Current and Recent Cases

Marketing Company Agrees to Pay $150 Million for Facilitating Elder Fraud Schemes

United States v. Epsilon Data Management, LLC
Docket Number: 1:21-cr-00006-RM (D. Colo.)

On January 27, 2021, U.S. District Judge Raymond P. Moore approved the entry of a deferred prosecution agreement (“DPA”) between the Department of Justice and Epsilon Data Management, LLC, (“Epsilon”).  The DPA relates to the company’s role in knowingly selling consumer data to clients engaged in fraud.  Under the terms of the DPA, Epsilon, a marketing company with principal sales operations based in Colorado, agreed to pay a total monetary penalty of $150 million, with $127.5 million of that amount going to compensate victims of the fraudulent schemes that used consumer data sold by Epsilon.  Epsilon also agreed to implement significant compliance measures designed to safeguard consumers’ data.  In a statement of facts, Epsilon admitted that its employees sold consumer data to clients engaged in fraud despite knowing that those and similar clients had been arrested, charged with crimes, convicted, and were otherwise subject to law enforcement actions for false and misleading practices.  Epsilon further admitted that over the course of nearly a decade, the company knowingly sold 30 million American consumers’ data to clients engaged in fraud.

Peruvian Man Sentenced to 100 Months’ Imprisonment for Overseeing Call Centers that Threatened and Defrauded American Consumers
United States v. Hidalgo
Docket Number: 1:15-cr-20471 (S.D. Fla.)

On September 3, 2020, U.S. District Judge Robert N. Scola sentenced Johnny Hidalgo to 100 months’ imprisonment and three years of supervised release for his supervision of the Everglades Peruvian call center to carry out a fraud and extortion scheme against American consumers.  As part of his guilty plea, Hidalgo admitted that he and others at Everglades in Peru called victims in the United States claiming to be attorneys or government representatives.  The callers falsely claimed that victims failed to pay for or receive certain product deliveries, and that victims owed thousands of dollars in fines as a result.  The callers threatened victims with negative credit reports, imprisonment, deportation, or property seizures that could be avoided only through the immediate payment of “settlement fees” to co-conspirators at the Angeluz Florida Corporation in Miami.  Hidalgo was arrested in 2016 by Peruvian authorities and extradited to the United States with two co-defendants last year. 

Court Enters Temporary Restraining Order Against Tech-Support Wire Fraud Scheme
United States v. Maven Infotech Pvt. Ltd., d/b/a Maven Info Tech Ltd., d/b/a Ozemio Inc., d/b/a OZM, d/b/a Urgent Tech Help, d/b/a UTH
Docket Number: 0:19-cv-60570 (S.D. Fla.)

On March 6, 2019, U.S. District Judge Beth Bloom entered a temporary restraining order under 18 U.S.C. § 1345 against Maven Infotech Pvt. Ltd., an India-based company.  In a complaint filed in March 2019, the government alleged that the defendant uses telemarketers who, posing as computer technicians and often impersonating well-known technology companies, contact unsuspecting consumers and falsely inform them that their computers have serious problems; the telemarketers then falsely tell consumers that the problems are resolved and then demand payment on one or more occasions for purported technical-support services.  Based on the evidence presented, the court found probable cause to conclude that “Defendant Maven Infotech Pvt. Ltd., which also does business as Maven Info Tech Ltd., Ozemio Inc., OZM, Urgent Tech Help, and UTH, is violating, or is about to violate” the federal wire fraud statute, 18 U.S.C. § 1343.  The order further notes that “the United States has produced evidence demonstrating that Defendant is involved in a predatory wire fraud scheme that victimizes consumers. That scheme particularly affects elderly individuals throughout the country, and in several foreign countries.”  Among other provisions, the order bars the defendant from engaging in computer-security telemarketing, accepting payment for technical-support services, impersonating technology companies, and from conducting business through use of its email addresses in the “@ozemioinc.com” and “@urgentechelp.com” domains.  For more information, please visit

Complaint for Injunctive Relief and Civil Penalties Filed Against Online Consumer “Background Report” Provider MyLife.com
United States v. MyLife.com, Inc. et al.
Press Release
Docket Number: 2:20-cv-6692 (C.D. Calif.)

On July 27, 2020, the Department filed a civil complaint against MyLife.com and its founder Jeffrey Tinsley seeking injunctive relief, redress, and civil penalties under the FTC Act, the Telemarketing Sales Rule, the Restore Online Shoppers’ Confidence Act, and the Fair Credit Reporting Act for unfair and deceptive conduct in selling online subscriptions to purported consumer background reports and for selling background reports without complying with the legal requirements for doing so.  The complaint alleges that the defendants market their consumer background report service by implying, often falsely, that searched-for individuals have criminal or sexual offense records that can be viewed only by buying a MyLife subscription.  According to the complaint, the defendants also misrepresent or fail to disclose material terms of those subscriptions, including that a lump sum will be paid up front, that subscriptions will automatically renew, and that subscriptions can be cancelled only by calling a customer service center that prevents and discourages cancellations or refunds.  The defendants also sell background reports despite failing to comply with the laws requiring defendants to ensure that the reports are as accurate as possible, to identify who is buying the reports and how they plan to use them, and to notify buyers of how they may legally use the reports.

Peruvian Man Sentenced to 90 Months’ Imprisonment for Overseeing Call Centers that Threatened and Defrauded American Consumers

United States v. Francesco Guerra
Docket Number: 15-cr-20471 (S.D. Fla.)

On June 1, 2020, U.S. District Judge Robert N. Scola sentenced Francesco Guerra to 90 months’ imprisonment and three years of supervised release for his supervision of a Peruvian call center used to carry out a fraud and extortion scheme against American consumers.  As part of his guilty plea, Guerra admitted that he and others in Peru called victims in the United States claiming to be attorneys or government representatives.  The callers falsely claimed that victims failed to pay for or receive certain product deliveries, and that victims owed thousands of dollars in fines as a result.  The callers threatened victims with negative credit reports, imprisonment, deportation, or property seizures that could be avoided only through the immediate payment of “settlement fees.”  Guerra was arrested in 2016 by Peruvian authorities and extradited to the United States last year.  One co-defendant in the scheme was sentenced in March, and a third defendant is set to be sentenced in July.

Court Enters Preliminary Injunction Against Tech-Support Wire Fraud Scheme
United States v. Elagoon Business Solutions Pvt Ltd d/b/a Computer Phone Assist
Docket Number: 2:19-cv-00324 (W.D. Wash.)

On May 2, 2019, U.S. District Judge Robert Lasnik entered a preliminary injunction under 18 U.S.C. § 1345 against Elagoon Business Solutions Pvt Ltd., an India-based company.  In a complaint filed in March 2019, the government alleged that the defendant uses telemarketers who, posing as computer technicians, contact unsuspecting consumers and falsely inform them that their computers have serious problems; the telemarketers then falsely tell consumers that the problems are resolved and then demand payment on one or more occasions for purported technical-support services.  Based on the evidence presented, the court found probable cause to conclude that “Defendant Elagoon Business Solutions PVT Ltd., d/b/a ‘Computer Phone Assist’ was, prior to filing of the Complaint, violating and, unless a preliminary injunction is entered, will continue to violate” the federal wire fraud statute, 18 U.S.C. § 1343.  Among other provisions, the preliminary injunction bars the defendant from providing or purporting to provide technical-support services and from conducting business through use of any of its email and internet website addresses, including www.computerphoneassist.com, www.elagoonites.com, www.elagoondigital.com, contact@computerphoneassist.com, and contact@elagoonites.com.  The Summons and Complaint in this matter may be found at this

Peruvian Call Center Operator Pleads Guilty to Fraud and Attempted Extortion in Telemarketing Scam

United States v. Francesco Guerra
Press release
Docket Number: 15-cr-20471 (S.D. Fla.)

On May 1, 2020, Francesco Guerra pleaded guilty to conspiracy, mail fraud, wire fraud, and attempted extortion in connection with his supervision of call centers in Peru that threatened consumers across the United States into paying fraudulent settlements for nonexistent debts.  As part of his guilty plea, Guerra admitted that he and others at the call centers falsely claimed to be attorneys or government representatives.  The callers falsely claimed that victims owed thousands of dollars after failing to pay for or receive a delivery of products.  The callers threatened victims with negative credit scores, imprisonment, deportation, or seized property if they refused to immediately pay “settlement fees.”  Guerra and two co-defendants were arrested in Peru and extradited in 2019.  U.S. District Judge Robert N. Scola sentenced one of Guerra’s co-defendants to 88 months’ imprisonment in March.

Facebook Ordered to Pay $5 Billion Civil Penalty and Implement Enhanced Consumer Privacy Protections

United States v. Facebook, Inc.
Docket Number: 1:19-cv-2184 (D.D.C.)

On April 23, 2020, Judge Timothy Kelly of the U.S. District Court for the District of Columbia granted the United States’ motion to enter a stipulated order against Facebook, Inc.  In a July 2019 complaint, the government alleged that Facebook violated a 2012 FTC Order and committed new violations of the FTC Act by misrepresenting to consumers how to protect personal data and how Facebook used such data.  The settlement requires Facebook to pay a $5 billion civil penalty and amends the 2012 FTC order by requiring Facebook to implement comprehensive new privacy measures, including creating an independent assessor and independent privacy committee to oversee compliance with the order; conducting privacy reviews for all Facebook-owned products and services, including Instagram and WhatsApp; and committing to annual compliance certifications by Facebook CEO Mark Zuckerberg.  The Court also denied two motions to intervene in the case by a data privacy advocacy group and a private individual.  Facebook paid the $5 billion penalty on April 29, 2020.

TRO Shutters Website in First Enforcement Action Against COVID-19 Fraud

United States v. Doe
Docket Numbers: 1:20-cv-00306-RP (W.D. Tex.)

In its first court action to combat fraud related to the coronavirus pandemic, the Department obtained a temporary restraining order on March 22, 2020, to block a website purporting to offer to the public World Health Organization COVID-19 vaccine kits.  The website stated that kits would be sent in exchange for a $4.95 shipping charge, which consumers would pay by providing credit card billing information.  In fact, there are currently no legitimate COVID-19 vaccines in existence.  The action, brought under the anti-fraud injunction statute (18 U.S.C. § 1345), was filed against a John Doe defendant standing in for the operator of the website, whose true identity remains unknown.  NameCheap, Inc., the company that registered the fraudulent website on the defendant’s behalf, took down the site within hours of receiving the TRO entered by U.S. District Judge Robert Pitman.

Peruvian Man Sentenced to 88 Months of Imprisonment for Overseeing Call Centers that Threatened and Defrauded Spanish-Speaking U.S. Consumers

United States v. Rodolfo Hermoza
Docket Numbers: 15-cr-20471 (S.D. Fla.)

On March 24, 2020, U.S. District Judge Robert N. Scola sentenced Rodolfo Hermoza to serve 88 months’ imprisonment in connection with his supervision of call centers in Peru that threatened American consumers into paying fraudulent settlements for nonexistent debts.  The defendant also was ordered to make restitution payments to victims.  As part of a guilty plea, Hermoza admitted that he and other callers he supervised falsely told victims that they were attorneys or government representatives.  The callers claimed that victims owed thousands of dollars in fines, and threatened victims with supposed court proceedings, negative marks on credit reports, imprisonment, and deportation.  Hermoza and the other callers told victims that they must immediately pay “settlement fees” to avoid these consequences.  Hermoza was extradited from Peru last year.  One of his co-defendants will be sentenced in April, and another co-defendant is set for trial later this spring.

Court Enters Preliminary Injunction Against Telecom Carriers Alleged to Facilitate Hundreds of Millions of Fraudulent Robocalls

United States v. Palumbo, et al. and United States v. Global Voicecom, Inc., et al.
Docket Numbers: 1:20-cv-473; 2:20-cv-474 (E.D.N.Y.)

On March 24, 2020, U.S. District Judge Eric Komitee entered a preliminary injunction under 18 U.S.C. § 1345 against two Scottsdale, Arizona-based voice-over-internet-protocol (VoIP) carriers, Ecommerce National LLC d/b/a TollFreeDeals.com and SIP Retail d/b/a sipretail.com, and their owner/operators Nicholas and Natasha Palumbo.  In a complaint filed in January, the government alleged that the defendants knowingly conveyed hundreds of millions of fraudulent robocalls from foreign entities to American consumers.  Based on the evidence presented, the court found probable cause to conclude that the defendants engaged in “a widespread pattern of telecommunications fraud, intended to deprive call recipients in the Eastern District of New York and elsewhere of money and property.”  Among other provisions, the injunction bars defendants from carrying any VoIP calls destined for phones in the United States and from providing any U.S. telephone numbers (often used as call-back numbers in the fraudulent robocalling schemes) to any individuals or entities during the pendency of the litigation.  On March 24, 2020, U.S. District Judge Brian Cogan entered a consent decree in a related case barring KAT Telecom, Inc., a New York corporation, from conveying fraudulent telephone calls, fraudulent recordings, or “spoofed” telephone calls. 

Another consent decree entered in that case on March 2 barred defendants Jon Kahen, Global Voicecom, Inc., and Global Telecommunication Services Inc. from conveying recorded telephone calls, directing calls into the United States from overseas, and originating calls within the United States.

California Man Pleads Guilty to Possession of Child Pornography

United States v. Adrianzen
Docket Numbers: 1:19-cr-20658 (S.D. Fla.)

On February 12, 2020, Angel Armando Adrianzen pleaded guilty to two counts of possession of child pornography.  The material was found on Adrianzen’s cell phone and laptop computer when government agents executed search warrants on both devices in connection with an unrelated fraud investigation.  The fraud investigation resulted in Adrianzen’s conviction in November 2019 for conspiracy to commit mail and wire fraud.  As part of the fraud plea, Adrianzen admitted that he partnered with call centers in Peru that took money from vulnerable and elderly U.S. Spanish-speaking victims through lies and threats.  Sentencing is set for April 20 in Miami.

Two Peruvian Men Plead Guilty in Call Center Extortion Scheme
United States v. Hidalgo et al.

Press release
Docket Number: 1:15-cr-20471 (S.D. Fla.)

On January 15, 2020, Johnny Hidalgo and Rodolfo Hermoza pleaded guilty to conspiring to commit mail fraud and wire fraud in connection with an extortion scheme involving call centers in Peru.  As part of their guilty pleas, Hidalgo and Hermoza admitted that they and others they supervised called consumers in the United States falsely claiming to be attorneys and or government representatives.  The callers told victims they had failed to pay for or receive a delivery of products, and claimed that victims faced court proceedings and owed thousands of dollars in fines.  Some victims were threatened with negative marks on their credit reports, imprisonment, or deportation.  Hidalgo, Hermoza and the other callers said these consequences could be avoided if the victims immediately paid “settlement fees.”  Many victims made monetary payments based on these threats.  The defendants were arrested in 2016 by Peruvian authorities and extradited to Miami in December.  Sentencing is set for March 26, 2019.

British Man Pleads Guilty to Wire Fraud and Aggravated Identity Theft for Fraud Scheme with Hundreds of Thousands of Victims
United States v. Gareth David Long

Press release
Docket Number: 2:16-CR-0071 (D. Nev.)

On November 5, 2019, Gareth David Long pleaded guilty in the District of Nevada to one count of wire fraud and one count of aggravated identity theft.  In pleading guilty, Long admitted that he used personal and financial information of more than 375,000 victims to steal millions of dollars from checking accounts.  Long previously operated as a third-party payment processor, creating and depositing checks on behalf of numerous merchants.  In 2013, Long began to simply charge the bank accounts of consumers whose personal and financial information he had acquired during his time as a payment processor, as well as others whose information he purchased in the form of lead lists.  Long did not have authorization to charge any of these victims’ accounts.  From January through July of 2013, Long created and deposited more than 750,000 unauthorized checks totaling more than $22 million.  Only approximately half of these charges were reversed by victims’ banks.  Long used the proceeds of his fraud scheme to purchase a ranch in Texas, three airplanes, cars, buses, ATVs, and a fire truck, as well as to pay other personal expenses.  Sentencing is set for February 20, 2020.

Three men extradited from Peru for overseeing call centers that threatened and defrauded Spanish-speaking consumers in the United States
United States v. Hidalgo et al.

Docket Number: 1:15-cr-20471 (S.D. Fla.)

On December 19, 2019, Johnny Hidalgo, Rodolfo Hermoza, and Francesco Guerra were extradited from Peru to face charges of conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and extortion in the Southern District of Florida.  According to an indictment returned by a Miami grand jury, the defendants supervised call centers in Peru that placed calls to Spanish-speaking consumers across the United States.  The callers claimed to be attorneys or government representatives and falsely told victims that they had failed to pay for or receive a delivery of products.  The callers falsely threatened victims with court proceedings, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly deliveries and “settlement fees.”  Many victims provided payments as a result of these baseless threats.

Six Las Vegas-Area Defendants Charged in Elder Fraud Scheme
United States v. Castro et al.

Docket Number: 2:19-cr-295 (D. Nev.).

On November 12, 2019, a grand jury charged six Las Vegas-area residents in connection with a fraudulent mass-mailing scheme that allegedly tricked hundreds of thousands of consumers into paying more than $10 million in fees for purported cash prizes.  According to the indictment, the defendants’ mailings led victims, many of whom were elderly and vulnerable, to believe that they could claim large cash prizes in exchange for fees.  The indictment alleges that Mario Castro, Jose Salud Castro, Salvador Castro, Miguel Castro, and Jose Luis Mendez all worked at printing and mailing businesses that sent the fraudulent mailings and shared in the resulting profits.  The indictment alleges that the remaining defendant, Andrea Burrow, opened victim return mail, sorted cash and other payments, and entered data from the victims’ responses into a database that the scheme used to target past victims with more fraudulent mailings.  

District Court Permanently Enjoins 15 Individuals and Companies in Elder Fraud Mail Scheme
United States v. Kafeiti, et al.

Press Release
Docket Number: 2:18-CV-06581 (E.D.N.Y.)

On October 21, 2019, the District Court permanently enjoined two additional defendants in connection with three prize promotion schemes that primarily impacted elderly or vulnerable victims. In total, 15 defendants named in a November 2018 complaint now have been permanently enjoined from engaging in fraudulent mailings. According to the complaint, the defendants all played roles in the schemes, which involved solicitations claiming victims had won large cash prizes. Victims were told they must urgently pay fees to collect their winnings. The complaint alleged that the schemes generated approximately $4.8 million in annual victim losses. The defendants included direct mailers who organized the scheme, mailing list managers, “cagers” who opened and processed victim returns, and payment processors.

Facebook Agrees to Pay $5 Billion and Implement New Protections of User Information in Settlement of Data-Privacy Claims
United States v. Facebook, Inc.

Press Release
Docket Number: 1:19-CV-02184 (D.D.C.)

On July 24, 2019, the Department filed a complaint in District Court for the District of Columbia alleging that Facebook violated an administrative order issued by the FTC in 2012 by misleading users about the extent to which third-party application developers could access users’ personal information. The complaint further alleges that Facebook violated the FTC Act by deceiving users about their use of this and additional sensitive information.

In a stipulated order filed with the complaint, Facebook agreed to settle these allegations by paying a $5 billion civil penalty and implementing robust, new compliance measures that will change how Facebook prioritizes and approaches user privacy issues. These new compliance measures include privacy reviews for all new or modified Facebook products, a new Independent Privacy Committee on Facebook’s Board of Directors, and annual compliance certifications by Facebook CEO Mark Zuckerberg. For more information, see the press release dated July 24.

District Court Issues Preliminary Injunction Against Federal Trade Commission Impersonators in Sweepstakes Scheme

United States v. John Doe 1, et al.

Docket Number: 1:18-CV-22016 (S.D. Fla.)

On January 29, 2019, the district court issued a default judgment and permanent injunction pursuant to 18 U.S.C. § 1345 against three John Doe defendants connected to a fraudulent sweepstakes scam.  As alleged in the government’s complaint, the defendants called and sent letters to consumers falsely claiming that the consumers had won hundreds of thousands of dollars in a sweepstakes.

Posing as agents of a fake “Fraud Protection Agency,” which they claimed was a component of the Federal Trade Commission, the defendants told consumers to send a fee purportedly required by U.S. law in order to receive their prizes.  The permanent injunction extends a preliminary injunction that halted the scam and shut down two websites used to legitimize the scheme, www.fortune500sweepstakes.com and www.fraudprotectionagency.com.

Court Orders Dish Network to Pay $280 million for Illegal Telemarketing Calls
United States v. Dish Network, LLC

Press Release
Docket Number: 3:09-CV-03073 (C.D. Ill.)

On June 5, 2017, the U.S. District Court for the Central District of Illinois ordered Dish Network, LLC to pay $280 million in civil penalties and damages to the United States and the states of California, Illinois, North Carolina, and Ohio in connection with more than 100 million illegal telemarketing calls. The Court found that Dish and various “retailers” the company hired to market its products and services made millions of telemarketing calls to phone numbers on the National Do-Not-Call Registry, calls to persons who asked sellers not to call them, and illegal robocalls.

The civil penalties include $168 million payable to the United States related to at least 66 million illegal calls by Dish and its retailers. The Court also imposed strong injunctive relief against Dish to prevent future violations. The decision was the culmination of eight years of litigation and a five-week trial arising out of an investigation by the Federal Trade Commission into Dish’s violations of the FTC’s Telemarketing Sales Rule.

Fifth Defendant Sentenced in Debt Relief Fraud Scheme
United States v. Nelson et al.; United States v. Harati et al.

Press Release
Docket Numbers: 8:14-CR-0198-DSF; 8:15-CR-0041 (C.D. Cal.)

On November 21, 2016, defendant John Vartanian was sentenced to 27 months’ imprisonment and ordered to pay $1.2 million of restitution in connection with a fraudulent debt relief services scheme based in Orange County, California. Vartanian previously pled guilty to one count of conspiracy to commit mail and wire fraud for his role as a salesman at Nelson Gamble & Associates and Jackson Hunter Morris & Knight LLP, companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees.

The defendants portrayed the companies as law firms and attorney-based companies that would negotiate favorable credit card settlements on behalf of consumers. Clients made monthly payments expecting the money to go toward settlements. The defendants instead took the first six months of payments and more as undisclosed up-front fees.

Defendant Pleads Guilty in Vending Machine Business Opportunity Case
United States v. Kevin M. Marks

Docket Number: 2:16-CR-068 (E.D.N.Y.)(SJF)

On November 10, 2016, Kevin M. Marks pled guilty to conspiracy to commit wire fraud for fraudulently selling business opportunities. From July 2008 until May 2012, Marks made sales from an office in Brooklyn, New York, on behalf of U-Turn Vending, which was based in Idaho. Marks induced sales by misrepresenting the business opportunity’s likely profits, the amount of money that prior buyers were earning, how quickly buyers were likely to recover their investment, the quality of locations that were available for the vending machines, and the level of location assistance that buyers would receive from outside locating companies.

In his capacity as a sales representative, Marks also falsely told potential buyers that he and his family operated a profitable candy vending machine route. Marks also arranged for other U-Turn sales representatives to serve as phony references during his attempted sales, and Marks served as a phony reference for other sales representatives. No sentencing date has been set.

Owner of Loan Modification Scam That Targeted Struggling Owners Pleads Guilty
United States v. Bryan D’Antonio

Press Release
Docket Number: 8:13-CR-0208 (C.D. Cal.)

On August 9, Bryan D’Antonio pled guilty to conspiracy to commit mail and wire fraud for his role as owner and operator of Rodis Law Group and America’s Law Group, bogus law firms that purported to offer struggling homeowners assistance obtaining loan modifications. In reality, these companies were telemarketing operations that did very little to help homeowners after they paid upfront fees ranging from $3,500 to $5,500. Sales staff routinely lied to homeowners, stating that the firms had a team of experienced attorneys, a long track record and a very high success rate. At times, telemarketers directed homeowners to stop making their mortgage payments. Many homeowners lost their homes to foreclosure after hiring the firms.

D’Antonio was previously convicted of wire fraud for a separate work-at-home scheme involving medical billing and was also subject to a permanent injunction banning him from any involvement in a company engaged in telemarketing. His conduct in this case violated the injunction. D’Antonio’s two co-defendants, Ronald Rodis and Charles Wayne Farris, previously pled guilty. Farris was the sales manager in charge of the telemarketing sales floor. Rodis was paid for the use of his law license in an effort to lend legitimacy to the operation. During the course of the scheme, Rodis Law Group and America’s Law Group obtained more than $9,000,000 from over 1,800 homeowners. The defendants are scheduled to be sentenced early next year.

Jury Finds All Defendants Liable in Utah Telemarketing Case
United States v. Feature Films for Families, Inc., et al.

Docket Number: 2:12-CV-0811 (D. Utah)

On May 25, 2016, the Department of Justice secured a civil jury verdict in Salt Lake City, Utah, against Utah-based telemarketing defendants Feature Films for Families, Inc., Corporations for Character, L.C., Family Films of Utah, Inc., and Forrest S. Baker III. The verdict is the latest development in a lawsuit that the Department filed on behalf of the Federal Trade Commission (“FTC”) in May 2011, seeking, among other things, a permanent injunction and civil penalties against the defendants for engaging in widespread deceptive and abusive telemarketing practices in the course of selling and promoting DVDs and films.

In the lawsuit, the United States alleged that the defendants violated the FTC’s Telemarketing Sales Rule (“TSR”) by (1) making deceptive claims to, among other things, induce consumers to purchase the defendants’ DVDs, (2) placing numerous calls to phone numbers on the National Do Not Call (“DNC”) Registry, (3) ignoring consumers’ prior do-not-call requests, (4) failing to make required oral disclosures, (5) failing to transmit accurate caller ID information, and (6) abandoning calls answered by consumers. In March 2015, the district court granted partial summary judgment in the United States’ favor on the DNC Registry, oral disclosures, and caller ID claims. But the court left for the jury’s determination at trial the issues of whether the defendants were liable for making deceptive claims, ignoring consumers’ prior do-not-call requests, and abandoning calls. It also reserved for the jury the questions of how many TSR violations the defendants committed, whether they committed the violations with the requisite knowledge to support a civil penalty award, and whether individual defendant Forrest Baker had authority to control the three corporate defendants or participated in their practices.

Trial began on May 16 and lasted eight days. After four hours of deliberation, the jury found the defendants liable for the United States’ remaining claims and concluded that they committed more than 117 million knowing violations of the TSR. The defendants’ violations included placing over 99 million calls to phone numbers on the DNC Registry. The jury also determined that defendant Forrest Baker had authority to control the corporate defendants and participated in their practices and was therefore personally responsible for the violations.

The terms of the permanent injunction and appropriate civil penalty amount will be decided by the court.
 

Former Attorney Pleads Guilty for Role in Loan Modification Scam That Targeted Struggling Homeowners
United States v. Ronald Rodis

Press Release
Docket Number: 8:13-CR-0208 (C.D. Cal.)

On June 29, Ronald Rodis pled guilty to conspiracy to commit mail and wire fraud for his role in Rodis Law Group, a bogus law firm that purported to offer struggling homeowners assistance obtaining loan modifications. Three defendants, including Rodis, opened Rodis Law Group and advertised loan modification assistance nationwide. Rodis’ co-defendants recruited and trained telemarketing staff to answer consumer calls, during which sales staff routinely lied to homeowners about the firm’s success rates, ability to obtain loan modifications, and, at times, directed homeowners to stop making mortgage payments. After obtaining payment, company employees made little effort to obtain modifications. Many homeowners lost their homes to foreclosure after hiring the firms. Ronald Rodis was paid for the use of his law license in an effort to lend legitimacy to the operation. During the course of the scheme, Rodis Law Group and a successor company, America’s Law Group, obtained more than $9,000,000 from over 1,800 homeowners.
 

Suit Filed Against California Telemarketer to Halt Unlawful Robocalls Promoting Solar Panel Sales
United States v. KFJ Marketing et al.

Press Release
Docket Number: 2:16-CV-1643 (C.D. Cal.)

On March 10, 2016, the government filed a complaint against KFJ Marketing, Sunlight Solar Leads LLC, Go Green Education, and the owner of those companies, Francisco Salvat, to halt a telemarketing campaign which failed to transmit accurate caller identification information, and resulted in 1.3 million illegal phone calls to consumers who had placed their phone numbers on the Do Not Call Registry. The complaint charges that the defendants violated the Telemarketing Sales Rule (TSR) by operating a telemarketing campaign that delivered pre-recorded “robocall” messages warning consumers about a purported looming “14 percent increase” in their energy bill. The complaint alleges that when consumers asked the defendants not to call them again, their requests were often ignored.

United States v. Palacio, Case No. 1:21-cr-20301 (S.D. Fla.). 

On May 11, 2021, a Miami grand jury returned a two-count indictment against Jessica Palacio in connection with Palacio’s role in an alleged clinical trial fraud scheme.  The indictment alleges that Palacio, who worked as a study coordinator at a clinical research site named Unlimited Medical Research, conspired with others to fabricate data in a clinical trial intended to evaluate asthma treatments in a pediatric population.  The indictment charges Palacio with conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and with making a false statement to a regulatory investigator with the Food & Drug Administration, in violation of 18 U.S.C. § 1001.  Three of Palacio’s co-conspirators already have pleaded guilty and been sentenced, including clinical investigator Dr. Yvelice Villaman Bencosme, who was sentenced to 63 months’ imprisonment, Lisett Raventos, a study coordinator and co-owner of Unlimited Medical Research, who was sentenced to 30 months’ imprisonment, and Maytee Lledo, a former employee of Dr. Bencosme’s, who was sentenced to 14 months’ imprisonment.  An indictment is merely an allegation.  The defendant is presumed to be innocent until proven guilty beyond a reasonable doubt in a court of law.

Texas Resident Pleads Guilty to Illegal Importation of Counterfeit Vaping Products  

United States v. Christopher Reyes, Case No. 3:19-CR-00632 (N.D. Tex.).

On April 29, 2021, Christopher Reyes pleaded guilty in U.S. District Court for the Northern District of Texas to one count of Conspiracy to Import Drug Paraphernalia, in violation of 21 U.S.C. § 841(a) and (b)(l)(B).  According to a signed plea agreement, from approximately September 2019 to November 2019, Reyes intentionally and unlawfully imported counterfeit THC vaping materials from China.  Reyes then resold these vape cartridges for profit to a vape shop located in Dallas. 

Indian Cancer Drug Manufacturer Sentenced for Concealing and Destroying Records in Advance of FDA Inspection

Case No. 2:21-cr-20 (D. Nev.). 

On March 23, 2021, Indian drug manufacturer Fresenius Kabi Oncology Limited (FKOL) pleaded guilty and was sentenced by U.S. District Judge Jennifer A. Dorsey to pay a $30 million criminal fine and criminal forfeiture of an additional $20 million.  In a criminal information previously filed in the District of Nevada, the United States charged FKOL with violating the Federal Food, Drug and Cosmetic Act by concealing and destroying records prior to a 2013 FDA plant inspection in Kalyani, India.  Pursuant to a criminal resolution with the Department of Justice, FKOL agreed to plead guilty to the misdemeanor offense and pay the fine and forfeiture amounts.  FKOL also agreed to implement a compliance and ethics program designed to prevent, detect, and correct violations of U.S. law relating to FKOL’s manufacture of cancer drugs intended for terminally ill patients.

Court Denies Homeopathic Drug Company’s Third Motion for Injunctive Relief in Case Involving Challenge to FDA’s Addition of the Company’s Products to an Import Alert

MediNatura v. FDA,
Case No. 1:20-cv-02066 (D.D.C.). 

On March 16, 2021, U.S. District Judge Randolph Moss denied plaintiff MediNatura Inc.’s motion seeking a temporary injunction pending appeal of the court’s decision on a previous motion for preliminary injunctive relief.  MediNatura challenges FDA’s withdrawal of an enforcement-discretion policy for homeopathic drugs and the agency’s addition of MediNatura’s products to an import alert.  The court denied plaintiff’s two other motions for a preliminary injunction and dismissed MediNatura’s claims challenging FDA’s addition of its products to the import alert.

Owner of Texas Sport Supplement Company Ordered to Forfeit $3.5 Million for Unlawful Distribution of Steroid-like Drugs

United States v. Becker et al.,
Case No. 1:20-cr-49 (W.D. Va.). 

On March 15, 2021, U.S. District Judge James P. Jones sentenced Brett Becker to six months of home confinement for introducing unapproved new drugs into interstate commerce in violation of the Food, Drug, and Cosmetic Act.  The court also ordered Becker, the owner of sport supplement company Accelerated Genetix, LLC., to forfeit $3.5 million.  In pleading guilty last year, Becker admitted that, from approximately January 2016 to March 2019, he unlawfully distributed Selective Androgen Receptor Modulators (“SARMs”) and other substances that the FDA has not approved, including ostarine and ligandrol, as part of purported dietary supplements.  SARMs are synthetic chemicals designed to mimic the effects of testosterone and other anabolic steroids. The FDA has long warned against the use of SARMs, including stating in a publicly available 2017 warning letter that SARMs have been linked to life-threatening reactions including liver toxicity, and have the potential to increase the risk of heart attack and stroke.

Four Defendants Charged in Indictment Unsealed in Clinical Trial Fraud Case

United States v. Valdes et al.,
Docket No. 1:21-cr-20106 (S.D. Fla.). 

On March 8, 2021, the court unsealed an indictment charging four individuals—Dr. Martin Valdes, Fidalgis Font, Julio Lopez, and Duniel Tejeda—with engaging in a scheme to fabricate clinical trial data for profit while working at Tellus Clinical Research, a Miami medical clinic.  Each defendant was charged with conspiracy to commit mail and wire fraud and at least one substantive count of mail fraud.  In addition, Valdes and Font were charged with money laundering, and Valdes was charged with making a false statement to FDA investigators during a regulatory inspection.  The indictment, returned on February 23, 2021, alleges that the defendants enrolled subjects into clinical trials who did not meet the eligibility criteria for those trials, falsified laboratory results, falsified medical records, and falsely represented that subjects were taking the drugs being studied when in fact they were not.

Defendant Pleads Guilty in Alleged $174 Million Health Care Fraud Scheme

United States v. Assad, et al.,
Docket No. 2:18-cr-133 (E.D. Tenn.). 

On March 8, 2021, Michael Palso pleaded guilty to one count of conspiracy to commit health care fraud in connection with a nationwide scheme to defraud pharmacy benefit managers out of $174 million by submitting $931 million in bills for fraudulent prescriptions purchased from a telemarketing company, HealthRight LLC.  In pleading guilty, Palso admitted to conspiring to defraud pharmacy benefit managers into paying for fraudulent prescriptions for topical pain creams, vitamins, and other products.  Palso’s guilty plea follows pleas by co-conspirators Larry Smith, Mihir Taneja, Arun Kapoor, Maikel Bolos, and Sterling-Knight Pharmaceuticals in December 2020 and January 2021.  Trial for the remaining defendants is set for July 13, 2021. 

Court Denies Drug Company’s Motion for Emergency Relief in Case Involving Challenge to FDA’s Drug Withdrawal Determination

Arbor Pharmaceuticals v. Cochran,
Docket No. 1:21-cv-810 (N.D. Ga.). 

On March 4, 2021, U.S. District Judge William Ray denied Plaintiff Arbor Pharmaceuticals, LLC’s motion for a temporary restraining order against the government.  Arbor challenged FDA’s determination that the original formulation of its drug, Nymalize, was not withdrawn for reasons of safety and effectiveness, which would allow approval of potential generic versions of Arbor’s withdrawn drug.  Arbor claims that it withdrew its drug due to safety concerns raised by FDA, but FDA disagreed, concluding that Arbor’s drug could still safely be marketed, provided that certain labeling changes were considered to prevent dosing errors.  In its motion, Arbor argued that generic approvals were imminent and would result in the company losing millions of dollars in revenue.  The court denied Arbor’s motion, holding that it could not conclude that Arbor would most likely prevail in the litigation and expressing skepticism regarding Arbor’s claim of irreparable harm.

Court Orders New York Company and its Operators to Stop Distributing Adulterated Dietary Supplements

United States v. Confidence USA, Inc., et al.,
Docket No. 19-cv-03073 (E.D.N.Y.). 

On March 3, 2021, U.S. District Judge Edward R. Korman enjoined dietary supplement firm Confidence USA and its operators from continued violations of the Food, Drug, and Cosmetic Act.  The Court granted summary judgment in favor of the government in January. The defendants manufactured dietary supplements that they sold through their website and in stores and marketed primarily to Chinese-speaking communities. The government presented evidence, collected over nearly a decade, that the defendants violated current good manufacturing practice regulations by, among other things, failing to ensure that finished batches met specifications or to conduct appropriate tests to verify the identity of ingredients.  The Court’s order prohibits the defendants from continuing to manufacture or distribute their products unless and until they come into compliance with the law. 

Court Denies Homeopathic Drug Company’s Motion for Preliminary Injunction in Case Involving Challenge to FDA’s Addition of the Company’s Products to Import Alert

MediNatura v. FDA,
Docket No. 1:20-cv-02066 (D.D.C.).

On February 26, 2021, U.S. District Judge Randolph Moss denied Plaintiff MediNatura Inc.’s second motion for a preliminary injunction against the government.  MediNatura, a company that sells injectable homeopathic drugs, challenged FDA’s withdrawal of an enforcement-discretion policy for homeopathic drugs and the agency’s addition of MediNatura’s products to an import alert.  In October 2020, the court denied MediNatura’s first motion for preliminary injunction (which MediNatura appealed) and dismissed MediNatura’s claims challenging FDA’s addition of its products to the import alert.  MediNatura recently filed a second motion for preliminary injunction pending appeal, claiming that it was likely to succeed on the merits of the dismissed import alert claims due to changed circumstances.  In denying MediNatura’s motion, the court held that the company could not establish a likelihood of success on the merits of those claims without first asking the court to reconsider its dismissal of them. 

Justice Department Files Suit Against Tampa-Area Physician, Pharmacy, and Clinic Owners for Opioid-Related Controlled Substances Act Violations

United States v. Bacaner, et al.,
Docket No. Case No. 8:21-cv-00391 (M.D. Fla.). 

On February 19, 2021, the United States filed a civil complaint seeking to permanently enjoin the owners of a Tampa-area clinic and pharmacy from unlawfully dispensing opioids and other controlled substances.  The complaint alleges that Dr. Tobias Bacaner, Theodore Ferguson II, and Timothy Ferguson used Paragon Community Healthcare Inc., to unlawfully issue controlled substance prescriptions, and Cobalt Pharmacy Inc., to unlawfully fill controlled substance prescriptions, all in violation of the Controlled Substances Act.  The complaint alleges that the defendants ignored obvious signs of abuse or diversion when issuing and filling opioid prescriptions, and that drug toxicity played a role in the deaths of several individuals who received controlled substances from the defendants.  The complaint seeks civil penalties as well as a preliminary and permanent injunctive relief against the defendants.

North Carolina Dietary Supplement Distributor Sentenced in Case Involving Synthetic Steroids

United States v. Parks/MedFit RX
Docket No. 1:20-cr-00046 (W.D. Va.). 

On February 17, 2021, U.S. District Judge James P. Jones sentenced Brian Parks, the former owner of North Carolina sports supplement company MedFitRX, to 12 months and one day in federal prison.  Parks pleaded guilty last year to a one-count information charging him with distribution of an unapproved new drug with the intent to defraud and mislead, in violation of 21 U.S.C. §§ 331(d) and 333(a)(2).  In pleading guilty, Parks admitted that, from approximately June 2017 to September 2019, he and his company, MedFitRX, unlawfully distributed selective androgen receptor modulators (SARMs) and other substances that the FDA has not approved, including Ostarine (MK-2866), Ligandrol (LGD-4033), and Testolone (RAD-140).  SARMs are synthetic chemicals designed to mimic the effects of testosterone and other anabolic steroids.  The FDA has long warned against the use of SARMs, including stating in a publicly available 2017 warning letter that SARMs have been linked to life-threatening reactions including liver toxicity, and have the potential to increase the risk of heart attack and stroke.

Third Defendant Pleads Guilty in Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket No. 1:20-cr-20190 (S.D. Fla.). 

On February 5, 2021, Maytee Lledo pleaded guilty to conspiracy to commit wire fraud in connection with an scheme to falsify clinical trial data.  In pleading guilty, Lledo admitted that while working for a clinical trial company in Miami called Unlimited Medical Research, she helped to fabricate data for a clinical trial designed to test the efficacy of two asthma treatments in a pediatric population by falsely representing that subjects were participating in the trial when, in fact, they were not participating or taking the study medication as required.  Lledo is the third defendant to plead guilty in connection with the scheme.  Sentencing before U.S. District Judge Beth Bloom is set for April 16, 2021, in Miami. 

Medical Doctor Pleads Guilty in Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket No. 1:20-cr-20190 (S.D. Fla.). 

On January 8, 2021, Dr. Yvelice Villaman Bencosme pleaded guilty to conspiracy to commit wire fraud in connection with an alleged clinical trial fraud scheme at a Miami clinical research company, Unlimited Medical Research.  The clinical trial sought to compare the efficacy of two asthma treatments in a pediatric population.  In pleading guilty, Bencosme admitted that she, as principal investigator at Unlimited Medical Research, fabricated the clinical trial by falsely representing in medical charts and other sources that subjects were participating in the trial when, in fact, they were not participating or taking the study medication, as required.  Bencosme is the second defendant to plead guilty in connection with this scheme.  Sentencing before U.S. District Judge Beth Bloom is set for March 19, 2021, in Miami. 

Defendant Pleads Guilty in Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket No. 1:20-cr-20190 (S.D. Fla.). 

On October 30, 2020, Lisett Raventos of Miami, Florida, pleaded guilty to one count of conspiracy to commit wire fraud in connection with an alleged clinical trial fraud scheme at a Miami clinical research company, Unlimited Medical Research.  The clinical trial sought to compare the efficacy of two asthma treatments in a pediatric population.  In pleading guilty, Raventos admitted that she conspired with others to fabricate the participation of subjects in the clinical trial and falsify clinical trial data.  Among other things, Raventos admitted that she falsely represented in medical records that pediatric subjects were participating in the trial when, in fact, they were not participating or taking the study medication.  Raventos was charged in September along with three other individuals.  Raventos is the first of the four charged defendants to plead guilty.

Four Individuals Charged in Connection with Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket No. 1:20-cr-20190 (S.D. Fla.). 

On August 31, 2020, four individuals were charged in connection with an alleged clinical trial fraud scheme involving Miami company Unlimited Medical Research.  Yvelice Villaman Bencosme, M.D., Lisett Raventos, Jessica Palacio, and Maytee Lledo each were charged by information in the Southern District of Florida with one count of conspiracy to commit wire fraud, and Palacio was also charged with one count of making a false statement to the FDA.  According to the information, Dr. Bencosme served as the principal investigator for a clinical trial conducted at Unlimited Medical Research intended to investigate the safety and efficacy of an experimental asthma medication in children between the ages of four and eleven.  The government alleged that Bencosme and the other defendants fabricated the clinical trial by falsely representing in medical charts and other sources that subjects were participating in the trial when, in fact, they were not participating or taking the study medication.  The government also alleged that as part of an FDA inspection of UM Research in 2017, Palacio made a signed statement to the FDA in which she knowingly and falsely claimed that a particular clinical trial subject had participated in the trial when in fact that subject had not so participated.

Tampa Pharmacy and Two Employees Preliminarily Enjoined in Prescription Opioid Enforcement Action

United States v. WeCare Pharmacy, et al.
Docket NO. 8:21-cv-00188(M.D. Fla.). 

On February 5, 2021, U.S. District Judge Mary Scriven entered a stipulated preliminary injunction that bars a Tampa pharmacy and other named defendants from dispensing opioids and other controlled substances prescribed by a physician sharing building space with the pharmacy.  The United States alleged in a complaint filed January 26, 2021, that WeCare Pharmacy, its pharmacist owner Qingping Zhang, pharmacy technician Li Yang, and another related corporate entity, L&Y Holdings LLC, repeatedly dispensed opioids in violation of the Controlled Substances Act.  The complaint alleged that, over a period of several years, the defendants dispensed highly addictive and highly abused prescription opioids while ignoring “red flags” — that is, obvious indications of drug diversion and drug-seeking behavior. 

Indian Cancer Drug Manufacturer Agrees to Plead Guilty and Pay $50 Million for Allegedly Concealing and Destroying Records in Advance of FDA Inspection

United States v. Fresenius Kabi Oncology Limited
Docket NO. 2:21-cr-20 (D. Nev.). 

In filings unsealed on February 9, 2021, Indian drug manufacturer Fresenius Kabi Oncology Limited (FKOL) agreed to plead guilty to concealing and destroying records prior to a 2013 FDA plant inspection in Kalyani, India.  The government alleged that FKOL plant management directed employees to remove certain records from the premises and delete other records from computers that would have revealed FKOL was manufacturing drug ingredients in contravention of FDA requirements.  Along with pleading guilty, the company agreed to pay a criminal fine of $30 million and forfeit an additional $20 million.  FKOL also agreed to implement a compliance and ethics program designed to prevent, detect, and correct violations of U.S. law relating to FKOL’s manufacture of cancer drugs intended for terminally ill patients. 

Court Restrains Tampa Pharmacy and Two Employees from Dispensing Opioids or Other Controlled Substances

United States v. WeCare Pharmacy, et al.
Docket No. 8:21-cv-00188 (M.D. Fla.). 

In filings unsealed on January 29, 2021, U.S. District Judge Mary Scriven issued a temporary restraining order enjoining a Tampa pharmacy and two of its employees from dispensing opioids and other controlled substances.  The United States alleged in a complaint filed January 26 that WeCare Pharmacy, its pharmacist owner Qingping Zhang, pharmacy technician Li Yang, and another related corporate entity, L&Y Holdings LLC, repeatedly dispensed opioids in violation of the Controlled Substances Act.  The complaint alleged that, over a period of several years, the defendants dispensed highly addictive and highly abused prescription opioids while ignoring “red flags” — that is, obvious indications of drug diversion and drug-seeking behavior.  On February 5, 2021, the court entered a stipulated preliminary injunction that superseded the temporary restraining order and prevents the defendants from dispensing controlled substance prescriptions written by a particular prescriber during the pendency of this case.

Four Individuals Charged in Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket Number: 1:20-cr-20190 (S.D. Fla.)

On August 31, 2020, four individuals were charged in connection with a clinical trial fraud scheme in which the conspirators, working through a company called Unlimited Medical Research, allegedly falsified and fabricated the participation of subjects in a pediatric drug study.  Yvelice Villaman Bencosme, M.D., Lisett Raventos, Jessica Palacio, and Maytee Lledo each were charged by information in the Southern District of Florida with one count of conspiracy to commit wire fraud, and Palacio also was charged with one count of making a false statement to the FDA.  Dr. Bencosme served as the principal investigator for a clinical trial conducted at UM Research intended to investigate the safety and efficacy of an experimental asthma medication in children.  According to the information, Bencosme and her co-conspirators—including Bencosme’s medical practice receptionist, Maytee Lledo, and two UM Research study coordinators, Jessica Palacio and Lisett Raventos—fabricated the clinical trial by falsely representing in medical charts and other sources that subjects were participating in the trial when, in fact, they were not participating or taking the study medication as required.  The information also alleges that Palacio knowingly and falsely claimed in an affidavit to the FDA that a particular subject participated in the trial when, in fact, that subject had not so participated.

Court Dismisses Challenge to FDA’s Emergency Use Authorization for Hydroxychloroquine Related to COVID-19
Ass’n of Am. Physicians & Surgeons v. FDA.
Docket Number: 1:20-cv-493 (W.D. Mich.)

On August 14, 2020, the district court dismissed a challenge by a physicians’ interest group to FDA’s since-revoked emergency use authorization (“EUA”) for hydroxychloroquine related to COVID-19.  The group sought public access to the supply of hydroxychloroquine maintained in the Strategic National Stockpile, and alleged that the EUA violated the APA, the First Amendment, and the Fifth Amendment supposedly by curtailing physicians’ ability to prescribe hydroxychloroquine for COVID-19.  The suit was dismissed for lack of standing because neither the association nor its only identified member established an injury caused by defendants FDA and HHS.  In particular, the court found that because hydroxychloroquine remains an FDA-approved and commercially available drug, physicians are free to prescribe it, and any objections by state medical   boards to the use of hydroxychloroquine to treat COVID-19 are not traceable to FDA or HHS.

Court Enters Temporary Restraining Order Against Fraudulent Online Stores Purporting to Sell COVID-19 Health and Safety Products
United States v. Thu Phan Dinh, et al.
Docket Number: 8:20-cv-1794 (M.D. Fla.)

On August 11, 2020, the United States District Court for the Middle District of Florida entered a temporary restraining order pursuant to 18 U.S.C. § 1345 against three Vietnamese defendants, Thu Phan Dinh, Tran Khan, and Nguyen Duy Toan.  According to the government’s complaint in the case, the defendants perpetrated a wire fraud scheme by creating websites portrayed as online stores offering products for sale to American consumers, including health and safety related items such as hand sanitizer and disinfecting wipes that have become scarce during the COVID-19 pandemic.  The complaint alleges that consumers pay for items supposedly sold through the websites but never receive those purchases.  The temporary restraining order blocks the defendants from operating the alleged scam and shuts down hundreds of websites used by the defendants to carry out their scheme.

United States Seeks Temporary Restraining Order Against Fraudulent Online Stores Purporting to Sell COVID-19 Health and Safety Products
United States v. Thu Phan Dinh, et al.
Docket Number: 8:20-cv-1794 (M.D. Fla.)

On August 3, 2020, the United States filed a motion for a temporary restraining order pursuant to 18 U.S.C. § 1345 against three Vietnamese defendants, Thu Phan Dinh, Tran Khan, and Nguyen Duy Toan.  The complaint alleges that the defendants, as part of a wire fraud scheme, created websites portrayed as online stores offering products for sale to American consumers, including health and safety related items such as hand sanitizer and disinfecting wipes that have become scarce during the COVID-19 pandemic.  According to the complaint, consumers pay for items supposedly sold through the websites but never receive those purchases.  The temporary restraining order proposed by the United States would block the defendants from operating the alleged scam and shut down hundreds of websites used by the defendants to carry out their scheme. 

Court Enters Default Judgment and Permanent Injunction Against Remaining Two Defendants for Selling “Miracle” Coronavirus Bleach Cure
United States v. Genesis II Church of Health and Healing
Docket Number: 1:20-cv-21601 (S.D. Fla.)

On August 3, 2020, U.S. District Judge Kathleen M. Williams granted the government’s motion for default judgment against two Americans currently located in Colombia who lead the non-religious “Genesis II Church of Health and Healing,” in an FDCA civil enforcement action.  The court previously entered a default judgment against the entity and two principals located in the United States.  The remaining two defendants, Mark Grenon and his adult son, Joseph Grenon, are now permanently enjoined from distributing “Miracle Mineral Solution,” an industrial bleach product the defendants touted as a cure for COVID-19 and a plethora of other serious diseases.  As part of the permanent injunction, the district court ordered equitable disgorgement with refunds to consumers to be administered by a court-appointed special master.

Utah Man Indicted for Selling Fake COVID-19 Cure; Former Company to Plead Guilty and Provide Customer Refunds
United States v. Pedersen and United States v. My Doctor Suggests LLC
Press Release
Docket Number: 2:20-cv-279 (D. Utah)

On July 23, 2020, Utah resident Gordon H. Pedersen was indicted on wire fraud, mail fraud, and drug misbranding charges in connection with an alleged scheme to fraudulently sell a purported COVID-19 treatment.  Pedersen allegedly posed as a doctor to promote ingestible silver-based products as a cure for COVID-19 despite having no evidence that his products could treat the disease.  Pedersen’s former company, My Doctor Suggests LLC, agreed plead guilty to a one-count misdemeanor criminal information charging distribution of misbranded drugs in violation of the Federal Food, Drug, and Cosmetic Act.  The company severed ties with Pedersen and agreed to cooperate in his prosecution.  My Doctor Suggests is also subject to a civil consent order that requires the company to stop fraudulently labeling its products and to issue full refunds to affected consumers. Affected customers interested in refunds can contact My Doctor Suggests LLC at (1-866- 660-9868) or refunds@mydoctorsuggests.com.

Court Enters Default Judgment and Permanent Injunction Against “Church” Entity and Two Individuals for Selling “Miracle” Coronavirus Bleach Cure

United States v. Genesis II Church of Health and Healing
Docket Number: 1:20-cv-21601 (S.D. Fla.)

On July 9, 2020, U.S. District Judge Kathleen M. Williams granted the government’s motion for default judgment against the Genesis II Church of Health and Healing, along with two of the non-religious entity’s four principals, Jordan Grenon and Jonathan Grenon, who were located in the United States.  The other two defendants are presently in the Republic of Colombia, and their time to answer the Complaint for Permanent Injunction had not yet expired.  The permanent injunction prohibits the defendants from distributing “Miracle Mineral Solution,” an industrial bleach product the defendants touted as a cure for COVID-19 and a plethora of other serious diseases.  As part of the permanent injunction, the district court ordered equitable disgorgement with refunds to consumers to be administered by a court-appointed special master.

Supplement Company that Touted Silver COVID-19 Treatment Agrees to Permanent Injunction and Consumer Refunds

United States v. My Doctor Suggests LLC
Docket Number: 2:20-cv-279 (D. Utah)

On June 25, 2020, the court entered a consent order permanently enjoining Utah company My Doctor Suggests LLC under 18 U.S.C. § 1345 from fraudulently selling its silver dietary supplements as a protection and treatment for novel coronavirus (COVID-19).  The order also compels the company to issue notices to its customers disavowing past COVID-19 claims, offer full refunds to affected customers, and enter a robust compliance plan to prevent future violations of the Federal Food, Drug, and Cosmetic Act, among other statutes. Affected customers interested in refunds can contact My Doctor Suggests LLC at (1-866-660-9868) or refunds@mydoctorsuggests.com.

Former Virginia Physician Sentenced for Role in Internet Pharmacy Operation

United States v. Ryan (E.D. Va.)
Docket Number: 2:14-cr-126

On June 16, 2020, Lawrence B. Ryan was sentenced by U.S. District Judge Robert G. Doumar to 10 months’ imprisonment for his role in a conspiracy to unlawfully distribute controlled substances and to introduce into interstate commerce misbranded drugs with the intent to defraud or mislead.  In pleading guilty earlier this year, Ryan admitted that from 2007 through 2010, he unlawfully authorized more than 158,000 website prescription drug orders, including orders for Fioricet, which contains the controlled substance butalbital, and two drugs that later went on DEA’s controlled substances list, Soma and tramadol.  The websites were linked to RX Limited, a large Internet pharmacy operation that shipped orders with no face-to-face physician contact and allowed customers themselves to choose the type, strength, and quantity of drugs they ordered.  Ryan also agreed to forfeit $316,153, the sum of money he was paid by RX Limited.

Internet Pharmacy Operator Sentenced to 25 Years’ Imprisonment for Wide-Ranging Criminal Enterprise

United States v. Leroux (S.D.N.Y.)
Docket Numbers: 1:14-cr-75 & 1:12-cr-489

On June 12, 2020, Judge Ronnie Abrams sentenced Paul Calder Leroux to 25 years’ imprisonment in connection with various criminal activities, which included operating a long-running Internet pharmacy operation known as RX Limited.  RX Limited sold prescription drugs online to U.S. consumers using U.S. physicians and pharmacies.  The drugs were authorized and dispensed without any valid doctor-patient relationship; the websites linked to RX Limited focused on selling Soma, tramadol, and Fioricet directly to customers.  In addition to pleading guilty to international money laundering and conspiracy charges linked to RX Limited, Leroux also pleaded guilty to trafficking methamphetamine, unlicensed exportation of goods and technology from the United States to a third country, computer hacking, and accessory-after-the-fact charges.  He was arrested in Liberia and expelled to the United States in September 2012.  The government argued that profits from RX Limited’s drug sales funded Leroux’s other alleged criminal enterprises, including arms trafficking, weapons development for Iran, and cocaine trafficking.

Court Orders West Texas Man to Stop Selling Purported COVID-19 Treatments

United States v. Michael Marc Travalino a/k/a Marc White Eagle
Docket Number: 4:20-cv-46 (W.D. Tex.)

On June 1, 2020, U.S. District Judge David Counts issued a temporary restraining order under the anti-fraud injunction statute (18 U.S.C. § 1345) against Michael Travalino to stop him from marketing “herbal” remedies as purported treatments for COVID-19 and other serious medical conditions.  The government alleged in its complaint that Travalino sold various preparations through his storefront and a website as “guaranteed” cures and treatments even after receiving a joint warning letter from FDA and FTC advising him that the distribution of his products violated the Federal Food, Drug, and Cosmetic Act and Federal Trade Commission Act.  The court also set a June 11 hearing on the government’s motion for preliminary injunction.

Court Enters Preliminary Injunction in Case Involving Silver Products Touted as a COVID-19 Treatment

United States v. Xephyr LLC, et al.
Docket Number: 6:20-cv-140 (E.D. Okla.)

On May 27, 2020, U.S. District Court Judge Ronald A. White entered a preliminary injunction against an Oklahoma company that touted an unapproved colloidal silver product as a COVID-19 treatment.  In a complaint filed on May 14, the United States alleged that the defendants, Xephyr LLC (d/b/a N-Ergetics), Brad Brand, Derill Fussell, and Linda Fussell, sold colloidal silver through their website as a treatment for COVID-19 and other diseases and conditions, such as pneumonia, AIDS, and cancer.  The complaint alleged that the defendants continued to make such claims in violation of the Food, Drug, and Cosmetic Act despite receiving a March 6 joint warning letter from the Food and Drug Administration and the Federal Trade Commission.  The court previously entered a temporary restraining order against the defendants.

Court Orders Oklahoma Company to Stop Selling Silver Products as a COVID-19 Treatment

United States v. Xephyr LLC, et al.
Docket Number: 6:20-cv-140 (E.D. Okla.)

On May 14, 2020, U.S. District Court Judge Ronald A. White entered a temporary restraining order against an Oklahoma company that touted an unapproved colloidal silver product as a COVID-19 treatment.  In a complaint filed the previous day, the United States alleged that the defendants, Xephyr LLC (d/b/a N-Ergetics), Brad Brand, Derill Fussell, and Linda Fussell, sold colloidal silver through their website as a treatment for COVID-19 and other diseases and conditions, such as pneumonia, AIDS, and cancer.  The complaint alleged that the defendants continued to make such claims in violation of the Food, Drug, and Cosmetic Act despite receiving a March 6 joint warning letter from the Food and Drug Administration and the Federal Trade Commission.

California Hand Sanitizer Distributor Ordered to Stop Marketing Unapproved New Drugs

United States v. Innovative Biodefense, et al.
Press Release
Docket Number: 8:18-cv-996 (C.D. Cal.)

In an order entered May 4, 2020, U.S. District Judge David O. Carter enjoined Innovative BioDefense, Inc., of Lake Forest, California, along with company CEO Colette Cozean and distributor Hotan Barough, from distributing “Zylast” hand sanitizer products until the company removes disease-specific claims from product labeling or obtains FDA approval.  In a 2018 complaint, the United States alleged that the defendants distributed Zylast products in violation of the Federal Food, Drug, and Cosmetic Act.  According to the complaint, the defendants marketed their products as being effective against infection by pathogens such as norovirus, rhinovirus, rotavirus, the flu virus, Methicillin-Resistant Staphylococcus Aureus bacteria and Ebola, despite a lack of proof regarding the products’ safety and effectiveness for such uses.  The court’s order followed an eight-day bench trial that concluded in March.

Court Orders Non-Religious Florida “Church” to Stop Selling Unlawful Bleach Product as Coronavirus Treatment

United States v. Genesis II Church of Health and Healing
Docket Number: 1:20-cv-21601 (S.D. Fla.)

On May 1, 2020, U.S. District Judge Kathleen M. Williams issued a preliminary injunction against the Genesis II Church of Health and Healing, along with individuals Mark Grenon, Joseph Grenon, Jordan Grenon, and Jonathan Grenon.  The injunction prohibits the defendants, who run a non-religious “church,” from distributing “Miracle Mineral Solution,” an industrial bleach product the defendants touted as a cure for COVID-19.  Through multiple websites, the defendants promoted the “miracle solution” as a cure and treatment not only for COVID-19 but also for other serious diseases ⸺ including Alzheimer’s, autism, brain cancer, HIV/AIDS, and multiple sclerosis.  Defendants refused in writing to cease their violative conduct even after receiving a warning letter from FDA and FTC advising that distribution of Miracle Mineral Solution violated the Federal Food, Drug, and Cosmetic Act.  In addition to entering the preliminary injunction, the court set a show cause hearing for May 11 regarding the defendants’ alleged violations of the previously issued temporary restraining order. 

Manufacturer to Pay $43 Million for Distributing Medical Devices with Improper Instructions for Use and Failing to File Timely Adverse Event Reports

United States v. Pentax Medical Company
Press Release
Docket Number: 20-mj-2054 (D.N.J.)

On April 7, 2020, Pentax Medical Company entered into a deferred prosecution agreement in which it agreed to pay $43 million in criminal fines and forfeiture for violating the Federal Food, Drug, and Cosmetic Act.  Pentax was charged in a criminal complaint with failing to file timely reports of two hospital infection outbreaks associated with its duodenoscope and with shipping four other types of endoscopes for 18 months without FDA-approved instructions for use.  The criminal charges will be dismissed in three years if Pentax complies with enhanced compliance requirements that are part of the agreement.

Court Denies Indivior’s Motion to Dismiss Indictment in Suboxone Case

United States v. Indivior, Inc.
Docket Number: 1:19-cr-16 (W.D.V.A.)

On March 31, U.S. District Judge James Jones denied Indivior’s motion to dismiss a 28-count indictment alleging the company engaged in healthcare fraud, wire fraud, mail fraud, and conspiracy to commit the same.  The charges in the indictment stem from Indivior’s marketing of Suboxone, an opioid drug used in the treatment of addiction.  The indictment alleges Indivior employees encouraged misuse of Suboxone through relationships with doctors engaged in illegitimate prescribing and made fraudulent claims about the safety and diversion of the drug.  Indivior asserted in a motion to dismiss the indictment that the company’s alleged encouragement of illegitimate prescribing does not constitute fraud.  In denying Indivior’s motion, the court found the government properly alleged the conduct in the indictment and the question of whether it constitutes fraud should be decided by a jury.  Trial in the case, originally set for May, was continued to September 2020 because of the ongoing public health emergency.

Former Virginia Physician Pleads Guilty to Conspiracy to Violate the Controlled Substances Act and Food, Drug, and Cosmetics Act Related to Internet Pharmacy Operation
United States v. Ryan

Press release
Docket Number: 2:14-cr-126 (E.D. Va.)

On January 8, 2020, Lawrence B. Ryan pleaded guilty in the Eastern District of Virginia, Norfolk Division, to one count of conspiracy to unlawfully distribute controlled substances and to introduce into interstate commerce misbranded drugs with intent to defraud or mislead.  In pleading guilty, Ryan admitted that from 2007 through 2010, he unlawfully authorized more than 158,000 drug orders placed by customers using websites to purchase prescription drugs, including Fioricet, a drug that contains butalbital, a controlled substance.  The websites were linked to a large Internet pharmacy organization known as RX Limited.  Ryan, at the time a licensed physician in Virginia, was paid $2 per drug order.  He admitted he had no face-to-face contact with customers, who themselves chose the type, strength, and quantity of drugs they ordered.  Sentencing is set for April 6, 2020. 

Court Denies Indivior's Motion to Dismiss Indictment Alleging Illegal Opioid Marketing
United States v. Indivior Inc. et al.

Docket Number: 19-CR-16 (W.D. Va.)

On November 14, 2019, the court denied Indivior's motion to dismiss a 28-count indictment alleging the company engaged in healthcare fraud, wire fraud, mail fraud, and conspiracy.  The charges in the indictment stem from Indivior's marketing of Suboxone, an opioid drug used in the treatment of addiction.  The indictment alleges Indivior employees encouraged the misuse of Suboxone through relationships with doctors engaged in illegitimate prescribing, and that they made fraudulent claims about the safety and diversion of the drug.  In its motion to dismiss, Indivior asserted that prosecutors engaged in misconduct before the grand jury related to a reference in the indictment to a doctor who had been charged with healthcare fraud unrelated to Suboxone.  The court found that the government's actions before the grand jury were neither improper nor misleading, and the court denied Indivior's motion to dismiss the indictment.  Trial is set to begin in Abingdon, Virginia on May 11, 2020.

Justice Department Obtains $1.4 Billion from Reckitt Benckiser Group in Largest Recovery in a Case Concerning an Opioid Drug in United States History
United States v. $647,000,000 in U.S. Currency

Press Release
Docket Number: 19-CV-00027 (C.D. Cal.)
(related to United States v. Indivior Inc. et al., Docket Number: 19-CR-16 (W.D. Va.))

Global consumer goods conglomerate Reckitt Benckiser Group plc (RB Group) has agreed to pay $1.4 billion to resolve its potential criminal and civil liability related to a federal investigation of the marketing of the opioid addiction treatment drug Suboxone.  The resolution – the largest recovery by the United States in a case concerning an opioid drug – includes the forfeiture of proceeds totaling $647 million, civil settlements with the federal government and the states totaling $700 million, and an administrative resolution with the Federal Trade Commission for $50 million.

Until December 2014, RB Group’s wholly owned subsidiary, Indivior Inc. (then known as Reckitt Benckiser Pharmaceuticals Inc.) marketed and sold Suboxone throughout the United States. In December 2014, RB Group spun off Indivior Inc., and the two companies are no longer affiliated. On April 9, a federal grand jury sitting in Abingdon, Virginia, indicted Indivior for allegedly engaging in an illicit nationwide scheme to increase prescriptions of Suboxone. The United States’ criminal trial against Indivior is scheduled to begin on May 11, 2020.

Medical Device Company Pleads Guilty and is Sentenced to Pay $3 Million for Failure to Report a Recall
United States v. ACell, Inc.

Press Release
Docket Number: 19-CR-0282 (D. MD.)

On June 11, 2019, ACell, Inc., a Maryland-based medical device manufacturer, pleaded guilty to one misdemeanor count of failure and refusal to report a medical device removal to the Food and Drug Administration (FDA). The Court sentenced ACell to pay a fine of $3 million. ACell manufactures and distributes MicroMatrix, a powder wound dressing produced from porcine bladder tissue.

In pleading guilty, ACell admitted that in 2012 it determined that more than 30,000 MicroMatrix devices were contaminated with high levels of endotoxin, which posed a risk to patient health ACell also admitted that it initiated a removal of MicroMatrix devices from sales representative inventories, hospitals, and other healthcare centers, but did not notify FDA of the removal or of the endotoxin contamination. ACell further admitted that it did not notify doctors who already had purchased or used contaminated MicroMatrix about the removal.　

District Court Enters Preliminary Injunctions Against Texas Doctors Who Prescribed Opioids With No Legitimate Medical Purpose
United States v. Cesar B. Pena Rodriguez, M.D., and Leovares A. Mendez, M.D.

Press Release
Press Release
Docket Number: 3:19-CV-1055 (N.D. Tex.)

On June 4, 2019, the district court entered two stipulated preliminary injunction orders against doctors Cesar B. Pena Rodriguez and Leovares A. Mendez to stop them from unlawfully prescribing powerful opioids linked to abuse and diversion.  The orders enjoin the defendants from distributing or dispensing any controlled substances defined as “opiates” and “opioids” under the Controlled Substances Act (CSA), and from altering, deleting, destroying, mutilating, or transferring any records related to their controlled substance prescriptions or related treatment.  The civil action against the defendants, filed by the United States Attorney’s Office for the Northern District of Texas and the Consumer Protection Branch, alleges that the defendants prescribed controlled substances in violation of the CSA. 

According to the complaint, the defendants issued thousands of prescriptions without apparent regard for patient harm, including prescriptions for a dangerous combination of an opioid, short-acting benzodiazepine, and a muscle relaxer.  The complaint further alleges that the defendants issued numerous purported prescriptions without a legitimate medical purpose and outside the usual course of professional practice to undercover agents of the United States Drug Enforcement Administration.  The court previously entered a temporary restraining order against the defendants on May 8, 2019.

District Court Orders PharMedium Compounding Pharmacy and Two Executives to Comply with Drug Safety Standards   
United States v. PharMedium Services LLC, et al.

Press Release
Docket Number: 1:19-CV-3382 (N.D. Ill.) 

On May 22, 2019, the district court entered a consent decree of permanent injunction requiring a multi-state outsourcing compounding pharmacy and two of its executives to comply with provisions of the Food, Drug, and Cosmetic Act (FDCA) while manufacturing, holding, and distributing drugs.  The government’s complaint alleged that PharMedium’s drugs were adulterated because they were prepared, packed, or held under insanitary conditions whereby they may have been contaminated with filth or rendered injurious to health and because PharMedium failed to comply with current good manufacturing practices.  

The complaint also alleged that PharMedium distributed unapproved new drugs and misbranded drugs by failing to comply with requirements for drugs compounded in a registered outsourcing facility.  As part of the settlement, PharMedium may not manufacture, hold, or distribute its drugs from its Tennessee facility unless PharMedium complies with specific remedial measures set forth in the consent decree.  PharMedium also must take remedial measures to ensure compliance with the FDCA at its other facilities and at its headquarters in Illinois.

Top Regulatory Official at Medical Device Company Sentenced 
United States v. Yabe, Hisao

Press Release
Docket Number: 2:18-CR-00726 (D. N.J.)

On May 22, 2019, Hisao Yabe was sentenced to one year of probation and fined $5,000 for his failure to report to the Food and Drug Administration information that called into question the safety of a medical device manufactured by Olympus Medical Systems Corporation. Yabe was formerly the top regulatory official at the Japanese company, which also was convicted and in December was ordered to pay $85 million in criminal fines and forfeiture. Yabe pled guilty to one misdemeanor violation of the Federal Food, Drug, and Cosmetic Act.

The convictions stem from a series of incidents in which multiple patients at hospitals in Europe and the United States experienced serious infections after being treated with a duodenoscope manufactured by Olympus. District Judge Stanley R. Chesler told Yabe that “you deserve to be professionally disgraced – your conduct was unpardonable,” but noted that there was no evidence that Yabe intentionally violated the law and credited him for coming to the United States to plead guilty, when there was little possibility that he would be extradited.

Michigan Defendant Sentenced in Kratom Distribution Scheme
United States v. Dailey

Press Release
Docket Number: 5:18-CR-20751 (E.D. Mich.)

On May 8, 2019, the court sentenced Matthew Dailey to 24 months in prison for the illegal importation and sale of kratom, which he sold to consumers as a purported treatment for various serious diseases and medical conditions, including opiate withdrawal symptoms.  Dailey was the owner and operator of Nomad Botanicals, an online business that sold kratom to consumers throughout the United States. 

Dailey pleaded guilty on January 8, 2019 to one count of introducing misbranded drugs into interstate commerce and one count of importing merchandise contrary to law.  As part of his plea, Dailey agreed to forfeit $1,000,000 in illegal proceeds.  In addition to two years’ imprisonment, Judge Judith E. Levy also sentenced Dailey to three years of supervised release.

Defendant Sentenced for Conspiring to Defraud the FDA and for Distribution of Over- and Under-Potent Compounded Drugs 
United States v. Paul Elmer and Caprice Bearden

Press Release
Docket Number: 1:17-CR-00113  (S.D. Ind.)

On April 29, 2019, Caprice R. Bearden was sentenced in Indianapolis for her role in a conspiracy to defraud the U.S. Food and Drug Administration concerning the distribution of under- and over-potent compounded drugs.  The court sentenced Bearden to five months’ imprisonment followed by three years of supervised release, the first five months of which will be home detention.  Bearden, the former compliance director of Pharmakon Pharmaceuticals, Inc. (Pharmakon), of Noblesville, Indiana, pleaded guilty in November 2017 to conspiracy and nine counts of adulterating drugs.  

In pleading guilty, Bearden admitted that she and her co-defendant, Paul J. Elmer, Pharmakon’s former president, lied during multiple FDA inspections about test results concerning under- and over-potent compounded sterile drugs manufactured by Pharmakon and distributed to hospitals nationwide.  One 2,460 % potent lot of Pharmakon morphine sulfate nearly caused the death of an infant at an Indianapolis hospital in 2016.  Elmer was convicted of conspiracy and nine counts of adulteration on April 10, 2019, following a jury trial trial.

Defendant’s Appeal Dismissed in “QLaser” Medical Device Scam
United States v. Robert “Larry” Lytle et al.

Press Release
Docket Number: 5:17-CR-50020-KES (D.S.D/8th Circuit)

On April 26, 2019, the Eighth Circuit Court of Appeals granted the government’s motion to dismiss an appeal brought by a defendant convicted of marketing and selling light-emitting medical devices as a cure-all to (primarily elderly) consumers.  Robert “Larry” Lytle, 84, of Rapid City, South Dakota is currently serving a 12-year prison sentence after pleading guilty last year to introducing misbranded medical devices into interstate commerce with the intent to defraud and mislead and criminal contempt.  Lytle argued on appeal, inter alia, that his plea was obtained by coercion, that he was not competent to plead guilty, and that his counsel was ineffective. 

In dismissing his appeal, the Court enforced a broad appellate waiver contained in Lytle’s plea agreement, which permitted an appeal based only on lack of jurisdiction or an upward departure or variance in sentencing.  The Court previously enforced an identical waiver in dismissing the appeal of one of Lytle’s co-defendants.

Indivior Inc. Indicted for Fraudulently Marketing Prescription Opioid
United States v. Indivior Inc.

Press Release
Docket Number: 1:19-CR-00016 (W.D. Va.)

On April 9, 2019, a grand jury returned and indictment against Indivior Inc., a pharmaceutical company, for engaging in an illicit nationwide scheme to increase prescriptions of Suboxone Film, an opioid drug used in the treatment of opioid addiction. The indictment charges Indivior with mail, wire, and health care fraud conspiracy and substantive counts. The indictment alleges that Indivior obtained billions of dollars in revenue from Suboxone Film prescriptions by deceiving health care providers and health care benefit programs into believing that Suboxone Film was safer, less divertible, and less abusable than other opioid-addiction treatment drugs. Indivior also is alleged to have sought to boost profits by using a “Here to Help” program to connect opioid-addicted patients to doctors the company knew were prescribing opioids at high rates and in a clinically unwarranted manner. Arraignment is scheduled for May 6 in Abington, Virginia.

District Court Finds Websites to be “Labeling” Under FDCA in Denying Motion to Dismiss Enforcement Action
United States v. Innovative BioDefense, Inc. et al.

Docket Number: 8:18-CV-996 (C.D. Cal.)

On February 22, 2019, Judge David Carter denied defendants’ motion to dismiss the United States’ complaint, finding that statements on websites can constitute drug “labeling” under the Food, Drug, and Cosmetic Act (FDCA).  The government’s complaint alleges that the defendants illegally market their “Zylast” hand sanitizer products as unapproved new drugs intended to fight various specific pathogens, such as Ebola.  The complaint alleges that such drug claims appear on the defendants’ primary website and the website of one of the company’s primary distributors.  Among other findings, the Court agreed with the government that statements of recommended uses published on company websites can be “labeling” under the FDCA pursuant to the Supreme Court’s seminal 1948 decision in Kordel v. United States.

District Court Issues First-of-its-Kind TRO to Stop Tennessee Pharmacies and Pharmacists from Dispensing Opioids
United States v. Oakley Pharmacy, Inc. et al.

Docket Number: 2:19-CV-9 (M.D. Tenn.)

On February 7, 2019, U.S. District Judge Aleta Trauger issued a temporary restraining order against two Celina, Tennessee pharmacies, their majority owner, and three pharmacists, stopping them from continuing to dispense controlled substances.　 The government’s complaint alleges that the pharmacies and pharmacists violated the Controlled Substances Act ("CSA") by filling numerous prescriptions for controlled substances outside the usual course of professional practice and in violation of the pharmacists’ corresponding responsibility to ensure that prescriptions were written for a legitimate medical purpose.　

Specifically, the complaint alleges that the defendants routinely dispensed controlled substances while ignoring numerous warning signs of diversion and abuse, such as unusually high dosages of oxycodone and other opioids, prescriptions for opioids and other controlled substances in dangerous combinations, and patients travelling extremely long distances to obtain and fill prescriptions.　 The complaint further alleges that the pharmacies’ dispensing of opioids has been tied to the deaths of at least two people, and that numerous other individuals have been treated at hospitals for serious overdoses.　

The complaint alleges that the two rural pharmacies are among the highest purchasers of opioids per capita in the entire country.　 In addition to seeking injunctive and civil monetary penalty relief for violations of the CSA, the complaint also contains allegations under the False Claims Act for falsely billing Medicare for illegally dispensed controlled substance prescriptions.　 A hearing on the government’s motion for a preliminary injunction is set for February 21, 2019.

District Court Enjoins Pennsylvania Compounding Pharmacy from Distributing Adulterated Drugs
United States v. Ranier’s Rx Laboratory, Inc., et al.

Docket Number: 2:19-CV-111 (W.D. Pa.)

On February 6, 2019, the district court entered a consent decree of permanent injunction against Ranier’s Rx Laboratory Inc., d/b/a Ranier’s Compounding Laboratory, and its owner, Francis H. Ranier.  In a complaint filed February 1, 2019, the United States alleged that the defendants violated the Food, Drug, and Cosmetic Act by causing drugs to become adulterated.  Specifically, the complaint alleged that multiple FDA inspections revealed that the defendants compounded sterile drugs under insanitary conditions.  As part of the consent decree, the defendants represented that they no longer engage in sterile compounding.

Medical Device Maker ev3 Agrees to Plead Guilty and Pay $17.9 Million for Distributing Adulterated “Onyx” Device
United States v. ev3, Inc., et al.

Press Release
Docket Number: 18-CR-10461 (D. Mass.)

On December 4, 2018, the Consumer Protection Branch and the U.S. Attorney’s Office for the District of Massachusetts announced an agreement with ev3, Inc., regarding a misdemeanor criminal plea, as well as a criminal fine and forfeiture totaling $17.9 million, to resolve the company’s liability for distributing Onyx Liquid Embolic System medical devices that were adulterated under the Food, Drug, and Cosmetic Act. According to the plea agreement, Onyx was approved by the U.S. Food and Drug Administration (FDA) as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain..

The FDA has approved Onyx only for use inside the brain. Despite the FDA’s limited approval of Onyx, from 2005 to 2009, ev3 sales representatives encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain. Medtronic, which acquired ev3 subsequent to the course of criminal conduct, also agreed to pay $13 million in a separate matter as part of a global settlement to resolve False Claims Act liability arising from an investigation of alleged kickbacks paid to surgeons to use the Solitaire medical device, a second ev3 neurovascular product.

Medical Device Manufacturer Ordered to Pay $85 Million Following Guilty Plea for Failing to File Adverse Event Reports
United States v. Olympus Medical Systems Corp.
United States v. Hisao Yabe

Press Release
Docket Number: 2:18-CR-727; 2:18-CR-726 (D.N.J.)

On December 10, 2018, Olympus Medical Systems Corp. and its former top regulatory official, Hisao Yabe, pleaded guilty to failing to file required adverse event reports involving infections connected to the company’s duodenoscope device. Olympus pleaded guilty to three misdemeanor counts and Yabe to one misdemeanor count of violating the Federal Food, Drug, and Cosmetic Act by failing to file the required reports with the U.S. Food & Drug Administration.

Olympus was ordered to pay $85 million in criminal fines and forfeiture, and also agreed to enact extensive compliance reforms. Yabe is scheduled to be sentenced on March 27.

Tennessee Personal Care Products Manufacturer to Comply with Drug Safety Requirements
United States v. Keystone Laboratories, Inc., et al.

Docket Number: 2:18-CV-2656 (W.D. Tenn.)

On October 23, 2018, the District Court enjoined Keystone Laboratories, Inc., its owner, Melinda Menke, and its operator, Elizabeth Jumet, from violating Food, Drug, and Cosmetic Act by distributing hair care and skin care products that were not manufactured, processed, packaged, or held subject to current good manufacturing practices for drugs. The complaint alleged that FDA inspections of Keystone’s facilities and products revealed numerous problems, including an instance in which the company released a batch of hair products despite test results suggesting contamination by the potentially harmful bacteria Staphylococcus aureus.

Under the Court’s order, the defendants may not manufacture or distribute their over-the-counter drug products from any facility owned or operated by the defendants unless they comply with specific remedial measures set forth in the injunction. The order also provides safeguards in the event that the defendants contract with third parties to manufacture similar products.

District Court Enters Permanent Injunction to Stop New Jersey and New York Companies and Executives from Distributing Unapproved and Misbranded Drugs
United States v. S Hackett Marketing LLC d/b/a Just Enhance, et al.

Press Release
Docket Number: 3:17-CV-04911 (D.N.J)

On August 30, 2018, the district court granted the government’s motion for default judgment and entered an order of permanent injunction against S Hackett Marketing LLC d/b/a Just Enhance, R Thomas Marketing LLC, Shawn Hackett, and Roger Thomas. In a July 2017 complaint, the government alleged that the defendants promoted and sold misbranded sexual enhancement products that contained the undisclosed ingredient sildenafil, which is the active pharmaceutical ingredient in Viagra.

The labeling for defendants’ products claimed – without FDA approval or clinical studies demonstrating safety and effectiveness – that the products could treat a variety of serious conditions. The defendants did not respond to the complaint, and the court ordered them to cease distribution of all drugs until the companies implement specified remedial measures to ensure compliance with the FDCA.

Civil Enforcement Actions Under Controlled Substances Act Announced Against Two Physicians Related to Opioid Distribution
United States v. Gregory J. Gerber, M.D., et al. and United States v. Michael P. Tricaso, D.O.

Press Release
Docket Number: 3:18-CV-01908; 5:18-CV-01891 (N.D. Ohio)

On August 22, 2018, civil enforcement actions under the Controlled Substances Act were unsealed against two physicians alleging the illegal distribution and dispensing of opioids and other controlled substances. The complaints were filed by the U.S. Attorney’s Office for the Northern District of Ohio and the Consumer Protection Branch. The complaint against Michael Tricaso, D.O., was filed August 15; the complaint against Gregory Gerber, M.D., which also alleges numerous False Claims Act violations, was filed on August 17.

The court in both matters granted temporary restraining orders to limit the defendants’ ability to distribute or dispense controlled substances. For more information, see the press release issued August 22, 2018.

Defendant Sentenced in Prescription Drug Diversion Scheme
United States v. Karen Turner

Press Release
Docket Number: 1:17-CR-0109-MOC-DLH (W.D. N.C.)

On August 2, 2018, Karen Turner was sentenced to nine months in prison for wire fraud and money laundering in connection with two fraudulent pharmacies that Turner used to divert prescription drugs into the gray market.  In pleading guilty, Turner admitted that to obtain prescription drugs at discounted prices, she agreed that the pharmacies she operated would not sell the drugs wholesale and would use the drugs only for the pharmacies’ “own use”, such as filling prescriptions. 

Contrary to these agreements, Turner sold the drugs to drug wholesalers at higher prices.  Turner also admitted that after her first fraudulent pharmacy was closed for drug diversion, she started an identical drug diversion scheme in a neighboring state.

Court Permanently Enjoins Mississippi Compounding Pharmacy and Two Individuals from Manufacturing and Distributing Adulterated Drugs
United States v. Delta Pharma, Inc., et al.

Press Release
Docket Number: 3:18-CV-0127 (N.D. Miss.)

On June 8, 2018, the district court entered a consent decree of permanent injunction against Delta Pharma, Inc., a Ripley, Mississippi, compounding pharmacy, its owner Dr. Tommy T. Simpson, and its Vice President and Pharmacist in Charge, Charles Michael Harrison, permanently enjoining the defendants from manufacturing and distributing compounded drugs that are adulterated under the Food, Drug, and Cosmetic Act.

In a complaint filed June 4, 2018, the United States alleged that inspections at Delta Pharma’s facility found numerous insanitary conditions and deviations from current Good Manufacturing Practice requirements, including failure to establish and follow appropriate written procedures that are designed to prevent microbiological contamination of drug products purporting to be sterile.

Complaint Filed Against California Hand Sanitizer Company Marketing Unapproved New Drugs
United States v. Innovative BioDefense, Inc. et al.

Press Release
Docket Number: 8:18-CV-996 (C.D. Calif.)

On June 6, 2018, the United States filed a civil action seeking to enjoin Innovative BioDefense, Inc., of Lake Forest, California and its CEO, Colette Cozean, from distributing “Zylast” antiseptic hand sanitizer products that are unapproved new drugs under the Federal Food, Drug, and Cosmetic Act. According to the complaint, the defendants market various Zylast products as being effective against infection by pathogens such as the norovirus, rhinovirus, rotavirus, flu virus, Methicillin-Resistant Staphylococcus Aureus bacteria, and Ebola virus, despite a lack of proof of the products’ safety and effectiveness and no approval from the U.S. Food and Drug Administration (FDA).

The complaint further alleges that the Zylast products are misbranded because of marketing claims stating that FDA considers Zylast’s active ingredient “safe and effective in open wounds” and “safe and effective for first aid” when FDA has not made such determinations.

Complaints for Permanent Injunction Filed Against Two Companies Purporting to Offer Stem Cell Treatments for Serious Diseases
United States v. US Stem Cell Clinic, LLC, et al. and United States v. California Stem Cell Treatment Center, Inc., et al.

Press Release
Docket Number: 0:18-CV-61047 (S.D. Fla.) and 5:18-CV-01005 (C.D. Calif.)

On May 9, 2018, the United States filed complaints against two clinics that purport to manufacture “stromal vascular fraction” (SVF) products from patient adipose (fat) tissue, which the companies then market as stem cell-based treatments for a host of serious conditions and diseases, including cancer, spinal cord injuries, Parkinson’s disease, pulmonary disease, arthritis, stroke, ALS, and multiple sclerosis.  According to the complaints, both sets of defendants manufacture their products without FDA approval and without proof of safety and efficacy.

The first complaint was filed against US Stem Cell Clinic, LLC, of Sunrise, Florida, US Stem Cell, Inc., and company officers Kristin Comella and Theodore Gradel.  The second complaint names California Stem Cell Treatment Center, Inc., of Rancho Mirage and Beverly Hills, California, Cell Surgical Network Corporation, and company owners Elliot Lander, M.D. and Mark Berman, M.D.  According to the complaints, the defendants and their affiliates have used their products on thousands of patients without obtaining necessary FDA approvals.  The complaints allege that that in some cases, adverse events that harmed patients occurred after treatment with the SVF products, and that recent FDA inspections showed that the defendants’ products are not manufactured, processed, packed, or held in conformance with current good manufacturing practice (CGMP).

District Court Enjoins Florida Company from Distributing Adulterated and Misbranded Drugs
United States v. MyNicNaxs, LLC et al.

Press Release
Docket Number: 6:18-CV-0389 (M.D. Fla.)

On March 27, 2018, the district court permanently enjoined dietary supplement distributor MyNicNaxs LLC, and two principals of the company, Chevonne Torres and Michael Banner, from selling and distributing unapproved and misbranded new drugs. In a complaint filed on March 14, the United States alleged that the Florida company sold sexual enhancement and weight loss products in violation of the Federal Food, Drug, and Cosmetic Act.

The complaint alleged that the defendants marketed such products as drugs to treat serious conditions without FDA approval and without proof of safety and efficacy. The complaint further alleged that FDA tests showed that some of the defendants’ products contained undisclosed pharmaceutical ingredients such as sildenafil, the active ingredient in Viagra. The consent decree entered by the court requires the defendants to implement specific remedial measures to comply with the law and obtain written approval from the FDA before distributing such drugs in the future.

United States Seeks Preliminary Injunction Against Arkansas Compounding Pharmacy
United States v. Cantrell Drug Co. et al.

Press Release
Docket Number: 4:18-CV-0159 (E.D. Ark.)

On Feb. 28, 2018, the United States filed a civil complaint, and on Mar. 1, 2018, filed a motion seeking a preliminary injunction against Cantrell Drug Company and its co-owner and Chief Executive Officer, James L. McCarley, Jr., to stop the manufacturing and distribution of adulterated drugs. The complaint alleges that Cantrell, a compounding pharmacy, distributed adulterated drugs in interstate commerce and caused drugs to become adulterated while held for sale after shipment of a component in interstate commerce.

Cantrell initiated voluntary recalls of drug products in 2016 and 2017 due to a lack of sterility assurance. According to the complaint, FDA inspections of the Cantrell facility documented evidence of insanitary conditions and significant deviations from current good manufacturing practice requirements, including records showing the company detected potentially dangerous bacteria in the air and on surfaces used for sterile processing.

Aegerion Pharmaceutical Pleads Guilty for Distributing Misbranded Drugs
United States v. Aegerion Pharmaceuticals, Inc.

Docket Number: 1:17-CR-10288 (D. Mass.)

On Jan. 30, 2018, Aegerion Pharmaceuticals Inc. (Aegerion) pleaded guilty to violating the Food, Drug, and Cosmetic Act (FDCA) relating to its distribution of a prescription drug, Juxtapid, and was sentenced to three years of probation, to include the establishment of a $7.2 million restitution fund. Juxtapid was approved to treat patients with homozygous familial hypercholesterolemia (HoFH), a rare genetic disorder that causes abnormally high levels of LDL-C, or “bad” cholesterol.

As part of Juxtapid’s approval, FDA required a Risk Evaluation and Mitigation Strategy (REMS) to educate prescribers about the risks of liver toxicity and to restrict access to Juxtapid only to those patients with a clinical or laboratory diagnosis consistent with HoFH. However, according to a criminal Information filed Sept. 22, 2017, Aegerion failed to give health care providers complete and accurate information about HoFH and distributed Juxtapid as a general treatment for high cholesterol without adequate directions for such use. The plea was part of an global resolution that included a separate consent decree of permanent injunction to resolve civil liability under the FDCA.

Civil Penalty and Permanent Injunction Entered Against Dr. Reddy’s Laboratories, Inc. Related to Child-Resistant Drug Packaging
United States v. Dr. Reddy’s Laboratories, Inc.

Press Release
Docket Number: 3:17-CV-13219 (D.N.J.)

On Jan. 18, 2018, the district court entered a consent decree imposing a $5 million civil penalty and a permanent injunction against Dr. Reddy’s Laboratories, Inc., a pharmaceutical company, to resolve a complaint that the company violated the Consumer Product Safety Act. The complaint, filed with the consent decree on Dec. 18, 2017, alleged that until 2012, Dr. Reddy’s distributed oral prescription drugs in blister packaging that it failed to test for child resistance under the Poison Prevention Packaging Act.

In addition to imposing a civil penalty, the order permanently enjoins Dr. Reddy’s from distributing household oral prescription drugs in violation of the law and requires Dr. Reddy’s to implement a compliance program. The injunction further requires Dr. Reddy’s to maintain internal controls and procedures designed to ensure timely, truthful, complete, and accurate reporting of such issues to the Commission.

Defendants Sentenced in Connection with Internet Pharmacy Scheme
United States v. W. Scott Harkonen

Docket Number: 15-16844 (9th Cir./N.D. Cal.)

On Dec. 4, 2017, the Ninth Circuit Court of Appeals affirmed the district court’s denial of Dr. W. Scott Harkonen’s coram nobis petition seeking to overturn his fraud conviction for ineffective assistance of counsel at trial. Harkonen was convicted of wire fraud in 2009 for distributing a fraudulent press release designed to boost sales of his company’s main drug.

Harkonen argued that his conviction should be overturned because his trial team failed to call any expert witnesses for the defense. The Ninth Circuit rejected Harkonen’s arguments, holding that his attorneys’ decision to forego calling defense expert witnesses was an appropriate “judgment call” made by competent counsel after an extensive search for and preparation of multiple defense experts.

Defendants Sentenced in Connection with Internet Pharmacy Scheme
United States v. Onochie Aghaegbuna; United States v. Jonathan Wall

Docket Number: 0:13-CR-273 (D. Minn.)

On October 6, 2017, Jonathan Wall was sentenced to probation and Onochie Aghaegbuna was sentenced to time served related to their roles in RX Limited, a fraudulent Internet pharmacy scheme. Wall previously pleaded guilty to one count of conspiracy to violate the Federal Food, Drug, and Cosmetic Act (FDCA). In pleading guilty, Wall admitted that beginning in 2007, he managed a call center in Manila associated with RX Limited’s online pharmaceutical sales websites. After returning to the United States in 2008, Wall used phony names to obtain wholesale pharmaceutical licenses from several states in the hope of selling wholesale quantities of drugs directly to RX Limited’s dispensing pharmacies. Aghaegbuna previously pleaded guilty to conspiracy and a substantive violation of the FDCA, as well as one count of conspiracy to commit international money laundering.

In pleading guilty, Aghaegbuna admitted that from 2004 through 2012, he authorized at least 322,157 invalid prescription orders and, along with co-conspirators, caused prescription drugs to be distributed to customers in violation of the FDCA. In the course of authorizing drug orders for RX Limited, the defendant had no face-to-face contact with customers, performed no mental or physical examinations, did not take patient histories or perform any diagnostic or laboratory testing, did not check the accuracy of the information customers provided, and did not monitor, or provide any means to monitor, medication response.

District Court Enters Permanent Injunction Against Utah Pharmacy and Individuals to Prevent Distribution of Adulterated and Misbranded Drugs and Unapproved New Drugs
United States v. Isomeric Pharmacy Solutions, LLC, et al.

Press Release
Docket Number: 2:17-CV-0852 (D. Utah)

On August 4, 2017, the district court entered a consent decree of permanent injunction against Isomeric Pharmacy Solutions, LLC and company principals William O. Richardson, Rachael S. Cruz and Jeffery D. Brown. Isomeric manufactures, labels, and distributes sterile drugs, including injectable hormones, injectable corticosteroids, and ophthalmic drops. In a complaint filed July 27, the United States alleged that inspections at Isomeric revealed a number of insanitary conditions, including the presence of several types of microorganisms in the air and on surfaces used for sterile processing, as documented by the company’s own records. FDA inspectors also found deviations from current good manufacturing practice requirements in the pharmacy’s sterile drug manufacturing operations. For example, as alleged in the complaint, Isomeric failed to conduct an adequate investigation of black particles observed in vials of product that had “passed” visual inspection.

As part of the consent decree, defendants agreed not to resume manufacturing, holding or distributing drugs until they comply with specific remedial measures set forth in the order entered by the Court. Among other requirements, the defendants must establish and implement procedures to ensure a thorough investigation of any unexplained discrepancy or failure in a drug batch, regardless of whether the batch has been distributed.

Alabama Pharmacy Enjoined from Distributing Adulterated, Misbranded, or Unapproved Drugs
United States v. Medistat RX, LLC, et al.

Press Release
Docket Number: 1:17-CV-0236 (S.D. Ala.)

On July 5, 2017, the district court entered a consent decree of permanent injunction against Medistat RX, LLC, a compounding pharmacy, and three individual defendants: Mark D. Acker, who served as its Chief Executive Officer, Timothy L. Fickling, who served as its Production Manager, and V. Elaine Waller, who served as its Pharmacist-in-Charge and Quality Manager. In a complaint filed in May, the United States alleged that inspections at Medistat revealed numerous insanitary conditions, including significant microbial contamination in aseptic processing areas and the failure to use sterile wipes to clean critical surfaces in the pharmacy.

The complaint alleged that the defendants failed to adequately investigate or take sufficient corrective action to correct the insanitary conditions. In 2015, drugs manufactured by the pharmacy were potentially linked to a 2015 outbreak of Staphylococcus aureus infections in Rhode Island. As part of the consent decree, the defendants represented that Medistat has ceased operations. The defendants would be required comply with remedial measures to resume any manufacturing, holding, or distribution of drugs.

Lead NECC Defendant Sentenced to Nine Years in Prison in Connection with 2012 Nationwide Fungal Meningitis Outbreak
United States v. Barry Cadden

Press Release
Docket Number: 14-CR-10363 (D. Mass.)

On June 26, 2017, Barry Cadden, the owner and head pharmacist of New England Compounding Center (NECC), was sentenced to nine years (108 months) of imprisonment, three years of supervised release, and forfeiture and restitution in amounts to be determined later. NECC was the source of contaminated drugs that spawned the 2012 nationwide fungal meningitis outbreak, the largest public health crisis ever caused by a pharmaceutical product. More than 750 patients in 20 states were diagnosed with a fungal infection after receiving injections of methylprednisolone acetate (MPA) compounded at NECC. The U.S. Centers for Disease Control and Prevention (CDC) reported that 64 patients in nine states died.

Cadden was convicted of 57 counts following trial, including racketeering, racketeering conspiracy, mail fraud, and violations of the Food, Drug and Cosmetic Act. Evidence at trial showed Cadden directed and authorized the shipping of contaminated MPA that caused the outbreak.Cadden also authorized the shipping of other drugs before test results confirming their sterility were returned, never notified customers of nonsterile results, compounded drugs with expired ingredients, and employed an unlicensed pharmacy technician. Cadden repeatedly took steps to shield NECC’s operations from regulatory oversight by the FDA by claiming to be a pharmacy dispensing drugs pursuant to valid, patient-specific prescriptions.

New Jersey and Florida Companies Enjoined from Distributing Unapproved, Misbranded, and Adulterated Drugs
United States v. Stratus Pharmaceuticals, Inc., et al.

Press Release
Docket Number: 0:17-CV-21659 (S.D. Fla.)

On June 14, 2017, the district court entered a consent decree of permanent injunction against Stratus Pharmaceuticals, Inc., Sonar Products, Inc., and two of the companies’ executives, Alberto Hoyo and Juan Carlos Billoch. Sonar, a New Jersey corporation, manufactures drugs for Stratus. Stratus, a Florida corporation, distributes prescription and non-prescription drugs and owns 80 percent of Sonar. The injunction permanently enjoins the defendants from distributing unapproved, misbranded, and adulterated drugs in violation of the Food, Drug, and Cosmetic Act. In a complaint filed in April, the United States alleged that inspections at Sonar and Stratus revealed violations of current good manufacturing practices that demonstrated a lack of quality oversight of the manufacturing, processing, and testing of drugs such that, if they continued, posed a threat to the public health.

The complaint also alleged that the companies manufactured and/or distributed a number of dermatological products that were not approved by the FDA. Some of the companies’ products were previously seized in April 2015 by the United States as unapproved and misbranded drugs. The injunction prohibits defendants from manufacturing and distributing unapproved drugs, and, among other measures, requires Sonar to cease manufacturing until the company implements remedial measures, including establishing a quality assurance and quality control program and retaining an expert to conduct a comprehensive evaluation of Sonar’s operations.

D.C. Pharmacist Who Distributed Drugs Without Valid Prescriptions Ordered to Pay $250,000 Criminal Fine
United States v. Akinyoyenu

Press Release
Docket Number: 1:15-CR-0042 (D.D.C.)

On May 10, 2017, pharmacist Titilayo Akinyoyenu was sentenced to 36 months of probation and ordered to pay a $250,000 criminal fine for his role in a conspiracy to ship pharmaceuticals that were misbranded because they lacked valid prescriptions. The fine represents Akinyoyenu’s pecuniary gain from the crime. Akinyoyenu pleaded guilty on February 27 to a misdemeanor conspiracy count. From 2006 to 2010, Akinyoyenu owned and operated an internet pharmacy called Apex Online Pharmacy.

Apex shipped prescription drugs, including addictive pain medications such as Fioricet, Soma, and Tramadol, to customers from across the United States who submitted orders and filled out online medical questionnaires. In pleading guilty, Akinyoyenu admitted that he paid a doctor to review thousands of prescription drug orders for a small fee per order. Akinyoyenu admitted that after the doctor approved the website orders from his home in Florida, Akinyoyenu would ship the pharmaceuticals from his brick-and-mortar pharmacy in Washington, D.C. Akinyoyenu admitted that the drugs lacked valid prescriptions, and therefore were misbranded, when shipped.

South Dakota Man Pleads Guilty in “QLasers” Medical Device Scam
United States v. Ronald D. Weir, Jr.

Press Release
Docket Number: 5:17-CR-50022 (D.S.D.)

On February 27, 2017, Ronald D. Weir, Jr. pled guilty to one count of conspiracy to introduce misbranded medical devices into interstate commerce with the intent to defraud and mislead in connection with an ongoing prosecution of individuals who sold “QLasers.” In pleading guilty, Weir admitted that he conspired with Robert “Larry” Lytle to sell the hand-held light-emitting devices to mostly elderly consumers as a purported treatment for more than 200 different diseases and disorders, including cancer, diabetes, and dementia.

Weir admitted that claims the device could safely and effectively treat virtually any disease were false and intended to mislead consumers. Weir continued to distribute QLasers even after being enjoined by a federal court in January 2015. Victims lost at least $16.7 million to the fraudulent scheme. Lytle and another QLaser distributor, Irina Kossovskaia, were indicted earlier this year on related charges of mail fraud, wire fraud, conspiracy, and contempt. Additionally, Lytle’s longtime live-in companion, Fredretta L. Eason, was charged with aiding and abetting Lytle’s criminal contempt. The Indictment also charged Lytle with obstruction of FDA proceedings. Weir is set to be sentenced on May 12, 2017. Trial for the remaining defendants is scheduled to begin June 13, 2017.

Baxter Healthcare Corporation Agrees to Pay More Than $18 Million for Failing to Follow Good Manufacturing Practices
United States v. Baxter Healthcare Corporation

Press Release
Docket Number: 1:17-CV-0015 (W.D.N.C.)

On January 12, 2017, Baxter Healthcare Corporation (Baxter) agreed to pay $18.158 million to resolve criminal and civil liability arising from its failure to follow current Good Manufacturing Practices (cGMP) when manufacturing sterile drug products. Under the Federal Food, Drug, and Cosmetic Act, the failure to follow cGMP renders drugs manufactured under such conditions adulterated. At a plant in North Carolina, Baxter manufactured large-volume sterile intravenous (IV) solutions in a clean room that had high-efficiency particulate absorption (HEPA) filters installed in the ceiling. Air was pushed into the clean room through the HEPA filters.

Between July 2011 and November 2012, Baxter manufactured IV solutions in a clean room with moldy HEPA filters, despite the fact that an employee had reported the presence of mold on the HEPA filters to plant management. Although Baxter distributed the adulterated products it made in that clean room, there was no evidence of impact on the IV solutions from the mold found on the filters. As part of a global resolution, Baxter agreed to a deferred prosecution agreement and to pay a total of $16 million in criminal monetary penalties and forfeiture. The resolution also includes a civil settlement with the federal government, including a payment of approximately $2.158 million, to resolve allegations that Baxter submitted false claims to the Department of Veterans Affairs in violation of the False Claims Act.

Medical Device Maker Pleads Guilty to Misbranding and Agrees to Pay $36 Million to Resolve Criminal Liability and False Claims Act Allegations
United States v. Biocompatibles, Inc.

Press Release
Docket Number: 1:16-MJ-00710 (D.D.C.)

On November 7, 2016, Pennsylvania-based medical device manufacturer Biocompatibles, Inc., a subsidiary of BTG plc, pled guilty to a misdemeanor charge of introducing a misbranded medical device into interstate commerce, in violation of the Food, Drug and Cosmetic Act. Biocompatibles was sentenced to pay an $8.75 million criminal fine and a criminal forfeiture of $2.25 million. In addition, the company is paying $25 million to resolve civil allegations under the False Claims Act. The civil resolution has been entered in the Western District of Texas, where a whistleblower qui tam complaint had been filed.

The $36 million global resolution relates to the medical device LC Bead, which is used to treat liver cancer. The Food and Drug Administration cleared LC Bead to be used for embolization, a process in which the flow of blood to liver tumors is stopped or reduced. Through a separate company that it contracted with to market and distribute LC Bead in the United States, Biocompatibles marketed LC Bead to deliver chemotherapy drugs – a use that was never cleared or approved by the FDA. The conduct occurred prior to Biocompatibles’ acquisition in 2011 by BTG.
 

Two Pakistani National Sentenced for Conspiring to Illegally Ship Pharmaceuticals into the United States
United States v. Ul Haq

Press Release
Docket Numbers: 1:12-MJ-00810 (D.D.C.)

On November 4, 2016, Sheikh Waseem Ul Haq was sentenced to time served, and three years’ supervised release, for his role in a long-running conspiracy to ship pharmaceuticals from Pakistan and the United Kingdom (UK) to customers in the United States. The Court also entered a Consent Order of Forfeiture for $388,265.12, Ul Haq’s portion of the proceeds from drug sales to United States customers. From 2005 to 2012, the websites operated by Ul Haq and his co-defendant Tahir Saeed illegally sold $2 million worth of prescription drugs, including anabolic steroids and other controlled substances, to customers worldwide, including nearly $780,000 in sales to United States purchasers. Many of the drugs sold by the defendants were generic drugs that were unapproved for sale in the United States; others were Schedule III steroids or drugs used by steroid users, such as clenbuterol. Clenbuterol is only approved for sale in the United States as an equine bronchodilator, yet is sold on the black market for use by bodybuilders. Ul Haq and Saeed were arrested in England in October 2012, and held without bond until they were extradited to the United States in the spring of 2013.

In January 2014, Ul Haq entered guilty pleas to all 48 counts of the indictment, which charged him with conspiracy to import and distribute Schedule II, III, and IV controlled substances, conspiracy to defraud the United States and its agencies and introduce into interstate commerce misbranded drugs, conspiracy to commit international money laundering, and numerous substantive offenses of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act. In January 2014, Tahir Saeed also entered guilty pleas to several counts of the indictment, and was sentenced in October 2016 to time served. At the time of their sentencings, both defendants had been incarcerated for approximately 4 years, including time spent in an English jail.

Jury Convicts Defendants in Medical Device Case
United States v. William Facteau and Patrick Fabian

Press Release
Docket Numbers: 1:15-CR-10076 (D. Mass.)

On July 20, 2016, a federal jury returned guilty verdicts against William Facteau and Patrick Fabian for distributing a medical device known as the Relieva Stratus Microflow Spacer (“Stratus”). The defendants were executives of Acclarent, a start-up company that was acquired by Johnson & Johnson in 2010. The evidence at trial demonstrated that Facteau and Fabian sought to quickly develop and market products, including the Stratus, to create a projected revenue stream that would make Acclarent an attractive business for either an initial public offering or acquisition. Despite the fact that the company had told the FDA that the Stratus was intended to maintain an opening to a patient’s sinus, Facteau and Fabian launched the product intending it to be used as a steroid delivery device.
The FDA had specifically refused Acclarent’s request to clear the Stratus for marketing as a drug delivery device without further submissions to support that use. Following a 6-week jury trial, each defendant was convicted of 10 counts of introducing adulterated and misbranded medical devices into interstate commerce. The jury acquitted defendants on 14 felony counts of fraud and one conspiracy count. The 10 counts of conviction were misdemeanor counts related to the same conduct.
 

Three Individuals Charged With Distribution of Unapproved Drugs
United States v. Guy Lyman; United States v. Flor Nutraceuticals, LLC and Guy Lyman; United States v. James Hill; United States v. James Hill d/b/a Viruxo LLC; United States v. Clifford Woods; United States v. Clifford Woods LLC d/b/a Vibrant Life and Clifford Woods

Press Release
Docket Numbers: 2:16-CR-0124 (E.D. La.);2:16-CV-12655 (E.D. La.); 5:16-CR-0022 (M.D. Fla.); 5:16-CV-0577 (M.D. Fla.);2:16-CR-0191 (C.D. Cal.); 2:15-CV-8889 (C.D. Cal.) (respectively)

Criminal and civil actions were filed against three individuals for marketing and selling dietary supplements as potential disease cures, part of an ongoing efforts to curtail the production and distribution of unlawful dietary supplements. On July 12, 2016, the government filed criminal informations against two individuals, charging each with one misdemeanor count of introducing an unapproved new drug into interstate commerce in violation of the federal Food, Drug and Cosmetic Act (FDCA). The defendants, Guy Lyman of New Orleans, Louisiana, and James Hill of Ocala, Florida, each sold products that they marketed as treatments for herpes. The products had not been approved by Food and Drug AdminIstration. They are expected to enter guilty pleas to the informations, which were filed in the U.S. District Courts for the Eastern District of Louisiana and Middle District of Florida. A third individual, Clifford Woods, pled guilty on May 9, 2016, in the U.S. District Court for the Central District of California to a misdemeanor FDCA violation for distribution of unapproved new drugs that he marketed and sold as treatments for cancer and other diseases. The government also filed civil complaints against these three individuals, all of whom agreed to the entry of consent decrees of permanent injunction. The decrees against Hill and Woods were entered on February 26, 2016, and June 27, 2016, respectively. The decree against Lyman was filed on July 12, 2016, and is subject to court approval.
 

B. Braun Medical Inc. Agrees to Resolve Criminal Liability for its Sale of Contaminated Syringes
United States v. B. Braun

Press Release
 

On May 18, 2016, drug and medical device company B. Braun Medical Inc. (B. Braun) agreed to pay $4.8 million in penalties and forfeiture and up to $3 million in restitution to resolve its criminal liability for selling contaminated B. Braun pre-filled saline flush syringes in 2007. In March 2006, B. Braun started buying saline syringes from AM2PAT, Inc. (AM2PAT), despite already being aware of problems related to AM2PAT complying with current good manufacturing practices. In the spring of 2007, AM2PAT moved to a new manufacturing facility and changed the company AM2PAT would use to sterilize B. Braun saline syringes through a new radiation sterilization process. Before B. Braun’s quality department approved either of AM2PAT’s changes, B. Braun began selling syringes manufactured in AM2PAT’s new facility. Two months after B. Braun started selling syringes manufactured at the new AM2PAT facility, B. Braun recalled all of the syringes because the radiation sterilization process caused dangerous white particles to develop in the saline inside the syringes.

However, B. Braun resumed buying syringes from AM2PAT without going to the new facility, and despite receiving new information showing that AM2PAT moved manufacturing equipment into its new facility without validating that the equipment worked as expected. Less than a month after B. Braun resumed buying syringes from AM2PAT, AM2PAT manufactured B. Braun saline syringes contaminated with Serratia marcescens bacteria. These contaminated syringes infected patients in California, Texas, New York and Nebraska. After these infections, all of B. Braun’s syringes manufactured by AM2PAT were recalled. The resolution with B. Braun included a non-prosecution agreement in which B. Braun admitted that it distributed B. Braun syringes that were adulterated under the Food Drug and Cosmetic Act. Under the terms of the agreement, B. Braun will increase oversight of its product suppliers by conducting on-site audits of companies that design and make finished products that bear the B. Braun name on the label or logo and testing such products for sterility, identity and purity, as appropriate, on a periodic basis.

Consent Decree Filed in Enforcement Action Against New Jersey Drug Manufacturer and Owner
United States v. Acino Products, LLC, and Ravi Deshpande

Docket Number: 3:15-CV-3769 (D.N.J.)

On June 5, 2015, the United States filed an injunction action in the District of New Jersey against Acino Products, LLC (“Acino”) and its owner, Ravi Deshpande, to prevent the distribution of unapproved and misbranded drugs.  Acino manufactures hydrocortisone acetate 25 mg suppositories, which it labels and sells as prescription drugs.  Because Acino has never submitted an application for FDA approval of the drugs, they have never been found to be safe and effective.  Further, because they are prescription drugs, their labels by definition cannot bear adequate directions for use by a layperson.  Thus, they are misbranded within the meaning of the Food, Drug, and Cosmetic Act (“FDCA").  In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing violations of the FDCA.  Once entered by the court, the consent decree will require Acino to cease all manufacture and distribution of the unapproved and misbranded suppositories, and to destroy any such suppositories already in existence.

Government Files Complaint for Permanent Injunction Against New Jersey Maker of Ultrasound Gels
United States v. Pharmaceutical Innovations Inc. and Charles Buchalter; Pharmaceutical Innovations, Inc. v. U.S. Food & Drug Admin;
United States v. All Articles of Other-Sonic Generic Ultrasound Transmission Gel...;United States v. Pharmaceutical Innovations, Inc.

Press Release
Docket Number: 2:14-CV-6139 (D.N.J.); 2:14-CV-1156 (D.N.J.); 2:12-CV-2264 (D.N.J.);2:16-CR-316 (D.N.J.) (respectively)

On October 2, 2014, the United States filed a complaint for a permanent injunction against Pharmaceutical Innovations Inc. and its founder, owner, and chairman, Gilbert Buchalter, for violations of the Federal Food, Drug and Cosmetic Act (FDCA). The company makes gels that hospitals and other caregivers use to take ultrasound scans. The complaint alleges that the defendants are in violation of current good manufacturing practice and quality-system requirements, and are marketing medical devices without either clearance or approval. In February 2012, a Michigan hospital traced infections among 16 surgical patients to a specific gel made by Pharmaceutical Innovations. FDA testing on samples of the gel tested positive for bacterial contamination. The relevant lots of that particular gel were seized in a seizure lawsuit the United States filed in 2012; the company is actively contesting that lawsuit. In a third lawsuit, the company sued the FDA in early 2014 for denying it an export certificate attesting that it is in full compliance with the FDCA.
 

On June 21, 2016, David Allen and William Rogers were sentenced to 12 months and 10 months in prison, respectively, in connection with the distribution of adulterated drugs. Allen was the former pharmacist-in-charge of Meds IV and Rogers was the former president of Meds IV. Both men pleaded guilty in March 2016 to two misdemeanor violations of the Federal Food, Drug and Cosmetic Act (FDCA). Both defendants were also sentenced to one year of supervised release following their imprisonment and a $5,000 fine. As alleged in the information, Meds IV compounded various drugs for human use, including an intravenous drug known as Total Parenteral Nutrition (TPN). TPN is liquid nutrition administered intravenously to patients who cannot or should not receive their nutrition through eating. The information alleged that beginning in or around February 2011, Meds IV compounded its own amino acid solution, which it then mixed with other ingredients to form TPN.

As charged in the information, amino acid used in compounding the TPN was adulterated in that it was contaminated with Serratia marcescens (S. marcescens) and was prepared, packed, or held under insanitary conditions. S. marcescens is a bacteria that can cause bloodstream infections if introduced into the bloodstream through contaminated medications. These infections can cause serious medical complications, including death, because S. marcescens is resistant to many antibiotics. According to the charging document, the amino acid was prepared by Meds IV outside a laminar airflow workbench and was kept unrefrigerated, in a room that was not sterile, in a large pot sitting on the floor, sometimes overnight, before it was sterilized and used. As alleged in the information, between March 5 and 15, 2011, nine patients at various Birmingham-area hospitals who developed bloodstream infections caused by S. marcescens died, and several other hospital patients developed S. marcescens bloodstream infections but survived. According to the charges, all of these patients had been given TPN that was compounded and distributed by Meds IV. As alleged in the information, while a number of the patients who died had underlying conditions which may have contributed to their deaths, medical records of some patients suggest that the S. marcescens bloodstream infections were also a significant factor.
 

California Man Sentenced for Prescription Drug Diversion
United States v. Joseph Dallal

Docket Number: 3:12-CR-922 (D.P.R.);1:14-CR-10 (S.D. Ohio)

On February 19, 2016, Joseph Dallal was sentenced to serve 33 months in prison in connection with two separate prescription drug diversion schemes.  The Court also ordered Dallal to forfeit $250,000 in ill-gotten gains.  Dallal was previously charged in the District of Puerto Rico and the Southern District of Ohio for selling illegally-sourced prescription drugs in connection with two distinct drug diversion schemes.  Dallal procured the drugs from multiple illegal and unlicensed sources and sold them to co-conspirators without the required pedigree document stating where Dallal had purchased the drugs.  In both cases, Dallal’s co-conspirators then sold the drugs to wholesalers and pharmacies throughout the United States with false pedigree documents that did not disclose the true sources of the drugs.  The cases were consolidated for plea and sentencing in Puerto Rico.  On December 5, 2014, Dallal pled guilty to two counts of conspiracy to commit mail and wire fraud.
 

Defendants Sentenced in Texas Prescription Drug Smuggling Ring
United States v. Catherine Nix,Tom Giddens, and Wanda Hollis

Press Release
Docket Number: 6:14-CR-49 (E.D. Tex.)

On February 3, 2016, Catherine Nix was sentenced to 15 months imprisonment, and on October 6, 2015, Wada Hollis and Thomas Giddens were also sentenced to 15 months imprisonment for their roles in in a prescription drug smuggling ring.  All three defendants previously pled guilty to charges of conspiracy to smuggle imitation, unapproved, and misbranded prescription drugs from China. The defendants conspired to smuggle at least 43 known shipments, totaling approximately 106,000 pills, from China to Texas.  The shipments contained bogus imitations of Xanax®, Valium®, sibutramine, Cialis®, Viagra® and Stilnox® (marketed in the United States as Ambien®). 

The defendants attempted to conceal their smuggling by using shipping labels that misrepresented the contents of their shipments, including customs declarations falsely describing the contents as “gifts” or “toys” with low declared monetary values, and by using multiple addresses in an effort to reduce the likelihood of seizures by U.S. Customs and Border Protection authorities.  Additionally, the defendants instructed others to destroy evidence once they became aware that they were under investigation.

Injunction Action Filed Against Drug Compounder
United States v. Downing Labs, LLC et al.

Press Release
Docket Number: 3:16-CV-003 (N.D.Tex.)

On January 8, 2016, the district court entered a consent decree of permanent injunction against Downing Labs, LLC, Ashley Downing, Christopher Downing, and Roger Mansfield. FDA inspections over the past three years have revealed multiple and repeated violations of the Food, Drug, and Cosmetic Act (FDCA) by Downing in the manufacture of compounded sterile injectable drugs. Downing and its immediate predecessor, NuVision Pharmacy, Inc., adulterated compounded sterile injectable drugs by preparing them under insanitary conditions, and by using methods or controls that did not comply with current good manufacturing practices. For example in the summer of 2014, inspectors found that 19 lots of Downing’s drugs had tested positive for various microorganisms, including Staphylococcus haemolyticus, which can cause septicemia, peritonitis, and urinary tract infections, and Nocardia nova, which can cause pneumonia, sinusitis, and skin infections. These lots of drugs were not distributed into interstate commerce. Following the most recent inspection, at FDA’s request, Downing voluntarily recalled all unexpired sterile injectable drugs that had been distributed and ceased manufacturing/compounding sterile injectable drugs. Under the proposed consent decree, Downing will be enjoined from manufacturing drugs in violation of the FDCA and will be required to cease operations until FDA determines that the company has brought its conduct into compliance with the law.

Court Enters Stipulated Preliminary Injunction Against St. Louis Chiropractor Deceptively Advertising Vitamin D and Zinc as COVID-19 Treatments  

United States v. Eric Nepute and Quickworks LLC,
Case No. 4:21-cv-00437-RLW (E.D. Mo.). 

On May 5, 2021, the Court entered a stipulated preliminary injunction against a St. Louis chiropractor, Eric Nepute, and his company Quickwork LLC, d/b/a Wellness Warrior, whom the government alleged were deceptively advertising vitamin D and zinc as COVID-19 treatments.  The government’s complaint seeks preliminary and permanent injunctions, civil penalties, and other equitable relief.  The complaint alleges that, to sell their vitamin D and zinc products, the defendants have been advertising on social media and the internet that vitamin D and zinc treat or prevent COVID-19 and are more effective than vaccines, in violation of Sections 5 and 12 of the FTC Act, as well as the COVID-19 Consumer Protection Act (CCPA).  This is the first enforcement action under the CCPA.

Summary Judgment Granted Against Manufacturer of Adulterated Dietary Supplements

United States v. Confidence USA, Inc., et al.
Docket No. 2:19-cv-3073 (E.D.N.Y.). 

On January 28, 2021, U.S. District Judge Edward R. Korman granted the government’s motion for summary judgment in a case seeking a permanent injunction against New York dietary supplement firm Confidence USA and its operators for continued alleged violations of the Food, Drug, and Cosmetic Act.  The defendants manufacture a variety of dietary supplements available on their website and in stores, primarily marketed to Chinese-speaking communities.  The government alleged that the defendants violated current good manufacturing practice regulations by, among other things, failing to ensure that finished batches met specifications or to conduct appropriate tests to verify the identity of ingredients.  The Court held that the defendants’ violations meant the supplements were adulterated as a matter of law, and set a hearing for February 17 to discuss the scope of a permanent injunction.

Dietary Supplement Companies Sentenced in Case Involving Alleged Link to Liver Damage

U.S. v. USPLabs, et al.
Docket Number: 3:15-cr-496 (N.D. Tex.)

On September 22, 2020, the court sentenced Dallas-based USPLabs to two years of probation and $4.7 million in criminal forfeiture for its role in fraudulently marketing a popular dietary supplement allegedly linked to liver damage.  The court sentenced SK Laboratories, based in Anaheim, California, the following day to two years of probation and $6 million in criminal forfeiture for its role in distributing the supplement.  Both companies, along with five individuals, pleaded guilty last year.  According to the indictment in the case, between 2008 and 2013, USP Labs marketed the highly successful workout supplements Jack3d and OxyElite Pro, which contained a synthetic stimulant known as DMAA.  Following controversy regarding the safety of DMAA, the defendants reformulated their products to contain a different substance called aegeline.  According to the indictment, the aegeline-containing product was associated with a 2013 outbreak of severe liver injuries before being pulled from the market.  The indictment further alleged that the defendants imported synthetic ingredients from China using false certificates of analysis and false labeling, and lied about the source and nature of those ingredients to retailers and consumers.  Two of the individual defendants, Jacob Geissler and Jonathan Doyle, are expected to be sentenced in federal court in Dallas on October 13 and 15, 2020, respectively. 

District Court Enters Permanent Injunction Against Chicago Sprout and Soybean Products Company

United States v. Fortune Food Product, Inc. et al.
Docket Number: 1:20-cv-5356 (N.D. Ill.)

On September 15, 2020, the district court entered a consent decree of permanent injunction against Fortune Food Product, Inc., company president Steven Seeto, and supervisor Tiffany Jiang.  In a complaint filed September 10, 2020, the United States alleged that the defendants violated the Food, Drug, and Cosmetic Act and the Produce Safety Rule by growing sprouts and preparing and holding soy products that FDA inspections showed did not comply with food safety regulations.  The complaint alleged that FDA issued a warning letter to the company in 2018, and that tests in 2018 and 2019 revealed Listeria species inside the facility and E. coli in water used to irrigate sprouts.  As part of the consent decree, the defendants must cease growing and packing sprouts or preparing other foods unless they comply with specific remedial measures.  The action is the first brought against a firm for violating safety standards under the Produce Safety Rule enacted under the Food Safety Modernization Act of 2011.
 

Blue Bell Creameries Sentencing Date Set in Listeria Contamination Case

United States v. Blue Bell Creameries
Docket Number: 1:20-cr-123 (W.D. Tex.)

U.S. District Court Judge Robert Pitman has scheduled the sentencing hearing for Blue Bell Creameries for September 17, 2020.  Sentencing will be held in U.S. District Court in Austin, Texas. 

For more information about this case and any further updates, please see this page.
 

Blue Bell Creameries Pleads Guilty in Ice Cream Listeria Contamination Case

United States v. Blue Bell Creameries
Docket Number: 1:20-cr-123 (W.D. Tex.)

On May 13, 2020, Blue Bell Creameries pleaded guilty before U.S. District Judge Robert Pitman to charges that the Texas-based ice cream manufacturer shipped listeria-contaminated products in 2015.  Blue Bell’s former president, Paul Kruse, was previously charged on May 1, 2020, in connection with his role in covering up from customers what the company knew about the contaminated ice cream.  Blue Bell pleaded guilty to two misdemeanor counts of distributing adulterated ice cream products and has agreed to pay a criminal fine and forfeiture amount totaling $17.25 million according to the terms of a plea agreement.  Blue Bell also agreed to pay an additional $2.1 million to resolve civil False Claims Act allegations regarding ice cream products manufactured under insanitary conditions and sold to federal military facilities. 

Sentencing will be held in Austin, Texas, before Judge Pitman.  The date of the sentencing hearing has not yet been set.  For more information, see the Press Release dated May 1, 2020.

Defendants in USP Labs Dietary Supplement Scheme Set for Sentencing in July/August 2020
United States v. USP Labs

Press Release
Docket Number: 6:20-cv-140 (E.D. Okla.)

Defendants named in the USP Labs matter pleaded guilty in 2019 to felony charges in connection with a scheme to fraudulently sell workout supplements.  Cyril Willson, who helped to formulate the company’s products, and Mathew Hebert, one of the owners of USP Labs, pleaded guilty to introducing misbranded food into interstate commerce with the intent to defraud or mislead.  Jonathan Doyle, the president of USPlabs, and Jacobo Geissler, the CEO of USP Labs, pleaded guilty to conspiracy to introduce misbranded food into interstate commerce.  Sitesh Patel, the vice president of S.K. Laboratories, a California dietary supplement manufacturer, pleaded guilty to conspiracy to introduce misbranded food into interstate commerce and to the introduction of misbranded food into interstate commerce.  In addition, S.K. Laboratories pleaded guilty to introduction of misbranded food into interstate commerce, and USPlabs pleaded guilty to conspiracy to introduce misbranded food into interstate commerce.  All of the defendants played roles in developing, manufacturing, or marketing the popular USP Labs supplements known as Jack3d and OxyElite Pro.  The indictment alleged that the defendants misrepresented the nature and origin of the active ingredients in their products.  OxyElite Pro was recalled in 2013 after being linked by the Food and Drug Administration to a deadly outbreak of serious liver injuries.

The Court rescheduled all sentencing hearings in this matter to July and August 2020.  Sentencing for USP Labs and SK Labs is set for July 14, 2020.  Sentencing hearings for Geissler, Doyle, and Patel are set for July 27, July 29, and August 10, 2020, respectively.  Sentencings for Willson and Hebert are set for August 13 and August 19, 2020, respectively.  The hearings will be held in Dallas before U.S. District Judge Sam A. Lindsay. 

If you believe you are a victim in this matter and would like to speak with someone regarding the case, please call Special Agent Chad Medaris, FDA Office of Criminal Investigations, at 214-887-4174.

Blue Bell Creameries Agrees to Plead Guilty and Pay $19.35 Million for Ice Cream Listeria Contamination; Former Company President Charged

United States v. Blue Bell Creameries; United States v. Kruse
Press release
Docket Number: 1:20-cr-123; 1:20-cr-122 (W.D. Tex.)

On May 1, 2020, the United States filed a criminal information and plea agreement resolving charges that Texas-based ice cream manufacturer Blue Bell Creameries shipped listeria-contaminated products in 2015.  Blue Bell’s former president, Paul Kruse, was charged in connection with his role in covering up from customers what the company knew about the contaminated ice cream.  Blue Bell agreed to plead guilty to two misdemeanor counts of distributing adulterated ice cream products and pay a criminal fine and forfeiture amount totaling $17.25 million.  Blue Bell also agreed to pay an additional $2.1 million to resolve civil False Claims Act allegations regarding ice cream products manufactured under insanitary conditions and sold to federal military facilities.  The total $19.35 million in fine, forfeiture, and civil settlement payments constitutes the second largest-ever amount paid in resolution of a food-safety matter.

District Court Enters Permanent Injunction Against Brooklyn Fish Processor

United States v. Gold Star Smoked Fish Corp., et al.
Docket Number: 1:20-cv-2016 (E.D.N.Y.)

On May 5, 2020, the district court entered a consent decree of permanent injunction against Gold Star Smoked Fish Corp., a New York company, and its CEO and co-owner, Rober Pinkow.  The court’s order permanently enjoins the defendants from violating the Food, Drug, and Cosmetic Act and requires Gold Star and Pincow to implement consumer safety measures before continuing to process, pack, or distribute any fish or fishery products.  In a complaint filed with the consent decree on May 4, the United States alleged that the defendants processed and packed fish and fishery products under chronic insanitary conditions, as demonstrated by the presence of the pathogenic bacteria L. mono in defendants’ Brooklyn facility and in their ready-to-eat products.  L. mono can cause listeriosis, a disease that can be serious, and even fatal, for vulnerable groups such as newborns and those with impaired immune systems.   

Chipotle Mexican Grill to Pay $25 Million Fine for Food Safety Violations

United States v. Chipotle Mexican Grill, Inc.
Press release
Docket Number: 2:20-cr-00188 (C.D. Cal.)

On April 21, 2020, the Department of Justice announced that Chipotle Mexican Grill had agreed to pay a $25 million fine to resolve criminal charges related to foodborne illness outbreaks that sickened more than 1,100 people between 2015 and 2018.  An information filed the same date charged the company with two misdemeanor counts of adulterating food in violation of the Federal Food, Drug, and Cosmetic Act.  The violations stemmed primarily from norovirus outbreaks connected to employees’ failure to follow company food safety protocols at company-owned restaurants.  The fine, the largest ever in a food safety case, is part of a deferred prosecution agreement that will allow Chipotle to avoid conviction if it complies with an improved food safety program. 

Court Rules in Favor of Government in Challenge to FDA’s Authority to Regulate Genetically Modified Salmon
IFR v. Azar

Docket Number: 3:16-cv-1574 (N.D. Cal.)

On December 19, 2019, Judge Chhabria of the Northern District of California granted the government’s motion for judgment on the pleadings (and denied Plaintiffs’ motion for judgment as a matter of law) as to three claims in a challenge by several environmental and food safety advocacy groups to FDA’s approval of a genetically engineered salmon that will be sold as food, and FDA’s guidance pertaining to such approvals.  In granting this motion, Judge Chhabria ruled that FDA has authority under the plain language of the Food, Drug, and Cosmetic Act to regulate the integration of an rDNA construct into a genetically engineered animal’s genome as a new animal drug.  Judge Chhabria also ruled that FDA’s guidance pertaining to genetically engineered animals cannot be challenged because it does not have direct and appreciable legal consequences, and therefore does not constitute final agency action.  Argument on the remaining claims in the case, regarding the proper analysis of certain environmental risks, is expected to take place in May.

Court Rules in Favor of Government in Challenge to FDA Guidance Document
Lystn, LLC, d/b/a Answers™ Pet Food v. FDA, et al.

Docket Number: 1:19-cv-1943 (D. Colo.)

On January 16, 2020, the court granted the government’s motion to dismiss for lack of subject matter jurisdiction in a challenge to an FDA guidance document concerning the presence of Salmonella in food for animals.  In granting the government’s motion, the court ruled that the FDA guidance document does not constitute final agency action because it “provides guidance only and does not create any legal right” and because FDA “derives no enforcement authority from the [guidance document].”  The court additionally compared FDA’s public warning to an FDA warning letter, which the Court noted does not constitute final agency action ripe for judicial review.  The court also observed that even if it had jurisdiction to consider plaintiff’s challenge to the FDA guidance document, the plaintiff’s request to enjoin FDA from conducting an enforcement action was an impermissible attempt to test a defense pre-enforcement.

District Court Orders New York Company to Stop Distributing Adulterated and Misbranded Dietary Supplements United States v. ABH Nature's Products, Inc., et al.

Press release
Docket Number 19-cv-06589 (E.D.N.Y.)

On December 23, 2019, the U.S. District Court for the Eastern District of New York permanently enjoined Edgewood, New York entities ABH Nature’s Products, Inc., ABH Pharma, Inc., and StockNutra.com, Inc., along with the businesses’ owner, Mohammed Jahirul Islam, of Flushing, New York, from distributing adulterated and misbranded dietary supplements in violation of the Federal Food, Drug, and Cosmetic Act.  The injunction requires the defendants to destroy dietary supplements that are in their possession and implement several consumer safety measures before resuming the manufacturing or distributing of dietary supplements.  The defendants agreed to be bound by a consent decree of permanent injunction filed with a complaint in November 2019.  The complaint alleged that ABH and Islam manufactured and distributed dietary supplements under conditions that failed to comply with current good manufacturing practice regulations.  The complaint also alleged that the defendants distributed unapproved new drugs that they claimed could be used to treat such medical conditions as cancer, heart disease, HIV and AIDS.

District Court Enters Permanent Injunction Against Eastern Michigan Seafood and Salad Processor
United States v. Home Style Foods et al.

Press Release
Docket Number: 2:20-cv-10032 (E.D. Mich.)

On January 13, 2020, the district court entered a consent decree of permanent injunction against Home Style Foods, Inc., its president, Michael J. Kowalski, and the company’s quality manager, Juan Valesquez.  In a complaint filed January 7, 2020, the United States alleged that the defendants violated the Food, Drug, and Cosmetic Act by processing and distributing fish products and other food, including salads, pierogis, and dips, in a facility where government inspectors previously found evidence of listeria contamination.  As part of the consent decree, the defendants must cease processing and distributing the products at issue unless and until they comply with specific remedial measures set forth in the injunction.

Court Permanently Enjoins Texas Ready-to-Eat Fish Processor and Three Individuals from Processing and Distributing Adulterated Food 
United States v. Topway Enterprises, Inc., et al.

Press Release
Docket Number: 4:19-CV-3214 (S.D. Tex.)

On August 29, 2019, the district court entered a consent decree of permanent injunction against Topway Enterprises, Inc., d/b/a Kazy’s Gourmet, a Houston, Texas company that processes and distributes ready-to-eat raw fish, and its principals, Jeff Liao, Ying Chen, and Adwin Liao. The order permanently enjoins the defendants from processing and distributing food that is adulterated under the Food, Drug, and Cosmetic Act. In a complaint filed with the consent decree, the United States alleged that the fish at defendants’ facility was processed under insanitary conditions, chiefly because the defendants failed to adequately control the growth of Listeria monocytogenes.

The complaint and consent decree follow FDA’s July 2019 administrative decision to suspend the defendants’ food facility registration.

Defendants Plead Guilty in USP Labs Dietary Supplement Scheme; Sentencings Set for August 2019 
United States v. USP Labs  

Press Release
Docket Number: 3:15-CR-496  (N.D. Tex.)

On March 13, 2019, the two remaining defendants in the USP Labs case pleaded guilty in Dallas to felony charges in connection with a scheme to fraudulently sell workout supplements.  Cyril Willson, who helped to formulate the company’s products, and Mathew Hebert, one of the owners of USP Labs, pleaded guilty to introducing misbranded food into interstate commerce with the intent to defraud or mislead.  Jonathan Doyle, the president of USPlabs, and Jacobo Geissler, the CEO of USP Labs, pleaded guilty February 21 and February 28, respectively, to conspiracy to introduce misbranded food into interstate commerce.  Sitesh Patel, the vice president of S.K. Laboratories, a California dietary supplement manufacturer, pleaded guilty on February 25 to conspiracy to introduce misbranded food into interstate commerce and to the introduction of misbranded food into interstate commerce.  In addition, S.K. Laboratories pleaded guilty on February 25 to introduction of misbranded food into interstate commerce, and USPlabs pleaded guilty to conspiracy to introduce misbranded food into interstate commerce on March 5. 

All of the defendants played roles in developing, manufacturing, or marketing the popular USP Labs supplements known as Jack3d and OxyElite Pro.  The indictment alleged that the defendants misrepresented the nature and origin of the active ingredients in their products.  OxyElite Pro was recalled in 2013 after being linked by the Food and Drug Administration to a deadly outbreak of serious liver injuries.

Sentencing hearings for all of the defendants will be held in Dallas before U.S. District Judge Sam A. Lindsay.  Sentencing for Geissler, Doyle, Patel, and S.K. Laboratories is set for Aug. 12, 2019.  Sentencing for USP Labs is set for Aug. 19, 2019.  Sentencing for Willson and Hebert is set for Aug. 22, 2019.

If you believe you are a victim in this matter and would like to speak with someone regarding the case, please call Special Agent Chad Medaris, FDA Office of Criminal Investigations, at 214-887-4174.

Employee of Chinese Chemical Supplier Sentenced in Scheme to Sell Mislabeled Dietary Supplements 
United States v. Zhang

Press Release
Docket Number: 3:17-CR-546 (N.D. Tex.)

On December 20, 2018, Zhang Xiao Dong (aka Mark Zhang), a Chinese citizen, was sentenced to 24 months’ imprisonment in connection with a fraud and smuggling scheme to sell mislabeled dietary supplements containing hidden synthetic stimulants.  Zhang was the sales manager for a Chinese firm that sold raw ingredients for use in dietary supplements. 

According to an indictment returned in October 2017, Zhang and two co-defendants agreed with a confidential government informant to either mislabel synthetic stimulants such as 1,4-DMAA or otherwise help to hide the true nature of a proposed dietary supplement from retailers.  In pleading guilty earlier this year, Zhang admitted that he knew major American dietary supplement retailers would refuse to carry supplements known to contain certain stimulants, such as DMAA. 

Enforcement Action Filed Against New York Company to Prevent Distribution of Adulterated Seafood Products
United States v. Foo Yuan Food Products, Inc., et al.

Press Release
Docket Number: 1:18-CV-04689-ENV-CLP (E.D.N.Y.)

On August 20, 2018, the United States filed a civil complaint for permanent injunction against Foo Yuan Food Products Company, Inc., its owner and president Hsing Chang, and its secretary Susan Chang. Foo Yuan, which is based in Long Island City, New York, prepares, packs, holds and distributes refrigerated and frozen ready-to-eat fish balls, fried fish cakes and fried fish balls.

The complaint alleges that defendants failed to adequately control the risk of Clostridium botulinum and Listeria monocytogenes (L. mono.) growth and toxin formation in susceptible fish and fishery products. According to the complaint, FDA inspections documented significant deficiencies relating to cleanliness and hygienic practices to protect against food contamination, causing the defendants’ products to be adulterated under the law.

Employee of Chinese Chemical Supplier Pleads Guilty in Scheme to Sell Mislabeled Dietary Supplements
United States v. Xu

Press Release
Docket Number: 3:17-CR-547 (N.D. Tex.)

On August 14, 2018, Xu Jia Bao (a/k/a Fred Xu) pleaded guilty to wire fraud in connection with a scheme to sell mislabeled dietary supplements containing hidden synthetic stimulants. Xu, a Chinese national, was the principal at a Chinese company that regularly supplied ingredients to American dietary supplement makers. According to an indictment returned last October, Xu agreed with a confidential government informant to mislabel synthetic stimulants arriving in the United States or otherwise help to hide from retailers the true nature of a proposed new dietary supplement.

In pleading guilty, Xu admitted that he agreed to falsely label for shipment a synthetic stimulant ingredient, namely DMHA. Xu was arrested at a Las Vegas dietary supplement trade show in September; two other defendants previously pleaded guilty in a related case.

Chicago Dietary Supplement Companies Ordered to Comply with FDCA
United States v. Global Marketing Enterprises, Inc., et al.

Press Release
Docket Number: 1:18-CV-5104 (N.D. Ill.)

On July 27, 2018, the District Court permanently enjoined three Chicago companies—Global Marketing Enterprises, Inc.; Lifeline Nutrients Corp., and Pronto Foods Company—along with the companies’ owner, Eduardo Chua, and operations manager, Haidee Dawis, from violating the Federal Food, Drug, and Cosmetic Act. According to the complaint filed in the case, the defendants manufactured and distributed adulterated dietary supplements not prepared in compliance with current good manufacturing practices.

The complaint also alleged that the defendants illegally distributed unapproved new drugs based on labeling claims that certain products treated diseases such as HIV and Alzheimer’s. The defendants agreed to be bound by a consent decree under which they must take remedial steps and secure FDA approval before resuming the manufacture or distribution of dietary supplements.

Employee of Chinese Chemical Supplier Sentenced in Scheme to Sell Mislabeled Dietary Supplements
United States v. Gao

Press Release
Docket Number: 3:17-CR-546 (N.D. Tex.)

On July 17, 2018, Gao Mei Fang (aka Amy Gao), a Chinese citizen, was sentenced to 12 months and a day of imprisonment on mail fraud and smuggling charges in connection with a scheme to sell mislabeled dietary supplements containing hidden synthetic stimulants. Gao was the supply chain manager for a Chinese firm that sold raw ingredients for use in dietary supplements.

According to an indictment returned in October 2017, Gao and two co-defendants agreed with a confidential government informant to either mislabel synthetic stimulants such as 1,4-DMAA or otherwise help to hide the true nature of a proposed dietary supplement from retailers. In pleading guilty earlier this year, Gao admitted that she knew major American dietary supplement retailers would refuse to carry supplements known to contain certain stimulants, such as DMAA.

Complaint Filed Against New York Food Distributors Alleging Insanitary Conditions
United States v. Euroline Foods, LLC, et al.

Press Release
Docket Number: 1:18-CV-2879 (E.D.N.Y.)

On July 16, 2018, the District Court permanently enjoined New York companies Euroline Foods, LLC, and Royal Seafood Baza, Inc., along with company owner/operators Eduard Shnayder, Syoma Shnayder and Albert Niyazov, and company operator Oleg Polischouk, from violating the Food, Drug and Cosmetic Act (FDCA). In a complaint filed in May, the United States alleged that the defendants processed and distributed ready-to-eat fish and fishery products, vegetable salads, and cheese products in a Staten Island facility with chronic insanitary conditions.

According to the complaint, FDA inspections revealed Listeria monogytogenes (L. mono) contamination at the facility. The defendants agreed to be bound by a consent decree in which they stated that they no longer manufacturer or process fish or fishery products, and only distribute prepackaged items. Under the order, the defendants would need to notify FDA and take remedial steps before processing various types of food.

Court Permanently Enjoins Minnesota Dairy Farm and Owners from Distributing Adulterated Meat
United States v. Todd and Patty Meech Dairy Farm, et al.

Press Release
Docket Number: 0:18-CV-0532 (D. Minn.)

On July 9, 2018, the district court entered a consent decree of permanent injunction against Todd and Patty Meech Dairy Farm, and its owners, Todd Meech and Patty Meech, permanently enjoining the defendants from distributing meat that is adulterated under the Food, Drug, and Cosmetic Act. The United States alleged in a February 2018 complaint that defendants failed to abide by laws designed to protect consumers from consuming food that contained new animal drugs above legal limits. According to the complaint, lab testing by the U.S. Department of Agriculture detected above-tolerance drug residue in the liver of one of defendant’s cows sold for slaughter.

The complaint alleged that an FDA inspection confirmed that the defendants did not record information regarding administered dosage, administration route, withdrawal time for meat, or the usable date for meat. The consent decree requires the defendants to establish and implement a quarantine or segregation system that ensures ready distinction between medicated and unmediated animals and that prevents defendants from selling or delivering for food slaughter any animals with illegal new animal drug residues in their edible tissues.

Court Permanently Enjoins California Individual from Distributing Adulterated Fish or Fishery Products
United States v. Michel G. Blanchet

Press Release
Docket Number: 2:17-CV-072773 (C.D. Cal.)

On May 25, 2018, the district court entered a consent decree of permanent injunction against Michel G. Blanchet, permanently enjoining the defendant from preparing, processing, and distributing fish or fishery products that are adulterated under the Food, Drug, and Cosmetic Act. The United States alleged in an October 2017 complaint that inspections at a facility that Blanchet previously owned found numerous violations of the current Good Manufacturing Practice regulations, including failing to adequately control the risk of Listeria monocytogenes (L. mono) and Clostridium botulinum toxin formation in fish or fishery products.

According to the complaint, FDA’s analysis of environmental samples collected during two 2016 inspections revealed the presence of L. mono contamination in multiple locations throughout the facility.

Court Enters Permanent Injunction Against New York Creamery Linked to Deadly Listeria Outbreak
United States v. Vulto Creamery et al.

Press Release
Docket Number: 3:18-CV-331 (N.D.N.Y.)

On March 30, 2018, the district court permanently enjoined a Walton, New York, creamery and its owner, Johannes Vulto, from manufacturing and distributing adulterated food. In a complaint filed March 19, the United States alleged that the defendants violated the Food, Drug, and Cosmetic Act by manufacturing and distributing ready-to-eat cheeses contaminated with listeria. According to the complaint, a 2017 investigation by FDA and the CDC determined Vulto Creamery cheese was the source of a multistate listeriosis outbreak that sickened at least eight people, two of whom died.

The complaint alleged that testing by the defendants revealed a type of listeria in the Vulto facility, but the defendants never attempted to identify the species of the bacteria or its source. The defendants agreed to be bound by a consent decree of permanent injunction filed with the complaint. Under the order, the defendants may not prepare, process, manufacture, pack and/or hold FDA-regulated food products until they can ensure that L. mono is not present in their facility and their food, and until they have received FDA’s written determination that their manufacturing practices comply with the law.

Court Permanently Enjoins New York Company from Distributing Adulterated and Misbranded Dietary Supplements
United States v. Riddhi USA, Inc., et al.

Press Release
Docket Number: 2:17-CV-6154 (E.D.N.Y.)

On March 28, 2018, the district court entered a consent decree of permanent injunction against Riddhi USA, Inc., and its owner and president, Mohd M. Alam, permanently enjoining the defendants from manufacturing and distributing dietary supplements that are adulterated and misbranded under the Food, Drug, and Cosmetic Act.

The United States alleged in an October 2017 complaint that inspections at Riddhi found numerous violations of the current Good Manufacturing Practice regulations, including the failure to establish product specifications for the purity and strength of finished dietary supplements, the failure to verify the identity of dietary ingredients, and the failure to follow written quality control procedures.

Court of Appeals Affirms Convictions and Sentences for Peanut Corporation of America Salmonella-Outbreak Defendants
United States v. Stewart Parnell, Michael Parnell, and Mary Wilkerson

Docket Number: 15-14400 (11th Cir.)

On Jan. 23, 2018, the 11th Circuit Court of Appeals affirmed the convictions and sentences of three defendants found guilty of fraud and other charges related to the distribution of contaminated peanuts and peanut products by Peanut Corporation of America. Evidence at trial showed PCA products sickened hundreds and likely thousands of people during an outbreak of salmonellosis in 2008-09. PCA president Stewart Parnell, sales manager Michael Parnell, and quality assurance director Mary Wilkerson all were convicted in September 2014 and sentenced to 336 months, 240 months, and 60 months of imprisonment, respectively.

On appeal, the 11th Circuit ruled that juror exposure to extrinsic evidence of deaths related to the outbreak did not influence or contribute to the verdict. The Court also found no reversible error related to the district court’s loss calculations at sentencing, and ruled against the defendants on various evidentiary claims and other arguments.

Ninth Circuit Affirms Conviction in Miracle Cure Case
United States v. Louis Daniel Smith

Press Release
Docket Number: 15-30332 (9th Cir./E.D. Wash.)

On Nov. 14, 2017, the Ninth Circuit Court of Appeals affirmed the conviction of Louis Daniel Smith, who is serving a 51-month sentence for conspiracy, smuggling, distributing misbranded drugs, and defrauding the United States.  Smith sold “Miracle Mineral Supplement” or MMS, which he touted as a cure for cancer, AIDS, malaria, hepatitis, lyme disease, asthma, the common cold, and various other diseases.  Smith instructed customers to combine MMS with citric acid and ingest the resulting chlorine dioxide. 

Chlorine dioxide, most commonly used as an industrial bleach, is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  Smith attempted to conceal his illegal activities by creating phony businesses to smuggle ingredients and destroying evidence when law enforcement agents executed a search warrant.

District Court Enters Permanent Injunction Against Illinois Caviar Supplier
United States v. Mary Parrish

Press Release
Docket Number: 3:17-CV-1005 (S.D. Ill.)

On September 27, 2017, the district court entered a consent decree of permanent injunction against Mary E. Parrish, doing business as Fort Massac Fish Market, a Metropolis, Illinois distributor of caviar and fishery products. In a complaint filed on September 20, the United States alleged that Parrish violated the Food, Drug, and Cosmetic Act by causing ready-to-eat caviar to become adulterated by being prepared, packed, or held under insanitary conditions. According to the complaint, Parrish failed to ensure the temperature of ready-to-eat caviar remained at a level low enough to control Clostridium botulinum growth and toxin formation, which can cause botulism.

The complaint further alleged that two FDA inspections revealed poor sanitation practices, including failures to sanitize hands, utensils, and food surfaces; insect residue throughout the building; and a pet dog in the facility. The consent decree requires Parrish to stop processing and distributing any food and prohibits her from resuming such activity unless she takes steps to ensure the safety of her food and receives FDA authorization to resume production and distribution.

Florida Company Enjoined from Distributing Misbranded and Adulterated Medicated Feeds
United States v. Syfrett Feed Company, Inc., et al.

Press Release
Docket Number: 2:17-CV-14038 (S.D. Fla.)

On May 4, 2017, the district court entered a consent decree of permanent injunction against Syfrett Feed Company, Inc.; the company’s owner and president, Charles B. Syfrett I; the company’s vice president, Melissa S. Montes De Oca; and its operations manager, Charles B. Syfrett II. The injunction permanently enjoins the defendants from distributing misbranded and adulterated medicated animal feed in violation of the Food, Drug, and Cosmetic Act, and requires the defendants to cease manufacturing medicated animal feed until they take certain remedial actions.

In a complaint filed in February, the United States alleged the company’s medicated feed labels did not list active drug ingredients or include adequate instructions for use. The complaint also alleged that the company failed to manufacture its medicated feeds in conformity with current good manufacturing practices. The injunction requires, among other measures, that the defendants retain an independent expert to conduct an inspection of Syfrett Feed and certify that the firm operates in conformity with current good manufacturing practices.

Dietary Supplement Manufacturer Enjoined from Distributing Adulterated, Misbranded Products Marketed as Drugs
United States v. EonNutra LLC et al.

Press Release
Docket Number: 1:17-CV-0033-MSK-MJW (D. Colo.)

On March 14, 2017, the United States District Court for the District of Colorado entered a joint Consent Decree of Permanent Injunction against EonNutra LLC, two related companies, CDSM LLC and HABW LLC, and their owner, Michael Floren, to prevent the defendants’ sale and distribution of adulterated and misbranded dietary supplements and unapproved and misbranded drugs in violation of the Federal Food, Drug, and Cosmetic Act (“FDCA”). As set out in the Department’s complaint, which was filed concurrently with the proposed joint Consent Decree on March 10, the defendants manufactured and distributed dietary supplement products as drugs that could help treat or prevent a host of serious conditions, including heart disease, diabetes, depression, hypertension, osteoporosis, and liver and kidney disorders. Defendants’ products, which included 4NOx2, HGH Night Time, rHGH Drops Black Label, Primal Rage Levo 5 GH Mass and Deer Antler Velvet Extract, were not approved by the FDA.

According to the complaint, a 2016 FDA inspection of the defendants’ manufacturing facility also revealed that the defendants failed to establish specifications for the identity, purity, strength, and composition of their finished products or the components in their products. The complaint further alleged that several of the defendants’ products were misbranded under the FDCA, in that many of the product labels did not list all ingredients or indicate the correct serving size. The injunction requires the defendants to implement certain remedial measures and obtain written approval from the FDA before resuming any manufacture of drugs or dietary supplements.

ConAgra Pleads Guilty to Shipping Contaminated Peanut Butter; Agrees to Pay Record Criminal Fine
United States v. ConAgra Grocery Products, LLC

Press Release
Docket Number: 1:15-CR-0024-WLS-TQL (M.D. Ga.)

On December 13, ConAgra Grocery Products LLC, a subsidiary of ConAgra Foods, pleaded guilty to a misdemeanor Food, Drug, and Cosmetic Act charge in connection with a 2006-2007 nationwide salmonellosis outbreak. On May 20, 2015, the United States filed a criminal Information against ConAgra Grocery Products, alleging that the company introduced salmonella-contaminated Peter Pan peanut butter into interstate commerce during the outbreak. Pursuant to a plea agreement filed with the Information, the company admitted that it shipped the contaminated peanut butter and agreed to pay a criminal fine of $8 million and forfeit assets of $3.2 million – the largest criminal fine ever paid in a federal food safety case.

In February 2007, the U.S. Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC) announced that an ongoing outbreak of salmonellosis cases in the United States could be traced directly to peanut butter produced at the company’s plant in Sylvester, Georgia. The company voluntarily terminated production at the plant on Feb. 14, 2007, and recalled all peanut butter manufactured there since January 2004. The CDC eventually identified more than 700 cases of salmonellosis linked to the outbreak with illness onset dates beginning in August 2006. The CDC estimated that thousands of additional related cases went unreported. The CDC did not identify any deaths related to the outbreak.
 

Alabama Seafood Soup Producer Signs Consent Decree in Connection with Distribution of Adulterated and Misbranded Food
United States v. BEK Catering, LLC d/b/a Floppers Foods, et al.

Press Release
Docket Number: 1:16-CV-0348 (S.D. Ala.)

On July 5, 2016, the district court entered a consent decree of permanent injunction against BEK Catering, LLC d/b/a Floppers Foods, LLC, and its co-owners Billy D. Stembridge, Jr. and Kyle Huxen, to stop them from violating the Food, Drug, and Cosmetic Act (FDCA). BEK prepared, processed, packed, and distributed ready-to-eat seafood products, namely seafood soups sold under the names Shrimp Locksley and Mama’s Gumbo. The firm sold their soups to various distributors after receiving seafood from other states including Florida. Several FDA inspections since 2011 revealed violations of seafood Hazard Analysis and Critical Control Point (HACCP) regulations and current Good Manufacturing Practice regulations. During an inspection in 2015, FDA observed that the firm failed to have adequate HACCP plans to control the hazards posed by several pathogenic bacteria, including Clostridum botulinum, Clostridum perfringens, and Listeria moncytogenes. The firm’s products were also found to be misbranded as the labels of the ready-to-eat soups failed to list all of the soups’ ingredients and failed to declare major food allergens.
 

Court Enters Injunction Against California Producer of Adulterated and Misbranded Soy Products
United States v. Wa Heng Dou-Fu & Soy Sauce Corporation, Peng Xiang Lin and Yuexiao Lin

Press Release
Docket Number: 2:16-CV-1358 (E.D. Cal.)

On June 24, the district court entered a consent decree of permanent injunction against Wa Heng Dou-Fu & Soy Sauce Corporation and the firm’s co-owners, Peng Xiang Lin and Yuexiao Lin, to prevent the distribution of adulterated and misbranded soy products. The defendants violated the Food, Drug, and Cosmetic Act by causing food that is held for sale after shipment of one or more of its components in interstate commerce to become adulterated and misbranded. The defendants had an extensive history of operating their food manufacturing facility under insanitary conditions, failing to follow current good manufacturing practice requirements and misbranding their food products. The defendants agreed to settle the case and to be bound by a permanent injunction that requires Wa Heng to cease all food preparation, manufacturing and distribution. If the defendants seek to resume preparing, manufacturing and distributing food, they must implement remedial measures set forth in the injunction, notify the FDA of the measures taken, and receive written notification from FDA that they appear to be in compliance with the remedial requirements set forth in the injunction and the statute.
 

District Court Rules for Government in Action Against Cheese Manufacturer
United States v. S. Serra Cheese Co., Fina Serra, and Stefano Serra

Press Release
Docket Number: 2:14-CV-13077 (E.D. Mich.)

On April 4, 2016, the district court issued an order of injunction to halt the distribution of adulterated cheeses.  The injunction, which will last for at least five years, follows an October 20, 2015 order in which the court granted the government’s motion for summary judgment, finding that the defendant company, Serra Cheese, was adulterating cheese products under the Food, Drug, and Cosmetic Act.  The defendants manufacture and distribute several varieties of Italian cheeses such as ricotta, provolone, mozzarella, and primo sale.  

FDA inspections and other evidence showed a repeated failure of Serra Cheese to reduce the risk of contamination from bacteria and to undertake critical measures that are essential to prevent the growth of certain potentially dangerous bacteria such as Listeria and E. coli, including failing to adequately clean and sanitize equipment in a proper manner.  The injunction requires the defendants to hire a sanitation expert, develop a written pathogen control and monitoring program, and retain a qualified independent laboratory to gather and analyze environmental samples from Serra Cheese’s facility.  The order further requires the defendants to have the independent laboratory test their cheese products for the presence of Listeria, E. coli, and other bacteria.
 

Docket Number: 2:14-CV-14450 (E.D. Mich.)

On March 28, 2016, the district court granted the United States’ motion for summary judgment against defendants Scotty’s Inc. and its co-owner and manager Sandra J. Jackson, sellers of adulterated ready-to-eat sandwiches.  This litigation arose following eight years of FDA inspections which found that the defendants continually violated the agency’s Current Good Manufacturing Practice (“CGMP”) regulations in their sandwich production.  Violations included having mold covering the ceiling of the walk-in cooler and moving racks of buns from the floor to food production surfaces without sanitizing them. 

The court found that the defendants had distributed sandwiches that were adulterated as a matter of law under the Food, Drug, and Cosmetic Act for failure to follow CGMP.  The court also found that defendants had distributed adulterated tuna salad sandwiches due to their failure to implement a plan pursuant to the agency’s Seafood Hazard Analysis and Critical Control Point (“HAACP”) regulations.  The Court found that given the egregiousness, seriousness, and willfulness of defendants’ past violations, coupled with their dubious promises of reform, a permanent injunction is necessary to prevent a substantial likelihood that defendants will violate the Act in the future.  The court asked the government to submit a proposed permanent injunction and has scheduled a conference for the parties to discuss the content of that injunction.
 

Enforcement Action Filed Against Kansas Food Manufacturer
United States v. Native American Enterprises, LLC, William N. McGreevy and Robert C. Conner

Press Release
Docket Number: 6:16-CV-1072 (D. Kan.)

On March 21, 2016, the United States filed an injunction action against Native American Enterprises, LLC (“NAE”), of Wichita, Kansas, its Vice President and 49% owner, William N. McGreevy, and its Production Manager, Robert C. Conner, to prevent the manufacture and distribution of adulterated food, namely ready-to-eat refried beans and sauces. The complaint alleges that the company’s products are manufactured under conditions that are insanitary and inadequate to ensure the safety of its products.

An FDA inspection performed in August of 2015 revealed the presence in the facility of Listeria Monocytogenes, a bacterium that poses a significant risk to public health. FDA had previously warned NAE, after inspections performed in 2013 and 2014, of its failures to maintain sanitary conditions. After numerous warnings in 2013, 2014 and 2015, NAE has still failed to take adequate steps to improve its manufacturing practices of its ready-to-eat refried beans and sauces.
 

Virginia Sprout Producer Agrees to Consent Decree in Connection with Distribution of Adulterated Food
United States v. Henry's Farm Inc., and Soo C. Park

Press Release
Docket Number: 3:16-CV-0089  (E.D. Va.)
 

On March 3, 2016, the district court entered a consent decree of permanent injunction against Henry’s Farm, Inc., and its owner, Soo C. Park.  The complaint alleged that defendants had a history of processing food products under insanitary conditions. The consent decree enjoins the defendants from processing or distributing food until they report to the Food and Drug Administration the actions they have taken to bring their operations into compliance with the Food, Drug and Cosmetic Act (FDCA), and FDA notifies them that they appear to be in compliance with specific remedial actions set forth in the decree and the FDCA.  Henry’s Farm manufactured and distributed a variety of soybean sprouts and repackaged and distributed mung bean sprouts. 

In December 2014, FDA inspected Henry’s Farm’s manufacturing facility and found numerous insanitary conditions, including: standing water in the sprout production room; sprout debris at various places along the packaging line and floor; and dead insects on packing material and a seed storage area.  FDA also discovered the presence of L. mono at the facility, including samples taken from food contact surfaces and a sample of finished sprout product collected in May 2012.  L. mono is food-borne bacteria that can cause serious illness or even death in consumers.

Delaware Cheese Company Pleads Guilty to Food Adulteration Charge; Company and Individuals Also Enter Consent Decree
United States v. Roos Foods, Inc.

Press Release
Docket Number: 1:16-MJ-0013 (D. Del.) (criminal case)
Docket Number: 1:16-CV-0032 (D. Del.) (civil case)
 

On March 3, 2016, Roos Foods Inc., a Delaware company, pleaded guilty to a misdemeanor violation of the Federal Food, Drug and Cosmetic Act.  The Court sentenced Roos to pay a fine of $100,000.  In addition to the company’s guilty plea, Roos, and its principals, Ana A. Roos and Virginia Mejia, agreed to a consent decree of permanent injunction.  The consent decree of permanent injunction was entered by U.S. District Court Judge Richard G. Andrews on Jan. 26.  

Roos distributed several varieties of ready-to-eat cheese, including ricotta, queso fresco and fresh cheese curd and sold and distributed its products to wholesale customers in Maryland, New Jersey, Virginia and Washington D.C.  The criminal charge and civil complaint alleged that Roos distributed cheese connected to a 2014 outbreak of Listeria monocytogenes (L. mono).  The criminal information alleged that on Feb. 21, 2014, the Centers for Disease Control and Prevention (CDC) reported that a total of eight people (five adults and three newborns) in Maryland and California were infected with L. mono.  According to the CDC, several of the Maryland patients reported having eaten soft or semi-soft cheeses in the month before becoming ill. 

On March 11, 2014, the Food and Drug Administration suspended Roos’ food facility registration after determining there was a reasonable probability that food manufactured, processed, packed, or held by Roos would cause serious adverse health consequences or death to humans.  A company without a food facility registration cannot distribute any food products.  Roos has not reopened.  

New Jersey Dietary Supplement Executive Pleads Guilty to Fraud, FDCA Charges
United States v. David Romeo 

Press Release
Docket Number: 2:16-CR-092  (D.N.J.)

On March 1, 2016, David Romeo pleaded guilty to a an information charging mail fraud and introduction of misbranded food into interstate commerce with an intent to defraud or mislead, both in relation to a scheme in which he directed the sale of diluted and adulterated dietary ingredients and supplements sold by his three companies: Global Nutrients, Stella Labs, and Nutraceuticals International.  One of the primary ingredients sold by Romeo’s companies was powder purportedly derived from a rare South African cactus called “hoodia,” which was claimed to have weight-loss properties.  In reality, Romeo’s companies sold Chinese knock-off hoodia that was imported using forged documentation.  As part of his plea agreement, Romeo admitted the fraud loss caused by the scheme was between $7 million and $20 million.  He also pleaded guilty to charges brought by the Narcotics and Dangerous Drugs Section of the Criminal Division related to his sale of methamphetamine precursor chemicals.  Romeo has agreed to forfeit more than $1.2 million in profits from his crimes. 

The Court set Romeo's sentencing for June 21.

District Court Enters Consent Decree of Permanent Injunction Against Maine Fish Processor
United States v. Mill Stream Corporation and Ira J. Frantzman

Press Release
Docket Number: 1:16-CV-0080  (D. Me.)

On February 12, 2016, the district court entered a consent decree of permanent injunction against Mill Stream Corporation of Hancock, Maine, and its owner, Ira J. (Joel) Frantzman, to prevent the distribution of adulterated seafood products.  Mill Stream Corporation processed and distributed a variety of refrigerated, vacuum-packed, ready-to-eat, cold and hot smoked fish or fishery products such as smoked salmon, trout, and char.  The government’s complaint, filed February 10, alleges that the company’s fish products were manufactured under conditions that were inadequate to ensure their safety.  An FDA inspection performed in March and April 2015 revealed that the company’s fish products were adulterated within the meaning of the Food, Drug, and Cosmetic Act in that the company failed to develop and implement an adequate Hazard Analysis Critical Control Point plan to control and prevent identified food safety hazards.  In addition, the company produced fish products under insanitary conditions based on its failure to comply with Current Good Manufacturing Practices. 

The insanity conditions included the presence of rodent excrement and mold in the production facility.  In a prior inspection in December 2011, FDA also found Listeria monocytogenes (L. mono) in the production facility’s environment and on a fish-skinning machine.  The injunction requires the defendants to cease all operations connected to the company, and not to resume operations until FDA determines that their manufacturing practices have come into compliance with the law.

Permanent Injunction Entered Against Vermont Dairy Farm
United States v. Correia Farm Limited Partnership d/b/a Wynsum Holsteins, and Anthony Correia, Barbara Correia, and Stephen Correia

Press Release
Docket Number: 1:15-CV-0256  (D. Vt.)

On December 14, 2015, the district court entered a consent decree against the Correia Farm Limited Partnership d/b/a Wynsum Holsteins, a dairy farm located in West Addison, Vermont, and its co-owners Anthony and Barbara Correia and their son and limited partner Stephen Correia, to prevent violations of the federal Food, Drug and Cosmetic Act (FDCA).  The action is based upon the defendants’ past and continuing violations of the FDCA, which resulted in the unlawful administration of new animal drugs for uses not approved by the FDA and the unlawful selling of livestock for slaughter and human consumption despite the presence of unsafe drug residues in the animals’ edible tissues.  The defendants agreed to settle the litigation, which was commenced with the filing of a complaint on December 7, 2015, and be bound by a consent decree of permanent injunction that prohibits them from violating the FDCA. 

The consent decree subjects the defendants to heightened FDA oversight and requires them to cease all operations until the defendants implement a number of new record-keeping and operational protocols designed to ensure consumer safety.  In order for the defendants to resume food production, the FDA first must determine that their manufacturing practices have come into compliance with the law. 

Permanent Injunction Entered Against Seller of Dietary Supplements
United States v. Bethel Nutritional Consulting, Inc., Felix Eamirez, and Kariny Ramirez

Press Release
Docket Number: 2:15-CV-8046 (D.N.J.)

On December 14, 2015, the district court entered a Consent Decree of Permanent Injunction against Bethel Nutritional Consulting and its owners. Bethel sold a wide variety of dietary supplements. Among other violations of federal law, the defendants made claims about many of their products that rendered the products drugs under the Food, Drug, and Cosmetic Act. Some of the defendants’ products also contained undisclosed active pharmaceutical ingredients. The permanent injunction entered by the court prohibits the defendants from selling any products until they hire experts to bring their labeling, recordkeeping, and other practices into compliance with federal law.

Spokane, Washington Man Sentenced to 51 Months Imprisonment for Selling Industrial Bleach as Miracle Cure
United States v. Smith

Press Release
Docket Number: 2:13-CR-14 (E. D. Wash.)

On October 27, 2015, the district court sentenced Louis Daniel Smith to 51 months imprisonment and four years of supervised release. Smith was also ordered to pay $12, 500.00 in fines. Smith was convicted on May 27, 2015, on charges of conspiracy, smuggling, distributing misbranded drugs, and defrauding the United States, following a seven-day jury trial. Smith sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of water and sodium chlorite, an industrial chemical used as a pesticide, for fracking and for wastewater treatment.  He instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. 

Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications, and a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the FDA or U.S. Customs and Border Protection.  He also hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business locations.

District Court Enters Consent Decree Against Dietary Supplement Manufacturer
United States v. Sunset Natural Products Inc., et al. 

Press Release
Docket Number: 1:15-CV-23419 (S. D. Fla.)

On September 25, 2015, the district court entered a consent decree of permanent injunction against Sunset Natural Products Inc., and the firm’s co-owners, Dr. Teresa Martinez (a.k.a Dr. Teresa Martinez-Arroyo) and Elsy Cruz, stopping them from violating the Food, Drug, and Cosmetic Act by manufacturing and distributing adulterated dietary supplements.  Sunset Natural Products was a dietary supplement manufacturer and distributor in Miami, Florida that, in addition to manufacturing its own products, also acted as a contract repacker/relabeler of previously encapsulated dietary supplements. 

Several inspections of the firm’s facility between 2012 and 2014 revealed numerous violations of FDA’s current good manufacturing practice regulations, including the failure to use equipment and utensils of appropriate design, construction and workmanship to enable them to be adequately cleaned and properly maintained.  The firm agreed to be bound by a consent decree of permanent injunction, which includes the recall and destruction of all dietary supplements manufactured, prepared, processed, packed, labeled, held, and/or distributed by the firm since April 2014.

Court Enters Order of Permanent Injunction Against California Mung Bean and Soy Manufacturer
United States v. Henh Wong Fresh Produce, et al. 
 

Press Release
Docket Number: 2:15-CV-1403 (E. D. Cal.)

On August 3, 2015, the district court entered an order of permanent injunction against Henh Wong Fresh Produce, a sole proprietorship, its owner, David C. Ly, and employees Kin S. Ly and Thahn “Danny” C. Ly, to stop them from violating the Food, Drug, and Cosmetic Act (FDCA) by causing food to be adulterated while it is held for sale after shipment in interstate commerce.  Henh Wong Fresh Produce was a mung bean and soy food manufacturer in Sacramento, California that sells such products as tofu, bean cakes, and soy bean drinks to various distributors after receiving raw ingredients from as far as Kentucky and Minnesota. 

In addition to manufacturing and distributing products under the name Henh Wong Fresh Produce, the firm also manufactures and distributes products as Henh Wong Fresh Product and Henh Wong Tofu.  Several FDA inspections since 2003 have revealed numerous cGMP violations including the defendants’ failure to maintain equipment used to produce food in a sanitary manner, and to prevent insanitary employee practices.  Inspections have also revealed defendants’ inability to control pests in the firm’s production facility.

Consent Decree Entered Against Three Dietary Supplement Manufacturers
United States v. Atrium Inc., et al.

Press Release
Docket Number: 1:15-CV-0927 (E. D. Wis.)

On July 31, 2015, the United States filed a complaint against three dietary supplement makers, Atrium Inc., Aspen Group Inc., Nutri-Pak of Wisconsin Inc., and the owners of the three firms, James F. Sommers and Roberta A. Sommers, based on violations of the Federal Food, Drug, and Cosmetic Act.  The complaint alleged that the defendants were not complying with the FDA’s current good manufacturing practice regulations and were, accordingly, misbranding the dietary supplements they manufacture and sell. 

On August 4, 2015, the court entered a consent decree signed by the parties. Pursuant to the decree, the defendants must cease all operations and obtain FDA’s approval before resuming the manufacture of dietary supplements in the future.

Cooperating Defendant Sentenced in Egg Contamination Case
United States v. Tony Wasmund

Press Release
Docket Number: 3:12-CR-3041 (N.D. Iowa)

On June 30, 2015, former Quality Egg marketing manager Tony Wasmund was sentenced to four years’ probation for his participation in a conspiracy to bribe a USDA Inspector, to sell restricted eggs with intent to defraud, and to introduce misbranded food into interstate commerce with intent to defraud and mislead regulators and customers.  Wasmund, who cooperated with the government in its investigation of Quality Egg and its principals, Jack and Peter DeCoster, pleaded guilty in September 2012 to one count of conspiracy.  In April 2015, Wasmund’s former employer, Quality Egg, was ordered to pay a fine of $6.79 million for the felonies of bribing a USDA inspector and selling restricted and misbranded eggs with intent to defraud, and the misdemeanor of selling and shipping adulterated eggs into interstate commerce.  At the same time, the court sentenced the principals of Quality Egg, Austin “Jack” DeCoster and Peter DeCoster, each to pay a $100,000 fine and to serve three months in prison followed by a year of supervised release.

On May 20, 2015, the United States filed a criminal Information against ConAgra Grocery Products LLC, a subsidiary of ConAgra Foods Inc., alleging that the company introduced peanut butter contaminated with salmonella into interstate commerce in 2006. 
View more updates.
 

On March 27, 2015, a federal district court entered a consent decree of permanent injunction against L.A. Star Seafood Company, Inc. of Los Angeles, and its corporate officers Sima Goldring and Sam Goldring to prevent the distribution of adulterated seafood products. The injunction requires L.A. Star and the Goldrings to cease all operations and requires that, in order for the defendants to resume distributing seafood products, the FDA must first determine that its manufacturing practices have come into compliance with the law. In January, the United States filed a complaint and proposed consent decree against the defendants to prevent them from distributing adulterated fish products in interstate commerce. L.A. Star processed and distributed a variety of ready-to-eat fish products. The complaint alleged that the company’s fish products were manufactured under conditions that were inadequate to ensure their safety. FDA inspections performed in 2013 and 2014 documented a pattern of insanitary conditions resulting in the presence of Listeria monocytogenes. The government alleged that the company’s fish products were adulterated pursuant to the Food, Drug, and Cosmetic Act. The entry of the permanent injunction resolves the litigation.
 

On December 10, 2014, the United States filed a civil action against William H. Oshiro d/b/a RZM Food Factory to enjoin him from violating the Federal Food, Drug and Cosmetic Act, including violations of current Good Manufacturing Practice standards.  Oshiro has an extensive history of growing, processing, and packaging ready-to-eat mung bean, alfalfa, clover, and radish sprouts under grossly insanitary conditions.  Prior to the filing of the complaint, Oshiro shuttered his business and agreed to a consent judgment wherein he will be required to obtain FDA approval before re-opening.  The United States will file the consent decree with the court upon assignation of the case.
 

On December 1, 2014, the U.S. District Court for the Central District of California entered a consent decree of permanent injunction against Neptune Manufacturing Inc. of Los Angeles and its corporate officers, Alexander Goldring, Peter Oyrekh and Semyon Krutovsky, to prevent the distribution of adulterated seafood products.  The department filed a complaint in the U.S. District Court for the Central District of California on Nov. 21 alleging that Neptune’s seafood products are produced under conditions that are inadequate to ensure the safety of its products.  The complaint alleged that Neptune prepares, processes, packs, holds and distributes ready-to-eat smoked and salt-cured seafood including pickled herring, smoked steelhead trout, smoked halibut, smoked whitefish, smoked salmon and smoked mackerel.  The complaint also alleged that defendants Goldring, Oyrekh and Krutovsky are Neptune’s corporate officers with the authority and responsibility for preventing and correcting violations of federal law at the company.  

In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing violations of the federal Food, Drug, and Cosmetic Act.  The consent decree requires Neptune to cease all manufacturing operations and requires that, in order for defendants to resume distributing seafood products, the FDA first must determine that Neptune’s manufacturing practices have come into compliance with the law.  The district court entered the proposed consent decree.
 

Consent Decree Entered Against California Dietary Supplement Company 
United States v. Scilabs Nutraceuticals, Inc. and Paul P. Edalat 

Press Release
Docket Number: 8:14-CV-1759 (C. D. Cal.)

On November 12, 2014, the U.S. District Court for the Central District of California entered a consent decree of permanent injunction against Scilabs Nutraceuticals, Inc., of Irvine, California, and its board chairman and chief executive officer, Paul P. Edalat, to prevent the distribution of adulterated dietary supplements in interstate commerce.  On November 4, the United States filed an injunction action against Scilabs and Edalat seeking this relief.  Scilabs is a contract manufacturer of dietary supplements distributed under the brand name All Pro Science, including Complete Immune + capsules and various flavored powders called Complete, Recovery and Precharge. 

The government filed a complaint alleging that the company’s dietary supplements are manufactured under conditions that are inadequate to ensure the quality of its products.  According to the complaint, FDA inspections performed in 2012, 2013 and 2014 revealed that the company’s dietary supplements are adulterated within the meaning of the Food, Drug, and Cosmetic Act because the company failed to follow various requirements, including testing its dietary ingredients to verify their identity before using them.  In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing violations of the Food, Drug, and Cosmetic Act.  The permanent injunction requires Scilabs and Edalat to cease all operations connected to the company, and not to resume until FDA determines that their manufacturing practices have come into compliance with the law.

Complaint Filed Against Dietary Supplement Maker
United States v. Applied Polymer Systems
d/b/a/ APS Pharmaco, et al.

Press Release
Docket Number: 2:14-CV-4395 (E.D.N.Y.)

On July 23, 2014, U.S. District Court for the Eastern District of New York entered a consent decree of permanent injunction against Applied Polymer Systems d/b/a APS Pharmaco (APS) and Nuka Reddy, the firm President, based on their distribution of adulterated dietary supplement. This action stems from a series of FDA inspections of APS’ manufacturing facility beginning in 2012, which revealed, among other things, that APS failed to perform identity tests or examinations for certain dietary ingredients before using them in their products.

The defendants ceased all operations as of June 2014, and are prohibited from resuming operations until FDA determines that their manufacturing practices have come into compliance with the law. The decree also requires a recall of all dietary supplements sold by the firm sold since January 1, 2014. View Complaint.

District Court Enjoins Smoked Fish Manufacturing Company and Several Key Employees from Continuing to Violate the Food, Drug, and Cosmetic Act
United States v. New York City Fish, Inc., Maxim Kutsyk, Pavel Roytkov, and Leonid Staroseletesky

Press Release
Docket Number: 1:13-CV-2909 (E.D.N.Y.)

On March 31, 2014, the U.S. District Court for the Eastern District of New York entered an injunction against New York City Fish, Inc., a manufacturer of ready-to-eat fishery products, including smoked salmon and mackerel, and three of its employees: Maxim Kutsyk, Pavel Roytkov, and Leonid Staroseletesky. During a bench trial conducted last summer, the government presented evidence that each of the defendants had failed to comply with current good manufacturing practices, failed to keep records necessary to evaluate food safety, and processed fish in a way that could lead to Listeria monocytogenes contamination, all in violation of the federal Food, Drug, and Cosmetic Act (“FDCA”). People who eat food contaminated with the Listeria monocytogenes bacterium can contract the disease listeriosis, which can be serious—even fatal—for vulnerable groups such as newborns and those with impaired immune systems. Complications from the disease can also lead to miscarriage. The court found that each of the defendants had violated the FDCA in the past, and that the court had “scant assurance” that defendants would comply with food safety laws going forward.

A copy of the Court Order is available.

Texas Auto Dealer Plead Guilty in Automobile Fraud Scheme   

United States v. Luna, et al. Case No. 5:21-cr-00156 (W.D. Tex.). 

On April 28, 2021, Nepthali Luna and his son, Devon Luna, pleaded guilty in connection with their roles in a scheme to sell used, high-mileage vehicles with false, low mileage readings entered on the vehicles’ odometers, titles, and odometer disclosure statements. According to court filings, Devon Luna purchased high-mileage vehicles through his company, Pioneer Auto Finance.  The defendants then caused the vehicles’ odometers and titles to reflect false, low mileages, and they sold the vehicles for inflated prices to unwitting consumers. In pleading guilty, the defendants admitted that they caused at least 225 vehicles to be sold with “rolled back” odometers.  The defendants admitted that the scheme resulted in consumer losses of more than $550,000.  The court set a sentencing date of August 3, 2021. 

Court of Appeals Upholds Civil Penalty and Injunction Against Spectrum Brands for Failure to Report Defective Coffeemaker Carafe
United States v. Spectrum Brands

Press Release
Docket Number: No. 18-1785 (7th Cir.) and 3:15-CV-0371 (W.D.Wis.)

On May 9, 2019, the Seventh Circuit Court of Appeals affirmed a civil penalty and injunction imposed by the district court against Spectrum Brands, Inc., a multinational consumer products distributor based in Madison, Wisconsin.  The district court found that Spectrum and its former subsidiary, Applica Consumer Products Inc., violated the Consumer Product Safety Act by waiting years to inform the Consumer Product Safety Commission (CPSC) of customer reports that handles on Black & Decker-brand coffee carafes suddenly could break and create a burn hazard from hot coffee. 

As the court found, Spectrum received about 1,600 reports of broken handles between 2008 and 2012, when it finally reported the problem to the CPSC.  The district court ordered Spectrum to pay $1.9 million in civil penalties, maintain adequate systems and controls to prevent future violations, and retain an outside consultant to evaluate its compliance program.  In affirming the district court’s decision, the Court of Appeals held that the statute of limitations for such a violation does not begin to run until a company finally files the required report, and that the Act allows courts to impose forward-looking injunctive relief.

The Seventh Circuit upheld the lower court’s ruling here in May 2019.

District Court Enters Permanent Injunctions Against Two New York Companies Banning the Importation of Dangerous Toys
United States v. Everbright Trading, Inc. et al. and United States v. Lily Popular Varieties & Gifts, Inc. et al.

Press Release
Docket Number: 1:17-CV-03751; 1:17-CV-03752 (E.D.N.Y.)

On August 2, 2017, the district court entered a consent decree of permanent injunction against Everbright Trading, Inc., its owner Yuan Xiang Gao, and its operator/manager Rong Qing Xu. The court previously entered a similar consent decree of permanent injunction on July 12 against Lily Popular Varieties & Gifts, Inc., Great Great Corporation, and their owners and operators Li Jing and Cheng Feng You. The injunctions resolve two separate civil actions filed by the Department on June 21 at the request of the U.S. Consumer Product Safety Commission (CPSC). The complaints alleged that the defendants imported children’s products containing, among other things, lead, phthalates, and small parts that posed a choking hazard for children under the age of three.

According to the complaints, the CPSC collected dozens of samples of non-compliant toys and other children’s products from the defendants’ facilities and import shipments.  The consent decrees require the defendants to stop importing, selling, or distributing toys and other children’s products until they implement product safety and testing programs that will bring their operations into compliance with the law.
 

Home Security Company Agrees to $20 Million Payment in Case Alleging FTC Act and FCRA Violations

United States v. Vivint Smart Home, Inc., Case No. 2:21-cv-00267 (D. Utah). 

On April 29, 2021, the Consumer Protection Branch filed a pre-settled complaint referred by the FTC against Utah-based Vivint Smart Home.  The defendant sells smart home monitoring products and services on commission using a door-to-door sales force.  The three-count complaint alleges that Vivint violated the Fair Credit Reporting Act and Section 5 of the Federal Trade Commission Act by: (1) failing to establish an identity theft prevention program; (2) obtaining consumers’ credit reports without a permissible purpose; and (3) unfairly selling false debts to debt collectors. According to the complaint, when prospective customers failed a credit check, Vivint’s sales representatives used the identities and credit reports of other, unknowing consumers to complete the sale on multiple occasions over several years.  In the settlement negotiated by the FTC, Vivint agreed to pay $15 million in civil penalties and $5 million in equitable relief, and to comply with injunctive relief requiring significant affirmative measures to ensure future compliance with the FCRA and to prevent recurrence of its past unlawful conduct.

Cameroonian National Extradited from Romania for Fraud Scam 

U.S. v. Desmond Fodje Bobga (W.D. Pa.). 

On April 26, 2021, Cameroonian national Desmond Fodje Boba arrived in Pittsburgh following his extradition from Romania.  Bobga was charged in June 2020 for his alleged role in a years-long consumer scam.  The government alleged that Bobga and his co-conspirators fraudulently offered puppies and other animals for sale on internet websites.  When contacted by prospective victims, the conspirators used false and fraudulent promises and documents regarding the puppies, shipping fees, and coronavirus exposure to extract payments.  Some victims lost thousands of dollars.

Fraudulent Call Center Operator Pleads Guilty to Overseeing Call Centers that Threatened and Defrauded Spanish-Speaking Consumers 

United States v. Omar Cuzcano Marroquin, et al., Case No. 18-cr-20506 (S.D. Fla.). 

On April 29, 2021, Omar Cuzcano Marroquin pleaded guilty to conspiracy to commit mail and wire fraud in connection with a series of Peruvian call centers that used Internet-based calls to contact Spanish-speaking consumers in the United States to threaten and defraud them.  Cuzcano admitted that he managed and supervised call centers that were operated as part of the scheme in which the defendants and their employees falsely claimed to be lawyers, court officials, federal agents, and representatives of a supposed “minor crimes court.”  According to court documents, Cuzcano and his co-conspirators falsely told victims that they had a contractual obligation to pay for and receive products and had caused legal problems for themselves and others by allegedly failing to do so.  The callers also falsely threatened victims with court proceedings, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and settlement fees.  Thousands of vulnerable victims paid the conspirators money because of these threats, which caused more than $1 million in losses to victims in the United States.  Cuzcano is the first of five defendants in the case to plead guilty.  Two additional defendants remain in Peru pending extradition.  The case is before U.S. District Judge Robert N. Scola.

Defendant Found in Civil Contempt in Connection with Lottery Fraud Scheme

United States v. Kimura, Case No. 20-CV-4218 (C.D. Calif.). 

On March 26, 2021, U.S. District Judge John F. Walter found George Masaaki Kimura in civil contempt for violating an order for permanent injunction.  In February 2020, Kimura admitted his involvement in a lottery fraud scheme whereby he would receive money orders from lottery fraud victims and “money mules,” or individuals connected to the scheme who assist in moving proceeds between bank accounts.  Kimura would deposit some of those money orders into his own bank account and forward the rest to others participating in the scheme.  In June 2020, the court permanently enjoined Kimura from participating in prize promotion fraud or acting as a money transfer business.  More recently, the government alleged that Kimura’s conduct continued and sought an order to show cause why Kimura should not be held in contempt.  Following a hearing, the court entered an order allowing the government to seek liquidated damages for further violations and imposing other restrictions aimed at curtailing Kimura’s participation in the schemes. 

Marketing Company Agrees to Pay $150 Million for Facilitating Elder Fraud Schemes

United States v. Epsilon Data Management, LLC
Docket Number: 1:21-cr-00006-RM (D. Colo.)

On January 27, 2021, U.S. District Judge Raymond P. Moore approved the entry of a deferred prosecution agreement (“DPA”) between the Department of Justice and Epsilon Data Management, LLC, (“Epsilon”).  The DPA relates to the company’s role in knowingly selling consumer data to clients engaged in fraud.  Under the terms of the DPA, Epsilon, a marketing company with principal sales operations based in Colorado, agreed to pay a total monetary penalty of $150 million, with $127.5 million of that amount going to compensate victims of the fraudulent schemes that used consumer data sold by Epsilon.  Epsilon also agreed to implement significant compliance measures designed to safeguard consumers’ data.  In a statement of facts, Epsilon admitted that its employees sold consumer data to clients engaged in fraud despite knowing that those and similar clients had been arrested, charged with crimes, convicted, and were otherwise subject to law enforcement actions for false and misleading practices.  Epsilon further admitted that over the course of nearly a decade, the company knowingly sold 30 million American consumers’ data to clients engaged in fraud.

Third Defendant Pleads Guilty in Clinical Trial Fraud Scheme

United States v. Bencosme, et al.
Docket NO. 1:20-cr-20190(S.D. Fla.). 

On February 5, 2021, Maytee Lledo pleaded guilty to conspiracy to commit wire fraud in connection with an scheme to falsify clinical trial data.  In pleading guilty, Lledo admitted that while working for a particular clinical trial site in Miami called Unlimited Medical Research, she helped to fabricate data for a clinical trial designed to test the efficacy of two asthma treatments in a pediatric population by falsely representing that subjects were participating in the trial when, in fact, they were not participating or taking the study medication as required.  Lledo is the third defendant to plead guilty in connection with the scheme.  Sentencing before U.S. District Judge Beth Bloom is set for April 16, 2021, in Miami. 

Long Island Man Pleads Guilty to Mail Fraud Conspiracy

United States v. Diaz
Docket NO. 2:21-cr-35(E.D.N.Y.). 

On February 8, 2021, Steven Diaz pleaded guilty to conspiracy to commit mail fraud as part of an fraudulent prize promotion scam.  In pleading guilty, Diaz admitted that he and co-conspirators caused to be mass-mailed to consumers notifications promising large cash prizes in exchange for payment of certain fees.  The government alleged that between 2013 and 2018, the scheme brought in millions of dollars from victims, many of whom were elderly or vulnerable, without paying the promised cash prizes to anyone.

Extradited Defendant Pleads Guilty to Odometer Fraud Scheme
United States v. Shmuel Gali
Docket Number: 1:20-cr-104 (E.D.N.Y.)

On August 19, 2020, Shmuel Gali pleaded guilty to conspiracy, conspiracy to commit money laundering, securities fraud, and false odometer statement charges in connection with an odometer fraud scheme involving more than 690 used vehicles and approximately $4.1 million in consumer fraud loss.  In pleading guilty, Gali admitted that from 2006 through 2011, he and his brother, Chaim Gali, devised a scheme to defraud consumers by misrepresenting the mileages of used vehicles.  As part of the scheme, the Galis used fictitious dealer names to purchase high-mileage vehicles, altered the odometers and vehicle titles, obtained “clean” Pennsylvania titles reflecting the false mileages, and sold the vehicles at auctions in Pennsylvania and New Jersey.  Gali was extradited from Israel in December 2019; his sentencing is scheduled for December 10.  His brother previously pleaded guilty and is awaiting sentencing.  

Nevada Woman Pleads Guilty in Multi-Million-Dollar Prize Notification Scam Affecting Elderly Victims
United States v. Burrow
Docket Number: 2:19-cr-295 (D. Nev.)

On August 12, 2020, Andrea Burrow pleaded guilty to conspiracy to commit mail fraud based on her participation in a scheme that cheated victims, many of whom were elderly and vulnerable, out of more than $10 million.  In pleading guilty, Burrow admitted that she and her co-conspirators used fraudulent prize notices to mislead victims into believing that they could claim a large cash prize if they paid a fee of $20 to $30.  Burrow is the fourth defendant to plead guilty in connection with the scheme.  Three other individuals – Patti Kern, Edgar Del Rio, and Sean O’Connor – pleaded guilty to conspiracy to commit mail fraud in 2019.  Five other defendants – Mario Castro, Jose Salud Castro, Salvador Castro, Miguel Castro, and Jose Luis Mendez – are awaiting trial, which likely will be scheduled for May 2021. 

Canadian Men Charged in Alleged Mass-Mailing Elder Fraud Schemes
United States v. Quaglia et al.
Docket Number: 2:20-cr-00196 (D. Nev.)

On August 5, 2020, a Nevada federal grand jury returned an indictment against Alex Quaglia and Patrick Fraser, both of Canada, for their alleged roles in elder fraud “sweepstakes” schemes.  Quaglia and Fraser each were charged with several counts of mail fraud and conspiracy to commit mail fraud in connection with deceptive mass mailings that falsely promised large cash prizes in exchange for the payment of fees.  According to the indictment, victims who paid fees received no cash prizes, while Quaglia, Fraser, and their co-conspirators pocketed the money.  Many of the victims were elderly. A trial date has not yet been set.

Defendant Sentenced in Identity Theft Scheme that Targeted Thousands of  U.S. Servicemembers and Veterans
United States v. Boling et al.
Docket Number: 5:19-cr-524 (W.D. Tex)

On July 9, 2020, U.S. District Judge Orlando L. Garcia sentenced Trorice Crawford to 46 months’ imprisonment for his role in an identity theft and fraud scheme that targeted U.S. servicemembers and veterans.  In pleading guilty to money laundering last December, Crawford admitted that from 2017 to 2019, he recruited at least 30 “money mules” to facilitate the receipt of millions of dollars taken from Department of Defense and Veterans Affairs benefit programs using personally identifying information stolen from victims.  Crawford kept a percentage of the fraudulently withdrawn funds for himself and oversaw the transmission of the remaining amounts to co-conspirators in the Philippines.  Some victims lost thousands of dollars in the scheme.  In addition to the prison term, the court also ordered Crawford to pay $103,700 in restitution.

British Man Sentenced to 70 Months in Prison for Fraud Scheme That Victimized Hundreds of Thousands of U.S. Consumers
United States v. Long

Press Release
Docket Number: 2:16-cr-71 (D. Nev.)

On June 23, 2020, Gareth David Long, of Las Vegas, Nevada, was sentenced to serve 70 months in prison for stealing millions of dollars from hundreds of thousands of consumers.  Long pleaded guilty in November 2019 to one count of wire fraud and one count of aggravated identity theft.  In pleading guilty, Long admitted that he used personal and financial information of more than 375,000 victims to steal millions of dollars from checking accounts.  Long previously operated as a third-party payment processor, creating and depositing checks on behalf of numerous merchants.  In 2013, Long began to simply charge the bank accounts of consumers whose personal and financial information he had acquired during his time as a payment processor, as well as others whose information he purchased in the form of lead lists.  Long did not have authorization to charge any of these victims’ accounts.  From January through July of 2013, Long created and deposited more than 750,000 unauthorized checks totaling more than $22 million.  Victims’ banks reversed only approximately half of these charges, and Long succeeded in stealing more than $11 million.  Long used the proceeds of his fraud scheme to purchase a ranch in Texas, three airplanes, cars, buses, ATVs, and a fire truck, as well as to pay other personal expenses.

Two Mississippi Men Sentenced in Odometer Fraud Scheme 
United States v. Baine; United States v. Savarese

Press Release
Docket Numbers: 1:19-cr-87; 1:19-cr-88 (S.D. Miss.)

On January 22, 2020, two Mississippi men were sentenced on charges stemming from their participation in a conspiracy to roll back odometers on used vehicles.  U.S. District Judge Louis Guirola Jr. sentenced Oscar M. Baine, 42, to 36 months’ incarceration and ordered him to pay $619,200 in restitution.  Jeffrey Lyn Savarese II, 36, was sentenced to 15 months’ incarceration and ordered to pay $320,000 in restitution.  Both men pleaded guilty in July 2019 to conspiracy to alter odometers.  In pleading guilty, Baine admitted that between 2011 and 2014, he caused the odometers on at least 387 vehicles to be rolled back to false, lower mileages and then sold to unsuspecting consumers from his car lot in Gulfport, Mississippi.  Savarese admitted he performed at least 200 of the rollbacks for Baine. 

California Man Indicted in Transnational Fraud and Extortion Scheme 
United States v. Adrianzen

Press Release
Docket Number: 1:19-CR-20658-RNS   (S.D. Fla)

On October 8, 2019, Angel Armando Adrianzen was charged with conspiracy to commit mail fraud and wire fraud, five counts of wire fraud, five counts of mail fraud, and four counts of extortion in connection with an alleged scheme operated by a transnational criminal organization.  The indictment alleges that Adrianzen partnered with several Peruvian call centers that contacted Spanish-speaking consumers in the U.S., many of whom were elderly and vulnerable.  According to the indictment, the Peruvian callers represented themselves as attorneys or government representatives and falsely told victims that they had failed to pay for or receive a delivery of products.  

The callers also falsely threatened victims with lawsuits, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and settlement fees.  Many victims made monetary payments based on these threats.  The indictment alleges that Adrianzen provided payment processing and shipping services for the call centers, knowing that they used fraudulent and extortionate means to extract money from victims.  

Four Peruvian Residents Sentenced in Fraud and Extortion Scheme
United States v. Jesus Gutierrez, Alexandra Podesta, Virgilio Polo, and Omar Portocarrero

Press Release
Docket Number: 1:16-CR-20912 (S.D. Fla)

On August 29, 2019, U.S. District Judge Roy K. Altman sentenced three residents of Lima, Peru in connection with a fraud and extortion scheme that targeted Spanish-speaking victims in the United States.  Jesus Gutierrez Rojas, Alexandra Podesta Bengoa, and Virgilio Polo Davila pleaded guilty to extortion following their extradition from Peru in April.  In pleading guilty, Gutierrez admitted that he oversaw a series of call centers in Peru that threatened Spanish-speaking victims with various consequences if they failed to pay non-existent debts.  

Podesta and Polo admitted that they managed and supervised call centers for the scheme.  The court sentenced Gutierrez to 51 months’ imprisonment, and Podesta and Polo to 46 months’ imprisonment.  Another co-conspirator, Omar Portocarrero Caceres, previously was sentenced to 46 months.

Virginia Man Pleads Guilty in Odometer Tampering Scheme 
United States v. Eubank 

Docket Number: 3:19-CR-0086 (E.D. Va.)

On June 24, 2019, Michael Carey Eubank pleaded guilty in the Eastern District of Virginia to one count of conspiracy to commit odometer tampering.  Eubank, who operated an automobile electronics repair shop in Midlothian, Virginia, acknowledged that between 2010 and 2016, he used various electronic tools to access motor vehicle odometers to lower the odometer readings of hundreds of vehicles.  At times, Eubank lowered mileage readings by more than 100,000 miles. 

Sentencing is set for October 9, 2019.

Executives of Canadian Payment Processor Charged with Fraud and Money Laundering
United States v. Day

Press Release 
Docket Number: 2:19-CR-155 (D. Nev.)

On June 19, 2019, four individuals were charged in connection with an alleged scheme involving payments from victims of numerous international mass-mail fraud campaigns.  Rosanne Day, Robert Paul Davis, Genevieve Renee Frappier, and Miles Kelly each were charged in the District of Nevada with one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering, and multiple counts of mail fraud and wire fraud.  Day and Davis were part-owners and the top managers of PacNet Services Ltd. (PacNet), a payment processing company based in Vancouver, British Columbia, Canada.  Frappier was in charge of PacNet’s Marketing and Client Services departments, and Kelly oversaw PacNet’s Compliance Department.  

The indictment alleges that PacNet, under the defendants’ direction, was the payment processor of choice for companies that mailed large volumes of fraudulent notifications designed to mislead victims into falsely believing they would receive a large amount of money, a valuable prize, or specialized psychic services upon payment of a fee.  Many alleged victims were elderly or otherwise vulnerable.  According to the indictment, PacNet served as the middleman between banks and the fraudulent mailers – aggregating the checks, cash, and credit card payments collected by its clients, depositing the payments into PacNet-controlled bank accounts, and then distributing the funds as directed by the clients. For more information, see the press release dated June 20, 2019.

Charges Unsealed Against Three Individuals Alleged to Have Operated Massive Mail Fraud Scheme
United States v. Thanos, United States v. Lett, United States v. Runner

Docket Number: 18-CR-260, 18-CR-261, 18-CR-578 (E.D.N.Y.)

On March 6, 2019, the court unsealed the guilty pleas of two defendants as well as an 18-count indictment against a third individual alleged to have operated a massive mail-fraud scheme for more than 20 years. On October 25, 2018, Patrice Runner, a Canadian and French citizen, was indicted in the Eastern District of New York on charges of mail and wire fraud, conspiracy to commit mail and wire fraud, and conspiracy to commit money laundering. Runner was arrested in Spain, and extradition proceedings have been initiated in Spanish court.

In June 2018, Canadian citizens Maria Thanos and Philip Lett pleaded guilty in the Eastern District of New York to charges of conspiracy to commit mail fraud for their roles in the operation of the same psychic mail fraud scheme. The charges allege that the defendants defrauded more than 1 million victims of over $180 million dollars by sending letters purporting to be from world-renowned psychics and promising assistance in achieving wealth and happiness in return for a fee.

 

Court of Appeals Affirms Convictions and Sentences of Co-Conspirators in $60 Million Business Opportunity Scam
United States v. Kaplan et al.

Docket Number: 16-3985 (2d Cir.)

On December 6, 2018, the Court of Appeals for the Second Circuit affirmed the convictions and sentences of five defendants who worked at Vendstar, a Long Island company that brought in more than $60 million from selling worthless candy vending machine business opportunities. Six defendants were convicted of conspiracy, mail fraud, and wire fraud charges following trial in 2015. The Second Circuit previously affirmed the conviction and sentence of Ned Weaver, the manager of the scheme.

Vendstar sales representatives misrepresented to victims the likely profits they would earn, how past customers were doing, the availability of high-profit locations, and services that purported locating companies would provide. Altogether, 22 individuals were convicted of fraud in connection with Vendstar.

District Court Issues Temporary Restraining Order Blocking Multi-Million Dollar Elder Fraud Schemes
United States v. Kafeiti et al.

Press Release
Docket Number: 2:18-CV-06581 (E.D.N.Y.)

On November 19, 2018, the district court entered a temporary restraining order against 15 defendants alleged to have been involved in mailing fraudulent solicitations related to three prize promotion schemes. According to the complaint filed in the case, the defendants sent solicitations informing recipients they had won large cash prizes, but that they urgently must pay fees to claim their winnings. The complaint alleged the schemes targeted the elderly and generated approximately $4.8 million in annual victim losses. 

The defendants included the alleged direct mailers who organized the scheme, mailing list managers, “cagers” who opened and processed victim returns, and payment processors. A preliminary injunction hearing is scheduled for December 3, 2018.

Defendant Pleads Guilty in Multimillion-Dollar Prize-Promotion Scam
United States v. Lovisa

Press Release
Docket Number: 2:18-CR-349 (E.D.N.Y)

On October 12, 2018, Tully Lovisa, of Huntington Station, NY, pleaded guilty to conspiracy to commit mail fraud in connection with a mass-mailing scheme that brought in millions of dollars from victims. In pleading guilty, Lovisa admitted that he sent prize-promotion mailings that misled recipients, many of whom were elderly, into believing that they could claim and receive large cash prizes in exchange for modest fees.

Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the Federal Trade Commission, which previously sued him regarding an earlier prize-promotion mailing business.

Court Permanently Enjoins Canadian Mass-Mailers From Sending Fraudulent Solicitations
United States v. Thomas, et al.

Docket Number: 1:18-CV-1121 (E.D.N.Y)

On August 8, 2018, the District Court permanently enjoined Patrick Fraser, Christopher Fraser, and Ubuki Kanehira, three members of an alleged Canada-based mass-mailing scheme. The injunction follows a temporary restraining order entered on allegations that the defendants sent fraudulent notifications to consumers promising large cash prizes pending payment of small fees.

According to the complaint in the case, the defendants mailed more than 1 million solicitations to potential victims in the United States, France, Germany, the Netherlands, Japan, and elsewhere, grossing about $4.5 million annually since 2016. Victims sent money to mailboxes located in the United States and received no cash prizes.

International Mass-Mailers Enjoined from Further Participation in Fraudulent Solicitation Schemes
United States v. Alexander Quaglia, et al.

Docket Number:1:18-CV-1102 (E.D.N.Y.)

On August 6, 2018, the District Court permanently enjoined a group of entities and individuals alleged to have been involved for more than a decade in predatory mail fraud schemes that targeted primarily elderly victims throughout the world.

The government alleged in a February complaint that Navigator Marketing Ltd., a Canadian company, and Rockport Promotional Marketing, LLC, a Delaware registered corporation, and the corporations’ principals, Alexander Quaglia, Rychard McKeown, and Brent Nishiguchi, all of British Columbia, Canada, operated an international fraud scheme that mailed solicitations informing recipients that they would receive large sums of money after payment of a small fee. Victims never received the promised winnings.

Operator of Odometer Fraud and Title Scheme Sentenced
United States v. Basnight

Press Release
Docket Number: 2:17-CR-171 (E.D. Va.)

On July 25, 2018, Lawson Basnight of Norfolk, Virginia, was sentenced to serve 18 months in prison and three years of supervised release in connection with an odometer and title fraud scheme. Basnight also was ordered to pay approximately $400,000 in victim restitution. Basnight pleaded guilty in January to one count of conspiracy to commit odometer tamping and securities fraud.

As part of his plea agreement, Basnight admitted that from 2010 until 2016, he purchased more than 50 high-mileage vehicles from individuals and arranged to alter the vehicles’ odometers to reflect false, lower mileage readings. Basnight fraudulently obtained new title documents reflecting the false mileages and resold the vehicles at inflated prices.

Defendant Sentenced in Multi-Million-Dollar Prize Promotion Scams Targeting Elderly Victims
United States v. Burke and Rossi

Press Release
Docket Number: 2:16-CR-0262 (D. Nev.)

On June 25, 2018, Michael Rossi was sentenced to 63 months in prison plus three years of supervised release in connection with a telemarketing scheme that defrauded thousands of victims, many of whom were elderly, out of more than $2.7 million.  Victims were told they had won cars, boats, or other prizes they could claim by purchasing hundreds of dollars’ worth of vitamins. 

In return, victims received worthless costume jewelry.  Rossi pleaded guilty in December 2017 to conspiracy to commit mail and wire fraud.  Another defendant, Glen Burke, also pleaded guilty in December 2017 and was sentenced on March 12, 2018, to 87 months in prison and three years of supervised release.

Former Auto Body Shop Owner Sentenced for Role in Odometer and Title Fraud Scheme
United States v. Paul Robinson

Press Release
Docket Number: 2:17-CR-00004 (E.D. Va.)

On June 8, 2017, Paul Robinson was sentenced to 37 months in prison for his role in an odometer tampering and securities fraud conspiracy. Robinson also was ordered to pay $320,797.82 in restitution to the victims of the scheme. Robinson pleaded guilty in February 2017 to one count of conspiracy to commit odometer tampering and securities fraud.

Robinson owned an auto body shop located in Chesapeake, Virginia. He purchased high-mileage vehicles, then caused the vehicles’ odometers to be altered to reflect fraudulent, low-mileage readings. Robinson and his co-conspirators then acquired Virginia motor vehicle titles with false, low-mileage odometer readings, which were used to sell the vehicles to unsuspecting purchasers. One of Robinson’s co-conspirators, the title clerk who issued many of the fraudulent titles, was sentenced to five years of probation with 12 months of home detention in September 2016.

Two Georgia Defendants Sentenced in Odometer Fraud Conspiracy
United States v. Rojen Burnett and Amber McLaughlin

Press Release
Docket Number: 5:12-CR-0141 (N.D. Ga.)

On May 31, 2017, Rojen Burnett was sentenced to serve 12 months in prison and pay $399,363 in restitution for his role in a conspiracy to sell cars with rolled-back odometers. Burnett’s co-defendant, Amber McLaughlin, was sentenced to serve 12 months in prison and pay $176,725 in restitution. Burnett owned and operated Lifestyle Auto Broker LLC, a Georgia corporation that bought and sold used cars. McLaughlin was a former customer service specialist at the Motor Vehicle Department of the Georgia Department of Revenue.

In 2012 and 2013, Burnett bought high-mileage used cars, altered the mileage on the titles, rolled back the odometers, obtained new titles with false low mileages, and sold the cars to unsuspecting dealers. The dealers, in turn, sold them to consumers. McLaughlin helped Burnett commit odometer fraud by fraudulently issuing new Georgia titles with false low mileages in exchange for cash. Both defendants pleaded guilty last year.

Court Enters Permanent Injunction and Civil Penalty Against Utah Telemarketers
United States v. Feature Films for Families, Inc., et al.

Press Release
Docket Number: 2:11-CV-0419 (D. Utah)

On March 23, 2018, the district court entered a stipulated order permanently enjoining three Utah-based telemarketing companies and their owner from engaging in deceptive and abusive telemarketing practices. The order also imposes a civil penalty of approximately $45.4 million, of which all but $487,735 is conditionally suspended based on the defendants’ financial condition. This case was initiated in 2011, alleging that the defendants, Feature Films for Families, Inc., Corporations for Character, L.C., Family Films of Utah, Inc., and Forrest S. Baker III, committed widespread violations of the FTC Act and Telemarketing Sales Rule (TSR) in various telemarketing campaigns to sell DVDs and movie tickets, and in charitable solicitation call campaigns.

On May 25, 2016, following eight days of trial, a jury found the defendants committed more than 117 million knowing violations of the TSR, including 99 million calls to phone numbers on the Do Not Call Registry, and more than four million additional calls in which they made misleading statements to induce DVD sales. The verdict was the first ever in an action to enforce the Telemarketing Sales Rule and Do Not Call Registry rule.

Montana Man Pleads Guilty for Designing Fraudulent Solicitations as Part of Large-Scale International Mass-Mailing Fraud Scheme
United States v. Thomas Ressler

Docket Number: 6:18-CR-0004 (D. Mont.)

On Feb. 22, 2018, Thomas Ressler pleaded guilty to one count of conspiracy to commit mail fraud for his role in a large-scale international mail fraud scheme. Between 2012 and 2016, Ressler designed fraudulent sweepstakes and prize notification solicitations sent by co-conspirators to victims in the United States and other countries. The letters falsely claimed recipients had won money or valuable prizes, such as luxury cars, and instructed victims to send a $20-$25 processing fee to claim their prize.

Victims who paid the fees received either nothing, a cheap piece of jewelry, or a report listing unrelated sweepstakes. Ressler also agreed to a civil consent order, filed Feb. 21 with in the Eastern District of New York, that enjoins him from involvement in further fraudulent solicitation schemes.

Ressler’s sentencing is currently scheduled for June 12, 2018 at 10:00 a.m. before Judge Sam Haddon in Helena, Montana.

Learn more information about this case.

Indiana Resident Charged with Sending Fraudulent Collection Letters to Mail Fraud
United States v. Sherry Gore

Docket Number:1:18-CR-0046 (S.D. Ind.)

On Feb. 21, 2018, Sherry Gore was charged with conspiring to use a false name in connection with a fraud scheme for her role collecting money for a long-running psychic mail fraud scam. According to charges, Gore sent collection letters to victims of the psychic scheme after the victims’ checks bounced. In many letters, Gore used a false name, claimed to be the “Director/Legal Services-Collections,” and threatened that lawyers would pursue legal proceedings against victims. The charge against Gore carries a statutory maximum penalty of 5 years in prison. 

A hearing for entry of a plea and sentencing is scheduled for May 21, 2018.

Learn more information about this case.

District Court Issues Temporary Restraining Order Against Florida Businesses in Direct-Mailing Scheme
United States v. Marotta, et al.

Docket Number:0:18-CV-60377 (S.D. Fla.)

On Feb. 21, 2018, the district court issued a temporary restraining order pursuant to 18 U.S.C. § 1345 against two businesses and two individuals alleged to operate a direct-mailing scheme based in Fort Lauderdale, Florida. The complaint filed in the case alleges that Art Masters LLC, which does business as Palm Beach Liquidation Gallery, and its principal, Eugene Marotta, of Fort Lauderdale, Florida, and William Clutter, doing business as Edge Graphics of North Las Vegas, Nevada, committed mail fraud in connection with their scheme.

The complaint alleges that the defendants send fraudulent solicitations styled as notifications that the recipient has won a large package of cash and prizes, typically worth more than $350,000. The complaint further alleges that the defendants mail thousands of solicitations to potential victims throughout the United States and have grossed more than $1 million since 2016. A hearing for the defendants to show cause why a preliminary injunction should not issue is scheduled for April 17, 2018.

District Court Issues Temporary Restraining Order against Las Vegas Defendants in Direct-Mailing Scheme
United States v. Kern, et al.

Docket Number: 2:18-CV-283 (D. Nev.)

On Feb. 20, 2018, the district court issued a temporary restraining order pursuant to 18 U.S.C. § 1345 against six individuals and fourteen corporate entities alleged to have operated a mass-mailing scheme based in Las Vegas, Nevada. According to the complaint filed in the case, the defendants send fraudulent solicitations styled as notifications that the recipients have won large cash prizes, typically said to be worth more than $1 million. Victims who send payments receive no prize.

The complaint further alleged that the defendants have grossed at least $10 million over the course of the scheme. The named defendants include direct mailers, printers, a cager, and a data manager who created and maintained lead lists. A hearing for the defendants to show cause why a preliminary injunction should not issue is scheduled for April 24, 2018.

New Jersey Man Pleads Guilty to Large-Scale International Mass-Mailing Fraud Scheme
United States v. Ryan Young

Docket Number: 2:18-CR-0046 (E.D.N.Y.)

On Feb. 13, 2018, Ryan Young pleaded guilty to one count of conspiracy to commit mail fraud for his role in a large-scale international mail fraud scheme that brought in $50 million from victims between 2011 and 2016. Young worked with a co-conspirator named Ercan Barka, who pleaded guilty to the same charge in January. Young and Barka sent fraudulent prize notification letters to victims in the United States and numerous other countries.

The letters falsely claimed recipients had won money or valuable prizes, such as luxury cars. Victims were instructed to send small processing fees – typically $20 or $25 – to claim the prizes. Many victims received nothing; others received only a cheap piece of jewelry or a report listing unrelated sweepstakes.

New Jersey Man Pleads Guilty to Large-Scale International Mass-Mailing Fraud Scheme
United States v. Ercan Barka

Docket Number: 2:18-CR-0031 (E.D.N.Y.)

On Jan. 25, 2018, Ercan Barka pleaded guilty to one count of conspiracy to commit mail fraud for his role in a large-scale international mail fraud scheme that brought in $50 million from victims between 2011 and 2016. Barka, who primarily resided in Turkey during the course of the scheme, worked with a co-conspirator to send fraudulent prize notification letters to victims in the United States and numerous other countries.

The letters falsely claimed recipients had won money or valuable prizes, such as luxury cars. Victims were instructed to send small processing fees – typically $20 or $25 – to claim the prizes. Many victims received nothing; others received only a cheap piece of jewelry or a report listing unrelated sweepstakes.

Injunctions Entered Against Defendants in Multi-Million Dollar International Mail Fraud Scheme
United States v. BDK Mailing GmbH, et al.

Press Release
Docket Number: 1:16-CV-5264 (E.D.N.Y.)

On Nov. 21, 2017, the district court entered consent decrees against defendants BDK Mailing GmbH, Mailing Force Pte, Ltd., Only Three Pte. Ltd., Aurora Jouffroy-Brandtner, Chantal Seguy, Marion Elchlepp, Macromark, Inc., Mary Ellen Meyer, Mail Order Solutions India Pvt. Ltd., Dharti Desai and Mehul Desai. The United States’ complaint, filed in September 2016, alleges that the defendants ran an international mail fraud scheme that sent millions of multi-piece solicitations to potential victims throughout the United States that professed to come from financial entities, scholars, and world-renowned psychics.

The solicitations misled recipients into believing that they would receive large sums of money or powerful talismans for payments of $50 to $55. According to the complaint, victims sent hundreds of millions of dollars to defendants in “fees,” but received nothing of value in return. The consent decrees permanently enjoin the defendants from using the U.S. Mail to distribute fraudulent mailings or any mailings promoting similar schemes.

Defendant Sentenced in Connection with Lottery Scam Based in Jamaica
United States v. Shashana Stacyann Smith

Press Release
Docket Number: 3:16-CR-313-RJC (W.D.N.C.)

On September 15, 2017, Shashana Stacyann Smith was sentenced to serve 24 months in prison related to her role in a fraudulent lottery scheme based in Jamaica. Smith also was ordered to pay $167,532.95 in restitution. Smith previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. In pleading guilty, Smith admitted that from in or around early 2015 through at least in or around August 2016, she participated in a scheme to defraud victims throughout the United States. Victims of the scheme received telephone calls about substantial lottery prizes they supposedly had won. They were told to pay thousands of dollars to Smith and others in order to collect their winnings. Smith received the money, kept a portion for herself, and sent the remainder to individuals in Jamaica.

Victims never received any lottery winnings. Smith is a Jamaican national living in the United States. Two co-conspirators previously were sentenced in connection with this matter. Dominic Smith (no relation to Shashana Smith) was sentenced in October 2015 to 27 months in prison and one year of supervised release. Smith was also ordered to pay $724,408.79 in restitution. Felecia Roxanne Lindo was sentenced in February 2017 to 24 months in prison and three years of supervised release. Lindo was also ordered to pay $292,900 in restitution.

See February 17, 2017 update on Felecia Lindo.

Defendant’s Foreign Properties Sold for $1,665,000 To Obtain Restitution for Fraud Victims
United States v. Shevin Goodman

Docket Number: 1:07-CR-20871 (S.D.Fla.)

On August 25, 2017, the closing of the sale of defendant’s two condominiums in Costa Rica was finalized. Defendant Shevin Goodman pled guilty in 2008 to conspiracy to commit mail fraud in violation of 18 U.S.C. § 371, and criminal contempt in violation of 18 U.S.C. § 401(3), in connection with his role in several fraudulent business opportunities. Goodman served a prison term of 49 months. A restitution order required the defendant to pay restitution of more than $3.8 million, and the court repeatedly ordered the defendant to sell his condominiums in Costa Rica and apply the funds to his restitution obligations. However, as of early 2017, the defendant had not brought any purchase offers to the court, and he continued to owe more than $2.8 million.

As a result, in March 2017, the United States sought and obtained the court’s appointment of a second realtor – in addition to the defendant’s realtor – to attempt to sell the properties. In the coming months, several offers were received, including the highest offer of $1,665,000, which was approved by the court on July 27, 2017. Final proceeds from the sale of these properties will go toward restitution payments in the fraud case.

Second Circuit Affirms Conviction and Sentence of Business Opportunity Fraudster
United States v. Edward Morris "Ned" Weaver (Vendstar)

Press Release
Docket Number: 16-3861 (2d. Cir.)

On June 21, 2017, the Court of Appeals for the Second Circuit affirmed the conviction and sentence of Edward “Ned” Weaver, who ran Vendstar, a Long Island company that sold worthless candy vending machine business opportunities.  Weaver and five other co-conspirators were convicted of mail fraud, wire fraud, and other charges following trial in 2015.  Sixteen other defendants pled guilty.  Vendstar sales representatives – with the knowledge and encouragement of Weaver and other managers – misrepresented the businesses’ likely profits, how its past customers were doing, the availability of high-profit locations, and the services that locating companies would provide. 

During the last five years it was open, Vendstar made approximately $62 million in sales.  Weaver argued in his appeal that he was not guilty because Vendstar customers signed purchase agreements in which they disclaimed reliance on what sales representatives had said verbally.  The Second Circuit rejected that argument, holding that “[f]raudsters may not escape criminal liability for lies told to induce gullible victims to make worthless investments by inducing them to sign a contract containing disclaimers of reliance.”

Learn more.

Defendant Sentenced in Connection with a Lottery Scam Based in Jamaica
United States v. Claude Shaw

Press Release
Docket Number: 0:17-CR-60056 (S.D. Fla.)

On June 2, 2017, Claude Shaw of Miramar, Florida, was sentenced to serve 36 months in prison and three years of supervised release for his participation in a fraudulent lottery scam based in Jamaica.  Shaw also was ordered to pay $128,440 in restitution.  Shaw pleaded guilty on March 22 to one count of mail fraud in connection with his role in the scheme.  In pleading guilty, Shaw admitted that from September 2013 through August 2015, he participated in a scheme to defraud victims throughout the United States.  Victims received telephone calls informing them that they had won more than one million dollars in a lottery, but that they needed to pay advance fees to claim their winnings.  Victims sent such fees to Shaw, who then forwarded a portion of the money to Jamaica.  Victims never received any lottery winnings and lost more than $150,000.
 

Sixteen Defendants Have Pled Guilty to the Fraudulent Sale of Vending Machine Business Opportunities Fraud; Six Defendants Accused of Fraud Are Awaiting Trial

Vendstar (Multivend, LLC) (United States v. Edward Morris "Ned" Weaver, Lawrence A. Kaplan, Scott M. Doumas, Mark Benowitz, Richard R. Goldberg, Richard Linick, Paul E. Raia, Howard S. Strauss, Wallace W. “Wally” DiRenzo, and James P. Ellis, a/k/a “Max Braddock,” a/k/a “Patrick Cosgrove,” a/k/a “Todd Parker," Theodore D. Heyman, Adam Abzug, Jeffrey T. Baird, a/k/a “Jay Baird,” Dennis Daniele, Jay A. Friedman, Steven Gralnick, a/k/a “Robert Gralnick,” Mark L. Harris, a/k/a “Harris Marks,” Iris Jumper; Michael C. Minotto, a/k/a “Dean Minotto,” Steven Rosenberg, Anthony Joseph Spinelli, and Barry Stern)

Press Release
Docket Numbers: 13-CR-120; 13-CR-500; 13-CR-501 (E.D.N.Y.)

On March 23, Richard Linick was sentenced to 3 years in prison for fraudulently selling $1.65 million in vending machine businesses to more than 140 victims.  Linick was one of six defendants convicted at trial in 2015 of committing wire fraud and conspiracy while working for Multivend, LLC, d/b/a/ Vendstar, a Long Island, New York, company that closed in 2010.  During the last five years it was open, Vendstar made approximately $62 million in sales. 

Sales representatives – with the knowledge and encouragement of Vendstar’s CEO and other managers – misrepresented the businesses’ likely profits, how its past customers were doing, the availability of high-profit locations, and the services that locating companies would provide.  In all, 22 individuals were convicted of fraud in connection with Vendstar.  Ten of those defendants have been sentenced to prison, and 12 have been sentenced to probation.

See latest for Edward Morris "Ned" Weaver or learn more.

Florida Resident Sentenced in Connection with Jamaica-Based Lottery Scam
United States v. Cassandra Althea Palmer

Press Release
Docket Number: 1:16-CR-20821 (S.D. Fla.)

On March 22, 2017, Cassandra Althea Palmer was sentenced to serve 24 months in prison and three years’ supervised release in connection with her participation in a Jamaican-based lottery scheme. Restitution will be decided at a later hearing. On December 7, 2016, Palmer pleaded guilty to one count of conspiracy to commit mail and wire fraud. As part of the scheme, a victim in Maryland was contacted by an individual in Jamaica and told that she had won a multi-million dollar lottery prize, but that in order to collect her lottery prize, she first had to pay taxes and fees.

The victim did not win a lottery prize and did not collect any winnings. Working with her co-conspirator in Jamaica, Palmer recruited a friend in Maryland to receive $7,500 of the victim’s money. Palmer and her friend kept a portion of the money, and Palmer wire transferred the rest to her Jamaican co-conspirator.

Eleventh Circuit Affirms Sentence of Business Opportunity Fraudster
United States v. Sirtaj “Tosh” Mathauda

Docket Number: 15-10399 (11th Circuit)

On February 21, 2017, the Court of Appeals for the Eleventh Circuit affirmed the sentence of Sirtaj “Tosh” Mathauda, who was convicted of conspiracy and multiple counts of mail and wire fraud in connection with a series of fraudulent business opportunities. Following a jury trial in the Southern District of Florida, Mathauda was sentenced to 200 months’ imprisonment. In this appeal, he argued that the sentence was substantively unreasonable given, among other things, his age and health, and his non-citizenship concerns.

Mathauda also appealed the court’s denial of his motion to proceed pro se, arguing that he had made a clear and unequivocal request to proceed pro se before his sentencing and that the denial of the motion without a hearing violated his Sixth Amendment right to self-representation. The Eleventh Circuit rejected both of his arguments, holding that the prison sentence was substantively reasonable and that the district court did not err in denying his motion to proceed pro se without holding a third Faretta hearing.

Defendant Sentenced in Connection with a Lottery Scam Based in Jamaica
United States v. Felecia Roxanne Lindo

Docket Number: 3:16-CR-0224 (W.D.N.C.)

On February 17, 2017, Felecia Roxanne Lindo was sentenced to serve 24 months in prison and three years’ supervised release for her role in a fraudulent lottery scheme based in Jamaica. Lindo was also ordered to pay $292,900 in restitution. Elderly victims of the scheme were contacted and falsely told that they had won millions of dollars in a lottery or sweepstakes.
They were told to pay thousands of dollars to Lindo and others in order to collect their winnings.
Lindo received victims’ money, kept a portion for herself, and sent the remainder to individuals in Jamaica. Victims never received any lottery winnings. Lindo is a Jamaican national and naturalized U.S. citizen. She pleaded guilty to one count of conspiracy to commit wire fraud on Sept. 28, 2016.

Justice Department and State Partners Secure Nearly $864 Million Settlement With Moody’s Arising From Conduct in the Lead up to the Financial Crisis
In re: Moody’s Investors Service Inc.

Press Release
(D.N.J.)

On January 13, 2017, the Department ratified a nearly $864 million settlement agreement with Moody’s Investors Service Inc., Moody’s Analytics Inc., and their parent company, Moody’s Corporation over allegations arising from Moody’s role in providing credit ratings for Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDO), contributing to the worst financial crisis since the Great Depression. The agreement resolves pending state court lawsuits in Connecticut, Mississippi, and South Carolina, as well as potential claims by the Justice Department, 18 states, and the District of Columbia. The settlement follows an investigation by the Consumer Protection Branch and the U.S. Attorney’s Office for the District of New Jersey into potential claims pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and investigations conducted by various State Attorneys General pursuant to state law. The settlement includes a $437.5 million federal civil penalty, which is the second largest payment of this type ever made to the federal government by a ratings agency. The remainder will be distributed among the settlement member states in alignment with terms of the agreement. The states involved in the settlement include Arizona, California, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, North Carolina, Oregon, Pennsylvania, South Carolina and Washington as well as the District of Columbia.

The multi-faceted settlement includes a Statement of Facts in which Moody’s acknowledged key aspects of its conduct, and a compliance agreement to prevent future violations of law. The Statement of Facts addresses Moody’s representations to investors and the public generally about: (1) its objectivity and independence; (2) its management of conflicts of interest; (3) its compliance with its own stated RMBS and CDO rating methodologies and standards; and (4) the analytic integrity of certain rating methodologies. In particular, the Statement of Facts addresses whether Moody’s credit ratings were compromised by what Moody’s itself acknowledged were the conflicts of interest inherent in the so-called “issuer pay” model, under which Moody’s and other credit rating agencies are selected by the same entity that puts together and markets the rated securities and therefore stands to benefit from higher credit ratings. The Statement of Facts also addresses Moody’s failure to adhere to its own published standards when rating RMBS and CDOs. The settlement includes significant commitments by Moody’s to improve its business practices, including: separation of Moody’s commercial and credit rating functions; independent review and approval of changes to rating methodologies; changes to ensure that key personnel are not compensated on the basis of the company’s financial performance; enhancing Moody’s oversight over its press releases and methodology development; and certifications of compliance by the President/CEO of Moody’s with these commitments for at least five years.

Chief Executive Officer and Manager of Fraudulent Business Opportunity Seller Sentenced to Prison
United States v. Edward Weaver

Press Release
Docket Number: 2:13-CR-0120 (E.D.N.Y.)

On November 3, 2016, the CEO and a senior manager of a Long Island, New York, company that fraudulently sold vending machine business opportunities were sentenced to prison. Both defendants worked at Multivend, LLC, d/b/a/ Vendstar, based in Deer Park, New York. Before closing in July 2010, Vendstar made approximately $10 million to $12 million in sales per year. Edward Morris “Ned” Weaver, who was Vendstar’s president and CEO from 2004-2010, was sentenced to 60 months in prison. Lawrence A. Kaplan, who was Vendstar’s technical support manager, a position in which he stifled complaints to keep the scheme going, was sentenced to 54 months in prison.

Weaver and Kaplan were both found guilty after a 6-week trial last year of conspiracy, mail fraud, wire fraud, and making a false statement. Twenty other individuals also have been convicted in connection with Vendstar, many of whom are awaiting sentencing. The defendants made misrepresentations about profits, operating their own vending routes, locations, and ongoing customer support to induce the victims to buy what was advertised as a complete business package, but turned out to be essentially worthless. Weaver and Kaplan were ordered to report to prison on January 9, 2017.

Woman Pleads Guilty to Conspiracy to Commit Money Laundering in Connection with International Lottery Scheme
United States v. Samaiyah Armistead

Press Release
Docket Number: 1:16-CR-0450 (D. Md.)

On October 17, Samaiyah Sharron Armistead pleaded guilty in U.S. District Court for the District of Maryland to one count of conspiracy to commit money laundering. The money laundering was in connection with an international lottery fraud scheme involving co-conspirators in Florida and Jamaica. Armistead received $7,500 in cash from a victim in Maryland and deposited most of that money into accounts of a co-coconspirator. She later received $32,500 in cash from an undercover officer pretending to be the victim from Maryland, and was promptly arrested.

In the underlying lottery fraud scheme, the victim was falsely informed that she had won a lottery but had to pay various up-front fees. In fact, the victim did not win the lottery and never received any winnings.
The court scheduled Armistead’s sentencing for December 22.

 

Defendant Sentenced for Role in Jamaican Lottery Scam
United States v. Vania Lee Allen

Press Release
Docket Number: 1:16-CR-0021 (S.D. Ga.)

On September 27, 2016, Vania Lee Allen was sentenced to 40 months in prison and 3 years of supervised release following her conviction on charges of conspiracy to commit wire fraud and falsely impersonate an employee of the United States. Allen was also ordered to pay $117,000 in restitution. Earlier this year, Allen pled guilty to one count of a pending indictment charging that she and a co-conspirator in Jamaica sought to unlawfully enrich themselves in a fraudulent lottery scheme targeting an elderly resident of Evans, Georgia. Allen's co-conspirator falsely informed the victim by phone that the victim had won money in a lottery, and instructed the victim to make payments to various people in order to collect the purported lottery winnings.

In order to gain the trust of the victim and induce him to continue to make payments, Allen traveled from Jamaica to the United States and falsely portrayed herself to the victim as an FBI agent, provided him with a cellphone, and directed him to speak with the person on the line, who was her co-conspirator in Jamaica. The scheme was disrupted before the elderly individual could be further victimized by the conspiracy.

TRO Entered Against Mass-Mailing Fraud Schemes Targeting the Elderly
United States v. Trends Service, et al.

Press Release
Docket Number: 1:16-CV-2770 (E.D.N.Y.)

On June 1, 2016, the district court entered a temporary restraining order against an individual and two Dutch companies that allegedly engaged in multiple international mail fraud schemes that have defrauded elderly and vulnerable U.S. victims out of approximately $18 million annually. According to the complaint, United States residents received fraudulent direct mail solicitations that falsely claimed that the recipients had won, or would soon win, cash or valuable prizes or otherwise come into great fortune. These solicitations, mailed from locations around the globe, purport to be personalized to each individual recipient, despite the fact that they are form letters mailed to hundreds of thousands of potential victims. Some solicitations instruct recipients to pay a fee in order to receive their winnings; others urge recipients to purchase goods or services based on false promises that they will guarantee future lottery wins.

According to the complaint, victims who received these solicitations sent payments through the U.S. and international mail systems to defendants Trends Service in Kommunikatie, B.V. (Trends), and Kommunikatie Service Buitenland, B.V. (KSB), both owned and operated by defendant Erik Dekker. Victims enclosed their payments, typically around $15 to $55, in pre-addressed return envelopes addressed to postal boxes in the Netherlands that are owned by Trends and KSB. Like other so-called “caging services,” Trends and KSB open the payment envelopes, remove the contents, enter payment and other personal information from the victims into a database, and handle victim payments.

Simultaneously with the filing of this action, Dutch law enforcement agents executed search warrants on the business address used by both companies and on Dekker’s home address. The Dutch authorities also took control of the Dutch postal boxes used by the defendants to receive victim funds. The coordinated U.S. and Dutch actions immediately stopped defendants from using the Dutch boxes to receive future payments from fraud victims and from further victimizing elderly Americans.

Injunction Entered Against Eight Individuals and Entities That Ran Psychic Mail Fraud Scheme
United States v. Metro Data Management, et al.

Press Release
Docket Number: 2:14-CV-6791 (E.D.N.Y.)

On May 6, 2016, the district court approved a consent decree resolving the claims against all remaining defendants in this civil action for injunction pursuant to 18 U.S.C. § 1345. The decree, which permanently enjoins the operation of a mail fraud scheme involving fraudulent direct mail solicitations from purported psychics Maria Duval and Patrick Guerin, was entered against: Canadian company 9097-9394 Québec Inc. dba Infogest Direct Marketing (Infogest); Infogest employees Mary Thanos, Daniel Sousse and Philip Lett, all of Quebec, Canada; Hong Kong corporation Destiny Research Center Ltd.; Destiny Research Center President Martin Dettling of Zurich, Switzerland; Patrick Guerin of France and Maria Duval of France.

These defendants ran a mail fraud scheme in which victims received letters from alleged world-renowned psychics, offering purportedly personalized psychic predictions and services for a fee. In reality, identical letters were sent to hundreds of thousands of consumers identified through the purchase of lead lists. This scheme defrauded more than 1 million Americans out of more than $180 million. The permanent injunction entered by the court enjoins the defendants from making various claims in any advertisements, solicitations, or promotional materials sent through the mail, including a ban on any advertisements on behalf of any actual or fictional individual or entity purporting to offer psychic, clairvoyant or astrological items or services for a fee.

British Man Indicted for Large-Scale Wire Fraud and Identity Theft Scheme
United States v. Gareth David Long

Press Release
Docket Number: 2:16-CR-0071 (D. Nev.)

On March 9, 2016, Gareth David Long, a British citizen residing in Las Vegas, Nevada, was charged in a 39-count indictment in the District of Nevada. Long was charged with multiple counts of wire fraud, aggravated identity theft, and money laundering for a scheme that victimized hundreds of thousands of account holders throughout the United States. 

From January 2013 through July 2013, Long created and deposited more than 750,000 remotely-created checks, totaling more than $22 million and drawn on the bank accounts of unwitting victims.  Long obtained the account information of his victims through purchasing detailed spreadsheets containing personal and financial information; and, account information that he possessed from his prior work as a payment processor for merchants and telemarketers. Long charged the accounts of more than 100,000 prior customers of these merchants who had not agreed to any new charges by Long’s company.  Long used the proceeds of his fraud to purchase airplanes, numerous vehicles, and other property.

TOBACCO PRODUCT LITIGATION

Texas Man Indicted for Alleged Illicit Importation of Vaping Products
United States v. Reyes

Case No. 19-cr-00632 (N.D. Tex.)

On December 4, 2019, a Dallas grand jury indicted Christopher Reyes on charges related to the importation of counterfeit THC vaping products from Chinese manufacturers. The indictment alleges that Reyes purchased and received at his home counterfeit THC vaping products from China. According to the indictment, Reyes then took these shipments to a Dallas vaping shop, where the counterfeit cartridges would be filled and passed off to the public as “legitimate” THC vaping paraphernalia. Reyes is charged with importation of drug paraphernalia, conspiracy to violate the Controlled Substances Act, and smuggling.

District Court Adopts Consent Order on Implementation Details for Tobacco Corrective Statement
United States v. Philip Morris USA, Inc., et al.

Press Release
Docket Number: 1:99-CV-2496 (D.D.C.)

On May 1, 2018, the district court entered a consent order requiring the country’s major cigarette companies to begin posting “corrective statements” on their websites starting on Monday, June 18. The order, part of the United States’ long-running racketeering lawsuit against the cigarette companies, also requires them to attach the same statements to cigarette packages for two weeks at a time, for a total of twelve weeks over two years. The order also will apply to any social media campaigns by the companies to promote cigarettes. The statements address the effects of cigarette smoking and the fact that cigarettes are deliberately designed to create and sustain addiction.

As a result of a previous court order, the statements currently are running on television five times per week, and previously ran as full-page ads in about fifty newspapers across the country. The district court ordered the tobacco companies to issue corrective statements as part of the 2006 permanent injunction, which followed the nine-month civil racketeering trial. The issue of corrective statements to appear at retail locations where cigarettes are sold is being litigated on a separate track before the district court.

U.S. SERVICEMEMBER AND VETERAN FRAUD

Two Defendants Plead Guilty to Identity Theft Scheme Targeting Servicemembers and Veterans
United States v. Crawford, United States v. Brown

Press Release - Brown
Press Release - Crawford
Docket No. 19-CR-00524 (W.D. Tex.)

On December 5, 2019, Trorice Crawford of San Diego pleaded guilty to one count of conspiracy to commit money laundering in connection with an identity theft scheme that allegedly targeted servicemembers and veterans. On October 29, 2019, Fredrick Brown, a former civilian contractor stationed at Yongsan Garrison, a US Army installation in South Korea, pleaded guilty to one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering in connection with the same scheme. Both defendants were charged in a 14-count indictment alleging a five-year identity theft scheme that targeted servicemembers and veterans. In pleading guilty, Brown admitted that he exploited his position as an electronic health records administrator to steal the personal identifying information of thousands of servicemembers and veterans, and then sold the data to co-conspirators based in the Philippines and the United States. Crawford admitted that he recruited at least 30 individuals to serve as money mules to receive funds stolen from servicemembers and veterans, and that he arranged to remit stolen funds to other co-conspirators in the Philippines. The indictment alleges that over a five-year period, members of the conspiracy exploited personal identifiers of military members to steal millions of dollars. The remaining three defendants are all in custody in the Philippines and awaiting repatriation/extradition.

For other matters of interest, see: CLOSED CASES or ARCHIVED CASE SUMMARIES