 333(a) (1) - Introduction of an Unapproved New Drug into Interstate
Commerce. 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: ìGAIACOLî, ìGAIA CU-29î,
ìAQUAGAIAî, ìGAIAGOLDî, ìGAIADHEAî, ìGAIATI-22î and ìGAIACLEANSEî.
On July 1, 2002, ECKERT-KUNICK appeared in United States District Court,
Eastern District of CA, Fresno, CA, for sentencing. ECKERT-KUNICK received
a sentence of four (4) months incarceration in the community correctional
center.
Metro Washington Field Office
Convictions/Sentencing
This investigation was initiated based on information received from
the U.S. Department of Agriculture (USDA), Office of the Inspector General
(OIG) that RHEE BROTHERS, INC., a Korean product importer and distributor
located in Columbia, MD, was importing vegetable dumplings, which actually
contained meat. USDA tested the dumplings and confirmed the presence
of meat. Meat products from Korea are prohibited from importation into
the U.S. based on an ongoing embargo. Information obtained from employee
interviews suggested that RHEE BROTHERS intentionally shipped the meat
dumplings using false labels to prevent detection by import officials.
The U.S. Customs Service (USCS) determined that the meat dumplings were
falsely invoiced when the product made entry into the U.S.
On June 17, 2002, RHEE BROTHERS, INC. appeared before U.S. Magistrate
Judge Paul Grim, District of Maryland, and was convicted of a one (1)
count Information charging the company with Title 21, U.S.C. ß 331 (a),
333 (a)(1), and 343 (a)(1) - Unlawfully Causing the Interstate Distribution
of Misbranded Food. RHEE BROTHERS, INC. was sentenced the same day and
fined $100,000. This was a joint investigation involving OCI, USDA-OIG,
USCS, and the Baltimore District Office, Dundalk Resident Post.
Metro Washington Field Office
Convictions/Sentencing
In June 2000, AstraZeneca Pharmaceutical Company, located in Wayne,
Pennsylvania, contacted the Food and Drug Administration, Center for
Drug Evaluation and Research (CDER), regarding possible drug diversion
by a current AstraZeneca employee named Jeffery S. PAGUE. PAGUE was
allegedly stealing drug samples from various physiciansí offices and
selling the stolen product to multiple pharmacies. CDER referred this
information to the Office of Criminal Investigations.
Following his receipt of a target letter from the United States Attorneyís
Office, PAGUE admitted to improperly diverting and selling samples of
the prescription drug Prilosec. PAGUE cooperated with the governmentís
investigation concerning additional suspects involved in the trading/selling
of prescription drug samples. During the investigation it was determined
that Anthony MANOS, M.D., a physician practicing in West Chester, PA,
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 (1) felony
count of Title 21, U.S.C. ß 331(t) and 333 (b)(1)(B) - Trading and Selling
Prescription Drug Samples.
On February 12, 2002, MANOS appeared in U.S. District Court for the
Eastern District of Pennsylvania and was convicted of one (1) felony
count of Title 21, U.S.C. ß 331(t) and 333 (b)(1)(B) - Trading and Selling
Prescription Drug Samples.
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.
On May 8, 2002, MANOS was sentenced to six months of home confinement
(electronic monitoring), three years supervised probation and ordered
to pay a fine of $10,000.
Metro Washington Field Office
Convictions/Sentencing
On November 27, 2000, the Baltimore District Office notified the Office
of Criminal Investigations 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 childís father, Larry WELLINGTON,
brought his son in on November 26, 2000, for treatment after he had
consumed a ìFruitopiaî 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 Forensic Chemistry Center confirmed that the product
in the Fruitopia bottle was a substance used to freshen toilets on traveling
buses and airplanes. The investigation revealed that WELLINGTON supplemented
his income as a Baltimore Police officer 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 vomited and had not
been injured.
On February 25, 2002, WELLINGTON was indicted by a Grand Jury for violation
of Title 18, U.S.C. ß 1365 (c) (1) ñ Communicating False Information
regarding Tampering of a Consumer Product, and Title 18, U.S.C. ß 1001
- Making False Statements to the FDA.
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 (1) count of Title 18, U.S.C. ß 1365 (c) (1) - Communicating
False Information Regarding Tampering of a Consumer Product; two (2)
counts of Title 18, U.S.C. ß 1001, False Statements; and one (1) count
of Title 18, U.S.C. ß 1505, Obstruction of an FDA Investigation. The
retrial was held in U.S. District Court in Greenbelt, MD, 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 three years supervised release following his prison sentence.
Miami Field Office
Convictions/Sentencing
This case originated on January 18, 1996, upon referral from the Tennessee
Health Related Board following a physician complaint that James Gary
DAVIDSON of the Macrotech Corporation in Paris, TN, was claiming to
have developed a ìcurativeî cancer treatment based on a device utilizing
magnets. A joint investigation was conducted by FDAís Office of Criminal
Investigations, FDAís Nashville Branch, Internal Revenue Service Criminal
Investigation, U.S. Postal Inspection Service and the Federal Bureau
of Investigation.
The primary false representation made to cancer victims and their families
was that a magnetic ring device, through which the patients were passed,
was capable of exploding or imploding cancer cells and thereby curing
cancer. Investments in the amount of $675,000 in the purported medical
technology were made by cancer patients, their families and others.
Treatments with essentially the same device were also falsely represented
to be cures or highly effective treatments for multiple sclerosis, arthritis,
muscular dystrophy, Alzheimerís, emphysema, coronary heart disease and
AIDS, among others.
DAVIDSON falsely represented himself as having a doctorate degree in
nuclear physics from Karl Marx University in Leipzig, Germany and as
being a former Central Intelligence Agency agent. DAVIDSON was previously
convicted in 1994 of felony securities fraud violations in Illinois
in connection with defrauding investors in a fuel scheme.
On March 4, 2002, DAVIDSON was convicted of one (1) count of Title 18,
U.S.C. ß 1341 - Mail Fraud and one (1) count of Title 18, U.S.C. ß 1956
- Money Laundering. DAVIDSON admitted that he devised a scheme to defraud
and obtain money by false pretenses from various persons interested
in a cancer treatment, knowing full well these representations were
false when he made them. DAVIDSON also admitted that he misrepresented
his education and background by falsely stating he obtained a doctorate
degree in physics and stating he had worked for the Central Intelligence
Agency. As part of his scheme, DAVIDSON led individuals to believe they
were free of, or had been ìclearedî of cancer.
On September 13, 2002, DAVIDSON appeared before U.S. District Court
Chief Judge James Todd. Judge Todd sentenced DAVIDSON to seven years
and four months incarceration. During the proceedings, DAVIDSON paid
restitution to a number of named victims totaling $675,000.
In sentencing DAVIDSON, Judge Todd stated that DAVIDSONís crime was
exceptionally cruel because although his claims were unbelievable, his
victims were desperate people looking for hope.
Miami Field Office
Convictions/Sentencing
This case originated on September 15, 1999 based on information received
from Detective Shane Fulmer, Chilton County Sheriff's Office, Clanton,
AL 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, AL was selling
pharmaceuticals via the Internet. According to the information, YATES
owned and operated a business by the name of Norfolk Menís 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 Viagra, Celebrex, Xenical,
Propecia, and Claritin-D via the Internet. A joint investigation was
conducted with the Chilton County Sheriffís 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, AL. Based on the undercover
purchases, a search warrant was executed not only on the business but
also on the YATES residence. During the search, numerous prescription
drug orders and empty prescription bottles along with several cases
of prescription drugs were seized.
During the course of the investigation, it was 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. Roger Dale EILAND, a local physician
in Clanton, AL. 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 Menís 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 INERNATIONAL 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, WV 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
DEGOMME were indicted by a Federal Grand Jury. The charges consisted
of money laundering, mail fraud, obstruction of justice, conspiracy,
and violating the FD&C Act.
On August 6, 2000, search warrants were executed at the business site
in Clanton, AL and two locations in Weirton, WV. During the searches
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
the Australian 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 of the corporation, ALL INTERNATIONAL
INC., appeared before Judge DeMent at which time the company was convicted
of one (1) count of violating Title 18, U.S.C. ß 1505 - Obstructing
Justice. The company misled the FDA on the number of shipments of prescription
drugs sent to YATES and PUSZTAI. DEGOMME was convicted of five (5) counts
of violating Title 21, Section ß 331 (k) ñ Misbranding Drugs Held for
Sale.
On February 16, 2002, YATES and PUSZTAI were convicted in Federal Court
for mail fraud, money laundering, conspiracy, and violating the FD&C
Act. 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. was sentenced and ordered to
pay a fine of $125,000. The company relinquished all wholesale licenses.
DEGOMME was sentenced to 12 months probation and fined $1,500.
On June 18, 2002, PUSZTAI was sentenced to 188 months incarceration,
36 months supervised probation, and ordered to forfeit $373,000 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 share in the assets:
Chilton County Sheriffís Office, Clanton, AL; Alabama Board of Medical
Examiners; and Weirton Drug Task Force, Weirton, WV.
Miami Field Office
Appeals Decision
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,
AL. Based on the investigation and the indictment, Harry SNYDER and
Renee PEUGEOT conspired to make false statements that were ultimately
mailed to the Center for Drug Evaluation and Research. After a jury
trial, SNYDER and PEUGEOT, husband and wife, were convicted of Title
18 USC ß 371 - Conspiracy; Title 18, USC ß 1341 - Mail Fraud; and Title
18, USC ß 1001, False Statements. SNYDER was sentenced to 37 months
incarceration followed by three (3) years probation, and PEUGEOT was
sentenced to 30 months incarceration followed by three (3) years probation.
The case was appealed to the United States Court of Appeals for the
11th Circuit.
On May 21, 2002, the United States Court of Appeals for the 11th Circuit
affirmed the conviction of SNYDER and PEUGEOT stemming from their falsification
of data in connection with a clinical trial designed to study the effectiveness
of the drug on psoriasis and cutaneous T Cell Lymphoma. The case was
remanded back to the lower court for re-sentencing.
At initial 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 initial
trial court's sentencing, the United States Court of Appeals determined
that the initial trial court should have used loss as the measure of
the fraud, and had improperly used gain as a proxy for loss.
Both SNYDER and PEUGEOT have been debarred by the FDA and have not yet
been re-sentenced.
Miami Field Office
Convictions/Sentencing
This investigation involved the misbranding and adulteration of crabmeat
that was processed by several crab processing plants in and around Mobile,
AL.
In 1998, Consumer Safety Officer/Supervisor Anthony Abel, FDA Nashville
District Office, reported that allegations had surfaced in the Mobile,
AL area that Petros GREVENITIS, SeaQuest Crab Co., was conspiring with
Dan VIRAVONG, Grand Bay Seafood, Inc., to mix imported crabmeat with
domestic crabmeat. He stated the allegations further indicated that
these companies were selling and/or distributing this crabmeat as domestic
crabmeat, product of the USA.
On September 5, 2001, VIRAVONG appeared before U.S. Magistrate/Judge
Steele, Southern District of Alabama, Mobile, AL. During this appearance,
VIRAVONG was convicted of a two (2) count Information for violating
Title 21, U.S.C. ß 331 (a) and 331 (c) ñ Introduction into Interstate
Commerce of a Misbranded Food.
On November 20, 2001, VIRAVONG was sentenced to 2 years supervised probation
and ordered to pay a $15,000 fine.
On January 29, 2002, GREVENITIS appeared before U.S. Magistrate/Judge
Steele, Southern District of Alabama, Mobile, AL. During this appearance,
GREVENITIS was convicted of a one (1) count Information for violating
Title 21, U.S.C. ß 331 (k) ñ Misbranding of a Food after Introduction
into Interstate Commerce.
On April 15, 2002, GREVENITIS was sentenced to 2 years probation and
a $15,000 fine.
Miami Field Office
Convictions/Sentencing
This investigation began after Victor TSIMBAL, a Russian national, offered
to sell sturgeon caviar with false labels stating that the contents
were "Atlantic Lumpfish Roe" - an unprotected species. A search warrant
was executed at TSIMBAL's business and more than $500,000 worth of caviar
was seized along with the false labels. TSIMBAL admitted that the lumpfish
labels were part of an overall scheme to continue to use false documents
to smuggle caviar into the United States after a number of couriers
had been arrested.
TSIMBAL admitted to using false documents to smuggle more Beluga caviar
from Russia into the United States via Poland in 1999 than the entire
Russian export quota for the year, according to a detailed factual statement
filed in court.
TSIMBAL orchestrated a conspiracy in which smugglers were paid approximately
$500 for each trip and were provided airline tickets, pre-packed luggage
filled with black market caviar and apartments and hotel rooms in Europe
and Miami. TSIMBAL used bank accounts in Europe to launder the proceeds
of the wildlife smuggling scheme. Upon conviction, TSIMBAL also admitted
that he encouraged an employee to lie to the grand jury.
On November 7, 2002, TSIMBAL was sentenced to 41 months incarceration
and two years of supervised release as the result of his involvement
in a far-reaching wildlife smuggling conspiracy. In this conspiracy,
TSIMBAL paid couriers to bring suitcases filled with caviar into the
United States after new international restrictions were announced in
1998 to protect sturgeon. TSIMBAL, 42, at the time of the offenses was
the president and owner of Beluga Caviar, Inc., located in North Miami
Beach, FL. TSIMBAL was sentenced by U.S. District Court Judge Federico
A. Moreno after being convicted of Title 18, U.S.C. ß 371- Conspiracy,
Title 18, U.S.C. ß 545 - Smuggling, and Title 18, U.S.C. ß 1956, Money
Laundering. TSIMBAL also forfeited $36,000 found in his possession upon
his arrest at Miami International Airport. Caviar valued at approximately
$860,000 was also seized and forfeited.
Miami Field Office
Convictions
This investigation involves the misbranding and adulteration of crabmeat
that was being processed in the back yard of Cuc NGUYENís home in Boothville,
LA.
During the course of this investigation, it was learned that Chi HUYNH,
who was operating ROSEíS SEAFOOD, New Orleans, LA, was transporting
misbranded and adulterated crabmeat from Boothville, LA to Bayou La
Batre, AL. Based on this information, the Office of Criminal Investigations
along with the Alabama Department of Public Health interviewed HUYNH.
HUYNH admitted to transporting approximately 2000 lbs. of misbranded
and adulterated crabmeat from Boothville, LA to several crab processing
plants in and around Mobile, AL. This crabmeat was produced in the back
yard of NGUYENís home in Boothville, LA.
Based on HUYNHís information, the Louisiana Department of Fish and Wildlife
proceeded to NGUYENís home. Upon their arrival NGUYEN admitted to processing
crabs in her backyard. Based on her admission, the Fish and Wildlife
obtained a consent to search that resulted in the seizure of approximately
500 lbs. of processed crabmeat.
On May 5, 2000, HUYNH appeared before U.S. Magistrate Judge Steele,
Southern District of Alabama, Mobile, AL. During this appearance, HUYNH
was convicted of a one count Information for violating Title 21, U.S.C.
ß Section 331 (a) - Introduction into Interstate Commerce of an Adulterated
Food. HUYNH was sentenced to 24 months probation, ordered to pay a $10,000
fine and restricted from handling any type of processed seafood.
On November 22, 2001, NGUYEN was charged with two (2) counts of Title
21, U.S.C. ß 331 (a), Introduction into Interstate Commerce of an Adulterated
Food.
On January 24, 2002, NGUYEN was convicted of the charge and sentenced
to 24 months probation.
Miami Field Office
Convictions/Sentencing
This case was initiated based on a referral from the Federal Bureau
of Investigation. The subsequent investigation developed conclusive
evidence that Abraham ERGAS possessed and introduced in interstate commerce
stolen pharmaceuticals and sold the pharmaceuticals without a wholesale
license.
On April 22, 2002, ERGAS was convicted in U.S. District Court for the
Southern District of Florida after a jury trial. ERGAS was found guilty
of violating Title 18, U.S.C. ß 2315 - Possession and Introduction of
Stolen Property into Interstate Commerce and Title 21, U.S.C. ß 353(e)
(2) (a) - Wholesaling without a License. ERGAS was sentenced to 33 months
incarceration and ordered to pay $1,340,400 in restitution.
New York Field Office
Convictions/Sentencing
This joint investigation was initiated in April 2001 when the New York
City Human Resources Administration ñ Bureau of Fraud Investigations
provided information that Anthony and Robert GARCIA were engaged in
the diversion of prescription drugs. Anthony and Robert GARCIA are twin
brothers. The subjects were alleged to have obtained valid Medicaid
numbers and/or cards and then use those to obtain pharmaceuticals from
different pharmacies. The subjects of this investigation were also alleged
to forge prescription slips to obtain the pharmaceuticals.
An undercover investigation was initiated whereby the undercover investigator
ìrentedî a controlled Medicaid card to the subjects. 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, Luis MERCED, William MERCED
and Roger HERB were identified.
On January 23, 2002, subjects Anthony GARCIA and 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 ß178.15 ñ Criminal Diversion of Prescription Drugs,
2nd Degree; PL ß170.25 ñ Criminal Possession of Forged Instrument and
PL ß110/155.25 ñ Petit Larceny. HERB was charged with violation of New
York State Penal Law: PL ß170.25 - Criminal Possession of a Forged Instrument,
2nd Degree and PL ß110/155.25 - Petit Larceny.
On this same date, the subjects Anthony GARCIA, Robert GARCIA, Luis
MERCED and William MERCED were indicted by a Grand Jury on violation
of New York State Penal Law ß170.10 ñ Forgery; 2nd Degree and Penal
Law ß170.25 - Criminal Possession of a Forged Instrument; 2nd Degree.
On January 24, 2002, HERB was indicted by a Grand Jury on violation
of New York State Penal Law ß170.25 - Criminal Possession of a Forged
Instrument; 2nd Degree and Penal Law ß110/155.25 - Petit Larceny.
On April 10, 2002, Anthony GARCIA was convicted of Penal Law ß170.25
and Penal Law ß170.10 and was subsequently sentenced to 28 to 84 months
incarceration in State Prison.
On April 10, 2002, Robert GARCIA was convicted of Penal Law ß170.10
and was subsequently sentenced to 18 to 36 months incarceration in State
Prison.
On April 10, 2002, Luis MERCED was convicted of Penal Law ß170.10 and
was subsequently sentenced to 18 to 36 months incarceration in State
Prison.
On April 10, 2002, William MERCED was convicted of Penal Law ß170.10
and was subsequently sentenced to 18 to 36 months incarceration in State
Prison.
On April 17, 2002, HERB was convicted of Penal Law ß170.25 and was subsequently
sentenced to 12 months incarceration in State Prison.
New York Field Office
Convictions/Sentencing
This case was initiated when information was received from the United
States Attorneyís Office for the District of New Jersey, the State of
New Jersey, Division of Criminal Justice, Office of the Attorney General
and the Avon-By-The Sea Police Department, Avon, NJ. The information
indicated that a pharmacist, Michael STAVITSKI, was involved in the
purchase and sale of physician samples (Rx samples) and misbranded prescription
drugs (Rx drugs). These diverted Rx samples and misbranded drugs were
being sold in zip lock bags.
On numerous occasions STAVITSKI purchased Rx samples from Nicholas DENUCCI,
a pharmaceutical sales representative. STAVITSKI then sold these samples
to the public as prescription drugs at the Avon Pharmacy. As a result
of his participation in the conspiracy STAVITSKI received between $5,000
and $10,000 in revenues from the sale of these RX samples at the Avon
Pharmacy.
Both DENUCCI and STAVITSKI were convicted of Title 18, U.S.C. ß 371
ñ Conspiracy to Defraud the United States and Title 21, U.S.C. ß 331
(t), 353 ( c ) (1) 353 (d) (1), 353 (d) (2) (A) and 333 (b) (1) (B)
ñ Buying and Selling Prescription Samples.
On January 14, 2002, DENUCCI was sentenced to the following: 6 months
of house arrest; 4 years probation; pay the US Government a fine of
$40,000; an occupational restriction regarding employment in the pharmaceutical
industry; full financial disclosure to include tax returns.
On March 25, 2002, STAVITSKI was sentenced for his participation in
the same conspiracy to 3 years probation and a fine of $10,000.
New York Field Office
Convictions/Sentencing
This case was initiated on January 4, 2000, when the Southern District
of New York/White Plains contacted the Office of Criminal Investigations
(OCI) with information that a firm called PARA TECH INDUSTRIES (PARA
TECH), located in Dayton, OH had shipped unapproved medical devices
into interstate commerce. PARA TECH shipped to various chiropractic
clinics in the New York regional area. The information was uncovered
in a health fraud investigation conducted by the Federal Bureau of Investigation
(FBI). The device in question was the CTD-Mark I, promoted for use in
the treatment of Carpal Tunnel Syndrome without FDA approval.
In January of 2000, numerous witness interviews were conducted in Dayton,
OH. The witnesses were primarily former employees of PARA TECH. The
subjects of the investigation were Paul F. FULK, President of PARA TECH,
and Earnie S. PHILPOT, Vice-President of PARA TECH. FULK was also the
President and Chief Executive Officer of THERASYS INC. PHILPOT was the
Vice-President, Secretary, and Treasurer of THERASYS INC. THERASYS INC.
is a related company incorporated in the State of Florida. PARA TECH
was incorporated in the State of Ohio.
Based on information developed through interviews of former PARA TECH
employees and investigators from FDAís Cincinnati District Office, FULK
and PHILPOT were indicted on February 16, 2000 by a Grand Jury located
in White Plains, NY. Both individuals and both entities were indicted
on the following charges: Title 18 U.S.C. ß 371 ñ Conspiracy to Defraud
the FDA; Title 21 U.S.C. ß 331 (a), 333 and 352 ñ Shipment of Adulterated
Devices into Interstate Commerce; and Title 18, U.S.C.ß 1341 and 2 ñ
Mail Fraud and Aiding and Abetting.
On February 23, 2000, FULK and PHILPOT surrendered to U.S. Marshals
in White Plains, NY. They appeared before U.S. Magistrate Judge George
Yanthis in the Southern District of New York and pled Not Guilty to
all of the above-mentioned charges. FULK also pled Not Guilty on behalf
of PARA TECH and THERASYS INC.
On June 29, 2000, FULK was convicted of Title 18, USC ß 371 and 1505
- Conspiring to Obstruct the Proceedings of the FDA. FULK admitted to
being the leader and organizer in the aforementioned criminal activity.
PHILPOT was convicted of the same charges as FULK, but did not admit
to being the leader or organizer. The FDA proceedings obstructed were
FDA inspections conducted by FDAís Cincinnati District Office in December
of 1994 and December of 1995. FULK and PHILPOT provided false and misleading
information during those inspections.
On March 3, 2002, FULK was sentenced to 12 months incarceration with
work release and 3 years supervised probation. PHILPOT was sentenced
to 3 years probation and 6 months home confinement. PARA TECH and THERASYS
INC. were each ordered to pay a total of $211,102.30 in restitution
to 24 chiropractors who bought the CTD-Mark I devices believing that
it was a FDA approved device.
New York Field Office
Convictions/Sentencing
This case involved the manufacturing and distribution of an unapproved
drug, LK-200, by Private Biologicals Corporation (PBC), Woburn, MA.
LK-200 is an injectable drug that was purported to treat cancer and
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, MA, and was distributing it to cancer
patients in the United States and 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 ìM.D.î 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.
ROGERS was previously convicted and sentenced.
THEODORE was previously convicted of Title 18, U.S.C. ß 1341 ñ Mail
Fraud, Title 21, U.S.C. ß 331 (p) ñ Unregistered Drug Manufacturing
Facility, Title 21 U.S.C. ß 331 (d) ñ Unapproved New Drug, and Title
21 U.S.C. ß 331 (a) ñ Adulteration.
On March 1, 2002, US District Court Judge Reginald Lindsay, sentenced
THEODORE to 121 months incarceration, followed by 3 years probation
and ordered THEODORE to pay $1.5 million in restitution to his victims.
New York Field Office
Convictions/Sentencing
This case originated on July 25, 2001 when the U. S. Customs Service
(USCS) advised that Christopher GERVASI was detained at the Rainbow
International Bridge, Niagara Falls, NY after he attempted to smuggle
more than $140,000 worth of Canadian manufactured prescription drugs
into the USA.
GERVASI was arrested for violations of Title 18, USC ß 1001 -Making
a False Statement to a Federal Officer and held overnight at the Erie
County Holding Center.
On July 26, 2001, GERVASI made an initial appearance in U.S. Magistrateís
Court in the Western District of New York (WDNY) in Buffalo and 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 Rx drugs, but GERVASI refused to cooperate regarding
this investigation.
On July 18, 2002, GERVASI was convicted as charged in Federal District
Court-WDNY in Buffalo.
On October 4, 2002, he was sentenced to three (3) years probation with
the stipulation that he continues with periodic drug/alcohol testing
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