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Justice News

Department of Justice
U.S. Attorney’s Office
Western District of Kentucky

FOR IMMEDIATE RELEASE
Tuesday, April 18, 2017

SCM True Air Technologies, Of Ohio And Kentucky, And Its Former Company President - Guilty Of Delivering Misbranded Medical Devices From Unregistered Facilities To A Georgia V.A. Medical Center And Obstructing An FDA Investigation Into Their Conduct

Defective and unusable bariatric beds were produced in unregistered facilities by the company

Company agrees to pay full restitution and a fine of $500,000

 

LOUISVILLE, Ky. – United States Attorney John E. Kuhn, Jr. today announced the guilty pleas to a criminal information made on April 17, 2017 by SCM True Air Technologies, Inc. and the former company president John N. Keesaer, in United States District Court before Magistrate Judge Dave Whalin. SCM True Air pled guilty to one count of operating an establishment that manufactured medical devices without having properly registered that establishment as required by law. Keesaer pled guilty to one count of obstruction of an FDA investigation and one count of introducing misbranded medical devices into commerce.

 

“This company and its former president sold defective and unusable beds to the VA,” stated U.S. Attorney John Kuhn. “Our veterans deserve far better consideration and treatment. These defendants will be held accountable for breaking the law then attempting to cover that up.”

 

"Defrauding VA by providing unregistered and substandard bariatric beds for use by our nation's veterans is inexcusable," said Kim Lampkins, Special Agent in Charge, U.S. Department of Veterans Affairs, Office of Inspector General, Mid-Atlantic Field Office. “This investigation demonstrates that the VA OIG, working with our colleagues in law enforcement, will aggressively pursue those who place our nation’s veterans at risk for their own private gain.”

 

“FDA’s ability to protect the public health relies on regulated industries fulfilling their responsibilities to comply with FDA requirements,” said Mark S. McCormack, Special Agent in Charge, U.S. FDA Office of Criminal Investigations’ Metro Washington Office. “Those who attempt to circumvent FDA’s regulatory process put consumers’ health at risk and this will not be tolerated.”

 

According to separate plea agreements, beginning at least as early as 2010 and continuing until September 2012, John N. Keesaer, acting as president of SCM True Air, delivered bariatric hospital beds, which are Class II medical devices, that were misbranded due to the fact that they were manufactured in an establishment that was not registered with the FDA as required by law. Further, on January 29, 2014, Keesaer corruptly obstructed an FDA compliance inspection regarding SCM True Air’s production methods including facilities that produced bariatric beds.

 

Specifically, while Keesaer was President of SCM True Air, the company’s manufacturing process for bariatric hospital beds involved establishments in both Roseville, Ohio, and Louisville, Kentucky, that the company had not properly registered with the FDA to produce Class II medical devices, despite the fact that Keesaer and the company had been previously advised on repeated occasions that such registration was required by law.

 

Starting in at least 2010, SCM True Air produced medical devices such as bariatric beds at its Louisville and Roseville establishments without properly registering the establishments with the FDA for over two and a half years. As a result of the fact that the bariatric beds were manufactured at establishments that were not duly registered with the FDA, those beds were misbranded in violation of federal law.

 

At Keesaer’s direction and under his supervision, SCM True Air then sold and delivered misbranded bariatric beds from its Louisville and Roseville establishments to purchasers throughout the

States. Keesaer personally participated in the delivery of misbranded bariatric beds from SCM True Air to various facilities.

 

In 2012, SCM True Air entered into a contract with the Department of Veterans Affairs to deliver 48 bariatric beds, mattresses and accessories to the Trinka Davis Veterans Village in Carrollton, Georgia, a unit of the Atlanta V.A. Medical Center. SCM True Air was paid $211,691.62 for the beds despite the fact that, unknown at the time to the Department of Veterans Affairs, those beds were produced by SCM True Air both using parts from the Louisville establishment and further manufactured in the Roseville establishment.

 

During the process of manufacturing the 48 bariatric beds for the contract with the Department of Veterans Affairs, Keesaer stated to others that the SCM True Air establishments were registered with the FDA when, as he then in fact knew, they were not. Further, upon delivery to the V.A. medical center in September 2012, the bariatric beds were substantially defective, as many of the beds had caulking and welding issues, rusting parts and dirt affixed to them. As a result of these defects, the beds were entirely unusable by the patients at the Veterans Village.

 

The FDA subsequently initiated a formal compliance investigation regarding SCM True Air’s alleged adulteration and misbranding of bariatric beds. During that investigation, Keesaer, acting as President of the company, intentionally obstructed the compliance investigation by making a materially false written statement in the course of that investigation.

 

If convicted at trial, Keesaer would face a combined maximum term of six years in prison, a maximum fine of the greater of $350,000 or twice the gross gain to the defendant or loss to victims resulting from his offense, and a four-year term of supervised release. If the company were convicted at trial it would face a maximum fine of the greater of $500,000 or twice the gross gain to the company or loss to victims resulting from its offense. Also, if convicted at trial, both Keesaer and the company would be obligated to pay restitution to any victims of their offenses.

 

According to the terms of its plea agreement, SCM True Air has agreed to pay restitution in the amount of $211,691.62 and a fine of $500,000. According to the terms of his plea agreement, Keesaer is jointly liable for the same amount of restitution, and the United States has agreed to recommend a sentence of probation and a fine at the time of his sentencing hearing.

 

Sentencing is scheduled before Senior District Judge Thomas B. Russell on July 17, 2017, in Louisville.

 

Assistant United States Attorneys Stephanie M. Zimdahl and H. Joseph Pinto III are prosecuting this case. The United States Food and Drug Administration Office of Criminal Investigations and Department of Veterans Affairs, Office of Inspector General, Mid-Atlantic Field Office, are investigating.

 

Rusted bed part

 

Topic(s): 
Financial Fraud
Updated April 21, 2017