United States v. Cadden

Decision Date09 July 2020
Docket Number17-2062,Nos. 17-1694,17-1712,s. 17-1694
Citation965 F.3d 1
Parties UNITED STATES of America, Appellee, Cross-Appellant, v. Barry J. CADDEN, Defendant, Appellant, Cross-Appellee.
CourtU.S. Court of Appeals — First Circuit

Bruce A. Singal, with whom Michelle R. Peirce, Lauren E. Dwyer, and Barrett & Singal, P.C. were on brief, for appellant/cross-appellee.

David M. Lieberman, Attorney, Criminal Division, Appellate Section, United States Department of Justice, with whom Andrew E. Lelling, United States Attorney, Amanda P. Strachan, Assistant United States Attorney, George P. Varghese, Assistant United States Attorney, Brian A. Benczkowski, Assistant Attorney General, and Matthew S. Miner, Deputy Assistant Attorney General, were on brief, for appellee/cross-appellant.

Before Barron, Stahl, and Lipez, Circuit Judges.

BARRON, Circuit Judge.

For years, the New England Compounding Center ("NECC") was a growing pharmacy business engaged in the practice of "compounding," which involves combining drugs with other substances to produce specialized medications for use by patients. In the fall of 2012, however, patients across the country became seriously ill -- and many eventually died -- after receiving injections of NECC-compounded medications that had been contaminated by fungi and bacteria. A federal criminal investigation into NECC's compounding practices soon followed, which then led to the convictions and punishments that are at issue in the two related appeals that are now before us.

The first of these appeals is brought by Barry Cadden, who was the founder and part-owner, as well as the president, of NECC at the time that the company manufactured and distributed the contaminated medications from its facilities in Framingham, Massachusetts. He challenges his 2017 federal convictions in the United States District Court for the District of Massachusetts for one count of racketeering, See 18 U.S.C. § 1962(c) ; one count of racketeering conspiracy, See id. § 1962(d) ; fifty-two counts of mail fraud, See id. § 1341; and three counts of violating the Federal Food, Drug, and Cosmetic Act, See 21 U.S.C. §§ 331(a), 333(a). He also challenges the $7.5 million forfeiture order that the District Court imposed on him. The other appeal that we address is brought by the government. It takes aim at both the District Court's forfeiture order against Cadden and the 108-month prison sentence that he received.

We affirm each of the convictions that Cadden challenges on appeal. We vacate and remand his prison sentence due to the errors that the government correctly points out that the District Court made in calculating Cadden's recommended sentencing range under the United States Sentencing Guidelines ("Guidelines"). We also vacate and remand the forfeiture order in consequence of separate errors that Cadden and the government, respectively, identify in the way that the District Court determined the amount of the forfeiture.

I.

For years, NECC produced large volumes of compounded medications and sold them without incident to hospitals and other medical facilities throughout the United States. In the early fall of 2012, however, patients across the country started to fall sick with fungal meningitis

, spinal or paraspinal infections, and other seemingly related illnesses. Over time, additional cases of patients suffering from these illnesses arose throughout the United States that seemed to be tied to the earlier ones.

A federal investigation into this unusual outbreak of seemingly related illnesses ensued. It traced the outbreak's cause to patients having been injected with a heavily contaminated medication that NECC had compounded. That medication was methylprednisolone

acetate ("MPA"), which is a steroid that is injected primarily into the backs or knees of patients to help them to alleviate their pain.

At that point, federal investigators began looking into NECC's compounding practices. The investigators discovered what they determined were significant deficiencies in the clean room where NECC had compounded the contaminated MPA as well as in other aspects of NECC's operations. Among the deficiencies were apparent violations of Chapter 797 of the "United States Pharmacopeia," or, as it is otherwise known, "USP-797," which the Massachusetts Pharmacy Board requires pharmacists to follow, See 247 Mass. Code Regs. 901(3), and which regulates the compounding of "high-risk" sterile medications like MPA

. Such medications are so deemed due to the nature of the harm that can befall patients who use them if they have not been properly prepared. The investigation also revealed that NECC had employed a pharmacy technician, Scott Connolly, who did not have a license that the Massachusetts Pharmacy Board required in order for him to be permitted to engage in the compounding work that he performed for the company.

Based on the investigation, a federal grand jury indicted Cadden on December 16, 2014, in the District of Massachusetts for a broad range of criminal conduct. These charges included fifty-three counts of mail fraud in violation of 18 U.S.C. § 1341, one count of racketeering in violation of 18 U.S.C. § 1962(c), one count of racketeering conspiracy in violation of 18 U.S.C. § 1962(d), one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371, and forty-one counts of Federal Food, Drug, and Cosmetic Act ("FDCA") violations, See 21 U.S.C. §§ 331(a), 333(a).

Many of the charges centered on fraudulent representations that NECC representatives had allegedly made to customers about the safety standards that the company followed in compounding various medications -- including the contaminated MPA -- that were shipped to customers between March 25, 2010, and September 27, 2012. In particular, each of the fifty-three mail fraud counts identified a specific shipment of compounded medications that NECC sent to one of its customers after having made inaccurate representations to that customer about the standards NECC would adhere to in preparing those medications.

The racketeering and racketeering conspiracy charges, too, were based on a "pattern of racketeering activity," 18 U.S.C. 1961(5), that centered on mail fraud, See id. § 1961(1)(B) (defining mail fraud as a "racketeering activity"). The racketeering offense itself alleged seventy-eight separate acts of racketeering as part of that pattern, of which the lion's share -- fifty-three acts -- were mail fraud acts that matched the alleged mail fraud acts set forth in the corresponding counts that charged Cadden with mail fraud as a stand-alone offense. The racketeering conspiracy charge, moreover, alleged that Cadden conspired with others to commit a racketeering violation involving a pattern of racketeering activity consisting of predicate acts of racketeering involving mail fraud, although it did not identify any of those acts of mail fraud specifically.

Even though many of the charges against Cadden centered on alleged misrepresentations about NECC's compounding practices to its customers, the one for racketeering was not based only on such allegations. And, as we will explain, a number of the issues that Cadden raises on appeal concern the fact that the racketeering charge alleged not only that Cadden's pattern of racketeering activity involved fifty-three predicate acts of mail fraud but also that it involved twenty-five predicate acts of second-degree murder, which is itself a racketeering activity. See id. § 1961(1)(A). Each of these alleged predicate acts of second-degree murder was associated with a death of a patient that allegedly had been caused by that individual having been injected with the contaminated MPA

that NECC had compounded. (By the time of Cadden's trial, 753 patients had been identified as having been afflicted in the outbreak that had been traced to NECC's contaminated MPA, of whom sixty-four had died in consequence of having been injected with that medication.)

The indictment charged thirteen others along with Cadden for their roles in alleged criminal conduct connected to NECC's compounding operations. The District Court severed Cadden's trial, however, from those for the others. Moreover, near the end of Cadden's ten-week trial, the District Court dismissed one of the stand-alone mail fraud counts that Cadden faced, as well as the alleged predicate act of racketeering involving mail fraud that corresponded to that stand-alone mail fraud count.

The jury ultimately found Cadden guilty of the racketeering and racketeering conspiracy counts, all fifty-two of the remaining stand-alone mail fraud counts, and three of the FDCA violations, each of which related to the introduction of misbranded drugs into interstate commerce. Cadden was found not guilty both of conspiring to defraud the United States and of the other FDCA counts. In a special verdict form, moreover, the jury indicated that, with respect to the racketeering charge, it did not unanimously find beyond a reasonable doubt any of the alleged predicate acts of racketeering involving second-degree murder. The special verdict form further indicated that the jury found forty-seven of the fifty-two alleged predicate acts of racketeering involving mail fraud, and thus it was on the basis of those mail-fraud-based predicate acts of racketeering alone that the jury's finding that there was a "pattern of racketeering activity" depended.

The District Court entered judgments of conviction and sentenced Cadden to a prison term that was at the very high end of the range that it had calculated under the Guidelines: 108 months' imprisonment. Based on Cadden's racketeering and racketeering conspiracy convictions, the District Court also imposed a forfeiture order on him in the amount of $7,545,501. Cadden's appeal and the government's appeal followed.

II.

Cadden first takes aim at the sufficiency of the evidence to support the allegations of mail fraud that underlie thirty of his fifty-two stand-alone mail fraud convictions1 as well...

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