Florida Resident Pleads Guilty to Fraudulent Shipments of Synthetic Drugs from Lab in Stockton

FRESNO, Calif. — Timothy New, 33, of Pensacola, Florida, pleaded guilty today to shipping in interstate commerce, with intent to defraud, misbranded synthetic drugs, commonly known as “spice,” Acting United States Attorney Philip A. Talbert announced.

According to court documents, between September 2012 and May 2103, New and his co‑defendants utilized a manufacturing and distribution operation at a processing lab in Stockton to ship at least 24 tons of misbranded smokeable synthetic cannabinoids that contained the synthetic drugs AM-2201 and XLR11 to smoke shops and retail outlets throughout the United States. They generated in excess of $33 million as a result of the fraudulent sales.

Operating under the guise of legitimacy by companies called Zencense Incense Works LLC, ZenBio LLC, and Biozen LLC, New and his co-defendants received falsely invoiced raw synthetic cannabinoids from China that they used to manufacture and distribute as smokeable synthetic cannabinoids. The drugs were sold under the brand names Bizarro, Orgazmo, Headhunter, Defcon, Neutronium, Sonic Zero, Sonic Boom, Sonic Blast, Shockwave, Hampster, and Posh. To evade detection by federal law enforcement authorities, New and his co-defendants deliberately misbranded and marketed their product as “potpourri” or “herbal incense” that they claimed was “not for human consumption,” but fully intended to be used as a narcotic. New and his co-defendants distributed the drugs to the Stuffed Pipe smoke shops located throughout the Central Valley of California, as well as to numerous other retail establishments throughout the United States.

At the time of the illicit enterprise, AM-2201 was a Schedule I controlled substance and XLR11 was a controlled substance analogue that was publically noticed for scheduling in April, 2013, and was placed under Schedule I as a controlled substance in May, 2013.

Public health and law enforcement agencies have seen the emergence of synthetic drug use. State and local public health departments note that synthetic cannabinoids cause serious adverse health effects, including agitation, anxiety, nausea, vomiting, tachycardia, elevated blood pressure, tremor, seizures, hallucinations, and paranoid behavior. DEA scheduled XLR11 based, in part, on findings of the Center for Disease Control and Prevention that the drug causes kidney damage.

This case is the product of an Organized Crime Drug Enforcement Task Force (OCDETF) investigation by the Drug Enforcement Administration, Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), with assistance from the Food and Drug Administration and the Fresno County Sheriff’s Office. Assistant United States Attorney Karen A. Escobar is prosecuting the case.

 The OCDETF Program was established in 1982 to mount a comprehensive attack against organized drug traffickers. Today, the OCDETF Program is the centerpiece of the United States Attorney General's drug strategy to reduce the availability of drugs by disrupting and dismantling major drug trafficking organizations and money laundering organizations and related criminal enterprises. This OCDETF investigation was also part of a nationwide law enforcement effort coordinated by the DEA’s Special Operations Division.

New is scheduled for sentencing on August 1, 2016, by United States District Judge Dale A. Drozd. He faces a maximum statutory penalty of three years in prison and a $250,000 fine, or twice the gross gain from the crime. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Co-defendants Douglas Jason Way, 41, of Evanston, Illinois, Timothy Ortiz, 45, of Waukegan, Illinois, and Natalie Middleton, 28, of Clovis, California, have entered not guilty pleas and are next scheduled to appear in federal court in September. They are charged with drug and money laundering offenses, in addition to the misbranding charge, and face a maximum penalty of 20 years in prison and a $10 million fine. The charges against them are only allegations; Way, Ortiz, and Middleton are presumed innocent until and unless proven guilty beyond a reasonable doubt.