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DECEPTIVE TRADE PRACTICES and TELEMARKETING FRAUD


 

Former Sales Manager Pleads Guilty for Role in Loan Modification Scam That Targeted Struggling Homeowners
United States v. Charles Wayne Farris

Docket Number: 8:13-CR-00208 (C.D. Cal.)

On July 11, Wayne Farris pled guilty to conspiracy to commit mail and wire fraud for his role in Rodis Law Group and America’s Law Group, bogus law firms that purported to offer struggling homeowners assistance obtaining loan modifications. Three defendants, including Farris, opened Rodis Law Group and advertised loan modification assistance nationwide. Farris and his co-defendants recruited and trained telemarketing staff to answer consumer calls, during which sales staff routinely lied to homeowners about the firm’s success rates, ability to obtain loan modifications, and, at times, directed homeowners to stop making mortgage payments. After obtaining payment, company employees made little effort to obtain modifications. Many homeowners lost their homes to foreclosure after hiring the firms. Ronald Rodis was paid for the use of his law license in an effort to lend legitimacy to the operation. After the FTC began investigating, Farris and codefendant Bryan D’Antonio recruited another attorney and changed the firm’s name to America’s Law Group in an effort to evade regulatory enforcement. During the course of the scheme, Rodis Law Group and America’s Law Group obtained approximately $9,000,000 from more than 1,500 victims. Farris will be sentenced April 17, 2017. D’Antonio is scheduled to stand trial beginning September 20, 2016.


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

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

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

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

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

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

 

 

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

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

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

 

Defendant Pleads Guilty in Connection with a Lottery Scam Based in Jamaica
United States v. Vania Lee Allen

Press Release
Docket Number: 1:16-CR-21 (S.D. Ga.)

On June 22, 2016, Vania Lee Allen pled guilty in connection with her participation in a fraudulent lottery emanating from Jamaica. Specifically, Allen pled guilty to one count of conspiracy to commit wire fraud and falsely impersonating an employee of the United States (an FBI Agent). Allen and a co-conspirator in Jamaica sought to unlawfully enrich themselves through a fraudulent lottery scheme targeting an elderly resident of Evans, Georgia. Allen’s co-conspirator falsely informed the victim by phone that the victim had won money in a lottery, and instructed the victim to make payments to various people in order to collect the purported lottery winnings. In order to gain the trust of the victim and induce him to continue to make payments, Allen traveled from Jamaica to the United States, falsely portrayed herself to the victim as an FBI Agent, provided the victim with a cellphone, and directed him to speak with the person on the line, who was her co-conspirator in Jamaica.
 

 

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

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

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

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

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

 

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


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

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

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

 

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

 

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

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

 

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

 

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

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

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

 

 

Defendant Charged with Fraud in Vending Machine Business Opportunity Case
United States v. Kevin M. Marks

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

On February 11, 2016, Kevin M. Marks was charged by information with conspiracy to commit wire fraud for fraudulently selling vending machine business opportunities . From July 2008 until May 2012, Marks made sales from an office in Brooklyn, New York, on behalf of a business opportunity seller that was based elsewhere. That company is not being named because it has not been charged. The charges against Marks allege that he induced sales by misrepresenting the business opportunity’s likely profits, the amount of money that prior buyers were earning, how quickly buyers were likely to recover their investment, the quality of locations that were available for the vending machines, the level of location assistance that buyers would receive from outside locating companies, and allege that – in his capacity as a sales representative – Marks falsely told potential buyers that he and his family operated a profitable candy vending machine route.

 

Three Plead Guilty in Prosecution of Fraudulent Debt Relief Scheme
United States v. Harati et al.; United States v. Nelson et al.

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

One June 1, 2015 Christopher Harati and Athena Maldonado pled guilty to conspiracy to commit wire fraud for their roles at companies known as Nelson Gamble & Associates and Jackson Hunter Morris & Knight LLP. Additionally, on February 1, 2016, Jeremy Nelson  plead guilty to his connection with Nelson Gamble & Associates. Nelson, Elias Ponce, and John Vartanian were charged in December 2014 with conspiracy, mail fraud, and wire fraud for their roles at the previously mentioned companies.

According to the indictment, Nelson and his employees 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.  Nelson and his co-conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. Trial against the remaining defendant, John Vartanian, is scheduled to commence in September 2016.

 

Peruvian Man Sentenced to Prison for Leading Conspiracy to Defraud and Extort Spanish-Speaking Consumers
United States v. Cesar Luis Kou Reyna  

Press Release
Docket Number: 1:15-CR-20668 (S.D.Fla.)

On December 18, 2015, the district court sentenced Cesar Luis Kou Reyna to 58 months in prison, and 3 years supervised release. Reyna was also ordered to pay $522,043.05 in restitution. In October 2015, Reyna pled guilty to Conspiracy to Commit Mail and Wire Fraud. Reyna owned and controlled Fonomundo, which operated call centers in Peru and payment and fulfilment operations in Miami. Fonomundo and its affiliates in South America used Internet-based telephone calling services to place cold calls to Spanish-speaking residents in the United States in which the callers posed as attorneys and sometimes government representatives.

The callers claimed that victims had failed to pay for or receive a delivery of products, and that the companies would obtain large monetary judgments against them. Some victims were also threatened with negative marks on their credit reports, imprisonment or deportation. The victims were told that these consequences could be avoided if they immediately paid “settlement fees,” and many of the victims made payments based on these threats.
 


Six Defendants Found Guilty After 6-Week Trial in $60 Million Vending Fraud Case
United States v. Edward Weaver, et al.

Press Release
Docket Number: 2:13-CR-120 (E.D.N.Y.)(JMA)

On November 5, a jury in Central Islip, New York, found the CEO of Multivend, LLC, d/b/a/ Vendstar, two other Vendstar managers, and three Vendstar sales representatives guilty of fraud. A total of 22 individuals have now been convicted in connection with Vendstar, a company based in Deer Park, New York, that until July 2010 sold vending machine business opportunities. Sixteen other Vendstar managers, sales representatives, and operators of “locating” companies that worked with Vendstar pled guilty before trial. Evidence introduced during trial showed that Vendstar defrauded approximately 7,000 consumers of $60 million from 2005-2010.

 

Defendant in Fraudulent Lottery Scheme Sentenced to Prison
United States v. Dominic H. Smith

Press Release
Docket Number: 3:14-CR-0107 (W.D.N.C.)

On October 22, 2015, the district court sentenced Dominic H. Smith to 27 seven months in prison and one year of supervised release.  Smith was also ordered to pay $724,408.79 in restitution.  In June 2014, Smith pleaded guilty to one count of conspiracy to commit wire fraud in connection with the conduct of telemarketing.  From December 2010 through at least April 2012, Smith was a member of a conspiracy in which elderly victims were falsely informed by telephone that they had won a large amount of money and prizes in a lottery and were induced to pay bogus fees in advance of receiving their purported lottery winnings. 

Victims sent hundreds of thousands of dollars to Smith in the United States.  This prosecution is one of several recent cases aimed at Jamaican-based fraudulent lottery schemes that prey on American citizens.  According to the U.S. Postal Inspection Service, American victims have lost tens of millions of dollars to such foreign lottery scams.

 

Costa Rica Based Fraudster Sentenced to 70 Months in Prison in Connection with Business Opportunity Fraud Ventures
United States v. John White

Press Release
Docket Number: 1:11-CR-20815 (S.D. Fla.)

On August 12, 2015, John White was sentenced to 70 months in prison and five years of supervised release following his conviction on charges of conspiracy to commit mail and wire fraud. He was also ordered to pay $6,412,006.19 in victim restitution. White was charged in a 2011 with conspiracy to commit mail and wire fraud, five counts of mail fraud, and 13 counts of wire fraud, based on the sale of fraudulent beverage and greeting card business opportunities. He was arrested in Costa Rica on February 9, 2012, and extradited to Miami where he ultimately agreed to plead guilty to one count of the pending indictment. White is one of 12 defendants charged in connection with a series of business opportunity fraud ventures that operated in Costa Rica. Nine of those other defendants have been convicted in the United States with sentences ranging from three to 16 years in prison.

 

11th Circuit Affirms Conviction of Defendant in International Lottery Scheme
United States v. Charmaine Anne King
 

Docket Number:14-12027 (11th Circuit)

On August 4, 2015, the U.S. Court of Appeals for the 11th Circuit upheld the conviction of Charmaine Anne King. Following a trial, King was convicted of conspiracy to commit mail and wire fraud, three counts of mail fraud and two counts of wire fraud.  King was sentenced to 57 months in prison. On appeal, King asserted that the district court committed numerous errors in connection with evidentiary rulings and that the district court incorrectly applied several enhancements under the sentencing guidelines. 

One of the more significant challenges in the appeal was to the district court’s decision to admit evidence related to a United States Postal Service administrative complaint provided to King which described the fraudulent scheme and cease and desist order. The Court of Appeals held, inter alia, that the district court properly admitted this evidence under Federal Rule of Evidence 408(b) because it was offered to show that King continued to participate in the scheme even after she was informed that it was fraudulent.

 

Owner of California Payment Processing Company Pleads Guilty to Fraud
United States v. Neil Godfrey

Press Release
Docket Number: 2:15-CR-285 (E.D. Pa.)

On July 16, 2015, the operator of a payment processing company that was involved in the unauthorized withdrawal of millions of dollars from consumers’ bank accounts pled guilty to wire fraud. Neil Godfrey operated Check Site, Inc., which from 2006-2010 enabled fraudulent merchants to withdraw money from consumers’ bank accounts without the consumers’ knowledge or consent. Godfrey worked with at least two merchants who operated websites that purportedly offered payday loans. Instead of providing consumers with payday loans, the merchants operating the websites used the information provided by the consumers in loan applications to withdraw money from the consumers’ bank accounts. Using Check Site, Godfrey knowingly processed the merchants’ fraudulent withdrawals and provided the merchants access to the banking system. The banks through which Godfrey facilitated the fraud included one located in Irvine, California, and one located in Philadelphia. Godfrey is scheduled to be sentenced at 9 a.m. on October 30, 2015, by U.S. District Court Judge Eduardo C. Robreno at the James A. Byrne U.S. Courthouse, 601 Market Street, Courtroom 15A, Philadelphia, Pennsylvania 19106.


Defendant Sentenced 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 July 1, 2015, Carlos O’Brian Ricketts was sentenced to 10 months in prison and 3 years’ supervised release for his role as a middleman in Virginia for a lottery scheme based in Jamaica. Ricketts was also ordered to pay restitution to the victims totaling $74,450. Ricketts conspired with other individuals to defraud elderly victims in the United States by leading them to believe they had won a lottery. Ricketts’ co-conspirator contacted victims claiming to represent the Publisher’s Clearing House Sweepstakes, and falsely telling them 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 and wire this money to Ricketts in Virginia. Ricketts received the money, kept a portion for himself and sent the remainder to individuals in Jamaica.
 

Two to Plead Guilty in Connection With Fraudulent Debt Scheme
United States v. John White et al.

  Press Release
Docket Number: 1:11-CR-20815 (S.D. Fla.)


On April 29, 2015, John White pleaded guilty to conspiracy to commit mail and wire fraud in connection with a business opportunity scam that operated out of Costa Rica.  White was arrested in Costa Rica on Feb. 9, 2012, and subsequently extradited to the United States.  He was charged in a 2011 indictment in the Southern District of Florida. 

The indictment charged that White and his co-conspirators fraudulently sold beverage and greeting card business opportunities to victims in the United States.  In addition to White, 11 other defendants have been charged in connection with related business opportunity fraud ventures that operated in Costa Rica.  Nine of those other defendants have been convicted in the U.S. with sentences ranging from three to 16 years in prison.  Two remaining defendants are not yet in the custody of the United States. 

White admitted that the conspiracy used various means to make it appear to potential purchasers that the businesses were located entirely in the U.S.  The companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.  In reality, White and his co-conspirators operated out of call centers in Costa Rica.

  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 customers. 

In three separately filed cases in the Eastern District of New York: 

  • Vendstar’s president, another manager, and four sales representatives are scheduled to stand trial beginning September 28, 2015.

  • Three defendants have been sentenced to prison:  Vendstar salesman Howard S. Strauss (28 months), Vendstar salesman Mark Benowitz (24 months), and locating company operator Wallace W. DiRenzo (12 months).

  • Thirteen other defendants have pled guilty and are awaiting sentencing.

Learn more.
 

 


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.
 

 


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.
 

 


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.
 

   
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.
 

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

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

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

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

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

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

 

Two Compounding Pharmacists Sentenced In Connection with Distribution of Adulterated Drugs
United States v. David Allen and William Timothy Rogers
 

Press Release
Docket Number: 2:16-CR-0042 (N.D. Ala.)

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

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

 

Internet Pharmacy Defendants Enter Guilty Pleas
United States v. Onochie Aghaegbuna; United States v. Jonathan Wall

 

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

On March 1, 2016, Onochie Aghaegbuna entered guilty pleas to violating the Food, Drug, and Cosmetic Act (FDCA) by conspiring to introduce into interstate commerce misbranded drugs, introducing into interstate commerce misbranded drugs, and international money laundering. On December 7, 2015, Jonathan Wall entered a guilty plea to violating the FDCA by conspiring to introduce into interstate commerce misbranded drugs. The drugs were misbranded because they were authorized and dispensed without valid prescriptions in connection with a long-running globally-run Internet pharmacy scheme operating under many names, including RX Limited. The drugs most commonly sold were carisoprodol (Soma), tramadol (Ultram), and Fioricet, and are prone to abuse. Aghaegbuna, who at one time held a Virginia medical license, began illegally approving online drug orders for RX Limited in 2005, despite residing in Canada and later Trinidad and Tobago. Aghaegbuna also continued to authorize online drug orders after he surrendered his Virginia medical license in March 2008.

In pleading guilty, Aghaegbuna acknowledged that he illegally authorized at least 322,157 prescription orders, and was paid at least $644,324, which he agreed to forfeit to the United States. In 2007, Wall managed a Philippines call center for RX Limited, which contacted previous customers in order to encourage them to reorder drugs. Wall, after moving from the Philippines to Kentucky, continued to work for RX Limited in various capacities, including hiring individuals to recruit U.S. licensed pharmacies to dispense their illegal drug orders. In pleading guilty, Wall acknowledged that during the four years he worked for RX Limited, the organization shipped over 2.9 million illegal prescription orders valued at more than $297 million.
 

California Man Sentenced for Prescription Drug Diversion

United States v. Joseph Dallal

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

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

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

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

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

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

 

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

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

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

 

Large-Scale Miami Supplier Pleads Guilty in Prosecution of Nationwide Prescription Drug Diversion Scheme
United States v. Ricardo Jurado

Press Release
Docket Number: 1:15-CR-097 (S.D. Ohio.)

On October 30, 2015, Ricardo Jurado pled guilty in the Southern District of Ohio to a one-count criminal information charging him with conspiracy to commit mail and wire fraud.   Jurado, who never had a drug wholesale license, purchased diverted prescription drugs from multiple illegal sources in South Florida and sold them to David Miller, a drug wholesaler operating from Los Angeles and Minnesota.  To hide Jurado’s involvement in the drug sales, Miller and Jurado used Fernando Galan, who owned a restaurant in Los Angeles, as a middleman.  Galan passed information, including drug lists and wiring instructions, from Jurado to Miller.  During the course of the conspiracy, from 2007 through 2014, Miller paid more than $40 million for the drugs supplied by Jurado.  At Jurado’s direction, Miller wired money to more than two dozen bank accounts in Florida, Mexico, Nicaragua, Canada, and other locations.  Both Galan and Miller have also been charged as part of this drug diversion investigation.

 

Consent Decree Entered against Animal Drug Manufacturer
United States v. Bio Health Solutions, LLC and Mark Garrison

Press Release
Docket Number: 3:15-CR-0354 (D.Nev.)

On July 10, 2015, the district court entered a consent decree of permanent injunction against a Nevada animal drug manufacturer to prevent the distribution of unapproved and adulterated animal drugs. The decree enjoins Bio Health Solutions, LLC, and its founder, Mark Garrison, from introducing RenAvast, an unapproved animal drug, and any other unapproved new animal drug, into interstate commerce. As alleged in a complaint filed the day before, Bio Health Solutions sold and promoted RenAvast for the treatment and prevention of kidney disease and chronic renal failure in cats and dogs, uses for which it had not received FDA approval. By distributing this unapproved product to treat disease, Bio Health Solutions caused RenAvast to be adulterated under the Food, Drug, and Cosmetic Act.

 

Medical Device Manufacturer CEO Gets Two-Year Sentence for Distributing FDA-Rejected Surgical Device

United States v. Chi

Press Release
Docket Number: 2:14-CR-687 (D.N.J)

On June 26, 2015, Charlie Chi, the former president, chairman, and chief executive officer of OtisMed Corporation (now a subsidiary of Stryker Corporation) was sentenced after pleading guilty last December to three misdemeanor counts of introducing adulterated medical devices in interstate commerce. OtisMed marketed the OtisKnee cutting guide as a tool to assist surgeons in making accurate bone cuts during knee replacement surgery. After FDA notified OtisMed and Chi that the distribution of the OtisKnee device was prohibited due to safety and effectiveness concerns, Chi ordered the shipment of approximately 218 devices to surgeons nationwide. The district court rejected the defendant’s request for probation and instead sentenced Chi to eight months imprisonment on each count, to be served consecutively (24 months total), to be followed by one year of supervised release. The court also fined Chi $75,000.
 

Supplier Pleads Guilty in Nationwide Prescription Drug Diversion Scheme
United States v. Nguyen

Press Release
Docket Number: 1:15-CR-60 (S.D. Ohio)

On June 22, 2015, Vin Nguyen pled guilty to one count of conspiracy to commit mail and wire fraud for his role in a massive prescription drug diversion scheme. Nguyen supplied illegally diverted prescription drugs to David Miller and his company, Minnesota Independent Cooperative (MIC). Nguyen obtained prescription drugs from illegal suppliers in Southern California and Florida and sold the drugs to Miller. Miller and MIC then sold the drugs obtained from Nguyen – along with five other illicit suppliers – to pharmacies and wholesalers throughout the United States. To hide the true sources of the drugs, Miller and MIC created fraudulent pedigrees that falsely identified a Puerto Rico company as the source of the drugs. On May 6, Miller and MIC, along with two other individuals, were indicted in the Southern District of Ohio. The indictment charges the defendants with conspiracy to commit mail and wire fraud, multiple counts of mail fraud, and conspiracy to distribute prescription drugs without a license and to make false statements.
 


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


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

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

 

  Court Enters Consent Decree Against Medical Device Manufacturer Medtronic and Two Top Executives for FDCA Violations
United States v. Medtronic Inc., Thomas Tefft, and S. Omar Ishrak
 
 

Press Release
Docket Number: 15-CV-2168 (D. Minn.)

On April 29, 2015, the district court entered a consent decree against Medtronic and two of its top executives, including the company’s CEO, Omar Ishrak. The decree resolves allegations that the world’s largest standalone medical device manufacturer repeatedly failed to correct violations of the Food, Drug, and Cosmetic Act (“FDCA”) with regard to its SynchroMed II infusion pump system, an implantable infusion system that delivers medication directly into the spines of patients with chronic pain or spasticity from conditions such as cancer. FDA regulators conducted a series of inspections at Medtronic’s manufacturing facilities between 2006 and 2013 that revealed significant violations of FDA regulations relating to design controls, complaint handling, and corrective and preventative action.

Medtronic repeatedly failed to correct these violations despite multiple warnings from FDA. The problems that FDA observed could result in over- or under-infusion of medication that could result in death. Under the terms of the consent decree, Medtronic must stop manufacturing and distributing the SynchroMed II except in extraordinary cases and upon a physician certification that a SynchroMed II is medically necessary. Medtronic may not resume distribution until it receives permission from FDA.
 

  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.
 

 


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

 

 

 

 

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FOOD and DIETARY SUPPLEMENTS
 

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

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

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

 

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

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

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

 


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

 

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

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

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

  Summary Judgment Granted Against Seller of Adulterated Ready-to-Eat Sandwiches
United States v. Scotty’s, Inc., et al.
 


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

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

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

 

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

 

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

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

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

 

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

 

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

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

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

 

 

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

 

Press Release
Docket Number: 1:16-MJ-00013  (D. Del.) (criminal case)
Docket Number: 1:16-CV-00032  (D. Del.) (civil case)
 

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

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

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

 

 

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

 

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

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

The Court set Romeo's sentencing for June 21.

 

 

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

 

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

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

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

 

 

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

 

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

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

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

 

 

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

 

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

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

 

  Justice Department and Federal Partners Announce Enforcement Actions of Dietary Supplements Cases
Criminal Charges Brought Against Bestselling Supplement Manufacturer

United States v. USP Labs  
 
 

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

As part of a nationwide sweep, on November 17, 2015, the Department of Justice and its federal partners announced that they have pursued civil and criminal cases against more than 100 makers and marketers of dietary supplements.  The actions resulted from a year-long effort, beginning in November 2014, to focus enforcement resources in an area of the dietary supplement market that is causing increasing concern among health officials nationwide.  In each case, the department or one of its federal partners allege the sale of supplements that contain ingredients other than those listed on the product label or the sale of products that make health or disease treatment claims that are unsupported by adequate scientific evidence.
 
Among the cases announced as part of the sweep was a criminal case charging USPlabs LLC, a Dallas firm, and several of its corporate officers.  USPlabs was known for its widely popular workout and weight loss supplements, which it sold under names such as Jack3d and OxyElite Pro.  The indictment charges USPlabs, S.K. Laboratories Inc., based in Anaheim, California, and their operators with a variety of charges related to the sale of those products.  The indictment alleges that USPlabs engaged in a conspiracy to import ingredients from China using false certificates of analysis and false labeling and then lied about the source and nature of those ingredients after it put them in its products.  According to the indictment, USPlabs told some of its retailers and wholesalers that it used natural plant extracts in products called Jack3d and OxyElite Pro, when in fact it was using a synthetic stimulant manufactured in a Chinese chemical factory.
 

 

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

 

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

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

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

 

 

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

 

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

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

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

 

 

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

 

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

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

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

 

 

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

 

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

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

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

 

 

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

 

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

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

 

  Criminal Information Filed Against ConAgra Subsidiary
United States v. ConAgra Grocery Products, LLC
 
 

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

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

  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.
 

 
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.
 

 


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

 

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

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

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

   

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

 

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

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

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

   

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

 

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

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

A copy of the Court Order is available.

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CONSUMER PRODUCT SAFETY
 

Injunction Entered  Against Toy Importer
United States v. Brightstar Group, Inc., et al.

 

Press Release
Docket Number: 2:15-CV-7822 (C.D. Cal.)

On November 9, 2015, the district court entered a consent decree of permanent injunction against Brightstar Group, Inc. and its president, Sherry Chen. Brightstar was a California corporation that imported toys and other children’s products from China and distributed them wholesale and through their store as a retailer to other retailers and individuals. Brightstar’s president, Sherry Chen, was also sued for violations that occurred while she was the manager of Taifung Corp. (“Taifung”), a now dissolved California corporation that also sold children’s products and toys imported from China.  Under Chen’s leadership, Brightstar and Taifung imported numerous children’s products in violation of the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”) and their implementing regulations. 

These violative products included toys and products containing illegal levels of total lead content, toy strollers that failed to meet folding mechanism requirements, and marbles that lacked the required cautionary statements.  The consent decree of permanent injunction requires the defendants to cease all importation and sale of toys and children’s products, unless and until the CPSC determines that the firm’s practices have come into compliance with the CPSA, the FHSA and with various remedial measures set out in the decree.

 

 

District Court Orders Recall of Dangerous Magnets
United States v. Unik Toyz Trading Inc., et al.

 

Press Release
Docket Number: 2:15-CV-7821 (C.D. Cal.)

On October 13, 2015, the district court entered a consent decree of permanent injunction against Unik Toyz Trading, Inc., Julie Tran, and Kiet Tran. The injunction enjoins the defendants from selling, offering for sale, distributing, or importing any toy or other consumer product intended for children 12 years of age or younger until they are found to be in full compliance with the law. Unik is a Los Angeles, California corporation that imported toys from China and distributed them wholesale to small retailers throughout the United States.  Since September 2011, the Consumer Product Safety Commission (“CPSC”) identified 39 different children’s products imported by Unik that violated the Consumer Product Safety Act (“CPSA”), the Federal Hazardous Substances Act (“FHSA”) and their implementing regulations. 

These violative products included toys containing illegal levels of lead and phthalates, and toys intended for children under the age of three that contained small parts and accessible batteries, posing a choking hazard.

 

 

Complaint Filed for Failure to Report Hazardous Coffeemaker Defect
United States v. Spectrum Brands

 

Press Release
Docket Number: 3:15-CV-0371 (W.D.W.)

On June 17, 2015, the United States filed a civil complaint against Spectrum Brands alleging the company and its former subsidiary, Applica Consumer Products, failed to timely report to the CPSC a hazardous defect involving Black & Decker brand SpaceMaker coffee pots.  The complaint alleges that the companies, which distributed the coffeemakers to retailers around the country beginning in 2008, knowingly violated Consumer Product Safety Act reporting requirements by failing to disclose to the government information regarding defective carafe handles that could fall off and dump hot coffee on consumers. 

The coffeemakers generated more than 1,600 consumer complaints over more than three years before Applica finally notified the CPSC of the carafe-handle defect and recalled the product in 2012.  More than 60 consumers contacted the company to report burns related to the handle suddenly detaching.  In addition to failing to notify the CPSC of the risk “immediately” as required by law, the government also alleges that Applica knowingly sold hundreds of coffeemakers after the recall was announced, also in violation of the Consumer Product Safety Act.

 

 

Civil Penalty and Injunction Action Filed for Delay in Reporting Lawnmower Hazard
United States v. Black & Decker

 

Press Release
Docket Number: 1:15-CV-01239 (D. Md.)

On April 29, 2015, the United States filed a complaint alleging that Black & Decker (United States) Inc. knowingly violated the reporting requirements of the Consumer Product Safety Act with respect to cordless electric lawnmowers that started spontaneously and that continued to operate after consumers released the lawnmower handles and removed the safety keys.  The United States alleged that between 1998 and 2009, Black & Decker received more than 100 complaints about these defects.  The United States further alleged that, after consulting an outside expert, the company knew in 2004 that the lawnmowers could continue to run even if a user released the handle and removed the safety key. 
Despite knowledge of all of this information, Black & Decker failed to report to the Consumer Product Safety Commission until early 2009, even though federal law requires “immediate reporting.” 

To resolve the allegations, Black & Decker has agreed to pay a civil penalty of $1,575,000 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 proposed consent decree is awaiting judicial approval.
View Complaint and Proposed Consent Decree
 

  United States Files Suit against Michaels Stores Inc. for Failing to Report Serious Safety Hazard to Consumer Product Safety Commission
United States v. Michaels Stores, Inc.
 
 

Press Release
Docket Number: 3:15-CV-1203 (N.D. Tx.)

On April 21, 2015, the United States filed suit against Michaels Stores Inc. and its subsidiary, Michaels Stores Procurement Co. Inc., alleging that Michaels knowingly violated the reporting requirements of the Consumer Product Safety Act with respect to glass vases that shattered in consumers’ hands, sometimes as the consumer lifted the vase from the Michaels Stores shelf.  Michaels imported and sold the vases, which caused serious injuries to consumers, including lacerations requiring stitches, permanent nerve damage and surgery to repair severed tendons. 

The complaint seeks civil penalties and permanent injunctive relief.  In addition to failing to notify the Consumer Product Safety Commission (“CPSC”) “immediately” as required by law, the government also alleges that Michaels knowingly misrepresented to the CPSC that Michaels did not import the vases.  Michaels sold the vases in its stores from 2006 to 2010.  Michaels’ report conveyed the false impression that Michaels did not import the vases, even though Michaels should have known it was the importer.

According to the Justice Department’s complaint, the vases pose a safety hazard because their walls are too thin to withstand the pressure of normal handling and, as a result, they shatter in consumers’ hands.  The complaint alleges that beginning as early as November 2007 and continuing for more than two years, Michaels received numerous consumer complaints that the vases were unsafe because they shattered during normal use and caused serious injuries.  The vases were recalled in September 2010. 
 

 

District Court Orders Recall of Dangerous Magnets
United States v. Zen Magnets, LLC, and Shihan Qu

 

Press Release
Docket Number: 1:15-CV-955 (D. Colo.)

On March 22, the district court ordered Zen Magnets, LLC to recall powerful small magnets that can cause fatal injuries when swallowed.  The court made permanent its previous preliminary injunction that prohibited Zen Magnets LLC and its owner, Shihan Qu, from further sale of the magnets.  In the latest order, the court also ordered Zen Magnets to conduct a recall in which the company must provide refunds to consumers who return the magnets, and directed Zen Magnets to destroy the remaining magnets in the company’s inventory.  Zen Magnets purchased approximately 917,000 small magnets at a substantial discount from another company in July 2014, knowing that the seller was about to enter into an agreement with the U.S. Consumer Product Safety Commission to recall the magnets. 

The court ruled that Zen Magnets’ subsequent sale of those magnets violated the Consumer Product Safety Act.  The company had argued that by placing the magnets in different packaging and selling the magnets under different names, the magnets were no longer covered by the recall.  The court rejected that argument, saying that Zen Magnets’ interpretation “would allow manufacturers and importers of consumer products to simply circumvent (and effectively disarm)” the Consumer Product Safety Act “by merely repackaging recalled products as they saw fit.” 

 

 

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.)

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

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ODOMETER FRAUD
 
Defendant Pleads Guilty in Odometer Tampering Scheme
United States v. Kyle Novitsky and Judith Aloe

Press Release
Docket Number: 5:12-CR-0657 (E.D. Pa.)

On June 23, 2016, Judith Ann Aloe pled guilty to all 23 counts of an Indictment related to an odometer tampering scheme that continued from at least as early as 2004 through 2010.  Aloe pled guilty to conspiracy to commit odometer tampering, as well as 11 counts each of securities fraud and making false odometer statements.  Aloe failed to appear for her May 2014 trial, and in February 2016 she was arrested at the Mexico/California border, having been a fugitive for 21 months. 

During the conspiracy, close to 250 high-mileage vehicles were purchased by Aloe and her co-defendant, Kyle Novitsky, and later sold by them with low mileage rolled-back odometers.  Novitsky pled guilty in April 2014 and was sentenced in October 2014 to 60 months’ imprisonment. Aloe is scheduled to be sentenced on September 29 before Chief United States District Judge for the Eastern District of Pennsylvania Petrese B. Tucker.
 

Government Charges Two in Vehicle Title Washing Scheme
United States v. Rojen Burnett and Amber McLaughlin

Press Release
Docket Number: 1:16-CR-00141 (N.D. Ga.)

On April 27, 2016, a federal grand jury returned an indictment against Rojen Burnett, the owner/operator of Lifestyle Auto Brokers, Inc., an Atlanta, Georgia business that bought and sold used motor vehicles, and Amber McLaughlin, a former customer service specialist in the Motor Vehicle Department (MVD) of the Georgia Department of Revenue. Beginning as early as February 2012 and through at least May 2013, the defendants devised a scheme to defraud buyers of used motor vehicles by rolling back the vehicles’ odometers, causing title paperwork to be altered and then selling the motor vehicles with false low-mileage titles that matched rolled back odometers.

Burnett purchased high-mileage, used motor vehicles from auctions in Maryland and Virginia. He then caused the odometers in these vehicles to be altered to show false, lower mileages. Burnett caused the existing titles associated with these vehicles to be altered to match the false odometer readings. McLaughlin then provided Burnett with newly issued, clean Georgia titles reflecting the false, lower mileages. Burnett subsequently sold the motor vehicles with false, lower mileages and the fraudulent titles to unsuspecting used car dealers through an auto auction based in Georgia. Burnett and McLaughlin were both arrested following indictment and are out on bond awaiting trial.
 

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
Docket Number: 2:14-CR-00533 (C.D. Cal.); 2:14-CR-00532 (C.D. Cal.)

On April 13, 2015, Shamai Salpeter was sentenced to serve two years in prison on charges related to an odometer tampering scheme.  Salpeter was also ordered to pay $421,666 in restitution to victims who purchased vehicles without knowing the odometers displayed incorrect mileages. 

In November 2014, Salpeter pled guilty to one count of conspiracy to tamper with odometers and one count of tampering with an odometer.  Salpeter altered odometers in the driveway of his residence in Woodland Hills, California.  For a fee of $100 to $300, he reset hundreds of odometers to any mileage requested by his customers.  Many of Salpeter’s customers were referred to him by Jeffrey Levy, a salesman at a Galpin Ford, one of the busiest car dealerships in the country. 

On March 16, 2015, Levy was sentenced to a year in prison for his role in the conspiracy.  Future purchasers of the vehicles were defrauded because they purchased vehicles with false odometer readings.
 

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

Press Release
Docket Number: 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.

 

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.

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CIVIL DEFENSIVE LITIGATION
 

D.C. Circuit Upholds FDA’s Approval of Generic Cancer Drug
Spectrum Pharmaceuticals, Inc. v. Burwell, et al.


Docket Number 1:15-CV-631 (D.D.C.); 15-5166 (D.C. Cir.) 


On June 3, 2016, the D.C. Circuit affirmed the district court’s summary judgment ruling upholding FDA’s approval of a generic version of the ​cancer drug levoleucovorin (brand name Fusilev) in specified vial sizes with a labeling “carve out” that omits certain information about an indication for Fusilev that remains protected by orphan drug exclusivity.  The plaintiff/appellant Spectrum Pharmaceuticals, Inc. (“Spectrum”), the manufacturer of Fusilev, argued that FDA’s approval of a generic version of Fusilev violated Spectrum’s exclusive marketing rights because the generic manufacturer, Sandoz Inc. (“Sandoz”), intended doctors and patients to use the generic for the protected, carved out indication, even though that indication did not appear on the generic’s label.  In rejecting this contention, the court of appeals endorsed the district court’s holding that orphan drug exclusivity protects only a labeled use, credited FDA’s finding that Sandoz’s generic version of Fusilev is safe and effective for its labeled use, and reiterated that FDA is not responsible for preventing a physician from prescribing a drug for off-label use.

 

Court Rejects Drug Manufacturer’s Bid to Reverse Therapeutic Equivalence Downgrade of Extended Release ADHD Product
Mallinckrodt Inc. v. U.S. Food and Drug Administration, et al.


Docket Number 8:14-CV-3607 (D. Md.)


On July 29, 2015, the district court (Deborah K. Chasanow) denied a bid by Mallinckrodt Inc. to overturn an FDA action downgrading the therapeutic equivalence (“TE”) rating that the agency published for Mallinckrodt’s generic Methylphenidate Extended Release products. These products are commonly used to treat ADHD in children over the age of 6. Although initially assigned an AB rating upon approval, thus making it automatically substitutable for brand-name Concerta, FDA became aware of reports of therapeutic inequivalence in Mallinckrodt’s generic Methylphenidate products since September 2013. Following a multidisciplinary review that included evaluation of adverse event reports, a review of data submitted by Mallinckrodt, laboratory testing and consultations with physicians, pharmacists, chemists and other agency scientists, the agency concluded that there was insufficient evidence to support Mallinckrodt’s continued status as automatically substitutable for the name brand drug. FDA notified Mallinckrodt of the TE code change and posted new draft guidance for notice and comment in an effort to help prevent therapeutic equivalency issues with similar products in the future. Mallinckrodt filed suit on November 17, 2014 and sought a TRO to restore its prior TE rating. Following a hearing, the court denied the TRO from the bench, and, on July 25, 2015, issued a 73-page opinion dismissing three of Mallinckrodt’s claims and entering judgment for the government on two additional claims. The court found that FDA’s TE reclassification was not final agency action and further found that the agency’s draft guidance was an interpretive, not a legislative rule, and that Mallinckrodt failed to show that FDA had deprived Mallinckrodt of a property interest when it reclassified the product’s TE code.
 

District Court Upholds FDA Exclusivity Determination for Anti-Rejection Drug; Dismisses Drug Manufacturer's Suit 
Veloxis Pharmaceuticals, Inc. v. FDA, et al.


Docket Number 1:14-CV-2126 (D.D.C.)


On June 12, 2015, the district court (Judge Reggie B. Walton) dismissed a lawsuit brought by Veloxis Pharmaceuticals, Inc., challenging an FDA decision to delay approval of Veloxis’ drug, Envarsus, pending the conclusion of a three-year exclusivity period belonging to a competing drug manufactured by Astellas Pharma US, Inc.  The drug at issue, Envarsus, is an anti-rejection medication intended for kidney transplant recipients.  In late 2014, FDA determined that Envarsus’ approval was blocked by the unexpired exclusivity of Astellas’ previously approved anti-rejection medication, Astagraf, because Envarsus and Astagraf shared at least one “condition of approval.”  After further attempts by Veloxis to overcome this determination, Veloxis filed suit on December 17, 2015, seeking preliminary and permanent injunction.  FDA issued its final decision on January 12, 2015, and thereafter the parties engaged in expedited briefing.  Veloxis argued, among other things, that Envarsus should not be subject to Astagraf’s exclusivity because the Envarsus application had not relied upon any studies conducted in support of Astagraf’s application (rather, the Envarsus application had relied upon studies conducted in support of Prograf, another anti-rejection medication).  The government argued, and the court ultimately agreed, that because Envarsus and Astagraf shared conditions that were necessary to FDA’s approval, Envarsus was subject to Astagraf’s exclusivity regardless of whether the Astagraf studies were relied upon.

 

District Court Rejects Bid to Overturn Approval of Generic Abilify
Otsuka Pharmaceutical Co., Ltd., et al. v. Burwell, et al.


Docket Number 8:15-CV-852 (D. Md.)


On May 27, 2015, the district court (Judge George Hazel) granted summary judgment to the government in a case brought by Otsuka Pharmaceuticals challenging FDA approval of multiple generic versions of Otsuka’s blockbuster antipsychotic drug, Abilify.  Otsuka claimed that FDA was precluded from omitting certain protected pediatric labeling from the generic labeling, and sought a TRO to preclude FDA from approving generic versions of the drug.  Otsuka argued that because the statute assertedly does not permit such information to be “carved out” of the generic labeling, no generic product can be approved – even for an unprotected indication – until after the expiration of Otsuka’s seven-year exclusivity period.  The court heard argument on April 28, and denied the TRO the following day.  On May 27, following additional briefing and argument, the court issued a written opinion upholding FDA’s decision on the merits.  In so ruling, the court held that “the [Food, Drug, and Cosmetic Act], its legislative history, the case law, and FDA’s regulations all support the FDA’s construction of the statute that allows it to carve out an indication or other information from ANDA labeling when that indication or information is protected by orphan drug exclusivity as long as the ANDA with that carved out label remains safe and effective for the remaining non-protected conditions of use.”
 

District Court Upholds FDA Rescission of Tentative Drug Approvals 
Ranbaxy Laboratories Ltd., et al. v. Burwell, et al.


Docket Number 1:14-CV-1923 (D.D.C.)


On February 27, 2015, the district court (Judge Beryl Howell) granted summary judgment to the government and denied a motion for preliminary injunction filed by Ranbaxy Laboratories in a bid to reinstate the tentative FDA approval of two Ranbaxy products.  Ranbaxy filed suit against FDA on November 14, 2014, seeking to overturn an FDA decision to rescind Ranbaxy’s tentative approval for generic versions of the brand drugs Valcyte® and Nexium® based on the company’s failure to adhere to good manufacturing practice requirements and, more specifically, the company’s non-compliant GMP status at the time the tentative approvals were mistakenly issued in 2008.  Once FDA became aware of its mistake (some six years later), it acted to rescind Ranbaxy’s tentative approval for generic versions of those products.  At the same time, the agency determined that Ranbaxy had forfeited its right to 180-day marketing exclusivity for Valcyte® due to its failure to timely obtain tentative approval and approved two competing generic versions of the drug.  Ranbaxy brought suit and sought a TRO to reverse FDA’s actions, arguing that FDA lacked the authority to rescind tentative approval, that it did so in an untimely manner, and that the agency’s decision reflected an impermissible change in policy.  After denying Ranbaxy’s TRO request in November for failure to establish ripeness and irreparable harm, the court addressed the merits on summary judgment, upholding both FDA’s statutory authority to rescind an erroneously issued tentative approval and its decision to do so based on Ranbaxy’s lack of CGMP compliance in this case.
 

Court Rebuffs Challenge to FDA Drug Approval
Takeda Pharmaceuticals v. Burwell; Elliott Associates, et al. v. Burwell


Docket Number 1:14-CV-1850 (D.D.C.)


On January 9, 2015, the district court entered summary judgment in favor of the Government and denied summary judgment motions filed by the plaintiffs in two actions challenging FDA’s approval of a new version of colchicine, a drug intended for the treatment of gout.  Following FDA’s approval in September of Mitigare, a colchicine product manufactured by Hikma Pharmaceuticals, Takeda Pharmaceuticals, the maker of Colcrys, a previously approved version of the drug, filed suit in order to prevent Hikma from distributing its new product.  Takeda took issue with the omission of certain dosing information in Mitigare’s labelling, and argued, among other things, that FDA should have required Hikma to certify to various use patents that related to the dosing information in Takeda’s Colcrys product.  A second lawsuit, filed by Elliott Associates, sought to vindicate the interests of several entities entitled to patent royalties from Takeda’s product and raised similar claims.  The court consolidated the two cases and ultimately rejected all of their claims on summary judgment.  The court’s 77-page opinion, issued on January 12, thoroughly addressed the multiple arguments put forth by the plaintiffs, concluding that FDA had properly construed the statute and regulations, and that its decision approving Hikma’s Mitigare product was not arbitrary, capricious, or otherwise unlawful.  The court subsequently denied the plaintiffs’ requests for an injunction pending appeal and the plaintiffs have indicated that they intend to seek immediate review in the D.C. Circuit.
 

District Court  Grants Summary Judgment In Favor of Federal Agencies In Response to Demand that Agencies Require Certain Labeling on Eggs
Compassion Over Killing v. FDA, et al.


Docket Number 3:13-CV-1385 (N.D. Cal.)


On December 23, 2014, the U.S. District Court for the Northern District of California granted summary judgment of behalf of the government, holding that USDA does not have the authority to issue the requested egg labeling regulations and that FDA and FTC appropriately exercised discretion in declining to issue the requested egg labeling regulations.  This case arose following citizen petitions filed by several animal rights organizations asking USDA, FDA, and FTC to promulgate rules requiring all eggs sold in the United States to be labeled with information regarding whether or not the chickens were caged.  All three agencies denied the petitions and plaintiffs filed this action under the Administrative Procedures Act.     
 

District Court Rejects Bid to Block FTC Investigation
MPHJ Technology Investments, LLC v. FTC


Docket Number 6:14-CV-11 (W.D. Tex.)


On September 16, 2014, the district court dismissed an action brought against the FTC by MPHJ Technology Investments, a Waco, Texas company that had threatened numerous small businesses with litigation if they refused to purchase licenses for certain patents owned by MPHJ.  The suit sought to halt an FTC investigation of MPHJ’s activities, which included falsely threatening imminent patent infringement litigation when it did not intend to take and did not take such action and falsely representing to potential licensees that substantial numbers of businesses had responded by purchasing licenses when, at the time of the representations, MPHJ had not sold any licenses.  Because the FTC has yet to take final agency action against MPHJ and its actions to date have not affected the company in any legally consequential way, the court ruled that MPHJ lacked standing to bring its claims, that its claims were not ripe, and that it had failed to exhaust its administrative remedies.  Accordingly, the court dismissed MPHJ’s complaint for lack of subject matter jurisdiction.
 

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 to 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.

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TOBACCO PRODUCTS
 

District Court Dismisses Constitutional Challenge to PACT Act as Moot
Gordon v. Holder


Docket Number 1:10-CV-1092 (D.D.C.)


On March 26, 2015, the district court dismissed as moot the remaining aspects of a constitutional challenge to several provisions of the Prevent All Cigarette Trafficking (PACT) Act of 2009.  The plaintiff, an internet seller of tobacco products who went out of business during the pendency of the litigation, filed suit in 2010 to challenge the Act’s requirement for delivery sellers to ensure that all state taxes are paid prior to the delivery of cigarettes, and its ban on using the U.S. mail to deliver tobacco products.  In a 2011 decision, the district court upheld the mail ban, but preliminarily enjoined the PACT Act’s tax-collection requirements on due-process grounds.  In 2013, the D.C. Circuit affirmed both aspects of the lower court’s ruling.  On remand, the district court held that the case had become moot, because the plaintiff no longer intended to return to business even if he prevailed; a consent decree he accepted in litigation brought by the City of New York barred him for life from selling tobacco products; and the ATF certified that, based on the evidence currently known to ATF, the agency had no intention of recommending or seeking enforcement against the plaintiff.  The district court further held that the prudential mootness doctrine also required dismissal, both because it was wholly speculative that invalidating the PACT Act’s tax provisions would actually relieve the plaintiff’s asserted injuries, and because the plaintiff was raising a constitutional issue of first impression as a facial challenge against a federal statute.  Finally, the district court vacated its 2011 preliminary injunction.
 

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 or ARCHIVED CASE SUMMARIES

 

 

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 July 22, 2016