21 U.S.C. § 333(a)(2) INCLUDES, BUT IS NOT
LIMITED TO, INTENT TO DEFRAUD OR MISLEAD
THE ULTIMATE CONSUMERS OF MISBRANDED DRUGS
INTENT TO DEFRAUD OR MISLEAD DIRECTED TOWARD THE FDA
SATISFIES THIS ELEMENT OF THE OFFENSE
INTRODUCTION
Any person who commits one of the prohibited acts set forth in
21
U.S.C. § 331 has violated the Federal Food, Drug and Cosmetic
Act
(FD&C Act). However, any person who commits such an act "with the
intent
to defraud or mislead" is guilty of a felony and is subject,
pursuant to
21 U.S.C. § 333(b)(2), to punishment of up to three year's
imprisonment.[FN1] Counts Two, Three, Five, Six, Seven, Eight, and
Nine
(formerly Ten) of the Indictment in this case charge the Defendants
with
manufacturing and thereafter introducing into interstate commerce
specified misbranded and adulterated drugs - "with the intent to
defraud
and mislead" - in violation of 21 U.S.C. §§ 331(a) or
(k)[FN2]
and 333(a)(2). Count Four and Count Ten (formerly Count Eleven)
charge
that the defendants - "with the intent to defraud or mislead" -
failed
to maintain accurate batch production records (Count Four) and
product
complaint records (Count Ten).
FN1. Pursuant to 18 U.S.C. § 3571, the maximum
potential
fines for violations of the FD&C Act are $250,000. per count for
individuals and $500,000. per count for organizations.
FN2. 21 U.S.C. § 331(a) prohibits, inter
alia, introducing or delivering for introduction into
interstate
commerce any drug which is adulterated or misbranded. Under 21
U.S.C.
§ 351(a) a drug is adulterated if it consists in any part of
any
filthy substance, or has been held under insanitary
conditions
whereby it may have been contaminated with filth or
if the
methods used in its manufacture do not conform to or are not
operated or
administered in conformity with good manufacturing practices. Under
21
U.S.C. 352(a) a drug is misbranded if its labeling is false or
misleading in any particular. This definition of false or
misleading
includes, but is not limited to, the failure on the labeling to
reveal
material facts relating to the safety or efficacy of the drug. 21
U.S.C.
§ 321(n).
A FRAUD DIRECTED AGAINST THE FDA SATISFIES THE MENS REA
REQUIREMENTS OF 21 U.S.C. § 333(a)(2)
The mens rea element of Section 333(a)(2) -
the
intent to defraud or mislead - can be established by evidence of
intent
to defraud the customers of violative products. In addition,
however, a
seller of violative products acts "with the intent to defraud" as
defined by section 333(a)(2) if he or she takes affirmative steps
to
evade detection by, and thus mislead, regulatory authorities.
See, e.g., United States v. Andersen, 45 F.3d
217,
220 (7th Cir. 1995)("The FDA represents the public, and a
deliberate
attempt to mislead the FDA should be considered as clearly a fraud
as
are attempts to mislead customers or other individuals.");
United
States v. Arlen, 947 F.2d 139, 143 (5th Cir. 1991),
cert.
denied, 112 S.Ct. 1480 (1992); United States v.
Cambra,
933 F.2d 752, 755 (9th Cir. 1991); United States v.
Bradshaw, 840
F.2d 871, 874 (11th Cir.), cert. denied, 488 U.S. 924
(1988); see also United States v. Mitcheltree,
940
F.2d 1329, 1350-51 (10th Cir. 1991) (adopts the Bradshaw
analysis
concerning "intent to defraud or mislead" but adds a refinement
pertinent to misbranding offenses). Appellate courts have uniformly
held
that FD&C Act cases involving fraud on regulatory authorities are
properly sentenced as felonies under U.S.S.G. ڈF1.1.
E.g.,
Andersen, 45 F.3d at 220; Arlen, 947 F.2d at 143-44,
146-47; Cambra, 933 F.2d at 756.
The plain language of 21 U.S.C. § 333(a)(2) provides for
felony
treatment for any person who violates a provision of 21 U.S.C.
§ 331
"with the intent to defraud or mislead." The focus is upon the
violator's intent; there is no limitation with respect to whom the
violator's intent is directed. Thus, when a person manufactures or
distributes misbranded or adulterated drugs in violation of 21
U.S.C.
§ 331(a) or 331(k) with intent to defraud or mislead either a
purchaser of the drugs or any other person or entity (including the
FDA), that person is subject to the punishment specified in §
333(a)(2).
Courts have held that schemes to circumvent the requirements
of the
FD&C Act constitute schemes to defraud the FDA. United States v.
Bradshaw, 840 F.2d 871, 874 (11th Cir.) (expressly finding that
an
illicit steroid distribution scheme amounted to fraud against the
FDA
and state regulatory authorities), cert. denied, 109
S.
Ct. 305 (1988); see also, e.g.,
Hammerschmidt v.
United States, 265 U.S. 182, 188 (1924); Dennis v. United
States, 384 U.S. 855, 861 (1966) (holding that an agreement to
impair, obstruct or defeat the lawful function of the FDA
constitutes a
conspiracy to defraud an agency of the United States in violation
of 18
U.S.C. § 371). Fraud against the FDA alleged in this indictment
includes that the defendants interfered with the agency's
governmental
function and undermined the agency's important statutory
responsibilities by preventing legitimate inspection and by
preparing
and maintaining false records that were required to be maintained
under
the FD&C Act.
The starting point of statutory construction is the plain
language
of the statute itself. Greyhound Corp. v. M[t]. Hood Stages,
Inc., 437 U.S. 322, 330 (1978). If the language of the statute
is
clear, there is no need to look elsewhere. Packard Motor Car Co.
v.
NLRB, 330 U.S. 485, 492 (1947)." Because the words of §
333(a)(2) are unambiguous, there is no basis for or need to look
beyond
those words for enlightenment as to the statute's meaning.
Caminetti
v. United States, 242 U.S. 470, 485 (1917) ("Where the language
is
plain and admits of no more than one meaning, the duty of
interpretation
does not arise, and the rules which are to aid doubtful meanings
need no
discussion.").Nonetheless, a review of judicial decisions
construing the
FD&C Act and a consideration of the purposes to be served by the
Act
further support the conclusion that "intent to defraud or mislead"
governmental regulatory bodies, and not just the ultimate consumer
of
misbranded drugs, is punishable as a felony under §
333(a)(2).
Although, to the government's knowledge, prior to the
Bradshaw case in 1988, 840 F.2d 871, no written opinion
construed
the "intent to defraud or mislead" provision of § 333(b) [now
codified as 21 U.S.C. § 333(a)(2)], the leading cases
interpreting
the related provisions of the FDC Act, 21 U.S.C. § 333(a), all
concluded that the Act's enforcement provisions are to be liberally
construed to effectuate the purposes of the Act.
In United States v. Dotterweich, 320 U.S. 277 (1943),
the
Court was faced with the question of whether a corporate officer,
and
not just the corporation itself, could be subject to prosecution
and
conviction under § 333(a) for introducing misbranded and
adulterated
drugs into interstate commerce in violation of 21 U.S.C. §
331(a).
The Court of Appeals had reversed the conviction of the officer,
Dotterweich, relying on an exception to the criminal liability
provisions of the Act contained in 21 U.S.C. § 333(c), the
so-called
"guaranty clause," which insulates from criminal liability a person
who
introduces a violative product into interstate commerce in reliance
upon
a guaranty, given by the original supplier of the product, that the
product is not adulterated or misbranded. 320 U.S. at 279-80. The
Supreme Court rejected the Court of Appeals construction of the
guaranty
clause as "read[ing] an exception to an important provision
safeguarding
the public welfare with a liberality which more appropriately
belongs
to enforcement of the central purpose of the Act." Id.
at 284
(emphasis added). The Court said:
The guaranty clause cannot be read in isolation. The
Food
and Drugs Act of 1906 was an exertion by Congress of its power to
keep
impure and adulterated food and drugs out of the channels of
commerce.
By the Act of 1938,[FN3] Congress extended the range of its control
over
illicit and noxious articles and stiffened the penalties for
disobedience. The purposes of this legislation thus touch phases of
the
lives and health of people which, in the circumstances of modern
industrialism, are largely beyond self-protection. Regard for these
purposes should infuse construction of the legislation if it is to
be
treated as a working instrument of government and not merely as a
collection of English words.
FN3. The Act of 1938, 52 Stat. 1040, 21 U.S.C.
§§
301--392, as amended, is the present FDC Act.
Id. at 280. Based on this analysis of the Act's purposes,
the
Court reinstated Dotterweich's conviction.
In United States v. Sullivan, 332 U.S. 689, 692 (1948),
the
Supreme Court once again rejected an appellate court's "narrow
construction" of the FDC Act and upheld a conviction under the
Act's
misbranding provisions. The particular FD&C Act provision at issue
in
Sullivan was 21 U.S.C. § 331(k), which prohibited the
doing
of any act with respect to a drug, "while such article is held for
sale
after shipment in interstate commerce," that rendered the drug
misbranded. The Supreme Court rejected the appellate court's
construction that § 331(k) applied only to acts done by the
first
person to hold the drug after interstate shipment and not by
subsequent
intrastate purchasers of the drug who also held it for
sale:
[T]he language used by Congress broadly and
unqualifiedly
prohibits misbranding articles held for sale after shipment in
interstate commerce, without regard to how long after the shipment
the
misbranding occurred, how many intrastate sales had intervened, or
who
had received the articles at the end of the interstate shipment.
Accordingly we find that the conduct of the respondent falls within
the
literal language of § 331(k).
Id. at 696.
The Sullivan Court found ample support for its decision
in
the purposes underlying the FDC Act:
Given the meaning that we have found the literal
language of
§ 331(k) to have, it is thoroughly consistent with the general
aims
and purposes of the Act. For the Act as a whole was designed
primarily
to protect consumers from dangerous products. This Court so
recognized
in United States v. Dotterweich .... Its purpose was to safeguard
the
consumer by applying the Act to articles from the moment of their
introduction into interstate commerce all the way to the moment of
their
delivery to the ultimate consumer.
Id.
More recently, in United States v. Park, 421 U.S. 658,
672-73 (1975), the Court reaffirmed the strict liability of
corporate
officers and agents, as enunciated in Dotterweich, for
misdemeanor violations of the FDC Act:
Congress has seen fit to enforce the accountability of
responsible corporate agents dealing with products which may affect
the
health of consumers by penal sanctions cast in rigorous terms, and
the
obligation of the courts is to give them effect so long as they do
not
violate the Constitution.
These cited cases are part of a large, uniform body of law
which
has consistently held that the FDC Act is to be liberally construed
to
effectuate its public health purposes.
The FDC Act protects consumers from adulterated and misbranded
drugs by, inter alia, authorizing agents of FDA to
enter
and inspect the contents of any premises or vehicle in which drugs
are
held for or after introduction into interstate commerce to ensure
proper
storing, handling, and dispensing of drugs. 21 U.S.C. § 374.
"Nothing is clearer than that the later legislation [the 1938 Act
adopting the criminal provisions of § 333] was designed to
enlarge
and stiffen the penal net and not to narrow and loosen it."
United
States v. Dotterweich, 320 U.S. at 282.
Moreover, limiting the Act's felony provision only to cases
involving "intentional misconduct intended to deceive the ultimate
consumer" would render § 333(a)(2) a nullity with respect to
several
of the violations prohibited by 21 U.S.C. § 331. Section 331
prohibits not only violative activities that directly impact upon
consumers but also activities that would inhibit FDA from
fulfilling its
regulatory mission. For example, § 331 prohibits refusal to
permit
access to and copying of records of interstate drug shipments, the
failure to maintain records required under the Act such as drug
manufacturing and production records and records of adverse drug
reactions, refusal to permit entry or inspection of drug facilities
by
FDA, and the failure to register with FDA as a drug manufacturer.
21
U.S.C. §§ 331(e), (f), & (p).
Section 333(a)(2) applies by its terms to any person who
violates
any provision of § 331 with intent to defraud or mislead. While
since such violations as those just listed do not directly affect
the
ultimate consumers of drugs (but rather affect FDA's ability
effectively
to regulate the drug industry and, thereby, to protect consumers),
they
nevertheless constitute felonies under the FD&C Act. Any
alternative
interpretation of § 333(a)(2) would read the statute out of
existence with respect to whole classes of violations. This would,
in
part, "render the statute useless, a result inconsistent with the
well-established principle of statutory construction requiring that
all
parts of an act be given effect, if at all possible." In re
Hall,
752 F.2d 582, 586 (11th Cir. 1985); Weinberger v. Hynson,
Westcott
and Dunning, Inc., 412 U.S. 609, 633 (1973) ("well-settled rule
of
statutory construction that all parts of a statute, if at all
possible,
are to be given effect" applied to FDC Act's "new drug"
definition).
Any contrary reading of the statute § 333(a)(2) would thus
be,
in reality, a loose reading of the statute that would impose
limitations, for the benefit of violators, not present in the plain
words or the manifest purposes of the FD&C Act. In analogous
settings,
courts have declined to read such limitations into otherwise
unambiguous
statutory language. See Riggs v. United States, 280
F.2d
750, 752 (5th Cir. 1960) (upholding conviction for passing
counterfeit
currency with intent to defraud even though recipient of currency
knew
it was counterfeit; "'intent to defraud' required by 18 U.S.C.
§
472,[FN4] when, as here, such intent is not restricted by the terms
of
the indictment or by a bill of particulars to any specified person,
may
be an 'intent to defraud unknown third persons or the United States
itself"); Bachrack v. United States, 75 F.2d 824, 824-25
(5th
Cir. 1935) (statute prohibiting possession of counterfeit internal
revenue stamps "uses the comprehensive term 'with intent to
defraud' for
the very purpose of making it immaterial whether the offender
intended
to defraud the government or some particular individual");
United
States v. Cattle King Packing Co., 793 F.2d 232, 237-38 (10th
Cir.),
cert. denied, 107 S. Ct. 573 (1986) (upholding convictions
for
violations of Federal Meat Inspection Act, with intent to
defraud,[FN3]
where defendants attempted to avoid inspection of spoiled meat by
federal inspectors).
FN3. The Federal Meat Inspection Act makes any
violation a
misdemeanor and, modeled on the FDC Act, provides for enhanced
felony
punishment "if such violation involves intent to defraud." 21
U.S.C.
§ 676(a).
FN4. 18 U.S.C. § 472 provides, in relevant part,
that
"[w]hoever, with intent to defraud, passes ... any falsely made,
forged,
counterfeited, or altered obligation or other security of the
United
States, shall be fined not more than $5,000 or imprisoned not more
than
fifteen years, or both."
There is simply no authority for any contrary interpretation
of
§ 333(a)(2).
FRAUD ON THE CONSUMER
FIRM's [NOTE: name changed from original] manufacture of
adulterated
and misbranded drugs for distribution to unknown consumers also
defrauded those ultimate consumers of those drugs. See
Bradshaw, 840 F.2d at 873-74 n. 4. In addition to being
deprived
of the FD&C Act's safeguards that are designed to prevent consumers
from
having drugs in their possession that may be unsafe or ineffective,
these individuals also received less than they bargained for.
Consumers
did not know that drug products they purchased had passed the
established expiration date, were made from raw material that was
delivered to FIRM in punctured barrels, contained metal fragments,
desiccant and other extraneous matter, had been manufactured using
unapproved and undocumented manufacturing procedures and that the
quality control personal who tested these drugs had been instructed
not
to record failing test results. Had the ultimate consumers been
informed
of these facts, those products would, of course, have been
unmarketable.
CONCLUSION
Intent to defraud or mislead, as defined at 21 U.S.C. §
333(a)(2), can be established by demonstrating a fraud upon either
the
ultimate consumer of the product, or upon the FDA, or both. In this
case
the evidence demonstrates that the defendants attempted to defraud
and
mislead both the ultimate consumer and the FDA.
Respectfully submitted,
JAMES B. BURNS
United States Attorney
SUSAN E. COX
Assistance United States Attorney
219 South Dearborn Street
Chicago, Illinois 60604
(312) 886-1223
LAWRENCE G. MCDADE
DEBORAH S. SMOLOVER
Office of Consumer Litigation
U.S. Department of Justice
P.O. Box 386
Washington, D.C. 10044
(202) 307-0138
(202) 307-0090
| November 1998
| Civil Resource Manual 103
|