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CommerceWest Bank Admits Bank Secrecy Act Violation and Reaches $4.9 Million Civil and Criminal Settlement
United States v. CommerceWest Bank

Press Release
Docket Number: 8:15-CV-00379 (C.D. Cal.); 8:15-CR-25 (C.D. Cal.)

On March 10, 2015, the United States filed a criminal information and a civil complaint against CommerceWest Bank in U.S. District Court in the Central District of California. The criminal information charges CommerceWest with a felony violation of the Bank Secrecy Act for willfully failing to report suspicious transactions. The civil complaint alleges that CommerceWest – knowingly or with deliberate ignorance – facilitated consumer fraud schemes by a third-party payment processor and two merchants. The complaint alleges that CommerceWest ignored major red flags indicative of fraud, including incredibly high rates of returned transactions and explicit warnings from other banks that consumers were being defrauded.

To settle the civil and criminal charges, CommerceWest agreed to a total monetary resolution of $4.9 million, including payment of $2 million ($1 million to the U.S. Treasury as a civil monetary penalty and $1 million forfeited to the US Postal Inspection Service Consumer Fraud Fund) and giving up any claim to more than $2.9 million the government seized from bank accounts at CommerceWest. To resolve the criminal case, CommerceWest admitted its conduct then agreed to a deferred prosecution agreement that can be dismissed in 2 years if not violated. To resolve the civil case, CommerceWest has agreed to a permanent injunction that includes a strict routine of underwriting and monitoring designed to prevent future consumer fraud by third-party payment processors.

Peruvian Man Sentenced for Defrauding and Extorting Spanish-Speaking U.S. Residents through Fraudulent Call Centers
United States v. Maria Luzula, Juan Rodriguez Cuya, Angeluz Florida Corporation and Angeluz Miami, LLC

Press Release
Docket Number: 14-CR-20221 (S.D. Fla.)

On January 27, 2015, U.S. District Judge Patricia Seitz sentenced Juan Alejandro Rodriguez Cuya to 210 months in prison for his operation of Angeluz Florida Corporation in Miami and call centers in Peru that lied to and threatened Spanish-speaking victims into paying fraudulent settlements for nonexistent debts.  According to evidence presented at trial, Rodriguez Cuya’s employees in Peru used Internet-based telephone calls to Spanish-speaking victims in the United States, threatened lawsuits, arrest, deportation, and forfeiture of property for refusing delivery of certain products and claimed the victims owed thousands of dollars in fines.  In reality, the victims had never ordered these products and nothing had been delivered, but Rodriguez Cuya’s employees claimed that the consumers could resolve the threatened fines if they immediately paid a “settlement fee.” A phone room in Miami collected the fees from thousands of victims.  Rodriguez Cuya was convicted of twenty-six counts of conspiracy, mail fraud, wire fraud, and extortion following a two week trial in October.  Rodriguez Cuya’s co-defendant Maria Luzula pled guilty halfway through trial and was sentenced to serve 165 months in federal prison. Learn More.

Summary Judgment Briefing on Landmark Telemarketing Case
United States v. Dish Network

Press Release
Docket Number: 3:09-CV-3073 (C.D. Ill.)

On December 12, 2014, the district court (Judge Sue E. Myerscough) granted partial summary judgment to the United States in the government’s long-running litigation against Dish Network.  In March 2009, the United States brought suit against Dish, one of the country’s largest satellite-television providers, for violating the Federal Trade Commission’s Telemarketing Sales Rule (TSR); co-plaintiffs the States of California, Illinois, North Carolina, and Ohio brought similar federal and state law claims.  The United States’ TSR claims related to the telemarketing calls placed between 2003 and 2011 by Dish and its “retailers,” large direct-marketing entities authorized to market Dish nationwide. 

In a comprehensive 238-page opinion, the court ruled for the United States on the vast majority of the contested legal issues in the case.  Among the highlights: Dish is liable under the TSR for “causing” its retailers’ TSR violations regardless of whether the retailers were Dish’s agents; Dish was not entitled to the TSR safe harbor because it failed to present evidence about how it complied with the TSR; and the Court found admissible over 1,000 consumer complaints collected by FTC’s Consumer Sentinel system over Dish’s hearsay objections.  All told, the court found Dish liable for placing some 57,704,663 illegal telemarketing calls in violation of the TSR: to our knowledge, the largest judicial adjudication of do-not-call violations in history.  Because the Court found factual disputes precluded summary judgment on a number of contested issues, including civil penalties and injunctive relief, the case will proceed to trial on those remaining matters, most likely in separate liability and remedies phases.  A status conference is scheduled for January 9, 2015.

Three Indicted in Fraudulent Debt Relief Scheme  
United States v. Nelson, Ponce, and Vartanian

Press Release
Docket Numbers: 2:14-CR-198 (C. D. Cal.)

On December 3, 2014, a grand jury in Santa Ana, California, indicted three individuals in connection with a fraudulent debt relief services scheme. Jeremy Nelson, Elias Ponce, and John Vartanian were charged with conspiracy, mail fraud, and wire fraud for their roles at companies known as Nelson Gamble & Associates and Jackson Hunter Morris & Knight LLP. The defendants portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements. The defendants instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely towards undisclosed up-front fees. All three defendants are scheduled to be arraigned in Santa Ana on December 29, 2014.

Government Files Enforcement Actions to Shut Down Psychic Mail Fraud  
United States v. CLGE, Inc., et al. and United States v. Metro Data Management, Inc., et al. 

Press Release

On November 19, 2014, the United States filed civil complaints and  motions seeking a temporary restraining order and a preliminary injunction to immediately put a stop to two related multi-million dollar mail fraud schemes, known as Destiny Research Center and CLGE.  The defendants operate two mail fraud schemes in which they send solicitation letters purportedly written by world-renowned psychics to consumers through the U.S. mail.  In the letters, the psychics recount a vision revealing that the consumer has the opportunity to dramatically improve his or her financial circumstance.  The solicitation letters, targeted at the elderly, ill, and those in perilous financial condition, appear personalized but are actually identical, mass-produced form letters.  The solicitations urge victims to purchase various products and services in order to ensure that the foreseen good fortune comes to pass.  Metro Data Management Inc., doing business as Data Marketing Group Ltd., a company on Long Island, New York, along with its president, Keitha Rocco, performed “caging” services on behalf of both mail fraud schemes.  These services consisted of processing victim payments and maintaining databases of consumers who responded to the fraudulent solicitations.  Data Marketing Group processed victim payments for the Destiny Research Center scheme, resulting in annual gross receipts of at least $13 million.  The CLGE scheme brought in annual revenue of $1.5 to $2 million. 

The government is seeking an injunction under the Anti-Fraud Injunction Statute immediately shutting down the fraudulent schemes in order to protect victims from further harm.  The injunctions would enjoin the defendants from using the mail to distribute the fraudulent solicitations or to collect victim payments, and from selling lists of consumers who have responded to the solicitations.  The injunctions would also authorize the U.S. Postal Service to detain any outgoing solicitations mailed by the defendants and any incoming responses to solicitations.


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.)

Twenty-two individuals have been charged with fraud in connection with Multivend, LLC, d/b/a Vendstar, a Long Island-based company that sold vending machine business opportunities until 2010. 

The charges allege that Vendstar’s managers, sales representatives, and the operators of “locating companies” recommended by Vendstar conspired to defraud consumers by, among other things, misrepresenting profits, the availability of high-traffic locations, the success of Vendstar’s previous customers, the ease of operating the business, and the services Vendstar would provide its customeres.  In three separately filed cases in the Eastern District of New York, sixteen of the defendants have pled guilty and are awaiting sentence. 

Vendstar’s president, another manager, and four sales representatives are scheduled to stand trial beginning September 8, 2015.  Learn More.


Defendant Indicted in Connection with a Lottery Scam Based in Jamaica
United States v. Carlos O’Brian Ricketts

Press Release
Docket Number: 5:14-CR-46 (W.D.Va.)

On November 6, 2014, Carlos O’Brian Ricketts was indicted by a federal grand jury in Harrisonburg, Virginia based on his participation in a fraudulent lottery emanating from Jamaica.  Ricketts was charged with conspiracy to commit mail fraud and wire fraud, four counts of mail fraud, three counts of wire fraud, conspiracy to commit money laundering and 18 counts of money laundering.  He has been arrested.  As alleged in the indictment, beginning in May 2010, Ricketts’ co-conspirator contacted elderly victims in the United States, claimed to represent a known sweepstakes, and falsely informed the victims that they had won thousands or millions of dollars in a lottery.  The co-conspirator told the victims to make payments of several thousand dollars in order to collect their purported prize winnings and instructed the victims to send this money to Ricketts in Virginia.  Ricketts received the money, kept a portion for himself and sent the remainder to individuals in Jamaica.  As part of the money laundering conspiracy, Ricketts sometimes sent the victims’ money to Jamaica in smaller, separate payments to the same person in Jamaica during a short period of time.  Ricketts sometimes used the alias Kevin Brown when receiving money from victims and sending money to Jamaica, and he used different addresses to conceal his identity.  The victims never received any lottery winnings.



Business Opportunity Fraudster Sentenced in Houston
United States v. Robert D. King

Docket Number: 4:12-CR-87 (TXS)

On July 2, 2014, Robert King, the proprietor of Mark Five, a business opportunity firm in Houston, was sentenced to 63 months of imprisonment after pleading guilty to one count of conspiracy to commit mail and wire fraud. From the mid-1990s through 2010, King offered consumers the opportunity to purchase, at a typical purchase price of $10,000, a business opportunity consisting of jewelry display racks and jewelry. King falsely told prospective purchasers from across the country that the business opportunity was a lucrative venture that would earn substantial profits. King admitted as part of his plea that he paid false references—including three people who also pleaded guilty and have been sentenced—to take reference calls and make misrepresentations to consumers about the potential success they might experience from purchasing a Mark Five business opportunity. King was also ordered to pay restitution in an amount that will be determined by the Court within 90 days.


Jamaican Citizen Sentenced in Connection with a Jamaican Lottery Scam
United States v. Oneike Mickhale Barnett

Press Release
Docket Number: 0:12-CR-60186 (S.D. Fla.)

Oneike Mickhale Barnett, a Jamaican citizen convicted in connection with the operation of a fraudulent lottery, was sentenced on April 29, 2014 to 60 months in prison and 5 years’ supervised release in connection with a lottery scheme based in Jamaica that fraudulently induced elderly victims in the United States to send the conspirators thousands of dollars to cover fees for lottery winnings that victims had not in fact won. Barnett was also ordered to pay restitution to the victims in the amount of $94,456.

Barnett was arrested August 13, 2013 in Orlando, Fla., following his indictment by a federal grand jury in Fort Lauderdale, Fla., on Aug. 9, 2012. Beginning in October 2008, the conspirators contacted victims in the United States, announced that the victims had won cash and prizes and persuaded the victims to send them thousands of dollars in fees to release the money. The victims never received cash or prizes. The conspirators made calls from Jamaica using Voice Over Internet Protocol technology that allowed them to use a telephone number with a U.S. area code. Victims sent money to middlemen in South Florida, who forwarded the money to Barnett and others in Jamaica. Barnett pled guilty to conspiracy to commit wire fraud in connection with this conduct.


Two Florida Residents Sentenced in Connection with Fraudulent International Lottery Scheme
United States v. Althea Angela Peart and Charmaine Anne King

Press Release
Docket Number: 1:13-CR-20834 (S.D. Fla.)

On April 29, 2014, Charmaine Anne King was sentenced to 57 months in prison and 5 years’ supervised release in connection with her role in a fraudulent international lottery scheme that targeted U.S. citizens. Co-defendant Althea Angela Peart was sentenced on March 20, 2014 to 33 months in prison and 5 years’ supervised release. A hearing on restitution is scheduled for June 5, 2014. King was convicted by a federal jury in Miami on Feb. 5, 2014, of one count of conspiracy, three counts of mail fraud and two counts of wire fraud. Peart pled guilty to one count of conspiracy to commit mail and wire fraud. The evidence at King’s trial showed that a co-conspirator sent letters to victims purporting to be from a known sweepstakes in the United States and included counterfeit cashier’s checks made out to the victims for thousands of dollars.

Victims were instructed to call “claims agents” who were actually co-conspirators, and who informed the victims that they had to pay several thousand dollars in fees in order to collect their purported lottery winnings. The claims agents told the victims to deposit the cashier’s checks in the victims’ bank accounts to cover the money they had to pay and instructed the victims to send this money to King, Peart, and others. King and Peart each kept a percentage of the money they received from victims and sent the rest to a co-conspirator. Both King and Peart continued to participate in this scheme even after the U.S. Postal Inspection Service verbally informed each of them that they were participating in unlawful activity, and after they each signed a Cease and Desist Order requiring that they stop receiving money from victims of fraud. The cashier’s checks that victims received from the fraudulent lottery had no value and ultimately bounced. Victims never received any lottery winnings.


Three Convicted in Coffee Display Rack BizOpp Scheme
United States v. Mitchell Berman, Robert Gallo, and Steven Axelrod

Press Release
Docket Number: 1:13-CR-60156 (S.D. Fla.)

On February 13 and 14, 2014, Mitchell Berman, Robert Gallo, and Steven Axelrod pleaded guilty to conspiracy to commit mail fraud based on their fraudulent and deceptive conduct in selling business opportunities. Berman and Gallo owned and operated a series of five companies that sold coffee display rack business opportunities from 2000 to 2011. The defendants sold the business opportunities by misrepresenting profits and available customer service to potential purchasers. Sentencing before Judge William J. Zloch in Ft. Lauderdale is set for May 8 (Axelrod) and May 9, 2014 (Gallo and Berman).

Corporation Pleads Guilty to Fraud and Pays Full Restitution
United States v. Vend Three, LLC

Docket Number: 1:14-CR-20009 (S.D. Fla.)

On January 29, 2014, Vend Three, LLC, a Long Island, New York, based corporation, pled guilty to conspiracy to commit mail fraud, was sentenced to five years of probation, and paid $1 million in restitution. Vend Three’s sales representatives made misrepresentations about profits and locations to entice 130 consumers across the country to buy worthless business opportunities involving bulk candy vending machines. The restitution payment made at the time of the sentencing represents the full amount the 130 victims paid Vend Three. As a condition of probation, the corporation’s president, Doug Cooper, and vice president, Michele Cooper, are prohibited from being involved in any way in the sale of business opportunities and franchises. Learn More.


Two Sentenced for Operating Fraudulent Telemarketing Business Targeting Spanish-Speaking Consumers
United States v. Daniel Carrasco and Federico Martin Gioja

Press Release
Docket Number: 1:13-CR-20542 (S.D. Fla.)

On January 9, 2014, Daniel Carrasco was sentenced to serve 121 months in federal prison, and Federico Martin Gioja was sentenced to serve 108 months in federal prison, for their operation of telemarketing companies in Argentina whose representatives consistently lied to consumers about products they would receive and threatened consumers with consequences of failure to pay for their shipments. Companies belonging to Carrasco and Gioja falsely claimed an affiliation with Univision and purported to sell products such as dietary supplements, lotions, girdles, and English-language training products. However, the companies frequently did not have the products they promised to send to consumers, and so consumers received other products instead. Their companies also promised consumers free gifts such as expensive watches and perfumes, gift cards, and medical insurance, which were not delivered as promised. After consumers refused delivery of the companies’ shipments, employees of Carrasco and Gioja in an Argentinian phone room called and falsely threatened the consumers with arrest, deportation, or fines on their gas and electric bills. The court ordered Carrasco and Gioja to forfeit numerous properties bought with illegal proceeds.


Two Arrested for Operating Loan Modification Scam That Targeted Struggling Homeowners
United States v. Bryan D’Antonio, Charles Wayne Farris, and Ronald Rodis

Press Release
Docket Number: 8:13-CR-208 (C.D. Cal.)

On December 3, 2013, FBI agents arrested Bryan D’Antonio and Charles Wayne Farris for their roles in operating Rodis Law Group and America’s Law Group, bogus law firms which purported to offer struggling homeowners assistance obtaining loan modifications. Attorney Ronald Rodis surrendered to federal agents on charges alleging that he participated in, and lent his name and the law license he formerly possessed to, the fraudulent operation. Farris and Rodis were charged with one count of conspiracy to commit wire fraud and nine counts of wire fraud. D’Antonio was also charged with 13 counts of criminal contempt for violating a 2001 court order which permanently banned him from participating in future telemarketing operations. The government has alleged that D’Antonio and Farris recruited and trained telemarketing staff to answer consumer calls, during which sales staff routinely lied to homeowners about Rodis’ success rates, ability to obtain loan modifications, and, at times, directed homeowners to stop making mortgage payments. Many homeowners lost their homes to foreclosure after hiring the firms. A trial has been set for September 30, 2014 before Judge David O. Carter in Santa Ana, California.


Eleventh Circuit Upholds Conviction of Business Opportunity Fraudster
United States v. Manuel Rodriguez

Press Release
Docket Number (Trial Court): 10:11-CR-60062 (S.D. Fla.)
Docket Number (Federal Appeals Court): 14-10117 (11th Cir.)

On October 16, 2013, the Court of Appeals for the Eleventh Circuit upheld the conviction of Manuel Rodriguez, who was convicted in September 2011 of mail fraud, wire fraud, and conspiracy following a three-week jury trial in Ft. Lauderdale, Florida. Rodriguez operated four different business opportunity frauds from 2005 until 2011, selling purchasers business packages that included coffee vending machines by misrepresenting that they would earn sufficient revenues to pay for their investment within the first 12 to 18 months and receive ample customer support. In reality, Rodriguez provided none of these services, and his customers all lost their money. In its opinion, the appeals court determined that the government presented overwhelming evidence that the scheme was fraudulent and affirmed the conviction. However, the court remanded the case to the district court for re-sentencing on one issue. The defendant was re-sentenced on December 30, 2013. On January 9, 2014, Rodriguez filed an appeal with the Eleventh Circuit from the Amended Judgment.


Three Sentenced in Immigration Fraud Scheme
United States v. Thomas Strawbridge, Thomas Laurence, and Elizabeth Meredith

Press Release
Docket Number: 2:12-CR-4009 (W.D. Mo.)

On August 27, 2013, Thomas Strawbridge was sentenced to serve 82 months in federal prison, Thomas Laurence was sentenced to 130 months in federal prison, and Elizabeth Meredith was sentenced to 12 months in federal prison, for their work in connection with an immigration fraud scheme. The three defendants worked at Immigration Forms and Publications (IFP), a Sedalia, Mo., company that falsely represented to consumers that: (1) IFP was affiliated with the federal government and sales representatives were immigration agents; (2) fees paid to IFP covered government filing fees for immigration documents; and (3) that IFP could speed up application processing. All three defendants pleaded guilty to mail and wire fraud charges in August 2012.


Court Refuses to Dismiss Complaint Against S&P
United States v. McGraw-Hill Cos.

Press Release
Docket Number: 13-CV-779 (C.D. Cal.)

On July 16, 2013, the district court entered an order denying the defendants’ motion to dismiss the United States’ lawsuit against credit rating agency Standard & Poor’s and its parent, McGraw-Hill Companies, which alleges civil FIRREA violations based on mail fraud, wire fraud and financial institution fraud. The court also rejected the remainder of defendants’ arguments, finding that the complaint sufficiently alleged subjective and objective falsity with the requisite particularity, and adequately alleged that defendants acted with specific intent to defraud. The case has now proceeded to pre-trial discovery.


Joint U.S.-Costa Rica Citizen Sentenced to 97 Months Imprisonment in Connection with Costa Rica-Based Business Opportunity Fraud Scheme
United States v. Sean Rosales

Press Release
Docket Number: 1:11-CR-20816 (S.D. Fla.)

On May 20, 2013 Sean Rosales was sentenced to 97 months in prison and five years’ supervised release following his conviction on charges of conspiracy to commit mail and wire fraud. Rosales purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. Between May 2005 and December 2008, the defendant participated in a conspiracy to fraudulently induce purchasers to buy business opportunities through the use of a complicated telemarketing scheme, including use of virtual offices in the U.S. and voice over internet protocol to make it appear to victims in the U.S. that such business were located in the U.S., when in fact the telemarketing rooms were all based in Costa Rica. The business opportunities the defendant and his co-conspirators sold cost thousands of dollars each, and most purchasers paid at least $10,000. In this case, more than 200 individuals were victims of the conspiracy, and the fraud loss was over $7 million.


Retailers Agree to Resolve Allegations Concerning Misidentification of Rayon Products as Being Made from Bamboo
United States v., Inc.; United States v. Leon Max d/b/a Max Studio; United States v. Macy’s, Inc.; United States v. Sears, Roebuck and Co.

Press Release
Docket Numbers: 1:13-CV-02 (Amazon); 1:13-CV-03 (Leon Max); 1:13-CV-04 (Macy’s); 1:13-CV-05 (Sears) (D.D.C.)

In January and April 2013, the United States District Court for the District of Columbia entered consent orders filed by the government to settle civil lawsuits concerning alleged violations of the Textile Fiber Product Identification Act and the Federal Trade Commission (FTC) Act. The complaints alleged that, Max Studio, Macy’s, Sears, Kmart, and advertised and sold textile products as being made from bamboo when they were really made from a manufactured fiber, rayon. Under the consent orders, the companies agreed to take steps to prevent future violations, including distributing the orders to employee managers with responsibility for marketing or sale of textile products, keeping accounting and other records necessary to demonstrate compliance with the order, and reporting relevant data to the FTC. In addition, each company made a monetary payment to the government as follows: Amazon ($455,000); Max Studio ($80,000); Macy’s ($250,000); and Sears ($475,000).

Defendant Remains At Large in Business Opportunity Fraud Indictment
United States v. Paul Hall (dba Vends R Us)

Docket Number: 1:11-CR-255 (S.D. Ala.)

Since his indictment on September 30, 2011 for defrauding consumers in a vending machine scheme, Paul H. Hall, has remained a fugitive. A federal grand jury in the Southern District of Alabama returned an indictment which charged Hall with five counts of wire fraud, one count of mail fraud, and one count of criminal contempt. The indictment states that in 2009-2010 Hall operated a business called “Vends R Us” from his home in Mobile, Alabama. Vends R Us sold a “business opportunity” for approximately $11,200 that was supposed to include ten snack vending machines, good locations for vending machines, and ongoing customer assistance. Vends R Us advertised in newspapers throughout the United States. According to the indictment, Hall misrepresented the profits that purchasers could expect to earn and the availability of locations. The indictment also charges that Hall used a fake name to try to hide his activities. Hall was ordered by a federal judge in 2005 not to be involved in the sale of business opportunities in a civil case previously filed against him by the Department of Justice in connection with earlier vending machine business opportunities Hall sold.

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Ninth Circuit Affirms Civil Contempt Finding Against Seller of Purported Cancer Cures
United States v. Toby Carl McAdam and Greta Armstrong

Docket Number: 1:10-CV-128 (District of Montana)

On March 20, 2015, the Ninth Circuit affirmed the December 4, 2013, civil contempt finding issued by the U.S. District Court for the District of Montana against Toby McAdam, owner/operator of Risingsun Health in Livingston, Montana, due to McAdam’s violations of a consent decree. In addition, the Ninth Circuit upheld the district court’s award to the U.S. of $80,000 in liquidated damages and just under $5,000 in attorney’s fees.

The U.S. sued McAdam, as well as co-defendant Greta Armstrong, for violations of the Federal Food, Drug, and Cosmetic act for selling, among other things, unapproved new drugs, including topically applied bloodroot and graviola plant salves that defendants claimed could cure skin cancer. In November 2010, per agreement of the parties, the court entered a consent decree against McAdam and Armstrong to enjoin them from introducing into interstate commerce unapproved drugs; however, McAdam continued to sell those products, as well as other dietary supplements, in violation of the court’s order.

Drug Manufacturer Pleads Guilty to Violating Federal Food, Drug, and Cosmetic Act
United States v. McNeil-PPC, Inc. 

Press Release
Docket Number: 2:15-CR-82 (E.D. Pa.)

On March 10, 2015, McNeil-PPC, Inc., a wholly-owned subsidiary of Johnson & Johnson, pleaded guilty to one misdemeanor count of delivering for introduction into interstate commerce adulterated infants’ and children’s over-the-counter (OTC) liquid medicines between May 2009 and April 2010. The drugs were adulterated because McNeil did not manufacture them in compliance with current Good Manufacturing Practices (cGMP), which is required under the Federal Food, Drug, and Cosmetic Act. Among other things, McNeil received a consumer complaint regarding “black specks” in its Children’s Tylenol (later identified as nickel/chromium-rich inclusions, which were not intended ingredients in the OTC liquid drug).

In addition to this consumer complaint, McNeil discovered other OTC batches with particulates. However, McNeil did not initiate or complete a Corrective Action Preventive Action (CAPA) plan as required by its Standard Operating Procedures. Consequently, McNeil was not in compliance with cGMP in connection with the manufacturing of certain OTC liquid drugs. As part of the plea, McNeil agreed to pay a $20 million fine and forfeit $5 million in substitute assets. The district court imposed the agreed fine and forfeiture during the hearing.

Florida Man Pleads Guilty in Prescription Drug Diversion Scheme
United States v. Gomez

Press Release
Docket Number: 1:15-CR-00007 (S.D. Ohio)

On February 19, 2015, Yusef Yassin Gomez (Yassin) pled guilty in U.S. District Court in the Southern District of Ohio to one count of conspiracy to commit an offense against the United States in the distribution of prescription drugs without a license. In pleading guilty, Yassin admitted that he conspired with others to distribute diverted prescription drugs throughout the United States, including in the Southern District of Ohio, while concealing the true illicit sources of the drugs. Yassin’s conspirators sold the illegally acquired drugs to U.S. pharmacies and wholesalers after purchasing them from a network of unlicensed and illicit suppliers who also purchased from sources, including street sources, Medicaid patients, and healthcare entities who were prohibited from re-selling the drugs. Yassin collected 0.5%-0.75% of all drug sales as commission since conspirators falsely represented the required pedigree documents in their sales, claiming the source of the drugs was one of two Puerto Rican companies, including Yassin’s former company, B&Y Wholesale.

District Court Enters Permanent Injunction Against Medical Device Manufacturer
United States v. Atrium Medical Corp., et al.

Press Release
Docket Number: 1:15-CV-41 (D.N.H.)

On February 3, 2015, the U.S. District Court of New Hampshire ordered a consent decree of permanent injunction against Atrium Medical Corporation (Atrium), Maquet Holding B.V. & Co. KG (Maquet), Maquet Cardiovascular, LLC (Maquet CV), Maquet Cardiopulmonary AG (Maquet CP), Heinz Jacqui, and Gail Christie to prevent future distribution of adulterated and misbranded medical devices in violation of the Food, Drug, and Cosmetic Act (FDCA). Atrium manufactures cardiovascular-related medical devices at its Hudson, New Hampshire facility, including chest drains, surgical meshes, vascular grafts, and stent systems. Maquet CV has a manufacturing facility in Wayne, New Jersey; Maquet CP’s manufacturing facilities are in Hechingen and Rastatt, Germany. The individual defendants, Heinz Jacqui and Gail Christie, are Maquet’s Chief Executive Officer and Corporate Chief Quality Assurance/Regulatory Affairs Compliance Officer respectively.

FDA inspections of Atrium’s New Hampshire facility revealed deviations from current good manufacturing practice requirements for medical devices, including a failure to establish and maintain procedures for implementing corrective and preventive action. In addition, FDA inspectors learned Atrium did not timely submit reports of adverse events within the mandatory 30-day time period required under the FDCA. FDA inspectors found similar violations at Maquet CV’s New Jersey facility, and Maquet CP’s Germany facilities. The consent decree requires that Atrium’s facility in New Hampshire be shut down until corrective actions described in the decree are completed. However, medical devices the FDA deemed medically necessary can continue to be distributed subject to certain provisions in the decree. Finally, the decree also requires the corporate defendants to pay the United States $6 million in equitable disgorgement within 28 days after entry of the decree.

Consent Decree Entered Against Manufacturer of Over-the-Counter Feminine Hygiene Products
United States v. Laclede, Inc., and Michael A. Pellico

Press Release
Docket Number: 2:14-CV-4948 (C.D. Cal.)

On January 29, 2015, a U.S. District Court judge entered a consent decree of permanent injunction against Laclede, Inc., a Rancho Dominguez, California-based pharmaceutical company, and its president, Michael A. Pellico, settling a lawsuit that was filed in June 2014. The decree prohibits Laclede from distributing unapproved or misbranded drugs and devices in interstate commerce.

The decree’s prohibition includes the feminine hygiene products that were identified in the complaint as the “Luvena Prebiotic Products” and as to which the complaint alleged that Laclede had made unapproved claims on its websites, Facebook page, and Twitter feed, including that the products would “rebalance” vaginal bacterial flora, correct pH, and reduce or minimize vaginal infections. For five years following the entry of the decree, Laclede must notify the FDA before it markets any new Luvena product and before it modifies Luvena product labeling. Laclede may not market such products until the FDA notifies the company that it complies with the law and the terms of the decree.

Former OtisMed CEO Plead Guilty to Selling FDA-Rejected Medical Devices; Corp. Pays $80M in Global Resolution
United States v. OtisMed Corporation; United States v. Charlie Chi

Press Release
Docket Number: 14-CR-00688 (D.N.J.)

On December 8, 2014, OtisMed Corporation (now a subsidiary of medical device giant, Stryker) pleaded guilty to a one-count felony information charging it with distributing adulterated medical devices in interstate commerce with the intent to defraud and mislead.  OtisMed’s former CEO pleaded guilty to a three-misdemeanor count information charging him with distributing adulterated medical devices.  Pursuant to a plea agreement with the government, the company was sentenced to pay a criminal fine of $34.4 million and criminal forfeiture of $5.16 million.  In a separate civil False Claims Act settlement, OtisMed agreed to pay an additional $40 million plus interest.

Pharmacist Sentenced in Internet Pharmacy Case
United States v. Charles G. Schultz

Docket Number: 1:14-CR-89 (W. D. Wis.)

On November 18, Charles G. Schultz, was ordered to forfeit $250,000 for his role in connection with his ownership of two Wisconsin pharmacies that unlawfully dispensed prescription drug orders to Internet customers.  On April 21, Schultz entered a guilty plea to one count of conspiracy to violate both the Controlled Substances Act by unlawfully distributing controlled substances (butalbital) and the Food, Drug and Cosmetic Act, by introducing misbranded drugs into interstate commerce, with intent to defraud or mislead.  Schultz owned and operated pharmacies affiliated with the RX Limited Internet pharmacy organization, which unlawfully sold prescription drugs over the Internet through a network of its own websites and affiliates. 

Between 2006 and 2012, Schultz’s pharmacies dispensed over 700,000 drug orders without valid prescriptions.  He and Schultz Pharmacy, Inc., also paid $100,000 to the United States to settle civil claims for his involvement with a different Internet pharmacy organization in 2007, for which his pharmacy in Oshkosh, Wisconsin, dispensed controlled substances, including hydrocodone.  Schultz, who recently turned 83, is in failing health, and as part of the plea agreement, the government agreed not to seek a custodial sentence. 

Related: See Information Complaint and Settlement

Government Files Complaint for Permanent Injunction Against New Jersey Maker of Ultrasound Gels
United States v. Vascular Solutions, Inc.

Press Release
Docket Number: 1:10-CV-883 (W. D. TX.)

On November 13, 2014, an indictment was filed charging Vascular Solutions, Inc. (VSI) and its chief executive officer, Howard Root, with selling medical devices without U.S. Food and Drug Administration (FDA) approval and conspiring to defraud the United States by concealing the illegal sales activity.  The devices at issue are from VSI's “Vari-Lase” product line, a system designed to treat varicose veins by burning or “ablating” them with laser energy.  Root and VSI are each charged with one count of conspiracy and eight counts of introducing adulterated and misbranded medical devices into interstate commerce.  The case is pending in the U.S. District Court for the Western District of Texas.


Government Files Complaint for Permanent Injunction Against New Jersey Maker of Ultrasound Gels
United States v. Pharmaceutical Innovations Inc. et al.

Press Release
Docket Number: 2:14-CV-1156 (D.N.J.)

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.


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

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

Three individuals, Wanda Hollis, Tom Giddens, and Catherine Nix, were indicted on charges associated with their alleged smuggling of imitation, unapproved, and misbranded prescription drugs from China. According to the indictment, the defendants conspired to smuggle at least 30 known shipments, totaling approximately 100,000 pills, from China to Texas. As alleged in the indictment, the shipments contained bogus imitations of Xanax, Valium, sibutramine, Cialis, Viagra and Stilnox, which is marketed in the United States as Ambien.

None of the pills seized and tested were legitimate, and all either contained incorrect active ingredients or were sub-potent. The defendants also attempted to conceal their smuggling by using shipping labels that concealed 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 authorities. Additionally, the indictment states that the defendants instructed family members to destroy evidence once they became aware that the U.S. Food and Drug Administration (FDA) was investigating them.


Endo Pharmaceuticals Agrees to Pay $192.7 Million for Marketing the Prescription Drug Lidoderm for Unapproved Uses
United States v. Endo Health Solutions and Endo Pharmaceuticals, Inc.

Press Release
Docket Number: 1:14-CR-66 (N.D.N.Y.) (Criminal); 05-CV-3450, 10-CV-2039, 11-CV-7767 (E.D.P.A.) (CIVIL)

On February 21, 2014, Endo Pharmaceuticals, Inc. and its parent company, Endo Health Solutions (collectively, “Endo”), agreed to pay $192.7 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drugs Lidoderm for uses not approved as safe and effective by the U.S. Food and Drug Administration (“FDA”). The Federal Food, Drug, and Cosmetic Act requires a company to specify the intended uses of a product in its new drug application to the FDA. Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses. Lidoderm is a topical drug that is only FDA-approved for the relief of pain associated with post-herpetic neuralgia (“PHN”), a complication of shingles. During the period of 2002 to 2006, however, Endo marketed Lidoderm for the treatment of non-PHN related pain, including low back pain, diabetic neuropathy and carpal tunnel syndrome, uses which were never approved by the FDA. Endo agreed to a deferred prosecution agreement and to pay a total of $20.8 million in monetary penalties and forfeiture. The resolution also includes civil settlements with the federal government and the states totaling $171.9 million based on false claims stemming from Endo’s promotion of Lidoderm for unapproved uses from 1999 through 2007, some of which were not medically accepted indications and, therefore, were not covered by the federal health care programs.


Certiorari Denied for Former Pharmaceutical CEO Seeking Appeal After Ninth Circuit Affirms His Fraud Conviction
United States v. W. Scott Harkonen

Press Release
Docket Numbers: 3:08-cv-164 (N.D. Cal.); 11-10209 (9th Cir.), 11-10242 (9th Cir.); 13-180 (Supreme Court)

On December 16, 2013, the U.S. Supreme Court declined to review the wire fraud conviction of the former chief executive officer of biotechnology company InterMune Inc. W. Scott Harkonen was convicted in 2009 of wire fraud following a seven-week trial. The case stemmed from a 2002 InterMune press release that described the results of a clinical trial that tested InterMune’s drug Actimmune as a treatment for the fatal lung disease of idiopathic pulmonary fibrosis (IPF). Despite the complete failure of the clinical trial, Harkonen falsely portrayed the trial results in the press release as proving that Actimmune helped IPF patients live longer. InterMune’s sales force used the press release with doctors to increase sales of Actimmune. The panel of the Ninth Circuit that heard Harkonen’s original appeal unanimously rejected Harkonen’s claim that his conviction criminalized scientific debate. In an unpublished opinion, the Ninth Circuit panel found that there was ample evidence at trial that showed that the press release was meant to mislead even if it was not literally false. The appellate court also affirmed Harkonen’s probationary sentence, which the government had cross-appealed.


Johnson & Johnson Pays More Than $2.2 Billion to Resolve Criminal and Civil Investigations
United States v. Janssen Pharmaceuticals, Inc.;
United States v. Scios, Inc.

Press Release
Docket Numbers: 2:13-CR-605 (E.D.P.A.); 3:11-cr-461 (N.D. Cal.)

On November 7, 2013, Janssen Pharmaceuticals, Inc., a subsidiary of Johnson & Johnson, Inc., pleaded guilty to charges stemming from its illegal promotion of the antipsychotic drug, Risperdal. From March 3, 2002, through Dec. 31, 2003, Janssen promoted Risperdal to physicians and other prescribers who treated elderly dementia patients. For most of this time period, Risperdal was only approved to treat schizophrenia. Under the terms of the plea agreement, Janssen paid a total of $400 million, including a criminal fine of $334 million and forfeiture of $66 million.

The global resolution included a civil agreement resolving allegations relating to Natrecor, a drug distributed by Johnson & Johnson subsidiary, Scios, Inc. Natrecor was approved to treat patients with acutely decompensated congestive heart failure who have shortness of breath at rest or with minimal activity. The government alleged that, shortly after Natrecor was approved, Scios launched an aggressive campaign to market the drug for scheduled, serial outpatient infusions for patients with less severe heart failure – a use not included in the FDA-approved label and not covered by federal health care programs. As part of the resolution, J&J and Scios agreed to pay the federal government $184 million to resolve their civil liability for the alleged false claims to federal health care programs. In October 2011, Scios pleaded guilty to a misdemeanor Food, Drug, and Cosmetic Act violation and paid a criminal fine of $85 million for introducing misbranded Natrecor into interstate commerce.


Wyeth Pharmaceuticals Pays $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses
United States v. Wyeth Pharmaceuticals Inc.

Press Release
Docket Number: 5:13-CR-129 (W.D.O.K.)

On July 30, 2013, Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer, Inc. in 2009, agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the immunosuppressant drug, Rapamune. Wyeth Pharmaceuticals received approval from the FDA to use Rapamune for kidney transplant patients. However, Wyeth trained its national sales force to promote the use of the drug in non-renal transplant patients and encouraged them, through financial incentives, to target all transplant patient populations to increase Rapamune sales. Wyeth pleaded guilty to a criminal Information charging it with a misbranding violation under the Food, Drug, and Cosmetic Act and agreed to pay a criminal fine and forfeiture totaling $233.5 million. The resolution also included civil settlements with the federal government and the states totaling $257.4 million based on false claims stemming from Wyeth’s promotion of Rapamune for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by federal health care programs.


Consent Decree Entered Against New Jersey Pharmacy
United States v. Med Prep Consulting Inc. and Gerald R. Tighe

Press Release
Docket Number: 3:13-CV-3856 (D.N.J.)

On June 27, 2013, the District Court entered a consent decree of permanent injunction against Med Prep Consulting, Inc. (“Med Prep”), a New Jersey pharmacy and Gerald R. Tighe, its president and owner. A recent FDA inspection of defendants’ facility documented numerous deviations from current good manufacturing practice requirements for drugs. FDA’s inspection followed reports that the company had distributed intravenous drug products containing visible contaminants that were confirmed to be mold to a Connecticut hospital. FDA found that the company failed to create and follow appropriate procedures to prevent contamination of drugs which were purported to be sterile, that the company failed to properly clean and maintain its equipment to ensure the safety and quality of the drugs it manufactured, and that the company failed to conduct adequate investigations of injectable drugs that failed to meet minimum quality specifications. Med Prep voluntarily recalled all products in the field and halted production following the reports of the distribution of mold-contaminated product. The consent decree resolves the Government’s complaint by requiring Med Prep to take a wide range of actions to correct its violations and ensure that they do not happen again.


Consent Decree Entered Against New Jersey Pharmacy
United States v. Med Prep Consulting Inc. and Gerald R. Tighe

Press Release
Docket Number: 3:13-CV-3856 (D.N.J.)

On June 27, 2013, the District Court entered a consent decree of permanent injunction against Med Prep Consulting, Inc. (“Med Prep”), a New Jersey pharmacy and Gerald R. Tighe, its president and owner. A recent FDA inspection of defendants’ facility documented numerous deviations from current good manufacturing practice requirements for drugs. FDA’s inspection followed reports that the company had distributed intravenous drug products containing visible contaminants that were confirmed to be mold to a Connecticut hospital. FDA found that the company failed to create and follow appropriate procedures to prevent contamination of drugs which were purported to be sterile, that the company failed to properly clean and maintain its equipment to ensure the safety and quality of the drugs it manufactured, and that the company failed to conduct adequate investigations of injectable drugs that failed to meet minimum quality specifications. Med Prep voluntarily recalled all products in the field and halted production following the reports of the distribution of mold-contaminated product. The consent decree resolves the Government’s complaint by requiring Med Prep to take a wide range of actions to correct its violations and ensure that they do not happen again.


United States Files Suit Against Louisiana Pharmaceutical Company for Distributing Unapproved New and Misbranded Drugs
United States v. Sage Pharmaceuticals, Jivn Ren Chen and Charles L. Thomas

Press Release
Docket Number: 5:13-CV-1983 (W.D. La.)

On June 20, 2013, the United States filed suit against Sage Pharmaceuticals, Inc. its president Dr. Jivn Ren Chen, and its Director of Corporate Quality, Charles L. Thomas. The Complaint alleges that the defendants violate the Federal Food, Drug, and Cosmetic Act by manufacturing and distributing unapproved new and misbranded drugs, specifically wound care products and over-the-counter (OTC) cold/cough remedies. In 2000, the government obtained an injunction against the company banning the manufacture and distribution of two unapproved new drugs. Since that time, FDA inspections revealed that defendants continue to manufacture and distribute other drug products without first obtaining the requisite approvals and without complying with FDA’s OTC regulations. The complaint seeks injunctive relief in order to halt defendants’ distribution of drug products that are potentially unsafe and ineffective.


Internet Pharmacy Supplier Receives Six-Year Prison Term
United States v. Michael Jackson and Lina Rodriguez

Press Release
Docket Number: 1:12-CR-20902 (S.D. Fla.)

On June 3, 2013, Michael Jackson was sentenced to 72 months’ imprisonment following his guilty plea to the first count of an indictment charging him with conspiracy to possess with the intent to distribute a controlled substance. Jackson supplied Adderall pills, which contain amphetamine, a Schedule II controlled substance, to his co-defendant, Lina Rodriguez, who operated an Internet pharmacy business that illegally shipped over $1.5 million of pharmaceuticals since July 2007 to U.S. and overseas purchasers. As part of his guilty plea, Jackson admitted to selling over 4,400 pills of Adderall to Rodriguez from about May 2009 to approximately December 2012, knowing and intending that she would sell them to her customers. The Court also ordered Jackson to forfeit the proceeds of his offense, over $18,000. Rodriguez, who pled guilty in February 2013, had been previously sentenced to a 72-month term of imprisonment.


ISTA Pharmaceuticals, Inc. Pleads Guilty and Agrees to Pay $33.5 Million to Resolve Criminal and Civil Charges Related to Off-Label Promotion of Xibrom
United States v. ISTA Pharmaceuticals

Press Release
Docket Number: 1:13-CR-99 (W.D.N.Y.)

On May 24, 2013, ISTA Pharmaceuticals pled guilty to felony charges stemming from ISTA’s promotion of Xibrom, an ophthalmic drug that is approved to treat pain and inflammation following cataract surgery. Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema. In addition, ISTA offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce those physicians to prescribe Xibrom. Under the terms of the plea agreement, ISTA paid a criminal fine of $16,625,000 and a criminal forfeiture in the amount of $1,850,000. As part of a related civil settlement, ISTA agreed to pay $15 million to resolve allegations that it caused false claims to be submitted to government healthcare programs for Xibrom.


Generic Drugmaker Agrees to Record $500 Million Settlement
United States v. Ranbaxy USA

Press Release
Docket Number: 1:12-CV-250 (D. Md.)

On May 13, 2013, generic drug manufacturer Ranbaxy USA, Inc. pled guilty to a seven-count Information charging it with three felony violations of the Food, Drug, and Cosmetic Act, and four felony false statement counts related to its drug manufacturing operations at two of its Indian facilities. The generic drugs at issue were manufactured at Ranbaxy’s facilities in Paonta Sahib and Dewas, India. The company’s manufacturing processes and laboratory testing procedures were insufficient to ensure that the drugs were of the strength, purity, and quality that they were represented to possess. The Information also charges Ranbaxy with failing to timely file required “field alert” reports for batches of drugs that had failed certain tests, and with making false, fictitious, and fraudulent statements to the FDA in Annual Reports filed in 2006 and 2007 regarding the dates of stability tests conducted on certain batches of drugs. The company agreed to pay a total settlement of $500 million. Of that, $130 million will go toward a criminal fine, $20 million for criminal forfeiture, and $350 million to settle the False Claims Act allegations. The resolution is the largest settlement ever with a generic drug company.


Court Sentences Par Pharmaceutical Companies as Part of Global Resolution
United States v. Par Pharmaceutical Companies

Press Release
Docket Number: 2:13-MJ-8080 (D.N.J.)

On March 5, 2013, Par Pharmaceutical Companies pled guilty to a misdemeanor charge of introducing a misbranded drug in interstate commerce, in connection with Megace ES, a drug approved by the FDA for the treatment of significant weight loss in AIDS patients. Par admitted that it misbranded the drug by promoting Megace ES for non-AIDS related weight loss in the geriatric population. Par was sentenced and ordered to pay an $18 million criminal fine and forfeit $4.5 million. Under the terms of its plea agreement, Par agreed to abide by several compliance measures, including maintaining policies that exclude from incentive compensation any sales that may indicate off-label promotion of Par’s products. The criminal plea occurred along with a civil settlement of False Claims Act violations by Par, as alleged in three qui tam lawsuits. In the civil settlement, Par agreed to pay $22.5 million to the federal government and various states to resolve claims arising from its unlawful marketing of Megace ES.


Former President of Canadian Internet and Mail Order Pharmacy Receives 4-Year Prison Sentence
United States v. Andrew Strempler

Press Release
Docket Number: 1:11-CR-20385 (S.D. Fla.)

On January 9, 2013, Andrew Strempler, a Canadian citizen, was sentenced to 48 months’ imprisonment, two years of supervised release, and fined $25,000 in connection with his role in an illegal Internet pharmacy. In October 2012, Strempler pled guilty to conspiracy to commit mail fraud in connection with his role as owner and president of a Canadian company that was an Internet, mail, and telephone order pharmacy, through which Strempler and others marketed and sold prescription drugs to residents of the United States. Strempler and his co-conspirators falsely represented that his company was selling safe prescription drugs in compliance with regulations in Canada, the United Kingdom and the United States. In fact, Strempler obtained the prescription drugs from various other source countries without properly ensuring the safety or authenticity of the drugs. Some of the drugs sold by Strempler included counterfeit drugs.

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District Court Enters Consent Decree of Permanent Injunction Against California Fish Processor
United States v. L.A. Star Seafood Company, Inc., Sima Goldring, and Sam Goldring

Press Release
Docket Number: 2:15-CV-34 (C.D. Cal.)

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.

Hawaiian Sprout Manufacturer Agrees to Consent Judgment
United States v. William H. Oshiro d/b/a RZM Food Factory

Docket Number: 1:14-CV-553 (D. Haw.)

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.

Two Sellers of Miracle Cure Plead Guilty
United States v. Smith, DeLong, Olson, and Olson

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

On December 1, 2014, defendants Karis Delong and Tammy Olson each entered guilty pleas to four counts of introducing a misbranded drug into interstate commerce.  Olson and Delong, along with co-conspirators Chris Olson and Daniel Smith, were arrested for defrauding regulators and suppliers in a scheme to manufacture and sell industrial bleach as a cure for numerous diseases, including Malaria, Cancer, and the common cold.  Smith and DeLong operated “Project GreenLife,” a Spokane company that sold the “Miracle Mineral Supplement” (“MMS”) over the internet.  MMS was a combination of sodium chlorite, an industrial chemical, and water. 

The defendants claimed MMS would cure numerous diseases when mixed and consumed according to instructions provided by the defendants.  In reality, the resulting mixture created Chlorine Dioxide, a chemical used in the textile and industrial water treatment industries.  Smith hired Chris and Tammy Olson to assist in the production and sale of MMS.  Tammy Olson was responsible for customer service at Project GreenLife, while Chris Olson manufactured and bottled MMS in a warehouse on property he owned outside of Spokane.  Chris Olson previously pleaded guilty on May 29, 2014.  Defendant Smith, who is representing himself, is scheduled to be tried separately in March 2015.  Karis Delong, Chris Olson, and Tammy Olson will be sentenced in March 2015.

Court Enters Injunction Against Seafood Manufacturer in California
United States v. Neptune Manufacturing, Inc., et al.

Press Release
Docket Numbers: 2:14-CV-9028 (C. D. CA.)

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.

Complaint Filed Against Sandwich Maker for Insanitary Conditions
United States v. Scotty’s, Inc., et al.

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

On November 21, 2014, the United States filed a complaint against Scotty’s Incorporated and Sandra J. Jackson in the Eastern District of Michigan alleging violation of the federal Food, Drug, and Cosmetic Act (FDCA).  According to the complaint, Scotty’s Incorporated, which does business as Bruce Enterprises and Bruce’s Fresh Products, prepares and distributes ready-to-eat (RTE) sandwiches, including RTE tuna sandwiches.  The complaint alleges that the company’s sandwiches are manufactured in insanitary conditions, and that the company’s procedures are inadequate to ensure the safety of its products.  Moreover, the company has failed to implement a written Hazard Analysis and Critical Control Point (HACCP) plan for handling seafood and minimizing the potential for harmful contamination in the company’s RTE tuna sandwiches.  According to the complaint, the FDA has performed five inspections of the defendants’ facility since 2006 and documented insanitary practices and/or seafood HACCP violations every time. 

According to the complaint, the FDA’s most recent inspection was conducted between January 14 and February 6, 2014.  At the inspection, according to the complaint, the FDA found that the defendants failed to have and implement an HACCP plan for food safety hazards reasonably likely to occur.  There were also no sanitation control records documenting the safety of, among other things, water used at the facility; the cleanliness of surfaces, utensils and equipment coming into contact with food; maintenance of hand-sanitizing machines and bathrooms; exclusion of pests from the facility; and control of employee health conditions such as the wearing of jewelry, hair nets or beard covers.  The complaint seeks injunctive relief requiring compliance with the FDCA and an upfront shutdown until FDA deems the defendants to be in compliance with the law.

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.


All Defendants Convicted in Trial of Former Peanut Company Officials
United States v. Stewart Parnell, Michael Parnell, Samuel Lightsey, and Mary Wilkerson

Press Release
Docket Number: 1:13-CR-12 (M.D. Ga.)

On September 19, 2014, a jury convicted two former Peanut Corporation of America (PCA) officials and a PCA broker on charges relating to the distribution of salmonella-tainted peanuts and peanut products following a two-month jury trial in Albany, Georgia. Stewart Parnell, the former President and Owner of PCA, and Michael Parnell, a former PCA food broker, were convicted of mail and wire fraud, the introduction of misbranded food into interstate commerce with the intent to defraud or mislead, and conspiracy. Stewart Parnell was also convicted of introducing adulterated food into interstate commerce, and both he and Mary Wilkerson, a former PCA Quality Assurance Manager, were convicted of obstruction of justice.

The charges arose from the defendants participation in several schemes by which they and others defrauded PCA customers, misleading these customers about the existence of foodborne pathogens, most notably salmonella, in the peanut products PCA sold to them. The defendants and others fabricated certificates of analysis – documents sent to customers containing a summary of laboratory results – in order to hide the fact that the peanut products either had tested positive for salmonella, or had never been tested for pathogens at all. Two other defendants, Samuel Lightsey and Daniel Kilgore, pleaded guilty prior to trial. A sentencing date has not yet been set.


Enforcement Action Filed Against Michigan Cheese Company
United States v. S. Serra Cheese Co., et al

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

On August 8, 2014, the United States filed a complaint for permanent injunction against the S. Serra Cheese Company and its owners, Stefano and Fina Serra, to prevent the distribution of adulterated cheese and to institute corrective measures to ensure compliance with good manufacturing practice requirements. S. Serra Cheese Company manufactures and distributes several varieties of Italian cheeses, such as ricotta, provolone, mozzarella, and primo sale. The complaint alleges that the company’s cheeses are manufactured in insanitary conditions, and that the company’s procedures are inadequate to ensure the safety of its products.

FDA inspections performed in 2013 revealed an absence of effective monitoring and sanitation controls in accordance with the current good manufacturing practice requirements for food and that the company repeatedly failed to reduce the risk of contamination from two potentially dangerous types of bacteria: Escherichia coli (E. coli) and Listeria innocua (L. innocua). Although the strains of E. coli found in cheese samples collected from the company’s facility were non-pathogenic, their presence indicates that the facility is insanitary and contaminated with filth. In addition, the presence of L. innocua indicates insanitary conditions and a work environment that could support the growth of L. monocytogenes, an organism that poses a life-threatening health hazard because it is the causal agent for the disease listeriosis, a serious encephalitic disease.


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.


District Court Enters Permanent Injunction against Pennsylvania-Based Dairy Firms and Individuals to Prevent Distribution of Foods That Contain Excessive Drug Residue
United States v. Metzler & Sons LLC, Pleasant View Farms, Rodney L. Metzler, Gretchen Metzler, Rodney T. Metzler, and Lee Metzler

Press Release
Docket Number: 3:13-CV-283 (W.D. Pa.)

On December 23, 2013 a U.S. District Court Judge entered a consent decree of permanent injunction against Metzler & Sons, Pleasant View Farms, Rodney L. Metzler, Gretchen Metzler, Rodney T. Metzler and Lee Metzler, designed to prevent the distribution of foods that contain excessive drug residue. The Pennsylvania firms own and operate several farms that sell cows for slaughter and for use as food. Inspections by the FDA and laboratory analyses performed by the Department of Agriculture indicated that the defendants sold cows that contained excessive levels of antibiotic residues in their edible tissues. Among other things, the permanent injunction requires the firms to establish and implement a written record-keeping system for every animal receiving drugs to prevent the firms from selling or distributing any animal whose edible tissues contain new animal drugs in amounts above the levels permitted by law.


Court Grants Summary Judgment against Houston Food Producer
United States v. Chung's Products, LP, Charlie A. Kujawa, and Gregory S. Birdsell

Press Release
Docket Number: 1:13-CV-759 (S.D.T.X.)

On April 3, 2013, the court granted summary judgment against Chung’s Products, LP, Charlie A. Kujawa, Chung’s president of operations, and Gregory S. Birdsell, Chung’s former director of quality assurance for violations of the Food, Drug, and Cosmetic Act (“FDCA”). The defendants manufacture ready-to-eat products such as seafood and vegetable eggrolls, as well as import and sell frozen, pre-packaged “Asian-style snacks” and spring rolls from their facility in Houston, Texas. The court’s ruling found that the defendants had a long history of violating the FDCA, including producing food under insanitary conditions, failing to control for the risks of Clostridium Botulinum, a highly potent toxin, in their seafood products, and a potentially deadly strain of listeria in their manufacturing environment. The court enjoined the defendants from receiving, processing, preparing, packing, holding and distributing food from Chung’s Houston-based facility or any other facility until defendants take the remedial action required by the court’s order.


Court Entered Consent Decree against Peanut Butter Manufacturer
United States v. Sunland, Inc., and Jimmie D. Shearer

Press Release
Docket Number: 2:12-CV-1312 (D.N.M.)

On December 20, 2012 the government brought suit and the court entered a consent decree of permanent injunction against Sunland, Inc., a New Mexico-based producer of peanut butter, and Jimmie D. Shearer, its President and Chief Executive Officer, based on their distribution of adulterated foods contaminated by Salmonella. FDA inspections conducted and confirmed that certain of Sunland’s nut products were contaminated with Salmonella Bredeney and established the widespread presence of Salmonella Bredeney in Sunland’s facility. The Centers for Disease Control and Prevention reported that since September 2012 at least 35 people from 19 states were infected with a strain of Salmonella Bredeney that was tied to peanut butter manufactured by Sunland. Among other things, the consent decree requires Sunland to develop and implement sanitation control programs, and implement testing, monitoring and remediation protocols.

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Axe Manufacturer to Pay $2.6 Million Penalty for Failing to Report Safety Hazard
United States v. Fiskars Brands, Inc.

Press Release
Docket Number: 3:14-CV-2061 (D. Or.) (C.D. Cal.)

On January 6, 2015, the district court (Judge Garr M. King) entered a consent decree against Gerber Legendary Blades, a division of Fiskars Brands, Inc., based on the company’s failure to immediately report to the U.S. Consumer Product Safety Commission a known safety hazard associated with Fiskars’ Gator Combo Axe. Pursuant to the decree, Fiskars will pay a civil penalty of $2.6 million and also establish and maintain a compliance program with internal recordkeeping and monitoring systems to keep track of information about product safety hazards. The government filed its complaint on December 30, 2014, alleging that as early as 2005 and continuing over the next several years, Fiskars received consumer complaints and warranty claims indicating that the knife fell out of the Axe handle while the Axe was being used to chop, pound or hammer. In several instances, the knife dislodged from the handle during use and caused injuries including lacerations requiring stitches, permanent nerve damage and surgery to repair severed tendons. Under the Consumer Product Safety Act, manufacturers, distributors and retailers are required to immediately report product hazards to the CPSC.

View Recall Announcement


Consent Decrees Filed in Toy Case
United States v. Toys Distribution, Inc., et al.

Press Release
Docket Number: 2:14-CV-1364 (C.D. Cal.)

On June 11, 2014, the United States District Court for the Central District of California entered three separate consent decrees shutting down the importation and sales activities of four California companies (Toys Distribution, Inc. dba TDI International, S&J Merchandise, Inc., BLJ Apparel, Inc., and All Season Sales, Inc.) and six individuals (Loan Tuyet Thai, Lan My Lam, Paul Phuong, Cuc T. Thai, Tom Liu, and Luan Luu) as a result of their imports of illegal children’s products. Among other things, the children’s products contained lead, phthalates, and small parts inappropriate for children under age three.

Phthalates are a chemical plasticizer which make certain products flexible, and certain types of phthalates are banned from use in children’s toys and other child care products. The Consumer Product Safety Commission (CPSC) determined through an investigation that the defendants imported various items into the United States in violation of the Consumer Product Safety Act (CPSA) and the Federal Hazardous Substances Act (FHSA). The violative products that were imported included: toy cars with impermissible lead content and small parts hazards, toy musical instruments with small parts hazards, dolls containing impermissible levels of lead and phthalates, rattles that failed to meet the infant rattle standards, a toy telephone with small parts hazards, and a children’s kitchen set and police set that both exceeded the lead content limit.


Civil Penalty and Injunction Action Filed for Delay in Reporting Oven Hazard
United States v. Electrolux

Press Release
(S.D. GA.)

On May 14, 2014, the United States filed a complaint alleging that Electrolux Home Products, Inc., knowingly failed to report immediately to the U.S. Consumer Product Safety Commission a safety hazard associated with certain wall ovens sold to consumers. The complaint alleged that Electrolux became aware of incidents in which gas could build up in the oven during broiling and escape and ignite, causing burn and fire hazards to consumers. Specifically, between February 2006 and November 2007, it was alleged that Electrolux knew of 22 consumer reports of flames shooting out of the oven when the broiler was on.

The incidents resulted in consumer injuries ranging from singed hair to facial burns. Electrolux failed to immediately report hazards with the oven, despite the fact that Frigidaire Canada, Electrolux’s sister company, identified the defective and hazardous nature of the ovens in January 2005 and implemented a design change to fix the defect in March 2006. Electrolux imported and distributed approximately 7,800 of the Kenmore ovens that were sold by Sears and other stores throughout the United States. To resolve the allegations, Electrolux has agreed to pay a civil penalty of $750,000 and has also agreed to establish and maintain a compliance program with internal recordkeeping and monitoring systems to keep track of information about product safety hazards. The Court entered the agreed upon order by the parties as the final judgment in the matter.


Civil Penalty Consent Decree Entered in Import Case as Part of Global Settlement
United States v. LM Import-Export, Inc. and Hung Lam

Press Release
Docket Number: 1:11-CV-20765 (S.D. Fla.)

On April 30, 2012, the court entered a Consent Decree directing defendants, LM Import-Export, Inc., and Hung Lam to pay a $287,500 civil penalty. LM Import-Export, Inc., owned and operated by Lam, was importing and distributing children’s products that did not comply with the Consumer Product Safety Act and the Federal Hazardous Substances Act. LM’s products lacked required safety labeling, exceeded permissible lead paint and lead content levels, and violated small parts requirements. Defendants were permanently enjoined from importing or distributing children’s products in an earlier consent decree entered in March 2011. The civil penalty is part of a global settlement which also involves a criminal action against the defendants.


Last of Four Defendants Sentenced in Connection with Submission of False Child Lighter Safety Testing Data to the Consumer Product Safety Commission
United States v. Karen Forcade, Joyce Serventi, Stephanie Van Treuren, and Nancy Buhrmann

Press Release
Docket Number: 2:09-CR-490 (D.N.J.)

On August 1, 2011, Joyce Serventi was sentenced to 24 months of supervised release for her role in a conspiracy to submit false data to the Consumer Product Safety Commission relating to child-resistance testing of cigarette and multipurpose lighters. Serventi was the owner of the now-defunct Results Research, a marketing research company, that was hired by co-conspirator Karen Forcade purportedly to perform child-resistance lighter testing. Forcade, Serventi, and codefendant Stephanie Van Treuren each pleaded guilty to a conspiracy to fabricate dozens of documents and photographs concerning child-resistance lighter safety testing that never occurred. They allegedly fabricated parental consent forms, birth dates, names, genders and testing locations regarding children who did not exist.


Maryland Resident Sentenced to 12 Months in Prison for Conspiracy to Deal in Explosive Materials
United States v. Dennis Coster and Fireworks Productions, Inc.

Press Release
Docket Number: 1:10-CR-354 (D. Md.)

On August 1, 2011, Dennis Coster was sentenced to a term of imprisonment of 12 months and one day for conspiring to deal in explosive materials and to create a false entry in a required record. Coster, acting through Fireworks Productions, Inc., sold more than 1,000 pounds of explosive materials in the form of display fireworks to an individual who was not licensed to purchase them, and who then illegally resold the display fireworks. In addition to the term of imprisonment, the Court ordered the forfeiture of $437,000 and ordered Fireworks Productions to pay a $65,000 criminal fine.

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Car Salesman at Prominent Los Angeles Dealership Sentenced in Connection with Odometer Fraud Scheme
United States v. Jeffrey Levy; United States v. Shamai Salpeter

Press Release
2:14-CR-00533 (C.D. Cal.); 2:14-CR-00532 (C.D. Cal.)

On March 16, 2015, a car salesman was sentenced in U.S. District Court in Los Angeles to serve one year and one day in prison on charges related to an odometer tampering scheme.

Jeffrey Levy, 63, of Woodland Hills, California, was ordered to pay $115,818.80 in restitution to victims who purchased vehicles without knowing the odometers displayed incorrect mileages.

Levy was a salesman at Galpin Ford in North Hills California and in November 2014 pleaded guilty to one count of conspiracy to tamper with odometers. Levy admitted that he referred customers and friends to his co-conspirator, Shamai Salpeter, who rolled back odometers in the driveway of his residence in Woodland Hills. Levy knew that some of his customers had exceeded the maximum allowed mileage under the terms of their leases and wished to avoid fees and penalties. He knew that other customers wanted to lower the mileage on their odometers to make their vehicles more valuable when they traded in the vehicles. After Salpeter altered the odometers, Levy’s customers returned or traded in their vehicles with false, lower mileage readings. Levy accepted the vehicles without alerting Galpin Ford that the odometer readings were false. Future purchasers of the vehicles were defrauded because they purchased vehicles with false odometer readings. Galpin Ford cooperated with the government’s investigation.

Salpeter, who pleaded guilty to odometer tampering and conspiracy to commit odometer fraud, is scheduled for sentencing April 13, 2015.

Used Motor Vehicle Dealers Indicted for Odometer Tampering and Money Laundering
United States v. Gali et al.

Press Release
5:14-CR-00634 (E.D.P.A.); 1:14-CR-00652 (E.D.N.Y.)

Chaim Gali, also known as Mike Gali or John Triculy, of Queens Village, was arrested January 6, 2015 in New York.  Along with Shmuel Gali, also known as Sam Gali, of Israel, indictment charges unsealed in federal courts in Philadelphia and Brooklyn relate to their long-term operation of an odometer tampering and money laundering scheme.  The Justice Department will seek the extradition of Shmuel Gali.

In the Eastern District of Pennsylvania, the defendants were charged with conspiracy, and seven counts each of securities fraud and false odometer statements.  In the Eastern District of New York, they were charged with mail and wire fraud conspiracy, and money laundering conspiracy.  The statutory maximum for each securities fraud charge in the Pennsylvania case is 10 years imprisonment; in the New York case each count carries a statutory maximum 20 years sentence.

The indictments allege that from as early as 2006, through at least June 2011, the Galis schemed to defraud vehicle buyers by using fictitious dealer names to purchase approximately 690 high-mileage vehicles, which they sold with altered odometers and fraudulent titles.  The vehicles were purchased from various locations of a national vehicle leasing company, including Florida, Maryland, and Missouri.  By altering the mileage on the vehicle titles accompanying the high-mileage vehicles, the defendants obtained new fraudulent Pennsylvania titles; in some cases a vehicle’s mileage was reduced more than 100,000 miles. The defendants sold the low mileage vehicles at auctions in Pennsylvania and New Jersey, then funneled the proceeds to Brooklyn bank accounts used to purchase additional vehicles.

Consumer information on odometer fraud prevention is available from NHTSA; a hotline for providing information on suspected odometer tampering is (800) 424-9393.

Defendant in Odometer Tampering Scheme Sentenced to 60 Months’ Imprisonment
United States v. Kyle Novitsky and Judith Aloe

Docket Number: 5:12-CR-657 (E.D.P.A.)

On October 9, 2014, Kyle Novitsky was sentenced in U.S. District Court in Philadelphia to serve 60 months’ imprisonment on charges related to an odometer tampering conspiracy. He was also ordered to pay restitution of $1,482,000 to victims. In April, 2014, the defendant pled guilty to one count of conspiracy to tamper with odometers, make false odometer certifications, and commit securities fraud, and two counts each of securities fraud and making false odometer certifications.

Novitsky rolled back odometers on used cars and trucks to make the vehicles appear more valuable. Doing business under various company names, Novitsky sold close to 250 vehicles with rolled back odometers. Novitsky’s co-defendant, Judith Aloe, is a fugitive, having failed to appear for trial in May in U.S. District Court in Philadelphia. Learn More.


Two Men Charged with Odometer Fraud
United States v. Erick Sanchez-Pulido and Israel Sanchez-Pulido

Press Release
Docket Number: 14-CR083 (E.D. Wis.)

On April 1, 2014, Erick Sanchez-Pulido and his brother, Israel Sanchez-Pulido, were indicted by a federal grand jury in the Eastern District of Wisconsin on charges of conspiracy, odometer tampering, making false odometer statements, and securities fraud. The indictment charged the defendants with buying high-mileage vehicles at Wisconsin auto auctions, rolling back the odometers, altering the mileage readings on the vehicles’ titles, and then selling the cars to consumers and car dealerships in Wisconsin and elsewhere. The indictment alleges that from October 2009 through February 2014, the defendants were involved in rolling back the odometers on at least 146 vehicles.

The defendants did not appear in court for their arraignment on April 9, 2014; arrest warrants were issued and the defendants are now fugitives.

A copy of the indictment is available.


Auto Dealer Pleads Guilty in Odometer Fraud Scheme
United States v. Edward Capicchioni

Press Release
Docket Number: 5:14-CR-71 (E.D.P.A)

On March 20, 2014, Edward Capicchioni pled guilty to one count of conspiracy to tamper with odometers and make false odometer certifications. Doing business under the name The General’s Auto Sales, Capicchioni purchased high mileage vehicles from individual sellers and worked with a co-conspirator to roll back and alter the odometers. He then resold the vehicles at a wholesale auto auction in Pennsylvania, representing that the false, low mileages were accurate. Capicchioni sold more than 50 vehicles with rolled back odometers as part of the scheme.


Defendant in Odometer Tampering Scheme Sentenced to 18 Months’ Imprisonment
United States v. Francis Marimo

Press Release
Docket Number: 5:13-CR-106 (E.D.N.C.)

Francis Marimo, of Raleigh, N.C., was sentenced on December 20, 2013, to 18 months’ imprisonment and one year of supervised release in connection with an odometer tampering scheme. Marimo also was ordered to pay $190,845 in restitution. Marimo pleaded guilty in June 2013 to an Information alleging two counts of odometer tampering relating to vehicles he fraudulently sold between 2008 and 2012. Marimo purchased used vehicles primarily through online advertisements, replaced the existing odometers with odometers showing lower mileages, and then sold the vehicles to consumers while representing the low mileages as accurate. Marimo has filed a notice of appeal. Learn More.

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Court Reverses Temporary Injunction, Upholds Generic Drug Approvals
Hospira v. Burwell, et al.

Docket Number: 8:14-CV-2662 (D. Md.)

On September 5, 2014, the district court lifted a temporary restraining order it had entered some two weeks prior and reinstated FDA’s approval of generic versions of Precedex (dexmedetomidine), a sedative drug manufactured by Hospira, Inc. On August 18, FDA approved abbreviated new drug applications (ANDAs) filed by Mylan Institutional LLC and Par Sterile Products, Inc., which permitted those manufacturers to begin marketing generic versions of Precedex with certain patent-protected indications “carved-out” of the labeling.

On August 19, Hospira brought suit challenging FDA’s determination that the generic companies could carve out the protected indications and sought a temporary restraining order (TRO) to halt the marketing of the generic products. Although the district court initially entered a TRO prior to any responsive briefing by the government, the court ultimately reversed itself and ruled in favor of the FDA, granting the government’s motion for summary judgment and upholding the agency’s approval of the generic drugs at issue. Hospira has appealed the court’s decision to the U.S. Court of Appeals for the Fourth Circuit.


Court Enters Final Judgment in Generic Celebrex Challenge
Mylan Pharmaceuticals, Inc. v. FDA

Docket Number: 1:14-CV-75 (N.D. W.Va.)

On June 16, 2014, the district court entered final judgment for the Food and Drug Administration in an action challenging the agency’s decision that a reissued patent does not give rise to eligibility for a period of marketing exclusivity that is separate and distinct from that which arises from the original patent. The drug product at issue in this case is celecoxib, marketed by Pfizer Corporation as the blockbuster brand-name drug, Celebrex. Mylan moved for a preliminary injunction to enjoin FDA from withholding final approval, on May 30, 2014, from Mylan and other generic celecoxib applicants that Mylan claims are eligible for exclusivity based on certification that a reissued patent for Celebrex would not be infringed by generic competition.

Following a hearing on May 15, 2014, the court denied the motion, ruling that Mylan was unlikely to succeed on the merits of its case because FDA properly interpreted the relevant provisions of the Federal Food, Drug, and Cosmetic Act in concluding that a reissued patent could not give rise to a new period of marketing exclusivity distinct from the original patent. The court also found that Mylan would not be irreparably harmed in the absence of a preliminary injunction and that the balance of the equities and the public interest favored denial of preliminary relief. Mylan appealed from the denial of the preliminary injunction, and, thereafter, moved the district court to convert the preliminary injunction denial to a final judgment. On June 16, 2014, the district court granted that motion and entered final judgment in favor of FDA. On the same day, Mylan appealed the final judgment to the Fourth Circuit.


District Court Dismisses Suit Seeking to Enjoin FDA’s Approval of Generic Drug
Teva Pharmaceutical Industries LTD., Teva Neuroscience, Inc., v. Sebelius

Docket Number: 1:14-CV-786 (D.D.C.)

On May 14, 2014, the district court dismissed an action brought by Teva Pharmaceuticals seeking to enjoin FDA’s approval of generic versions of Copaxone, a blockbuster drug for the treatment of multiple sclerosis. Teva sought relief following FDA’s denial of a series of citizen petitions in which Teva requested, among other things, that the agency require clinical trials before approving any abbreviated new drug application (“ANDA”) for a generic version of Teva’s drug. Because FDA is statutorily required to respond to such petitions within 150 days, the agency denied Teva’s latest petition but declined to address the substantive scientific issues raised in the petition outside the context of the approval of a specific ANDA.

FDA has not yet approved a generic version of Copaxone. The government moved to dismiss the complaint, as well as to deny a motion for preliminary injunction, because, without any generic approval, there was no case or controversy for the court decide. The district court agreed, denied the motion for preliminary injunction, and dismissed the case for lack of jurisdiction.


District Court Refuses to Enjoin FTC Administrative Proceedings in Data Privacy Case
LabMD, Inc., v. FTC

Docket Number: 1:14-CV-810 (N.D. Ga)

On May 12, 2014, U.S. District Judge William S. Duffey dismissed a complaint filed against the Federal Trade Commission (FTC) by LabMD, Inc., holding that the court lacked jurisdiction to hear the company’s claims. In August 2013, the FTC brought an administrative action against LabMD, a small medical laboratory, alleging that it had violated Section 5 of the FTC Act by failing to employ reasonable and appropriate data security measures to prevent unauthorized access to sensitive personal information. LabMD sought a preliminary injunction to halt the FTC’s ongoing administrative proceedings, claiming that FTC did not have authority to regulate data security, particularly with regard to medical information. Although the court questioned the FTC’s authority to “enlarge its regulatory activity in the data security area,” it declined to enjoin the Commission’s ongoing proceedings, holding that, in the absence of final agency action, none of LabMD’s claims were ripe for review. LabMD has appealed the court’s ruling to the Eleventh Circuit.


Court Dismisses Action Involving Access to Drugs in Short Supply
Carik, et al. v. United States Department of Health and Human Services, et al.

Docket Number: 1:12-CV-272 (D.D.C.)

On November 27, 2013, the district court dismissed an action asserting statutory and constitutional claims regarding two drugs in short supply. Plaintiffs claimed injury due to lack of access to full doses of Fabrazyme and Aquasol, two drugs for which there have been shortages. The government filed a motion to dismiss plaintiffs’ complaint on May 4, 2012, arguing that there was no subject matter jurisdiction because the government did not cause plaintiffs’ inability to obtain the full doses, and that there was no relief available that would redress plaintiffs’ injuries.

The district court agreed, holding that even if the plaintiffs had suffered an injury in fact, the shortages were caused by the drug manufacturers, not the government. Because the plaintiffs failed to establish that any action or inaction by the government had a sufficient causal link to their alleged injuries, their claims failed to meet the threshold requirements for Article III standing and the court, accordingly, dismissed the complaint for lack of subject matter jurisdiction.


District Court Rejects Challenge to FDA Approval of Generic Drug
Cumberland Pharmaceuticals Inc. v. FDA

Docket Number: 1:12-CV-1842 (D.D.C.)

On September 30, 2013, the district court granted summary judgment to the government in a case brought by Cumberland Pharmaceuticals challenging FDA’s approval of a generic drug product that competes with Cumberland’s brand-name product, Acetadote. This drug is used to prevent kidney injury for those who have taken a large dose of acetaminophen. When FDA initially approved Acetadote, the drug contained, as an inactive ingredient, edetate disodium (“EDTA”). Cumberland alleged that it spent millions studying the issue and concluded that the product did not need EDTA. Cumberland then submitted a supplemental New Drug Application for a new formulation of Acetadote that did not contain EDTA, FDA approved the supplement, and Cumberland removed the old formulation from the market.

In November 2012, FDA approved a generic product that contains EDTA and is identical to the original product marketed by Cumberland. Under FDA regulations, approval of a generic product that is identical to a product that has been removed from the market is not permissible if the original product was withdrawn for safety reasons. The court agreed with FDA’s conclusion that Cumberland’s original product had not been withdrawn for safety reasons, and approval of the generic was proper.


District Court Dismisses Suit Challenging FDA Regulations Governing Artificial Insemination
Doe v. Hamburg

Docket Number: 3:12-CV-3412 (N.D. Cal.)

On July 16, 2013, the district court dismissed an action challenging the constitutionality of FDA regulations governing sperm donation. Plaintiff Jane Doe alleged that she was in a committed, same-sex relationship and wished to conceive a child via artificial insemination using sperm from a specific private donor in lieu of sperm bank. Because such donation might have been subject to FDA regulations requiring, among other things, medical testing of donors and registration with the FDA, plaintiff Doe sought to challenge those regulations as unconstitutionally burdening her right to conceive a child. The government moved to dismiss the case on prudential standing grounds and for failure to state a claim. After hearing oral argument in June, the court granted the motion and dismissed the complaint on prudential standing grounds, agreeing with the government that Doe’s claims were derivative of the donor’s claims and that Doe failed to assert independent rights personal to her.

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

Docket Number: 1:99-CV-02496 (D.D.C.)

On June 2, 2014, the district court issued a consent order containing negotiated details of the implementation of corrective statements that the tobacco companies were ordered to make following a nine-month civil racketeering trial at which they were found liable for 50 years of fraud. After many months of mediation, the parties came to agreement regarding implementation details for the corrective statements which address five topics on which the court found that the tobacco company defendants had made false and deceptive statements and which are to be disseminated via television ads, newspaper ads, cigarette pack onserts, and statements on the companies’ websites. After the parties filed their joint proposed order on January 10, 2014, numerous media outlets appeared as amici to protest that the media buy (initially prescribed by the court in 2006) under-represented minority-owned media entities and would not adequately reach minority communities. At the Court’s direction, the parties resumed negotiations to consider those issues.

On April 22, 2014, the parties submitted a revised proposed order that would spread the media buy to newspapers in more states with large African-American populations, and would add 14 African-American newspapers. During May 2014, all but two of the original amici filed further briefs contending that the revised proposal was still inadequate to reach minority communities or use African-American media. To accompany its June 2 consent order, the district court issued an 8-page opinion discussing and rejecting the amicus objections to the revised media-buy part of the agreement. Although the consent order specifies how the corrective statements will look if and when the tobacco companies disseminate the statements, it does not finally resolve matters. In 2009, the DC Circuit vacated the highly important point-of-sale channel (which would have required the corrective statements to appear at retail locations where cigarettes are sold), and remanded in the summer of 2010 for further consideration. That topic is being litigated on a separate track before the district court. Moreover, the tobacco companies have lodged a First Amendment appeal from the wording of the corrective statements which should now go forward in the D.C. Circuit.


District Court Dismisses Constitutional Challenge to PACT Act
Musser’s Inc., d/b/a Genuine Tobacco Company v. United States

Docket Number: 10-4355 (E.D. Pa.)

On February 18, 2014, the district court dismissed an action challenging the constitutionality of the Prevent All Cigarette Trafficking Act of 2009 (the “PACT Act”), a broad cigarette and smokeless tobacco tax law, which went into effect in 2010. The Act, which is largely aimed at internet tobacco sales, imposes restrictions on the sale of cigarettes and smokeless tobacco which are delivered to the purchaser (rather than “in-person” sales), making it unlawful to deliver cigarettes and smokeless tobacco through the United States Postal Service, and prohibiting remote sales of these products unless applicable state and local taxes are paid in advance. The plaintiff operated an online retail store selling tobacco products via the internet and by telephone to customers in all fifty states. Some 10-15 % of the company’s online sales were to military personnel stationed on bases all over the world and who could only receive delivery by U.S. mail. The plaintiff challenged the statute on two grounds, alleging that the Act violates the Due Process Clause because it forces remote sellers to comply with tax laws of foreign jurisdictions with which they do not have sufficient contact, thereby denying them the right to contest the Act’s application, and that it violates the Equal Protection Clause because it discriminates without a rational basis against military personnel by denying them the ability to make remote purchases of tobacco products for delivery. The court rejected both claims.

As to the Due Process claim, the court found that selling products over the internet and knowingly conducting business through the internet in a state is a sufficient contact to satisfy due process concerns. Because the plaintiff’s activities were sufficient to render it subject to state jurisdiction, the court held that it did not offend the Due Process Clause for the plaintiff to be subject to taxation in the states where it does business. As to the Equal Protection claim, the court held that the plaintiff lacked standing to assert the rights of non-party military personnel. In the alternative, the court found that Congress had a rational basis for banning the use of the Postal Service to deliver tobacco products, citing congressional findings that the use of the mails to deliver such products facilitated tax evasion, trafficking in untaxed cigarettes, and criminal activity; made it easier for children to obtain these products; and led to unfair competition from sellers selling untaxed products when law abiding retailers were collecting local and state taxes. Accordingly, the court found both of plaintiff’s claims legally deficient and dismissed the action.

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For other matters of interest, see: CLOSED CASES


This page lists current CPB case updates accessible to the public.

Note: Read the "Justice for All Act of 2004", which describes crime victims rights.


Updated April 17, 2015