Five marketers of products labeled as dietary supplements but containing banned ingredients or of unapproved drugs sold directly to consumers were convicted or sentenced on criminal charges in May following Department of Justice and FDA investigations.

The convictions in federal district courts in California, Georgia, Louisiana and Maryland ought to interest supplement industry stakeholders long calling for DoJ and FDA to bring criminal charges stemming from investigations of spiked supplements, but likely will have them also calling for authorities to drill down with charges against the sources of the products ([A#05151214011]).

According to FDA's Office of Criminal Investigations:

Chenhsin Chan, aka Paul Chan, of Elmhurst, N.Y., was convicted May 26 in the Northern District of Georgia of 30 felony counts in connection with online marketing and sale of supplements containing ephedrine.
Adam Alden, of Bakersfield, Calif., pleaded guilty May 9 in the Central District of California to distributing 2,4-dinitrophenol (DNP), a chemical used as a dye, wood preserver and herbicide, among other things, as an extreme weight loss drug. Alden pleaded guilty to one count of introducing an unapproved drug into interstate commerce.
Gavin Burns Smith, of New Port Richey, Fla., on May 9 was sentenced in the District of Maryland to six months of home confinement followed by three years of probation for selling to bodybuilders peptides which were not approved by FDA for human use. Smith also was ordered to forfeit more than $2.1m, the value of the misbranded drugs subject to seizure.
John Wesley Hoag, was sentenced May 5 in the Middle District of Louisiana to 50 months in federal prison, to a fine of $7,500 and to forfeit all property traceable to proceeds of selling violative and mis-labeled diet pills throughout the US.
In a related case, Darlene V. Krueger was convicted in March on three counts of distribution of sibutramine and three counts of introduction of misbranded drugs into interstate commerce. Her sentencing date is not yet set.

The Northern District of Georgia US attorney reported that Chan's Wholesale Source LLC business from at least July 2005 through August 2012 marketed supplements, primarily through affiliated websites, that contained ephedrine alkaloids, even though the ingredients in a 2004 FDA final rule were banned from use in supplements. "Chan was warned by FDA investigators and others that it was illegal to sell dietary supplements containing ephedrine alkaloids, but he continued to do so," the federal prosecutor said.

Chan was charged by a federal grand jury in May 2014 with 10 counts each of mail fraud and introducing adulterated food into interstate commerce; and five counts each of knowingly distributing a listed chemical without obtaining the required registration and money laundering.

He was convicted on all 30 counts and ordered to forfeit more than $666,000 in proceeds from the crimes and assets he purchased with the proceeds, including real property purchased for $950,000 and automobiles priced at more than $160,000. Chan's sentencing is not yet scheduled.

Death From DNP Use

Alden, of Bakersfield, Calif., sold DNP to a Rhode Island consumer who died in October 2013 as a result of ingestion of the ingredient. Because the consumer also purchased DNP from other sources, prosecutors did not establish beyond a reasonable doubt whether the substance sold by Alden caused the death.

An FDA task force in Rhode Island determined that between August 2013 and January 2014, Alden sold DNP on eBay to customers throughout the US including Rhode Island, advertising that the product was intended for human consumption as a weight loss product. According to court documents, Alden made around $500 in profits from sales of DNP, a chemical used as a dye, wood preserver and herbicide among other things.

Alden is scheduled for sentencing July 19. His convictions are punishable by up to one year in prison or five years' probation, and a $100,000 fine or twice the gain/loss from the offense.

Disclaimers To Avoid FDA

In Smith's prosecution in Maryland, the US attorney's office and FDA's OCI reported that from 2010 through May 2015 he owned and operated two Florida businesses, Precision Peptides DNA Peptides, advertised on the companies’ websites and sold body-enhancing injectable, but non-approved drugs to consumers seeking to enhance their physiques. The products included human growth hormones.

Prosecutors said Smith sold misbranded drugs to an undercover officer and shipped those drugs from Florida to locations in Maryland on seven occasions from November 2011 through March 2015. None of the shipments included any directions for use of the products and although the labels stated that the products were for research only, Smith intended that the products be consumed by humans.

The undercover purchases occurred before and after law enforcement officers executed federal search warrants at Smith's businesses in August 2012. He then began operating DNA Peptides out of his residence and continuing to sell drugs using a different website with disclaimers stating that all products sold were for “research/laboratory use only.”

Prosecutors said Smith asked his customers to certify that they read the disclaimer that the “chemicals/materials for sale here are … not intended for human ingestion” and used the disclaimers as a ruse to avoid FDA scrutiny.

In Louisiana, Hoag was ordered to begin serving his sentence immediately after pleading guilty to engaging in a conspiracy to distribute sibutramine and introducing misbranded drugs into interstate commerce as part of a scheme to illegally distribute diet pills containing the banned ingredient but falsely labeled as “all natural” dietary supplements.

Although sibutramine was the active pharmaceutical ingredient in Meridia, an Rx drug removed from the market in 2010 following studies that showed significantly increased risk of strokes and heart attacks, no drug containing the ingredient has been approved in the US.

“Consumers are put at serious risk when they are unknowingly exposed to undeclared active pharmaceutical ingredients in products falsely labeled as natural dietary supplements,” said Robert West, special agent-in-charge of the Miami office for FDA’s OCI, in a DoJ statement.

In addition to FDA and DoJ, the Drug Enforcement Agency helped investigate some of these cases.

In Wake Of November Sweep

The 2016 federal prosecutions of business persons marketing adulterated health care products sold directly to consumers also have included one manufacturer. In February in Western District of Virginia court, Steven Donald Wood pled guilty to a one count Information charging him with manufacturing and shipping illegal pro-hormones as designer steroids throughout the US.

Wood, of Danville, Va., agreed to forfeit $1.5m to the federal government and paid the sum prior to pleading guilty. Through his businesses Competitive Edge Labs LLC, and MKZ Exports LLC, he manufactured and distributed large amounts of “pro-hormones,” steroids not specifically listed as an anabolic steroid under the Controlled Substances Act, according to the US attorney's office for the district.

According to prosecutors, Wood obtained raw ingredients from Xinli “Eric” Li, a Chinese national who pleaded guilty in the district in December and forfeited $1.6m.

Also in February, Almuntasser Hbaiu and Michael Kang, both of Los Angeles, were sentenced in the Central District of California on charges stemming from an investigation of products marketed under brands including “Mojo Nights,” “Libigrow” and “Blue Diamond” as “all natural” versions of erectile dysfunction drugs, although the drugs contained the active ingredients in Rx products indicated for ED.

Criminal charges originally were brought against Hbaiu in the Middle District of Pennsylvania in 2013. Arrests warrants were issued for other suspects identified in the investigation, which included the Internal Revenue Service.

“The structuring and concealment of monies derived from illegal activities is what enables criminal conduct such as the distribution of misbranded drugs to flourish,” said IRS Special Agent in Charge Akeia Conner in DoJ's statement.

Additionally, in March, DoJ reported that New Jersey businesses operating under a 2011 settlement to cease making unsubstantiated weight loss ingredients since then have diverted pseudoephedrine for making methamphetamine. David Romeo, who operated supplement ingredient suppliers Global Nutrients LLC, Stella Labs LLC and Nutraceuticals International LLC, pleaded guilty in District of New Jersey court to charges of conspiracy to distribute 3kg or more of "meth precursors," money laundering, mail fraud and introduction of misbranded food into interstate commerce with intent to defraud or mislead [A#PS108198].

Prosecutors in March also reported that [Viruxo LLC], of Ocala, Fla., entered a consent decree (PDF) of permanent injunction to stop selling a product it claimed could treat herpes four years after federal officials warned that executives with firms making STD claims for supplements could be prosecuted.

The prosecutions come after DoJ in November announced results of a 12-month enforcement sweep against marketers of spiked supplements and, along with FDA and other agencies, broadly warned the entire industry about the potential for additional criminal cases as well as civil complaints ([A#05151123005]).

In December, a DoJ official said the sweep signaled a shift in the department's approach to identifying and enforcing against noncompliant firms in the consumer health product space, emphasizing aggressively pursuing violators because those firms are cheating consumers and often threatening their health ([A#05151214011]).

Prosecutions Send Spiked Consumer Health Product Marketers To Prison

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