Author: WorkCompAcademy

Kia Zolfaghari pleaded guilty to charges regarding his role in a conspiracy to distribute fentanyl, as well as to related weapons and money laundering charges, announced United States Attorney David L. Anderson and Drug Enforcement Administration Special Agent in Charge Chris Nielsen..

In the plea agreement, Zolfaghari, 42, of San Francisco, admitted that from May of 2014 until June of 2016 he agreed with others to distribute and possess with intent to distribute fentanyl.  Fentanyl, a Schedule II controlled substance, is a highly potent opiate that can be diluted with cutting agents to create counterfeit pills that attempt to mimic the effects of oxycodone, and can typically be obtained at a lower cost than genuine oxycodone. In this case, Zolfaghari admitted that his role in the conspiracy included buying a pill press, using it to manufacture pills, and selling the pills, principally online.  Zolfaghari admitted he stamped the pills in a manner consistent with genuine oxycodone and advertised the pills as oxycodone, but that the pills did not contain oxycodone and instead contained fentanyl.  

In his plea agreement, Zolfaghari also described the roles of two of his co-conspirators in the drug trafficking conspiracy.  For example, Zolfaghari acknowledged that one of his co-conspirators assisted him in the operation by packaging and mailing pills as well as cleaning up after he manufactured the pills.  Additionally, Zolfaghari explained that another co-conspirator assisted him by maintaining a post office box for the delivery of fentanyl powder that he used to make pills and by delivering the powder that arrived in that post office box.  Zolfaghari admitted that over the course of the conspiracy he made over $400,000 through his sales, and sold at least 13,000 fentanyl pills.

Zolfaghari also pleaded guilty to conspiring to launder the proceeds of the drug trafficking operation.  Specifically, Zolfaghari admitted that sometime before May 1, 2014, he agreed with others to engage in several financial transactions to conceal the of those proceeds of his drug sales. For example, he arranged to be paid in the digital currency bitcoin, he used unlicensed bitcoin brokers to exchange the bitcoin for cash, and he directed a co-conspirator to purchase gift cards with the cash.  Zolfaghari further admitted that these transactions were intended to conceal the source and ownership of the proceeds of his drug transactions.  Zolfaghari also admitted he used the proceeds from his drug trafficking operation to make a $40,000 down payment (and additional monthly payments) on a 2015 Audi RS5 Coupe; to make payments on an apartment in San Francisco; and to make purchases of luxury goods such as high-end watches, designer shoes, and jewelry.

Zolfaghari was arrested on June 10, 2016.  At the time of his arrest, Zolfaghari was found in possession of a Smith & Wesson handgun and 500 pills containing fentanyl.  

Judge Illston scheduled Zolfaghari’s sentencing for November 22, 2019.  Zolfaghari faces a maximum sentence of life in prison and a $10,000,000 fine for the conspiracy to manufacture and distribute fentanyl charge.  The charge also carries a minimum 10 years in prison. The statutory maximum for the money laundering conspiracy charge is 20 years in prison, and a fine of $500,000 or twice the gain or loss from the criminal activity.  The statutory maximum for the weapons charge is life in prison and a $250,000 fine.  This charge carries a minimum five years in prison, which term must run consecutive to any other sentence imposed.  Additional terms of supervised release and monetary assessments also may be ordered; 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.  

In April 2017, Zolfaghari jumped bail and failed to appear for a hearing in this case.  On February 9, 2018, Judge Illston sentenced his wife and co-defendant, Candelaria Dagandan Vazquez, 43, who was also a fugitive, to 151 months imprisonment.  In February 2019, the United States Marshals Service, together with the Mexican Federal Police, located Zolfaghari and Vazquez in Mexico.  Vazquez is currently serving her sentence in the custody of the Federal Bureau of Prisons.  Also prosecuted for his role in the drug distribution scheme was King Edward Harris, II, 37, of Oxnard.  On September 22, 2017, Judge Illston sentenced Harris to five years in prison for possession and distribution of 40 grams or more of fentanyl.

Operating under their company, P&R Med-Legal Medical Corporation (P&R), Dolphus Dwayne Pierce, a chiropractor, and Tomas Ballesteros Rios, a physician, conspired with others to defraud various workers’ compensation insurance carriers. P&R contracted with physicians to perform cursory (if any) examinations of workers’ compensation patients at chiropractic clinics, and then dispense prepackaged medications to these patients with little or no regard for medical need.

Pierce and Rios contracted with a company to prepare and submit canned medical reports and bills to workers’ compensation insurance carriers. These bills sought payment for the medications dispensed, and for services relating to the dispensing of medications – some of which were not performed, and some costlier than the services actually performed by the physician. Eventually, a search warrant was executed on businesses and homes associated with P&R.

After P&R shut down, Pierce and Rios contracted with another company to rebill the insurance carriers for services initially billed by P&R, seeking to collect on existing unpaid bills for medications previously dispensed.

In June 2012, Pierce and six codefendants (Rios, John Brent Arakelian, Maria Cecilia Rios Cabangangan, Charles Orlando Lewis, M.D., Cathy Aguilar Pierce, and Chi Hong Yang, M.D.) were charged by grand jury indictment with conspiracy to commit insurance fraud and related charges.

Physician Tomas Rios pled guilty to conspiracy as charged in count 1 and testified for the prosecution. On October 22, 2015, jury trial against Pierce alone began. On January 8, 2016, the jury returned a verdict of guilty on count 1 and acquitted Pierce of the remaining counts.On September 16, 2016, the trial court placed Pierce on probation for five years, with the condition that he serve one year in county jail and pay $770,421 in restitution.

On appeal, Pierce raises numerous issues, contending the trial court prejudicially erred: (1) when it overruled his demurrer to count 1 of the amended indictment; (2) when it refused to strike reference to section 550, subdivision (a)(5) from the conspiracy charge as surplusage; (3) when it denied a motion to compel election of conspiracies at the close of the prosecution’s case; (4)in jury instructions given and refused; (5) when it denied a motion for acquittal; (6) when it quashed his subpoenas to the insurance companies and admitted the testimony of two attorneys; and(7) when it denied hismotion for recusal. Finally, Pierce contends sentencing error occurred.

The Court of Appeal affirmed the conviction in the unpublished case of People v Pierce.

The Court found no merit to any of the issues raised by Dolphus Pierce D.C.

Global consumer goods conglomerate Reckitt Benckiser Group plc (RB Group) has agreed to pay $1.4 billion to resolve its potential criminal and civil liability related to a federal investigation of the marketing of the opioid addiction treatment drug Suboxone. The resolution – the largest recovery by the United States in a case concerning an opioid drug – includes the forfeiture of proceeds totaling $647 million, civil settlements with the federal government and the states totaling $700 million, and an administrative resolution with the Federal Trade Commission for $50 million.

Suboxone is a drug product approved for use by recovering opioid addicts to avoid or reduce withdrawal symptoms while they undergo treatment. Suboxone and its active ingredient, buprenorphine, are powerful and addictive opioids.

On April 9, a federal grand jury indicted Indivior for allegedly engaging in an illicit nationwide scheme to increase prescriptions of Suboxone.

To resolve its potential criminal liability stemming from the conduct alleged in the indictment of Indivior, RB Group has executed a non-prosecution agreement that requires the company to forfeit $647 million of proceeds it received from Indivior and not to manufacture, market, or sell Schedule I, II, or III controlled substances in the United States for three years. In addition, RB Group has agreed to cooperate fully with all investigations and prosecutions by the Department of Justice related, in any way, to Suboxone.

According to the indictment, Indivior promoted the film version of Suboxone (Suboxone Film) as less-divertible and less-abusable and safer around children, families, and communities than other buprenorphine drugs, even though such claims have never been established.

The indictment further alleges that Indivior touted its “Here to Help” internet and telephone program as a resource for opioid-addicted patients. Instead, however, Indivior used the program, in part, to connect patients to doctors it knew were prescribing Suboxone and other opioids to more patients than allowed by federal law, at high doses, and in a careless and clinically unwarranted manner.

The indictment also alleges that, to further its scheme, Indivior announced a “discontinuance” of its tablet form of Suboxone based on supposed “concerns regarding pediatric exposure” to tablets, despite Indivior executives’ knowledge that the primary reason for the discontinuance was to delay the Food and Drug Administration’s approval of generic tablet forms of the drug.

The indictment alleges Indivior’s scheme was highly successful, fraudulently converting thousands of opioid-addicted patients over to Suboxone Film and causing state Medicaid programs to expand and maintain coverage of Suboxone Film at substantial cost to the government.

Under the civil settlement, RB Group has agreed to pay a total of $700 million to resolve claims that the marketing of Suboxone caused false claims to be submitted to government health care programs. The $700 million settlement amount includes $500 million to the federal government and up to $200 million to states that opt to participate in the agreement. The claims settled by the civil agreement are allegations only and there has been no determination of liability.

Under a separate agreement with the Federal Trade Commission (FTC), RB Group has agreed to pay $50 million to resolve claims that it engaged in unfair methods of competition in violation of the Federal Trade Commission Act, 15 U.S.C. § 53(b).

Christine Suh was not an attorney and was not otherwise authorized to represent Allstate’s insureds. She overcame that obstacle by creating and, with help from Christina Chang (Suh’s mother), and others, operating eight sham law offices.

Suh paid several individual attorneys a monthly fee of $3,000 to use their names and state bar numbers. Suh and Chang procured Allstate’s insureds as “clients,” filed 318 insurance claims on their behalf (not authorized by and without the knowledge of the individual attorneys), and diverted insurance proceeds to their personal use.

Allstate Insurance Company and several related companies (collectively, Allstate) brought this action under Insurance Code section 1871.7 (Insurance Fraud Prevention Act) on behalf of the People of the State of California against Christine Suh, Christina Chang (Suh’s mother), and others for insurance fraud in violation of Penal Code section 550 (section 550), which makes it unlawful to submit false or fraudulent claims to an insurance company.

A jury found in favor of Allstate and imposed over $6 million in civil penalties. Suh appeals from the ensuing judgment, arguing the trial court should have stayed this action pending the resolution of a criminal investigation of her conduct. Suh, joined by Chang, also argues that the insurance claims they submitted to Allstate were not fraudulent because, although the insureds were not actually represented by attorneys, the information in the claims forms was accurate.

The Court of Appeal affirmed the judgment in the published case of People v Suh.

Suh argues the trial court’s ruling in response to her ex parte motion for stay “forced [her] to have to choose between asserting her Fifth Amendment privilege and risking substantial monetary jeopardy in the civil action on one hand, and waiving her Fifth Amendment privilege and subjecting herself to criminal jeopardy on the other hand.”

Suh made her request for a stay, not in a regularly noticed motion, but in an ex parte application. A court will not grant ex parte relief in any but the plainest and most certain of cases. The rules governing ex parte applications in civil cases require that “[a]n applicant . . . make an affirmative factual showing . . . of irreparable harm, immediate danger, or any other statutory basis for granting relief ex parte.”

“The trial court here acted well within its discretion in denying Suh’s application. Suh did not make a showing of irreparable harm, immediate danger, or any other basis for ex parte relief.”

Suh and Chang argue Allstate’s theory that the insurance claims they submitted “were false or fraudulent was based solely on the testimony that the claims submitted to it were submitted by a [sic] ‘sham law firms.’ No evidence was presented that the claims were ‘false or fraudulent’ in any other regard.

“Suh and Chang read the insurance fraud statutes too narrowly. Unlawful conduct under section 550 does not require a misstatement of fact in the insurance claim.”

An insurance claim is fraudulent under section 550 and section 1871.7, subdivision (b), when it is “characterized in any way by deceit.”

The Trump administration suffered a blow when a federal judge blocked a key rule about drug price disclosures just hours before it was scheduled to take effect.

U.S. District Judge Amit P. Mehta in Washington, D.C., on Monday sided with a coalition of drug companies and blocked the Trump administration from implementing a policy that would require prescription drug manufacturers to disclose list prices in TV ads.

In May of 2019, the U.S. Department of Health and Human Services (“HHS”) published a final rule that regulates the marketing of prescription drugs. The rule requires drug manufacturers to disclose in any television advertisement the list price – also known as the wholesale acquisition cost – of a 30-day supply of the drug (“WAC Disclosure Rule”).

Merck & Co., Inc.; Eli Lilly and Company; and Amgen Inc.- and the National Association of Advertisers, Inc., a membership organization contend in a lawsuit they filed, that the WAC Disclosure Rule is unlawful. Plaintiffs advance two primary arguments.

First, they argue that the Rule exceeds HHS’s authority, because Congress neither expressly nor impliedly granted HHS the power under the Social Security Act to regulate drug marketing. Second, they maintain that the WAC Disclosure Rule is compelled speech that violates the First Amendment. Plaintiffs have asked the court to halt the WAC Disclosure Rule before it goes into effect.

The court found that HHS lacks the statutory authority under the Social Security Act to adopt the WAC Disclosure Rule. Neither the Act’s text, structure, nor context evince an intent by Congress to empower HHS to issue a rule that compels drug manufacturers to disclose list prices. The Rule is therefore invalid.

The court went on to conclude that “no matter how vexing the problem of spiraling drug costs may be, HHS cannot do more than what Congress has authorized. The responsibility rests with Congress to act in the first instance.”

It is not immediately clear how the administration will proceed, but the ruling threatens to rob President Trump of an important victory in the fight over drug costs.

Drug companies fought the rule from the start, arguing it would confuse consumers because a drug’s list price – which doesn’t reflect the discounts negotiated with insurers or through patient assistance programs – is often higher than what the patient actually pays.

Tricia Neuman, senior vice president of the Kaiser Family Foundation, said the administration and Congress are working on other drug pricing initiatives, but the decision is “certainly a setback for the administration.”

Neuman said drug pricing transparency “in and of itself is unlikely to have a huge impact on prices. There are a number of other proposals the administration and Congress are moving forward with that will have a more significant impact.”

But those initiatives, like tying what Medicare pays for drugs to what other countries charge, or even allowing Medicare to directly negotiate drug prices, are not close to being completed, and it’s not certain they will ever be finalized.

A drug industry lobbyist called the decision a “Pyrrhic victory,” because it would likely spur Congress to act.

“They won the battle and got the rule defeated, but now it’s likely going to be in legislation,” the lobbyist said, adding that it’s an easy bipartisan issue for lawmakers to support.

Bipartisan legislation introduced by Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Sen. Dick Durbin (D-Ill.) would codify the HHS regulation into law. The bill could be added to a legislative package that Grassley is trying to push through the committee.

A companion bill in the House is sponsored by Rep. Francis Rooney (R-Fla.).