United States v. Carter

• Decision Date: 27 September 2021
• Docket Number: No. 19-1645,No. 19-1644,19-1644
• Parties: UNITED STATES of America, Appellant, v. Sharon P. CARTER, Defendant, Appellee. United States of America, Appellant, v. Gregory Conigliaro, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

15 F.4th 26

UNITED STATES of America, Appellant,

v.Sharon P. CARTER, Defendant, Appellee.

United States of America, Appellant,

v.Gregory Conigliaro, Defendant, Appellee.

No. 19-1644

No. 19-1645

United States Court of Appeals, First Circuit.

September 27, 2021

Ross B. Goldman, Criminal Division, Appellate Section, United States Department of Justice, with whom Andrew E. Lelling, United States Attorney, Amanda P.M. Strachan, Assistant United States Attorney, Donald C. Lockhart, Assistant United States Attorney, Brian A. Benczkowski, Assistant Attorney General, and John P. Cronan, Principal Deputy Assistant Attorney General, were on brief, for appellant.

Michael J. Pineault, with whom Clements & Pineault, LLP was on brief, for appellee Sharon P. Carter.

Daniel M. Rabinovitz, with whom Shawn Lu and Murphy & King, P.C. were on brief, for appellee Gregory Conigliaro.

Before Lynch, Lipez, and Barron, Circuit Judges.

BARRON, Circuit Judge.

These consolidated appeals are the latest to reach us in connection with the federal criminal investigation that ensued after patients across the country became seriously ill or died in the fall of 2012 after having been injected with a contaminated medication traced to the New England Compounding Center ("NECC"). NECC was a licensed pharmacy based in Framingham, Massachusetts. It combined drugs with other substances to create specialized medications -- a practice known as compounding.

Unlike in the other appeals that we have considered in connection with the federal criminal investigation into NECC's operations, see United States v. Stepanets, 989 F.3d 88 (1st Cir. 2021) ; United States v. Cadden, 965 F.3d 1 (1st Cir. 2020) ; United States v. Chin (Chin I ), 965 F.3d 41 (1st Cir. 2020), the appellant here is the government. It challenges the post-verdict judgments of acquittal that the District Court entered in favor of Sharon Carter and Gregory Conigliaro, who were, respectively, NECC's former Director of Operations and NECC's former Vice President, Secretary, Treasurer, and General Manager.

Carter and Conigliaro were named along with twelve others in a 131-count indictment that a grand jury in the District of Massachusetts handed up in December 2014. Neither Carter nor Conigliaro was charged with playing any direct role in the physical compounding of the contaminated medication that was linked to patient illnesses and deaths. Instead, each was charged only with counts that pertained to their roles in connection with other aspects of NECC's operations. Among those charges was one that alleged that each had, while working at NECC, conspired to defraud the United States in violation of 18 U.S.C. § 371 "by interfering with and obstructing" the ability of the United States Food and Drug Administration ("FDA") to oversee the practices of NECC.

A jury found both Carter and Conigliaro guilty of violating § 371 following their joint trial. Carter and Conigliaro then each moved pursuant to Federal Rule of Criminal Procedure 29 for a post-verdict judgment of acquittal on the § 371 count for which each had been found guilty.¹ The District Court granted the motions. The government now appeals the resulting judgments of acquittal. We reverse.

I.

We describe the facts concerning the defendants' alleged conduct as they are pertinent to our analysis. To set the stage for that analysis, though, it is useful first to recount both the involved procedural history that has brought us to this point and some of the basic legal background that bears on the issues present in these appeals.

A.

The indictment charged that between 1998 and approximately October 2012, Carter, Conigliaro,² and three of their codefendants who also were employees of NECC at the time -- Barry Cadden, Robert Ronzio, and Alla Stepanets³ -- had engaged in a conspiracy to violate 18 U.S.C. § 371. That statute criminalizes the "conspir[acy]" by "two or more persons ... to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose" as long as "one or more of such persons do any act to effect the object of the conspiracy." Id. We have interpreted the "defraud" clause of § 371 to encompass conspiracies that seek to "interfere with government functions." United States v. Goldberg, 105 F.3d 770, 773 (1st Cir. 1997) ; see also United States v. Morosco, 822 F.3d 1, 6 (1st Cir. 2016) (explaining that § 371 criminalizes conspiracies to "obstruct[ ] the operation of any government agency by any ‘deceit, craft or trickery, or at least by means that are dishonest’ " (quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 68 L.Ed. 968 (1924) )); United States v. Barker Steel Co., 985 F.2d 1123, 1128 (1st Cir. 1993) ("The objective of the agreement is unlawful if it is ‘for the purpose of impairing, obstructing or defeating the lawful function of any department of [g]overnment.’ " (quoting United States v. Hurley, 957 F.2d 1, 4 (1st Cir. 1992) )).

In detailing the alleged § 371 conspiracy, the indictment charged the defendants with "interfering with and obstructing the lawful governmental functions of the FDA." In support of this contention, the indictment alleged that Carter, Conigliaro, and their co-conspirators had agreed to enter into a conspiracy defraud the FDA by "purport[ing] to be operating NECC as a state-regulated pharmacy, dispensing drugs pursuant to valid, patient-specific prescriptions as required by Massachusetts law, rather than as a drug manufacturer distributing drugs in bulk to customers without prescriptions and thereby subject to heightened regulatory oversight by the FDA" pursuant to its authority under the Food, Drug, and Cosmetic Act ("FDCA").

Passed in 1938, the FDCA gave the FDA authority to regulate "any new drug." Act of June 25, 1938, Pub. L. 75-717, 52 Stat. 1040 (codified at 21 U.S.C. § 301 et seq. ); FDCA § 505(a) (codified at 21 U.S.C. § 355(a) ). During the time of the alleged conspiracy, the FDCA defined "new drug" as "[a]ny drug ... not generally recognized ... as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof." 21 U.S.C. § 321(p). It further provided that "[n]o person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed [with the FDA] is effective with respect to such drug." Id. § 355(a). In addition, it provided that any "new drug" must be made in accordance with "current good manufacturing practice" ("GMP") -- a set of regulations that the FDA subsequently promulgated to impose strict safety controls on manufacturers of new drugs. Id. § 351(a)(2)(B); see also 21 U.S.C. § 371(a) ("The authority to promulgate regulations for the efficient enforcement of this chapter, except as otherwise provided in this section, is vested in the [Commissioner of the FDA].").

Compounded drugs would appear to fit within the FDCA's definition of a "new drug." After all, "[d]rug compounding is a process [that] combines, mixes, or alters ingredients to create a medication tailored to the needs of an individual patient ... that [is typically] not commercially available." Thompson v. Western States Med. Cntr., 535 U.S. 357, 360-61, 122 S.Ct. 1497, 152 L.Ed.2d 563 (2002). Nevertheless, for the first fifty years after the FDCA's enactment, "the FDA generally left regulation of compounding to the States." Id. at 362, 122 S.Ct. 1497.

"[E]ventually," however, the FDA "became concerned ... that some pharmacists were manufacturing and selling drugs under the guise of compounding, thereby avoiding the FDCA's new drug requirements." Id. It then began to take a more proactive role in the oversight of compounders -- at least those compounders that the FDA concluded behaved as manufacturers. Id. at 362-63, 122 S.Ct. 1497.

The indictment here centered on the role that the alleged conspirators supposedly played in defrauding the FDA. In particular, the indictment claimed that the defendants conspired to prevent the FDA from being able to determine whether NECC was a manufacturer or a pharmacy by intentionally misrepresenting the nature of the company's operations. The indictment explained in that respect that, as a "manufacturer," NECC would have been subject to heightened regulatory oversight by the FDA pursuant to its authority under the FDCA, while, as a "pharmacy," NECC would have been primarily regulated by state pharmacy boards. By conspiring to misrepresent to the FDA that NECC was operating only as a pharmacy and not as a manufacturer, the indictment alleged, the defendants conspired to interfere with the FDA's oversight function with respect to NECC and thereby conspired to defraud the United States in violation of § 371, given that such regulatory oversight by FDA is a "government function."

The indictment also alleged how the defendants carried out the alleged conspiracy to misrepresent the company's operations. Specifically, it alleged that the defendants agreed to participate in a conspiracy by which NECC would regularly misrepresent to the FDA that it was shipping its compounded medications to customers (which were hospitals and medical facilities rather than patients in their own right) pursuant to valid, patient-specific prescriptions. Yet, in fact, the indictment alleged, the company was processing the customers' orders for those medications without there being any such prescriptions. It then described three methods by which NECC allegedly disguised the fact that it was shipping compounded drugs in this manner before turning to the roles that that conspirators allegedly each played in carrying out the deception.

One such alleged method involved "backfilling." Here, NECC allegedly allowed customers to place their first order for medications without supplying any prescriptions or patient names. NECC then collected from customers the roster of patient names to whom these customers ended up prescribing and administering the...