People v. Gross

• Decision Date: 23 January 2019
• Docket Number: Ind.No. 897–12,2016–13182
• Parties: The PEOPLE, etc., Respondent, v. Ira GROSS, Appellant.
• Court: New York Supreme Court — Appellate Division

169 A.D.3d 159

93 N.Y.S.3d 50

The PEOPLE, etc., Respondent,

v.Ira GROSS, Appellant.

2016–13182

Ind.No. 897–12

Supreme Court, Appellate Division, Second Department, New York.

Argued—March 2, 2018

January 23, 2019

Garfunkel Wild, P.C., Great Neck, N.Y. (John G. Martin and Daniel Gorman of counsel), for appellant.

Letitia James, Attorney General, New York, N.Y. (Nikki Kowalski and James F. Gibbons of counsel), for respondent.

WILLIAM F. MASTRO, J.P., CHERYL E. CHAMBERS, SANDRA L. SGROI, JOSEPH J. MALTESE, JJ.

OPINION & ORDER

SGROI, J.

The defendant was convicted of various criminal charges arising from his role in an operation by which prescription medications for the treatment of HIV and AIDS were purchased from patients and ultimately resold to MOMS Pharmacy to be redispensed to other patients. The evidence against the defendant included recordings of intercepted phone calls obtained by wiretap. This appeal raises the issue of whether, in light of statutory requirements for the sealing of original wiretap recordings , it was error for the trial court to admit into evidence an unsealed compilation recording created from a computer hard drive onto which the conversations were originally recorded. We hold that, since an original recording was properly sealed and preserved in accordance with the applicable statute, it was not error for the trial court to admit into evidence an unsealed compilation recording that was otherwise properly authenticated. Nevertheless, we further hold that the People failed to present legally sufficient evidence to support the defendant's convictions of grand larceny in the first degree, attempted grand larceny in the first degree, criminal diversion of prescription medications and prescriptions in the first degree, and attempted criminal diversion of prescription medications and prescriptions in the first degree, such that those convictions, as well as his convictions of conspiracy in the fourth degree and money laundering in the first degree (three counts), which were based on the commission of the former felonies, should be reversed and those counts of the indictment dismissed insofar as asserted against the defendant.

The evidence presented by the People established the following facts. At the time of trial, 90% of prescription drugs sold in the United States were supplied by one of three wholesalers—AmerisourceBergen, Cardinal Health, and McKesson—deemed "the big three." Smaller, independent pharmacies that did not have the sales volume to obtain a contract with "the big three" were served by "secondary wholesalers," which generally bought from "the big three" or other secondary wholesalers.

In general, cocktails of drugs used to treat AIDS and HIV patients, which could cost, in total, $3,000 to $4,000 for a one-month supply, could be sold on the black market. Patients, particularly those on Medicaid or Medicare who paid very little or nothing at all for the medications, could sell them on the street to "street diverters." The street diverters aggregated the drugs, removed the labels from the medication bottles, and "cleaned" the bottles by using heat and solvents to remove label residue. They then stored the drugs in places such as sheds, warehouses, and cars, without temperature controls, and reintroduced them into the stream of commerce, usually through secondary wholesalers. According to the testimony of the People's expert, such medications that left the legal distribution system were deemed adulterated, rendering them unfit for resale, as there was no method to ensure that the products were safe and effective. The experts testified that no individual had a "medical need" for adulterated drugs.

In 2008, Stephen Costa approached Ruben Cruz, who was "a big money guy" involved in illegal drug distribution, about becoming involved in Cruz's prescription drug business. Costa thereafter learned the mechanics of "cleaning" medication bottles and set up a licensed wholesale pharmaceutical distributor, SMC Distributors, in Alabama. The plan was for SMC Distributors to sell prescription medications purchased from sources outside the legitimate wholesale market to MOMS Pharmacy, a division of Allion Healthcare (hereinafter Allion), which specialized in servicing HIV and AIDS patients.

To that end, Costa and Cruz met with the defendant, a licensed pharmacist, who agreed to communicate with his "contact" at Allion/MOMS Pharmacy—Glenn Schabel. Schabel served as the purchasing agent, corporate compliance officer, regional manager, and supervising pharmacist for Allion/MOMS Pharmacy, and was responsible for negotiating with and purchasing from secondary wholesalers and ensuring compliance with applicable laws and regulations. Following the meeting with Cruz and the defendant, Costa began receiving shipments of prescription medications from Cruz's suppliers, and after "cleaning" the medication bottles, Costa would send a list of available medications to the defendant. The defendant sent the list to Schabel, who put in a weekly purchase order. The defendant also advised Costa on "everything and anything that had to do with the business and the process."

Costa initially retained 3% of the proceeds of the sales to Allion/MOMS Pharmacy, and later kept 4 to 5% of the proceeds of the sales. The defendant was paid 5 to 7% of the proceeds of the sales, and in turn, the defendant paid Schabel, and later the defendant's friend, Harry Abolafia, whom the defendant brought in to the operation to help with "paperwork." After some time, SMC Distributors as well as other licensed wholesalers established by Costa were making sales to Allion/MOMS Pharmacy in the sum of $1.5 to $2 million per week.

This operation eventually came to the attention of the New York State Attorney General's Office, which obtained court orders for wiretaps on the defendant's and Costa's cell phones and proceeded to monitor calls between the defendant and Costa and the defendant and Schabel. On February 2, 2012, investigators from the Attorney General's Office executed a search warrant at MOMS Pharmacy headquarters and seized boxes of prescription medications delivered by Costa's wholesale companies. After the search warrant was executed, Allion/MOMS Pharmacy pulled all of its medications off the shelves in all of its locations, had them quarantined, and turned them over to the Attorney General's Office as evidence. Allion/MOMS Pharmacy then replenished its entire inventory with medications from AmerisourceBergen. Allion/MOMS Pharmacy, which in 2010 had been worth approximately $275 million, was later acquired by a nonprofit corporation for approximately $27 million.

In addition to the testimony of Costa and other witnesses, the People offered into evidence recordings of several phone calls that had been intercepted by the wiretaps. Supervising Investigator Aaron Sherer testified that when the subject calls were intercepted, three original recordings were made—two to "DVD–RAM drives" and one to a hard drive. It is undisputed that one set of recordings was sealed by the issuing judge in accordance with CPL 700.50(2). Prior to trial, Sherer created a composite disc of selected calls from the hard drive and compared the composite recording to the unsealed original version of the intercepted communications to ensure the accuracy of the composite recording. The defendant's objection to the admission of the composite recording on the ground that it was not sealed and had not been compared to the sealed original recording was denied, and numerous intercepted calls were played for the jury from the composite recording.

Upon the foregoing evidence, the jury convicted the defendant of grand larceny in the first degree, attempted grand larceny in the first degree, criminal diversion of prescription medications and prescriptions in the first degree, attempted criminal diversion of prescription medications and prescriptions in the first degree, conspiracy in the fourth degree, three counts of money laundering in the first degree, money laundering in the second degree, and commercial bribery in the first degree, and sentence was imposed. On appeal, the defendant argues, inter alia, that it was error to admit the composite recording of intercepted calls and that, with respect to all of the charges except commercial bribery in the first degree, the People failed to present legally sufficient evidence.

1. Admission of the Composite Recording of Intercepted Calls

After the United States Supreme Court struck down New York's eavesdropping statute as unconstitutional (see Berger v. New York , 388 U.S. 41, 43–44, 87 S.Ct. 1873, 18 L.Ed.2d 1040 ), the United States Congress passed the Omnibus Crime Control and Safe Streets Act of 1968 ( Pub L 90–351, 82 U.S. Stat 197; hereinafter the Act), setting forth "the minimum constitutional criteria for electronic surveillance" ( People v. Vespucci , 75 N.Y.2d 434, 438, 554 N.Y.S.2d 417, 553 N.E.2d 965 [internal quotation marks omitted]; see 18 USC § 2510 et seq. ). In so doing, Congress recognized the gravity of the privacy interests at stake—that "[e]very spoken word relating to each [individual's] personal, marital, religious, political, or commercial concerns" could be intercepted—and, thus, the need for extraordinary and uniform protection with regard to electronic surveillance ( S Rep 90–1097, 90th Cong, 2d Sess, reprinted in 1968 U.S.Code Cong & Admin News at 2112, 2154; see Berger v. New York , 388 U.S. at 55–56, 87 S.Ct. 1873 ). The federal law permitted the states to enact legislation governing such surveillance, as long as it conformed to the minimum requirements set forth under the Act (see 18 USC § 2516 [2]; People v. Vespucci , 75 N.Y.2d at 438, 554 N.Y.S.2d 417, 553 N.E.2d 965 ; People v. Shapiro , 50 N.Y.2d 747, 763–764, 431 N.Y.S.2d 422, 409 N.E.2d 897 ). Thereafter, New York adopted what is now codified as Criminal Procedure Law article 700, governing eavesdropping and video surveillance warrants, which tracks the...