U.S. v. Munoz
| Decision Date | 23 November 2005 |
| Docket Number | No. 03-16216.,03-16216. |
| Citation | 430 F.3d 1357 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Francisco MUNOZ, Alberto Llona, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
G. Richard Strafer, G. Richard Strafer, P.A., Angela D. Daker, Faith E. Gay, Rima Y. Mullins, White & Case, LLP, Michael A. Pizzi, Jr., Bierman, Shohat, Loewy & Klein, PA, Miami, FL, for Defendants-Appellants.
Sally M. Richardson, Anne R. Schultz, Asst. U.S. Atty., Emily Smachetti, Miami, FL, Douglas N. Letter, Washington, DC, for U.S.
Appeals from the United States District Court for the Southern District of Florida.
Before HULL, MARCUS and HILL, Circuit Judges.
Appellants Francisco Munoz ("Munoz") and Alberto Llona ("Llona") appeal their convictions and sentences for conspiracy to violate the federal Food, Drug & Cosmetic Act and six related counts of mail fraud. The charges stem from a scheme to sell, through telemarketing and without prescriptions, two treatments for erectile dysfunction. Appellants challenge their convictions on several grounds, including sufficiency of the evidence. Appellants also argue that their sentences were improperly enhanced on the basis of an incorrect loss calculation and in violation of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed. 2d 621 (2005). After review and oral argument, we affirm Appellants' convictions and sentences.
In late 1997 and early 1998, Munoz and Llona began discussing a business proposal with Dr. Carlos Nazir ("Nazir"), a urologist specializing in the treatment of erectile dysfunction. Munoz suggested that he, Llona, and Nazir market anti-impotence treatments to the general public through telemarketing. Nazir proposed the idea of creating a gel containing the prescription drugs prostaglandin, papaverine, and phentolamine. According to Nazir, urologists frequently combined these three drugs into an prescribable "tri-mix" injected directly into the erectile tissue of the penis to treat impotence. Nazir believed that a gel form of tri-mix, applied through a urethral suppository, would be "less aggressive" than an injectable treatment. More specifically, Nazir believed a gel would be easier for users to apply and less likely to entail serious side effects. Without direct injection into the penis, however, Nazir was aware that tri-mix gel would be unable to achieve the roughly 70% success rate of tri-mix injections.
In 1998, Munoz and Llona, along with non-party Fernando Maurin, formed U.S. One Marketing Services Corporation ("U.S. One"), a telemarketing business. Together Munoz and Llona owned 67% of U.S. One. Meanwhile, Nazir arranged to obtain tri-mix gel, to be named "Power Gel," from David Gaudio ("Gaudio"). Gaudio was the owner of, and pharmacist at, Prescription Specialties, a compounding pharmacy in Connecticut.
Because the components of Power Gel were prescription drugs, Gaudio insisted that Nazir provide prescriptions for any Power Gel ordered and that all Power Gel be delivered to Nazir and not to U.S. One. As such, Munoz and Llona, along with Gaudio and Nazir, agreed upon the following arrangement. Nazir wrote prescriptions using the names of his own patients without their knowledge. After Nazir faxed to Gaudio these fraudulent prescriptions, Gaudio shipped the Power Gel to Nazir's office and billed U.S. One. Nazir provided the drugs to U.S. One and Appellants Munoz and Llona paid Gaudio for the drugs. U.S. One then sold Power Gel to end users who had no connection to Nazir. As Munoz and Llona do not dispute, both knew that Nazir was writing prescriptions in his patients' names even though his patients were never aware of this fact and never received either the prescriptions or the tri-mix prescribed.
Appellants Munoz and Llona decided to promote Power Gel to a Spanish-speaking market. Munoz, who headed U.S. One's sales efforts, wrote scripts for radio advertisements and infomercials in which both Munoz and Nazir eventually appeared. In the advertisements, Munoz claimed that Power Gel was 100% effective as a treatment for impotence and that it had zero contraindications or side effects. Munoz also instructed Nazir to "enhance" what he said in the advertisements in order to increase sales, asking Nazir to declare that "nothing is better than Power Gel" and insisting that Nazir make no negative statements about Power Gel. The advertisements emphasized that Power Gel required no prescription and could be purchased and used with complete discretion. The advertisements also claimed that Power Gel was easy to apply, caused no pain, produced results in 10 minutes, and resulted in a complete erection lasting from 30 minutes to an hour.
Appellant Llona's responsibilities were more administrative than Munoz's, but Llona also wrote a pamphlet that U.S. One distributed with each Power Gel shipment.1 The pamphlet discussed the physical causes of erectile dysfunction and then described the use of Power Gel and how to apply it. In a section entitled "Subsequent effects," the pamphlet mentioned the possibility that an erection might last "a little while" after sexual relations, in which case the pamphlet instructed to "use some ice [on the penis] for a period of time no longer than ten minutes." The pamphlet also mentioned that "[y]ou may feel some pain in the penis, testicles, and in the area between the penis and the rectum." The "Subsequent effects" section concluded that "[i]n general, these effects are most often experienced with the first several uses, and disappear completely in the following application." The pamphlet later asserts that "30 percent of those who used this product did not respond to the treatment, ten percent complained of discomfort, and there has been no indication of priapism or prolonged and painful erection."
Customers who contacted U.S. One expressing interest in Power Gel talked to U.S. One's telephone salesmen. The scripts for the salesmen instructed them to say that there were no contraindications or side effects to Power Gel, that it would not cause burning or discomfort, and that it could be used by men with high blood pressure, diabetes, or who had undergone heart or prostate surgery.
Despite these representations in U.S. One's marketing and materials, Nazir had previously told Llona and Munoz that Power Gel would only help 30 to 40% of users. Nazir also knew and informed Appellants that the placebo effect for impotence treatments of all kinds is roughly 30 to 40%. Thus Nazir, in effect, communicated to Appellants that Power Gel would be no better than a placebo at treating impotence. None of U.S. One's marketing mentioned that prostaglandin, an ingredient of Power Gel, may cause harmful uterine contractions and that Power Gel users should therefore wear a condom. None of U.S. One's materials discussed in any detail the potential side effect of priapism, a dangerous and painful persistent erection that can require medical treatment to prevent permanent damage to the penis. None of the marketing stated that either Power Gel or its ingredients were prescription drugs. The advertisements and pamphlet also failed to discuss in any detail a range of other known side effects of Power Gel's ingredients.2
Shortly after U.S. One began selling Power Gel, Appellants Munoz and Llona expressed to Nazir an interest in an oral alternative to Power Gel. Nazir proposed Vasomax, an orally-administered phentolamine, and sent Appellants literature about the product. Appellants decided to sell their own oral phentolamine under the name "Vigor," and they established the same arrangement with Gaudio to obtain the drug. Nazir continued to write fraudulent prescriptions ostensibly for his patients and to fax these prescriptions to Gaudio. After receiving the prescriptions, Gaudio would ship the Vigor to Nazir. In turn, Nazir would hand the Vigor over to Appellants and U.S. One, and Appellants and U.S. One would pay Gaudio for the drugs.
Nazir made it clear to Appellants Munoz and Llona that Vigor was not an improvement over Power Gel, and that it could likewise be expected to show only a 30 to 40% success rate, i.e. about the same as a placebo. Moreover, both Nazir and Gaudio explained to Appellants that Vigor was another prescription drug with side effects and contraindications, posing special dangers for users with high blood pressure. Despite having been informed of the low effectiveness of Vigor and the risks involved in using it, Appellants marketed Vigor in much the same manner as they were marketing Power Gel. The advertisements for Vigor stated that Vigor required no prescription and had no contraindications or side effects. Both Appellants told U.S. One's salesmen to tell potential customers that Vigor could be used by anyone, including people who were sick or people with heart conditions.
In the summer of 1998, Cesar Arias ("Arias"), a registered pharmacist working for the Florida Department of Health, heard some of the Power Gel advertisements on the radio and received an anonymous complaint about Power Gel. Arias contacted Special Agent Mitchell Tapper ("Tapper"), who worked for the Food and Drug Administration ("FDA"). Tapper and Arias approached the Miami Police Department to voice suspicions about the legality of Power Gel. Together the agents began an investigation, making several undercover purchases of Power Gel. An analysis of Power Gel informed the agents that the product contained prescription drugs.
Arias also made an undercover call to U.S. One seeking to purchase Vigor. The U.S. One salesman told Arias that Vigor was a natural product, that it had no side effects, that it would not hurt or burn, and that it was safe to take regardless of the user's medical condition, including high blood pressure. Testing of Vigor revealed that Vigor...
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