Author: WorkCompAcademy

A federal jury convicted 58 year old David Jess Miller, who lived in Santa Ana, and his company, Minnesota Independent Cooperative (“MIC”), of a wide array of charges relating to the unlicensed and fraudulent distribution of prescription drugs. The verdicts were handed down after a two-week trial before the Hon. Charles R. Breyer, Senior U.S. District Judge.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, 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 codefendants Mihran Stepanyan and Artur Stepanayan. Miller and MIC also knew that the Stepanyans were not licensed to sell prescription drugs and that the Stepanyans 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 in Puerto Rico he controlled. 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, wire, and bank 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 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.

Miller remains out of custody pending sentencing. Miller faces a maximum statutory term of life in prison; however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The Stepanyans and 38 other defendants have pleaded guilty to their respective roles in the conspiracies.

“The illegal conduct of David Miller was reprehensible,” said FBI Special Agent In Charge Robert Tripp. “He and his co-conspirators undermined safeguards designed to protect the public, reintroduced diverted prescription drugs into the supply chain, and compromised patient safety for personal gain.”

The prosecution is the result of an investigation by the FBI, the IRS, the FDA, and USPIS. The United States Attorney’s Office notes the extraordinary contributions and commitment of IRS-CI Special Agent Bryan Wong in this case.

Agile Occupational Medicine announced that it had completed its merger with Pinnacle HealthCare. The combined practices provide 14 clinics throughout California and Yuma, Arizona, creating the fourth-largest occupational medical group in California.

Pinnacle Healthcare was founded in 1999 with the goal of providing high-quality medical care for non life-threatening situations, as well as occupational medicine options and urgent care.

According to its website “Hundreds of employers in Salinas, CA, Monterey, San Benito, Santa Cruz, and Merced counties choose Pinnacle Healthcare to be their sole provider in treating and managing employee and workplace health needs.”

Agile currently has fourteen clinics that it says is strategically located to achieve its goal of serving a majority of employers throughout California.

Agile focuses on forming partnerships with local businesses to ensure that the medical needs of local employees are addressed. From DOT physicals and drug screenings to workplace injury treatment, Agile offers a wide range of occupational health programs that help employers maintain a healthy and safe workforce while providing cost-effective health care for companies and employees.

After this merger, the two combined companies say they will be the “fourth-largest occupational medical group in California.”

The Agile Founder and CEO said “Agile and Pinnacle share a common vision of delivering the highest quality care and support to injured workers and employers. Coming together under a single company will allow us to partner in that effort and provide better services to a larger audience throughout California and southwest Arizona. Our teams have worked together on strategic initiatives in the past, and through those processes, have developed a shared vision for improving medical care in the workers’ compensation market to support employment-related health services better.”

“Joining Agile is a big win for Pinnacle. We have built a quality clinic group over the past 20 years, and Agile brings the funding and enterprise platforms that allow us to expand significantly going forward,” said Ernesto Alvero, PA, former CEO of Pinnacle who will serve as the Senior Vice President of Clinic Operations for Agile. “We see this as two great companies coming together to form greater value than the sum of the parts. It’s a real win for both organizations and our customers.”

The U.S. Occupational Safety and Health Administration (OSHA) announced another annual inflation based increase in the civil monetary penalties for violations of federal Occupational Safety and Health standards and regulations. The new penalties will be nearly 10% higher than the previous penalty amounts.

On November 2, 2015, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 was enacted, which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990 as previously amended by the 1996 Debt Collection Improvement Act to improve the effectiveness of civil monetary penalties and maintain their deterrent effect.

The OSHA cost-of-living adjustment multiplier for 2023, based on the Consumer Price Index for All Urban Consumers for October 2022 (not seasonally adjusted), is 1.07745. To compute the 2023 annual adjustment, the Department multiplied the most recent penalty amount for each applicable penalty by the multiplier, 1.07745, and rounded to the nearest dollar. The adjustment factor of 1.07745 is consistent across the minimum and maximum penalties set forth in the Occupational Safety and Health Act and the FOM.

The Inflation Adjustment Act required agencies to: (1) adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rule and (2) make subsequent annual adjustments for inflation, no later than January 15 of each year.

Using this formula, some examples of the new current maximum penalties for this year are as follows:

– – Serious and Other-Than-Serious Posting Requirements maximum penalty is $15,625 per violation
– – Failure to Abate violation maximum is $15,625 per day beyond the abatement date
– – Willful or Repeated violation is $156,259 per violation

States that operate their own Occupational Safety and Health Plans are required to adopt maximum penalty levels that are at least as effective as Federal OSHA’s. State Plans are not required to impose monetary penalties on state and local government employers. Cal/OSHA penalties are specified in section 336 of its regulations.

And their are some costly new changes to the penalty provisions of Cal/OSHA authority.

On Sept. 28, 2021, California Gov. Gavin Newsom signed into law Senate Bill 606 (SB 606), which, among other things, created two new categories of Cal/OSHA violations: “egregious” and “enterprise-wide.

The new categories of violations carry significant monetary penalties against employers. Under this new law, Section 6317.8 of the California Labor Code provides that Cal/OSHA “shall issue a citation to that employer for each egregious violation, and each instance of an employee exposed to that violation shall be considered a separate violation for purposes of the issuance of fines and penalties.”

Employers face up to $134,334 per egregious and enterprise-wide violation. So if this maximum penalty (increased by the COLA) is issued for “each instance of an employee exposed” the total penalty could theoretically result in hundreds of millions of dollars.

In the definition of “egregious” violation in Labor Code 6317.8 lists 7 criteria for this determination, and any “one or more” of them can be grounds for a finding of an egregious violation. One example is “persistently high rates of worker injuries or illnesses.” Theoretically, industries that are dangerous by the every nature of the work will have “persistently high rates of worker injuries or illnesses.”

And a COLA is now required annually to penalties under this new Cal/OSHA law. Labor Code 6429 (a)(2) provides that “Commencing on January 1, 2018, and each January 1 thereafter, the penalty amounts specified in this section shall be increased based on the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), not seasonally adjusted, for the month of October immediately preceding the date of the adjustment, as compared to the prior year’s October CPI-U.”

Thus, as employers enter 2023, OSHA penalties and Cal/OSHA penalties increase based upon CPI formulas. And then since each egregious and enterprise-wide violation in California applies the maximum penalty to “each instance of an employee exposed,” 2023 brings in higher OSHA and much higher Cal/OSHA penalties.

The San Francisco Mayor  approved a new city ordinance to require private employers to pay employees who are military reservists and are called for military duty the difference between their military salary and their salary as employees, for up to 30 days in a calendar year, and to create procedures for implementation and enforcement of this requirement. The San Francisco Board of Supervisors passed the ordinance in December 2022, and it will go into on February 19, 2023.

Under this Act an “Employee” means any employee of any Employer who works within the geographic boundaries of San Francisco, including but not limited to part-time and temporary employees, and who is a member of the reserve corps of the United States Armed Forces, National Guard, or other uniformed service organization of the United States.

And “Employer” means any person, as defined in Section 18 of the California Labor Code, including corporate officers or executives, who directly or indirectly or through an agent or any other person, including through the services of a temporary services or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of an employee and who regularly employs 100 or more employees, regardless of location. “Employer” shall not include the City or any other governmental entity.

And “Military Duty” means active military service in response to the September 11, 2001 terrorist attacks, international terrorism, the conflict in Iraq, or related extraordinary circumstances, or military service to provide medical or logistical support to federal, state, or local government responses to the COVID-19 pandemic, natural disasters, or engagement in military duty ordered for the purposes of military training, drills, encampment, naval cruises, special exercises, Emergency State Active Duty, or like activity.

However the law shall not apply to Employees covered by a bona fide collective bargaining agreement to the extent that such requirements are expressly waived in the collective bargaining agreement in clear and unambiguous terms.

If the Employee, having received Supplemental Compensation under this law and being fit for employment in their previous position upon release from Military Duty, does not return to their position with the Employer within 60 days of release from Military Duty, the compensation may, at the Employer’s option, be treated as a loan payable with interest in the manner specified in the Act.

If after an administrative hearing it is found that any Supplemental Compensation was unlawfully withheld, the dollar amount of Supplemental Compensation withheld from the Employee multiplied by three, or $250, whichever amount is greater, shall be included in the administrative penalty paid to the Employee.

And quite similar to the California Public Attorney General Act (PAGA) the City, or any person or entity acting on behalf of the public as provided for under applicable State law, may bring a civil action in a court of competent jurisdiction against the Employer or other person violating this new law. And any person or entity enforcing this Act on behalf of the public as provided for under applicable State law shall, upon prevailing, be entitled only to equitable, injunctive or restitutionary relief, and reasonable attorneys’ fees and costs.

The Background and Findings used to justify passage of the Act claims that as of 2022, there were over 600,000 United States military reserve and National Guard personnel serving. Military reserve and National Guard personnel face many challenges when they serve dually as civilian workers and in the uniformed services, including employment discrimination, income insecurity, financial stress, service-related injuries, mental stress, and suicide.

The United States has made efforts to protect the income and employment security of such personnel. Under the Uniformed Services Employment and Reemployment Rights Act of 1994, 38 U.S.C. Ch. 43, military reserve and National Guard personnel are protected from employment discrimination on the basis of their service and are guaranteed civilian reemployment rights following military service.

State and local laws also protect the income and employment security of military reserve and National Guard personnel. Under California Government Code Sections 19775 and 19775.1, state employees granted military leave are eligible for paid leave for the first 30 calendar days of active duty served during the absence. California Military and Veterans Code Sections 395.01, 395.02, and 395.03 grant other public employees up to 30 calendar days of pay while on military leave.