Appellate Brief Regarding Loss
NOTE: United States v. Marcus, 82 F.3d 606 (4th Cir.
1996), decided after this brief was written, should also be
examined when considering fraud loss calculations in matters
STATEMENT OF JURISDICTION
The Appellant correctly described the jurisdiction of the
District Court pursuant to 18 U.S.C. § 3231 and 28 U.S.C. §
2255. This Court has jurisdiction under 28 U.S.C. 1291, 2253 and
2255. It is the position of the United States that Appellant's
time to file a notice of direct appeal began on July 18, 1995, (DKT
# 51, J.A. 255a) and, accordingly, that on July 24, 1995, XXXXXX
filed a timely Notice of Appeal in 4th Circuit Appeal # 95-7222.
(J.A. 256a) Both Appellant and Appellee agree that a timely Notice
of Appeal was filed in 4th Circuit Appeal # 95-5603, an appeal of
the District Court's denial of XXXXXXX's Motion to Vacate Sentence
pursuant to 28 U.S.C. § 2255.
STATEMENT OF THE ISSUES
1. Given Appellant's failure, prior to the imposition of
sentence, to challenge the facts stated in the Presentence
Investigation Report, was the District Court's factual finding that
the consumers of Subject Pharmaceutical Company's (Subject) drugs
did not get what they bargained for, clearly erroneous [NOTE:
names changed from original].
2. Does the recent holding of this Court in United States v.
Chatterji, 46 F.3d 1336 (4th Cir. 1995), alter the loss
calculation under U.S.S.G. § 2F1.1 in this case, where:
(a) consumers of Subject's drugs did not get what they
bargained for because the Appellant caused pharmaceuticals that had
not been properly tested, and were therefore of unknown safety and
effectiveness, to be marketed to the public, and (b)
commercial competitors of Subject were intended and actual victims
of the Appellant's crimes.
3. Did the Appellant meet his burden to established that, at the
time it imposed sentence, the District Court was under a
misapprehension of material fact which affected the sentence.
4. Did the Appellant meet his burden of establishing that his
highly experienced, retained counsel's tactical decisions at the
sentencing (which avoided the utilization of potential upward
departures and secured a sentence of 60-months incarceration when
the District Court could have, within the guidelines (level 29),
imposed a sentence of 108 months incarceration), were so deficient
that they fell below the objective standard of reasonableness
articulated in Strickland v. Washington, 466 U.S. 668
STATEMENT OF THE CASE
On January 25, 1993, Appellant, XXXXXX XXXXXXX, previously the
President, Chief Executive Officer, Chairman of the Board and a
major stockholder of Subject Pharmaceutical Co., Inc., was
sentenced to 60-months imprisonment. This sentence was based on
his guilty plea to a five-count Criminal Information which charged
that MX. XXXXXXX had conspired to commit offenses against the
United States (including the distribution of adulterated drugs), in
violation of 18 U.S.C. § 371; obstructed a Food and Drug
Administration (FDA) proceeding, in violation of 18 U.S.C. §
1505; committed wire fraud, in violation of 18 U.S.C. § 1343;
and made false statements to FDA, in violation of 18 U.S.C. §
1001. At the heart of the conspiracy charge, and at the heart of
the relevant criminal conduct considered at sentencing, was a
scheme: 1) to secure expedited drug approvals from FDA,
through the submission of fraudulent and fictitious data; 2)
to manufacture and distribute unproven and adulterated drugs
without: a. complying with the good manufacturing practices
regulations (GMPs) promulgated by the FDA, b. utilizing the
approved production formulas specified in Subject's Abbreviated New
Drug Applications (ANDAs), or c. subjecting those drugs to
required and necessary testing, and then, 3) to hide these
derelictions from both the FDA and Subject's customers.[FN1]
FN1. MX. XXXXXXX was one of nine former Subject
employees to be convicted of felonies and sentenced by the District
Court in Maryland. In addition, the former chief scientific
officer of the laboratory which did the bioequivalence studies for
Subject was also convicted of crimes precipitated by Mr. XXXXXXX.
In sentencing the defendant as it did, the District Court found
that, for sentencing guidelines purposes,[FN2] XXXXXXX's fraudulent
conduct had caused a loss of more than $80 million. (J.A. 153a)
the offense level calculation for MX. XXXXXXX included an upward
adjustment of 18 levels based on the loss table set out at U.S.S.G.
FN2. Unless otherwise expressly noted, all references
to the United States Sentencing Commission Guidelines refer to
those in effect as of November 1, 1989.
FN3. In reaching its conclusion that loss had
occurred in the XXXXXXX case, the District Court looked to the $210
million in sales of Subject's drug products that had reached, or
stayed, on the market as a result of defendant's fraud on the FDA.
The District Court held, in conformity with, inter
alia, United States v. Cambra, 933 F.2d 752 (9th Cir.
1991) and United States v. Arlen, 947 F.2d 139 (5th Cir.
1991), cert. denied, 503 U.S. 939 (1992) that gross sales
was the appropriate measure of fraud loss because consumers of
Subject's products were led to believe they were buying products of
proven safety and effectiveness when, in fact, they were getting
adulterated drugs of unproven, untested and unknown usefulness.
The record also unequivocally demonstrates economic loss to
On January 25, 1993, the same day that he was sentenced on the
fraud charges, MX. XXXXXXX was also sentenced to 23-months
based on his guilty plea to a charge that he fixed generic drug
MX. XXXXXXX's imprisonment on the price- fixing charge was ordered
served concurrently with the sentence on the fraud charges. Because
guideline calculation for the antitrust violations was so much
than that for the fraud offenses (Level 14 vs. Level 32 - J.A.
there was no adjustment in the overall offense level under U.S.S.G.
§ 3D1.4(c). The validity of the Sherman Act sentence has not
In April 1995, MX. XXXXXXX moved pursuant to 28 U.S.C. §
2255 to vacate his sentence on the fraud charges. This motion was
based on three separate and distinct theories. First, XXXXXXX
claimed that, in light of the opinion of this Court in United
States v. Chatterji, 46 F.3d 1336 (4th Cir. 1995), the District
Court's calculation of the sentencing guideline range was
erroneous, since it was premised on the belief that consumers of
Subject's adulterated drugs suffered some loss. Second, based on
passing comments made by the sentencing judge, in court, several
months after the XXXXXXX sentencing,[FN4] Appellant hypothesized
that the Court must have sentenced him under "misapprehensions" of
material fact. Third, XXXXXXX claimed that he had received
ineffective assistance at sentencing because his counsel did not
ask the District Court for various downward departures. In
addition, since the record transcript did not affirmatively reflect
that MX. XXXXXXX had been advised of his right to appeal the
sentence, he asked the District Court to conduct another sentencing
hearing in order to resurrect his appellate rights.
FN4. These comments were made by the sentencing judge
during in-court proceedings involving former Subject employees,
XXXXXXXX XXXXXXXX and XXXXX XXXXXX, in late 1993, several months
after the XXXXXXX sentencing. (J.A. 181a - 206a)
Contrary to Appellant's assertions, however, this appeal does not
raise issues previously decided by this Court in United States
v. Chatterji, 46 F.3d 1336 (4th Cir. 1995) because the
operative facts in this case are so significantly different from
those in Chatterji. The Appellant's sentence was not based
on any misapprehension of material fact and MX. XXXXXXX's trial
defense counsel was hardly ineffective within the meaning of
Strickland v. Washington, 466 U.S. 668 (1984),
STATEMENT OF FACTS
The United States suggests that the Statement of Facts
provided by Appellant XXXXXXX is misleading. Most of the
significant "statements of fact" contained therein are drawn only
from the XXXXXXX Declaration (J.A. 175a through 180a). That
declaration was first submitted in September 1995. Thus, those
"facts" were not before the District Court at the time it sentenced
MX. XXXXXXX in January 1993. Likewise, because these facts were
not presented at the sentencing, the United States had neither
opportunity, nor obligation, to rebut them. Prior to his
sentencing, MX. XXXXXXX did not contest the underlying facts
proffered by the government in this case, he only contested the
conclusions to be drawn from those facts. The Appellant did not,
in either his Sentencing Memorandum (J.A. 87a through 113a) or at
the Sentencing Hearing (J.A. 114a - 160a), contest any of the
facts set forth by the United States at the Plea Hearing
(J.A. 60a through 71a), and in the Statement of Facts (J.A. 84a
through 86a); which were repeated in the Presentence Report (J.A.
260a through 270a). Rather, when counsel for the defense was asked
by the Court whether the defendant had any disagreement with the
facts articulated by the government, the reply was as follows:
There is no specific disagreement as to the specific
events attributed to MX. XXXXXXX and specific conduct ascribed to
him with respect to motives that have been ascribed to him or
implied in the statement.
MX. XXXXXXX, readily admitted at sentencing that he cut
corners and directed violations of FDA regulations for reasons of
expediency[FN5] (J.A. 95a); and that he bore responsibility for
presiding over a company and, in the defense's words, "permitting
it to spin completely out of control. (J.A. 135)In XXXXXXX's
Sentencing Memorandum the defense conceded that the government was
a victim of his crimes (J.A. 106a), and that his crimes caused the
public to lose faith in the efficiency of generic pharmaceuticals
Id.[FN6] The defense also conceded that the competitors of
Subject were real and intended victims of XXXXXXX's crimes (J.A.
89a). See also, where the sentencing judge noted that
the public health was not of concern to MX. XXXXXXX because of his
drive to beat the competition to the marketplace. (J.A. 149a -
FN5. The government, without contradiction, described
this conduct as creating a corporate culture where fraud committed
on the FDA was a way of life, (J.A. 125a) a sentiment which the
Court echoed. (J.A. 150a)
FN6. Thereby, the government contends, causing economic
by motivating consumers to use higher-cost brand name drugs - a
noted by the Judge at sentencing (J.A. 148a).
Prior to sentencing, the defense did not expressly claim that
products manufactured by Subject were as therapeutically effective
their brand-name counterparts. The defense only claimed (without
offering any basis) that MX. XXXXXXX believed that the products
therapeutically effective. See XXXXXXX Sentencing Memorandum
(J.A. 46a). XXXXXXX's unfounded beliefs on this subject not being
relevant, the government had no obligation or motive to rebut them.
Based on uncontested facts, the District Court at sentencing found
not one of the . . . consumers received the product for
which they bargained . . . . these products . . . . all had defects
in them of one sort or the other.
(J.A. 131a) The District Court also quite correctly noted that,
submit these applications to the FDA which are based on fraudulent
there is no way of knowing what the consequences will be. (J.A.
After noting all of these factors, the sentencing judge then
given that gross sales of the untested drugs was in excess of $210
million, that the loss under U.S.S.G § 2F1.1 exceeded $80
(J.A. 153a).[FN7] The District Court then gave MX. XXXXXXX a
reduction for acceptance of responsibility (U.S.S.G. § 3E1.1),
4-level downward departure for his assistance to the government
(U.S.S.G. § 5K1.1) and sentenced the Appellant toward the low
the guideline, to 60-months imprisonment. The District Court also
imposed a fine of $1,250,000.
FN7. Under U.S.S.G. § 2F1.1(b)(1)(S), once the
loss exceeded $80 million no additional increase in the offense
level was specified based on the amount of loss.
STANDARD OF REVIEW UNDER 28 U.S.C. §
A criminal sentence enjoys a presumption of regularity that
must be overcome by the petitioner/appellant. In overcoming this
strong presumption, MX. XXXXXXX bore the burden of proof on each
factual issue and had the obligation to meet that burden by a
preponderance of the evidence. See Miller v. United
States, 261 F.2d 546, 547 (4th Cir. 1958); Chandler v.
United States, 332 F. Supp. 397, 403 (D. Md. 1971).[FN8]
FN8. Non-constitutional claims such as improper
application of the sentencing guidelines may not be raised in
collateral proceedings pursuant to 28 U.S.C. § 2255.
See United States v. Emanuel, 869 F.2d 795, 796 (4th
Cir. 1989); United States v. Rowland, 848 F. Supp. 639 (E.D.
Va. 1994); Knight v. United States, 37 F.3d 769, 772 (1st
STANDARD OF REVIEW ON THE DIRECT APPEAL
OF THE U.S.S.G. § 2F1.1 LOSS ISSUE
The calculation of loss, pursuant to U.S.S.G. § 2F1.1, is
a question of fact subject to review only for clear error.
See United States v. Castner, 50 F.3d 1267, 1273
(4th Cir. 1995); United States v. Dozie, 27 F.3d 95, 99 (4th
Cir. 1994). In Chatterji, this Court represented its action
as an "application of a loss enhancement to undisputed facts."
Chatterji, 46 F.3d at 1342. Therefore, in order to rely on
the Chatterji decision, XXXXXXX must accept the facts as
found by the sentencing court or sustain the burden of
demonstrating that the sentencing court's findings that Subject's
customers received exactly what they bargained for was, based on
the record at the time of sentencing, clearly erroneous.
SUMMARY OF ARGUMENT
Appellant did not prove that, at the time it imposed sentence
on MX. XXXXXXX, the District Court acted under a misapprehension of
material fact which affected the sentence. The statements by the
District Judge that were cited by Appellant were made several
months after the XXXXXXX sentencing and, therefore, do not
necessarily reflect on the sentencing judge's knowledge at the time
sentencing was imposed. Further, these statements do not impact
material facts that could have affected the Appellant's sentence.
The unchallenged facts in this case support the District Court's
conclusion that XXXXXXX's crimes resulted in economic loss.
Accordingly, this Court's holding in Chatterji does not
Appellant's trial defense counsel provided far more than mere
adequate representation at sentencing. Counsel avoided the
utilization of numerous, factually and legally available, upward
departures and secured a sentence that was approximately half what
it could legally have been under the applicable guidelines.
Appellant has pointed out no errors, let alone significant errors,
made by his trial defense counsel. His counsel made decisions that
were tactically sound and universally effective. Appellant has not
demonstrated that he was denied effective assistance of counsel.
Finally, XXXXXXX's request that this case be remanded for a
new sentencing, because of a post-sentencing problem, is not
mandated by statute or case law, and is not logical. Such a remand
would only waste valuable court time without vindicating any right
of the Appellant.
I. THIS CASE IS DISTINGUISHABLE FROM CHATTERJI BECAUSE
XXXXXX'S CRIMES RESULTED IN ECONOMIC LOSS
Appellant's argument that this Court misapplied the loss
provisions of U.S.S.G. § 2F1.1 is based on a claim that the
facts in Chatterji track this case in all relevant respects.
Appellant's Brief at 25. This claim, however, ignores both the
narrow scope of the Chatterji decision and the vast factual
distinction between the record in this case and that in the
Chatterji case. The operative facts, as found in
Chatterji, were that "Quad's products were exactly what they
purported to be: Vancomycin and Ritodrine approved by the FDA,
manufactured in a certain strength and dosage and producing the
specified therapeutic benefits that FDA requirements were intended
to insure." 46 F.3d at 1344. Based on the record in that case,
this Court found that Quad's drugs were no less effective than the
innovator drugs or other approved generic versions of these drugs.
Accordingly, this Court concluded that, "[b]ased on the record
before it, no quantifiable, actual loss can be attributed to
[defendant's] conduct." 46 F.3d at 1341.However, no such facts or
conclusions were, or reasonably could be, found from the record in
this case. Based on the record in this case, the drugs which MX.
XXXXXXX put on the market were something less than they were
represented to be. As presented to the District Judge by the
government prior to the sentencing, and not factually contested by
the defendant until more than two years later,[FN9] the drugs that
are the basis for the charges in this case were in some instances
never tested in humans against the benchmark drug, i.e.
dyazide (J.A. 65a, 78a); in other instances the drug products that
were tested had been manufactured using different sources for the
active ingredients than the marketed products, i.e.
minocycline (J.A. 64a, 77a); and in numerous instances the product
that had been tested had been manufactured using different
production procedures and ingredients than the drugs that were
distributed to the public, i.e. the coversheet drugs (J.A.
FN9. Appellant had an obligation, for each factual
statement in the PSI with which he took issue, to assert with
specificity and clarity the nature of and basis for his objection.
United States v. Aleman, 832 F.2d 142, 145 (11th Cir. 1987).
Failure to file timely objections amounted to a valid waiver of
objections. United States v. Morsley, No. 94-5203, 5204,
5223; 1995 WL 530275 (4th Cir. Aug. 31, 1995). Accordingly, this
Court should consider the facts in the PSI as conclusively
These violations occurred because, as the Appellant stated in
Sentencing Memorandum, and echoed in his Brief, Subject's Research
Development Department had not ensured that the formulas submitted
the FDA for approval would function in commercial quantities.
formulas that were subjected to bioequivalence testing were, simply
"not viable for commercial size production." (J.A. 92a, Appellant's
Brief at 9) In response to this problem Appellant reformulated the
and released them to the public without testing to see if these
had been proven to be bioequivalent to the benchmark, innovator
B. SENTENCING FACTORS AS APPLIED TO XXXXXXX
Utilizing the fraud table, U.S.S.G. § 2F1.1, XXXXXXX was
at offense level 29, before his downward departures were considered
pursuant to U.S.S.G. § 5K1.1 [FN10] Further, his conviction
for antitrust violations, which resulted in a U.S.S.G. offense
level that was more than 9 levels below the guidelines for his
fraud conviction, did not increase his overall offense level, it
nevertheless did provide a basis for sentencing at the higher end
of the applicable guideline range. See U.S.S.G. §
3D1.4(c). Thus, without a downward departure, MX. XXXXXXX's
sentence could have been at the upper end of level 29, to
nine-years imprisonment. This is almost double the sentence
actually imposed. MX. XXXXXXX thus received more than ample credit
for his cooperation with the government and, given the nature and
extent of his criminal activity, he was sentenced very
Base offense level 6
Loss greater the $80 million +18
More than minimal Planning + 2
Obstruction + 2
Leadership role in the offense + 4
Acceptance of responsibility - 3
Adjusted offense level 29
(J.A. 270a -271a)
C. Subject'S DRUGS
Subject's adulterated drugs named in the XXXXXXX Information
sold for more than $210 million[FN11] and if the drugs in
Chatterji were at one end of the risk and culpability
spectra, Subject's drugs were at the other. As outlined in the
Statement of Facts filed at the time of XXXXXXX's plea (J.A. 74a
et seq.) and in the Presentence Report (J.A. 258a et
seq.), Subject, under MX. XXXXXXX's direction, engaged in
numerous practices that were in violation of the FDA's Good
Manufacturing Practices Regulations which are set out at 21 C.F.R.
Part 211. For example, Subject used unapproved components, 21
C.F.R. § 211.86 (J.A. 77a, 263a); Subject did not follow the
written master formulas, 21 C.F.R. § 211.100; did not keep
accurate production records, 21 C.F.R. § 211.186; and did not
prepare complete batch records, 21 C.F.R. § 211.188 (J.A.
262a). These drugs, which were not manufactured in accordance with
the Good Manufacturing Practices Regulations, were as a matter of
science of questionable integrity and as a matter of law were
adulterated pursuant to 21 U.S.C. § 353(b)(2). Of even greater
significance, however, since Subject did not conduct bioequivalence
studies in human subjects comparing drugs produced with the
manufacturing formulas that they actually used in production
against the innovator or benchmark drug (J.A. 78a, 92a to 95a),
these drugs were of unproven effectiveness and, could not legally
be distributed by Subject or by its customers, 21 U.S.C. §
331(a); were subject to seizure and condemnation pursuant to 21
U.S.C. § 334(a)(1); and were subject to destruction pursuant to
21 U.S.C. § 334(d)(1). As the sentencing judge expressly
found: it was "impossible to determine the effects of these drugs
on people" (J.A. 132a).
FN11. As explained without objection prior to
XXXXXXX's sentencing, dyazide sales exceeded $140 million (XXXXXXX
Plea Hearing at 37, J.A. 70a; PSI, J.A. 268a) $34 million of which
occurred after June 1989, the date by which XXXXXXX admitted he had
personal knowledge that the bioequivalence tests had been rigged
(J.A. 120a). It was also unchallenged that the other drugs, the
coversheet drugs, sold for over $70 million. (J.A. 120a)
As the District Court was well aware, generic
drugs are not proven to be safe and effective by objective
observations of their therapeutic effect. Such clinical studies,
in order to have any scientific validity, would involve thousands,
if not tens of thousands of patients, take many years, and cost
many millions of dollars. Instead, generic drugs are proven to be
safe and effective by comparing them to innovator drug products
which have gone through such testing, and have also been the
subject of many years of clinical use. The comparison is made by
conducting a bioequivalence test using a relatively small number of
subjects. Two groups are utilized in such tests. One group is
given the generic drug product and the other is given the benchmark
drug product. The rate and extent of absorption of the therapeutic
agent, or agents, as well as the excretion of metabolites of those
agents, are identified and measured in the blood and urine of the
subjects taking the generic drug product and then compared to those
in the subjects who are taking the innovator, or benchmark drug
product. If they are substantially the same, it can be assumed
with a reasonable degree of certainty that the two drug products
will have a similar therapeutic effect when consumed.
With regard to dyazide, Subject had secured FDA approval by
rigging the bioequivalence test and then submitting that fraudulent
data to FDA. Rather than producing a drug product that would
operate in the human body in the same manner as the benchmark drug,
Subject just gave both groups in the bioequivalence study the
benchmark drug. (PSI at 6, J.A. 264a) Not surprisingly, both
groups had similar experience with their test drug.
All of the quality assurance tests that were subsequently
conducted on Subject's drug products were premised on the false
belief that Subject had developed, and was utilizing a formula that
had been proven to mimic the therapeutic characteristics of the
benchmark drug. Proof that each capsule of Subject's generic
dyazide was uniform, the purpose of the quality assurance testing,
was absolutely meaningless unless that formulation had been proven
to be bioequivalent to the benchmark drug. Equivalent to a drug
that had been proven safe and effective by long-term, clinical
testing and experience.
The problem with Subject's "coversheet" drugs was similar to
that of Subject's dyazide. The drug product formulas that were
utilized by Subject in commercial production had never been
compared to the relevant benchmark drug products in bioequivalence
studies. Therefore, XXXXXXX could have no scientific basis for
believing that these drugs would be safe and effective. He was
willing to let his customers pay their money and take their
chances, even though alternatives that had been proven to be safe
and effective were readily available.
These facts, upon which the sentencing judge drew his
conclusions, were unchallenged by the defendant prior to his
sentencing. As noted above, when asked by the District Judge
whether they had any objection to these facts, the defense replied
in the negative. (J.A. 71a) Accordingly, given these uncontested
facts it was clear that both as a matter of fact and as a matter of
law, these drugs had no legitimate commercial value,
Subject's customers purchased these drugs under a misapprehension
of material fact and, as a result, suffered economic loss.
D. CONSUMER LOSS FACTORS
Since Subject's customers did not bargain for products that
had never been properly or adequately tested and thus were drugs of
unknown effectiveness, the District Court was not clearly in error
when it found that Subject's customers sustained a recognizable
economic loss as the result of XXXXX XXXXXXX's fraud. As the
District Court correctly found at the XXXXXXX sentencing, Subject
customers did not get what they bargained for. (XXXXXXX Sentencing
Hearing at 19, J.A. 131a).
XXXXXXX was charged with, and pled guilty to, a very broad,
criminal conspiracy which included, at its core, the manufacture
and distribution of adulterated drugs. As described, without
objection at XXXXXXX's sentencing on January 22, 1993, he was the
"Driving force in shaping the corporate culture of Subject... [a
culture in which]... it's OK to cheat." (J.A. 124-5) XXXXXXX
instilled at Subject a culture that was based on fraud, where it
was only important to create the appearance of propriety.
Twenty-six different Overt Acts charged in the Information to
which MX. XXXXXXX pled guilty involved the manufacture or
distribution of adulterated "coversheet" drugs. These drugs,
[FN12] unlike the drugs in Chatterji, never were subjected
to the kind of testing that is necessary in order to insure the
effectiveness of their formulas. By putting these powerful drugs
on the market without long-term clinical studies, or even the
bioequivalence studies required of generic drugs, MX. XXXXXXX, as
the leader of the Subject conspiracy, surreptitiously took from
physicians and their patients (who relied on these potent,
prescription pharmaceuticals to prevent or ameliorate
life-threatening diseases), the protection that the American public
has taken as a given since the passage of the Pure Food and Drug
Act in 1906.
FN12. The coversheet drugs listed in the Information
to which Mr. XXXXXXX pled guilty are as follows:
Phenytoin Sodium - A barbiturate used to treat epilepsy.
Procainamide HCL - A cardiac antiarrhythmic used to treat
life threatening heart disease.
Minocycline HCL - A synthetic antibiotic used to treat
Nitrofurantoin - An antibiotic used to treat urinary tract
Sulfasalazine - An anti-inflammatory used to treat
Methyldopa HCL - An antihypertensive used to reduce high
Eryoloid Mesylates - Used to treat the symptoms of senility.
As the District Court noted at the XXXXXXX sentencing, the
violations at Subject were far more excessive than at any of the
other firms that it had seen -- by a wide margin (XXXXXXX Sent.
at 34, J.A. 146a) and, as even his counsel admitted - as the Chief
Executive Officer at Subject, XXXXXXX bore substantial
responsibility for the climate that existed at Subject that
permitted these crimes to occur. (J.A. 134a) As a result, the
sentencing court found that: "Most Americans have lost tremendous
confidence in generic drugs." (J.A. 148a) [FN13]
FN13. This loss of confidence in the important
institution of generic drugs would, standing alone, support an
upward departure. U.S.S.G. § 2F1.1 - Application Note 9(e).
Competition for profit took precedence over the
public health. XXXXXXX wanted to beat the others to the
marketplace, because those who got there first made the most money.
(J.A. 149a) The Court expressly found that "the public health was
not a concern." The concern was: "How do I get this product on the
market faster than my competition and how much money can I
make....[Subject] didn't care whether the public got what they paid
for or not...." (J.A. 150a - 151a) Further, the Court expressly
noted that the true risk to the public health may not surface for
many years because the defendant, added a lot of things without the
permission of the FDA and left out a lot of things that were
necessary for the drug to perform. (J.A. 150a) [FN14] Because no
testing of these drugs was done in a controlled environment, their
actual safety and effectiveness will never be known. The District
Court, which had developed a significant degree of expertise in
pharmaceutical manufacturing during the scores of similar cases
which had come before it, recognized that clinical experience with
a marketed drug is no substitute for monitored drug studies and
that, without such studies, it is scientifically impossible to
assess the safety and effectiveness of any drug product.
FN14. Risk to the public health is a basis for an
upward adjustment to the applicable guideline range, U.S.S.G. §
2F1.1(b)(4), and/or an upward departure, U.S.S.G. § 5K2.14.
The Court also noted at that time that XXXXXXX
could well have gotten a "much more substantial sentence" because
of the antitrust connection (J.A. 157a) [FN15]
FN15. XXXXXX was neither charged nor convicted of any
[cited in USAM 4-8.250]