U.S. v. Radix Laboratories, Inc.

• Decision Date: 15 May 1992
• Docket Number: Nos. 91-2718,91-2719,s. 91-2718
• Citation: 963 F.2d 1034
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. RADIX LABORATORIES, INCORPORATED, and Premchand Girdhari, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1034

963 F.2d 1034

UNITED STATES of America, Plaintiff-Appellee, v. RADIX LABORATORIES, INCORPORATED, and Premchand Girdhari Defendants-Appellants.

Nos. 91-2718, 91-2719.

United States Court of Appeals Seventh Circuit.

Argued Jan. 22, 1992.

Decided May 14, 1992.

As Amended May 15, 1992.

Gregory T. Everts (argued) and Kenneth Jost, Dept. of Justice, Consumer Litigation, Washington, D.C., for plaintiff-appellee.

Glenn Reynolds (argued), O'Brien & Reynolds, Madison, Wis., for defendants-appellants.

Before COFFEY and KANNE, Circuit Judges, and WOOD, Jr., Senior Circuit Judge.

HARLINGTON WOOD, Jr., Senior Circuit Judge.

Radix Laboratories, Incorporated and Premchand Girdhari, president of Radix Laboratories, Incorporated, pled guilty to and were sentenced on violations of 21 U.S.C. § 331(a), which prohibits the introduction or delivery for introduction into interstate commerce of adulterated or misbranded drugs. Additionally, Girdhari pled guilty to and was sentenced on a violation of 18 U.S.C. § 1001, prohibiting the making of false statements to any department or agency of the United States. Radix Laboratories, Incorporated was fined $50,000. Girdhari was sentenced to a one-year prison term and fined $50,000. Both Radix and Girdhari appeal these sentences. The district court did not abuse its discretion in imposing the sentences, which are well within the statutory maximum, and the government's conduct in this case does not constitute reversible error. ¹ We therefore affirm.

FACTS

From the late 1970s to 1991, Radix Laboratories, Incorporated ("Radix") manufactured and sold animal drug products. Premchand Girdhari was the corporation's president. On January 9, 1991, Radix and Girdhari were charged in a 21-count indictment with one count of conspiring to defraud the Food and Drug Administration ("FDA"), a violation of 18 U.S.C. § 371, four counts manufacturing adulterated animal drugs in violation of 21 U.S.C. § 331(b) and 331(k), ten counts distribution of adulterated animal drugs, violations of 21 U.S.C. § 331(a) and 331(b), four counts distribution Subsequent to the guilty pleas, the prosecution submitted a letter and exhibits to the probation office detailing the violations to which Radix and Girdhari pled guilty as well as background material concerning the enforcement of FDA regulations and a factual summary of other violations committed by Radix and Girdhari. The defendants were not convicted on the other violations. The probation office included the government's letter in the presentence report. In the letter the government sought to demonstrate that Radix and Girdhari had trampled on and regularly flouted FDA animal drug regulations over a period of several years. The factual summary in the letter was divided into three sections and described events that took place at Radix facilities between 1983 and 1991.

                of misbranded drugs in violation of the same section and subsections and two counts making false statements to the United States, violations of 18 U.S.C. § 1001. 2  Prior to trial Radix and Girdhari pled guilty but to substantially fewer counts than were charged in the indictment.   Radix pled guilty to one count distributing a misbranded drug, a felony violation under 21 U.S.C. §§ 331(a) and 333(b).   Girdhari pled guilty to one count of distributing an adulterated animal drug with the intent to defraud and mislead, 21 U.S.C. §§ 331(a), 333(b) and 18 U.S.C. § 2, and he pled guilty to one count of making a false statement to the FDA, a felony violation of 18 U.S.C. § 1001.   All of the defendants' offenses occurred prior to November 1, 1987, so the United States Sentencing Guidelines did not apply
                

The first section of the factual summary describes events that took place between 1983 to January 1986. During those years, the Radix facility was located on Esmond Road in Eau Claire, Wisconsin. FDA inspections of the Esmond Road facility revealed gross manufacturing deficiencies. After an April 1983 inspection, the FDA concluded that the manufacture of sterile products was virtually impossible at the Esmond Road facility, though Radix products produced there were labeled "sterile." Moreover, Esmond Road production records did not allow the tracking of a particular raw material through the manufacturing process into the hands of the veterinarian customer as required by the Federal Food, Drug, and Cosmetic Act. See 21 U.S.C. § 351(a)(2)(B); see also 21 C.F.R. 211.80(a) and 211.184. Tracking was impossible at the Esmond Road plant since production records did not exist. It was during this time Girdhari was told by the FDA that if Radix made drugs only for the Eau Claire Animal Hospital, a local hospital which was part owner of Radix at that time, Radix did not need to register with the FDA as a drug manufacturer due to an exemption from registration for veterinarians. See 21 C.F.R. 207.10. Girdhari decided to capitalize on the exemption and sell a drug called "Cal-Plex" to a customer in South Dakota. In April 1985 Girdhari claimed he had not sold the product to any customer except Eau Claire Animal Hospital. This false statement provided the basis for Girdhari's guilty plea to one violation of 18 U.S.C. § 1001. The prosecution's letter details numerous other falsehoods Girdhari made to the FDA during inspections in September 1985, November 1985 and January 1986.

Girdhari and Radix dispute little of the government's factual summary of events occurring at Esmond Road: "It is without a doubt that the Esmond Road facility was not appropriate for manufacturing parenteral (injectable) drugs." Moreover, Girdhari does not address the government's assertions concerning falsehoods to the United States other than the one to which Girdhari pled guilty. Consequently, there was little discussion of the 1983 to January 1986 occurrences at the sentencing hearing.

Girdhari and Radix dispute much of the summary regarding the next time period covered in the government's letter, January 1986 to March 1987, after Radix was moved to a new facility at International The affidavits were introduced through the testimony of Marlin Bergeson, a Compliance Officer with the FDA. Bergeson testified that he talked to the four employees in February 1990, approximately three years after the affidavits were taken, in order to verify the information in the affidavits. During these conversations, Bergeson took notes. At the hearing Bergeson explained the factual basis of the 12-paragraph summary. First, Bergeson described from employee affidavits two incidents where Mr. Girdhari had mopped up a product which had overflowed a vat and then squeezed the mop out into the vat for further production. Girdhari had admitted to doing this only once. Bergeson then explained the basis for paragraph 2 stating that Girdhari had admitted to the FDA that he was shipping drugs without NADA--Girdhari told FDA investigators during a March 1987 inspection of his practice. ³ As for paragraphs 3, 4 and 6, stating that no production records were kept for products Girdhari considered illegal made between June and December 1986, that Girdhari and his wife manufactured unapproved products on weekends and in the evening to avoid FDA detection, and that Girdhari kept labels and active ingredients for unapproved products in his basement at home instead of at the Radix facility, Bergeson revealed the basis of these paragraphs to be employee affidavits. Immediately after this testimony, the government's attorney invited the court to examine certain portions of each of the four employee affidavits. Bergeson then explained the factual basis of paragraph 7 of the summary stating that Girdhari ordered a product be filled into a group of bottles though one bottle had broken and glass fragments entered the other bottles compromising their sterility; paragraph 8 stating that when a customer returned a product to Radix because it was causing abscesses at the injection site, Girdhari directed his employees to dump the product into a vat to be filtered and then refilled back into the same bottles without testing the product or washing the bottles; and paragraph 9 which states that Girdhari instructed his employees to indicate that a product was destroyed for not meeting specifications when in fact the product was shipped to a customer. All of this information was derived from the employee affidavits. Regarding paragraph 11, Bergeson named the employee who told him on the phone that Girdhari told him (the employee) if an animal died after taking a Radix drug, the farmer would blame the disease rather than the drug. Last, Bergeson explained that the basis of paragraph Defendants' counsel objected to Bergeson's testimony because the affidavits to which Bergeson testified were not turned over until after Bergeson's testimony. Counsel did not request a continuance, but the court took a recess after the government's direct examination of Bergeson. Radix and Girdhari's counsel had approximately 90 minutes to review the affidavits and prepare for cross-examination. During cross-examination, Bergeson admitted that he did not prepare the affidavits and that he was not present when the employees were interviewed by the FDA. Bergeson also admitted that he was aware that the employees had a disagreement with Girdhari that led to them either being fired or quitting and that all of the employees gave statements to the FDA immediately following the end of their employment with Radix. Then, defendants' counsel pointed out that none of the employees' allegations in the affidavits formed the basis of what Girdhari and Radix were convicted of as a result of their plea.

                Drive in Eau Claire.   The primary basis for the January 1986 through March 1987 summary is four affidavits of former Radix employees.   The four employees were hired at different times in 1986.   Two of the employees were fired on October 23, 1986.   All of the affidavits were taken in January of 1987.   The

...