California Lawyer Sentenced To Six Years In Prison For Racketeering Conspiracy, Mail Fraud, And Multiple Conspiracy Counts, Including Mail And Wire Fraud, Money Laundering, And The Illegal Distribution Of $157 Million In Diverted Prescription Drugs
SAN FRANCISCO – David Jess Miller was sentenced to serve 72 months in prison for his role in a variety of crimes stemming from conspiracies involving racketeering, mail and wire fraud, and money laundering, in addition to substantive mail fraud and conspiracy against the United States, announced First Assistant United States Attorney Patrick D. Robbins; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge of the Oakland Field Office Darren Lian; U.S. Postal Inspection Service (USPIS) Pittsburgh Division Inspector in Charge Lesley Allison; and U.S. Food and Drug Administration Office of Criminal Investigations (FDA-OCI) Special Agent in Charge of the Metro Washington Field Office George A. Scavdis. The sentence was handed down by the Hon. Charles R. Breyer, Senior United States District Judge.
A jury convicted Miller, 58, of Santa Ana, California, and his company, Minnesota Independent Cooperative (MIC), of all charges on January 26, 2023, following a two-week trial.
“Miller and his co-conspirators disregarded the health and safety of thousands of people in need of medication,” said First Assistant United States Attorney Patrick D. Robbins. By putting profits over patients, Miller and his criminal enterprise undermined important safeguards designed to ensure the safety of prescription drugs in the United States. This sentence sends the clear message that the diversion of prescription drugs and the intentional circumvention of these critical regulatory requirements will not be tolerated.”
“The FDA oversees the prescription drug supply chain; when criminals breach that supply chain, patients can no longer be assured of the safety or effectiveness of the drugs they may take,” said Special Agent in Charge George A. Scavdis, FDA-OCI Metro Washington Field Office. “We will continue to pursue and bring to justice those who would put the public health at risk through their criminal actions.”
“David Miller greedily put the health and well-being of people at risk with the orchestration and implementation of his prescription drug diversion scheme. He attempted to capitalize on his disregard for people’s health by laundering money around the world,” said Special Agent in Charge Darren Lian, IRS-CI Oakland Field Office. “Let today’s sentencing be a warning to those who aspire to profit from deception against the U.S. government and innocent taxpayers: IRS Criminal Investigation and partner law enforcement agents will catch you and justice will be served.”
The trial was the result of indictments filed in two separate districts—the Northern District of California and the Southern District of Ohio. The convictions included charges handed down in a second superseding indictment by a grand jury in the Northern District of California on February 11, 2016, and by a separate indictment handed down on May 6, 2015, in the Southern District of Ohio. Both indictments involved additional defendants and charges that were not presented at the trial.
The evidence at trial established that Miller, 58, of Santa Ana, Calif., was at the center of a vast racketeering enterprise responsible for the fraudulent distribution of hundreds of millions of dollars’ worth of diverted prescription drugs, including instances in which Miller and his co-conspirators distributed tampered medication that posed a health risk to consumers. The scheme targeted brand-name prescription drugs designed to treat HIV, hepatitis C, mental disorders, and various other serious conditions. Miller and MIC lied to their customers about the nature and sources of the prescription drugs being sold, falsely claiming that the drugs had been maintained in the safe, federally- and state-regulated supply chain. The evidence at trial established that Miller and his company agreed with many others, including Mihran Stepanyan, 37, and Artur Stepanyan, 45, to conduct the affairs of their wide-ranging and long-lasting criminal enterprise. The evidence established that the enterprise, operating primarily out of Southern California and Minnesota, was responsible for distributing diverted prescription drugs to unsuspecting pharmacies throughout the county. In finding Miller guilty, the jury concluded that he played a role in promoting the racketeering conspiracy. For example, as the owner and operator of MIC between 2007 and 2015, Miller bought approximately $157 million of diverted prescription drugs from co-defendants Mihran and Artur Stepanayan. Miller and MIC also knew that the Stepanyans were not licensed to sell prescription drugs and that they procured their drugs from street suppliers. Miller and MIC nevertheless purchased the diverted drugs from the Stepanyans and lied to their customers about the sources and nature of those drugs.
Further, the jury concluded Miller engaged in a money laundering conspiracy. The evidence established that Miller and others laundered hundreds of millions of dollars between approximately 2007 and 2015 to promote their criminal activities and to conceal the nature of their scheme. For example, to hide the fact Miller was paying the Stepanyans for the illegally sourced drugs they were distributing, Miller made payments to the Stepanyans’ company GC National Wholesale through companies he controlled in Puerto Rico. As to another supplier, Miller authorized payments to accounts held in the names of various front companies at banks in multiple countries. In this way, Miller and his co-conspirators sought to obscure the illicit sources of MIC drugs and to conceal the true identities of the suppliers.
In sum, at the conclusion of the trial, Miller was convicted of one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); ten counts of mail fraud, in violation of 18 U.S.C. § 1341; and one count of conspiracy to engage in the unlicensed wholesale distribution of drugs and making a false statement to the FDA, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(2)(A), and 18 U.S.C. § 371.
In addition to the prison term, Judge Breyer ordered Miller to pay a $250,000 fine, due immediately; to serve three years of supervised release to begin after the prison term is completed; and to pay a $1,400 special assessment. Judge Breyer also ordered MIC, currently a defunct entity, to pay a special assessment of $4,500.
Of the 38 defendants charged in the February 2016 second superseding indictment, all have either been convicted or resolved their case, and six remain to be sentenced.
Assistant United States Attorneys Claudia Quiroz, Andrew Dawson, and Chris Kaltsas are prosecuting the case, with the assistance of Paralegal Specialist Kevin Costello. The prosecution is the result of an investigation by the FBI, IRS-Criminal Investigation, U.S. Food and Drug Administration Office of Criminal Investigations, and U.S. Postal Inspection Service.