United States v. Conigliaro
| Citation | 384 F.Supp.3d 145 |
| Decision Date | 07 June 2019 |
| Docket Number | CRIMINAL ACTION NO. 14-10363-RGS |
| Parties | UNITED STATES of America v. Gregory CONIGLIARO and Sharon Carter |
| Court | U.S. District Court — District of Massachusetts |
Amanda P. Strachan, George P. Varghese, Christopher R. Looney, David G. Lazarus, United States Attorney's Office, Boston, MA, John W.M. Claud, United States Department of Justice, Consumer Protection Branch, Washington, DC, for United States of America.
Michael J. Pineault, Clements & Pineault, LLP, Daniel M. Rabinovitz, Shawn Lu, Murphy & King, Professional Corporation, John K. Wells, Pete S. Michaels, Greenberg Traurig LLP, Boston, MA, for Gregory Conigliaro and Sharon Carter.
MEMORANDUM AND ORDER ON DEFENDANTS' MOTIONS FOR JUDGMENTS OF ACQUITTAL
Once a promising niche drug business, the now defunct New England Compounding Center (NECC) willfully deviated from pharmaceutical industry safety standards in a mad pursuit of profits. Scores died and hundreds were injured when three contaminated batches of injectable methylprednisolone acetate (MPA) triggered a national outbreak of fungal meningitis
. In the third of the four federal jury trials that followed, defendants Gregory Conigliaro and Sharon Carter were convicted of conspiring to defraud the United States Food and Drug Administration (FDA) by frustrating its regulatory oversight of NECC, in violation of 18 U.S.C. § 371.
Both Conigliaro and Carter now move for a judgment of acquittal pursuant to Fed. R. Crim. P. 29, arguing, inter alia , that because the FDA's regulatory authority over compounding pharmacies was not clearly established, their conspiracy convictions were legally impossible and violated basic norms of due process. As I agree that defendants' rights to fair notice and due process were violated, their motions will be allowed.
On December 16, 2014, a federal grand jury handed up an indictment targeting fourteen former owners and employees of NECC. What the indictment lacks in precision it compensates for in length: 131 separate criminal counts involving differing combinations of defendants are spread over seventy-three pages. The unifying theory of the indictment is the allegation that NECC came to be operated as a continuing criminal enterprise as defined by the Racketeer Influenced and Corrupt Organizations Act (RICO), in violation of 18 U.S.C. § 1961. In support of the theory, the indictment sets out seventy-eight RICO predicate acts ranging from second-degree murder to mail fraud. Confusing matters further, under the RICO heading, the indictment sets out two distinct racketeering enterprises – one centered on twenty-five predicate acts of second-degree murder connected to the shipment of the three lots of fungal-contaminated MPA,1 the other more loosely centered on mail fraud and violations of the federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq.2 Bringing up the tail end of the indictment, the majority owners of NECC, Carla and Doug Conigliaro3 (who were not involved in the day-to-day operations of NECC) were charged with criminal contempts of Bankruptcy Court orders freezing their assets, and with the illegal structuring of certain cash transactions involving their personal bank accounts.4
The indictment charged three distinct conspiracies: a racketeering conspiracy (Count 2),5 a conspiracy to illicitly structure bank transactions (Count 128), and finally – and most relevant here – a Klein conspiracy to defraud (mislead) the United States, specifically the FDA, in violation of 18 U.S.C. § 371 (Count 3).6 The odyssey of Count 3 is worth recounting, if in brief. In addition to Carter, Conigliaro, and Ronzio,7 Cadden and Stepanets were also named as Klein conspirators and were acquitted by their respective juries; Ronzio, as previously noted, pled guilty pursuant to a cooperation agreement.8
The core allegation is that Conigliaro, Carter, and their fellow conspirators entered a corrupt agreement to defraud the FDA of its "right" to have its affairs conducted "free from corruption, fraud, improper and undue influence, dishonesty, unlawful impairment and obstruction." Indictment, Dkt #1, ¶ 77. The generic conspiracy statute, 18 U.S.C. § 371, in broad terms criminalizes conspiracies "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." The "defraud clause" of § 371 has been interpreted to encompass schemes that seek to "interfere with government functions." United States v. Goldberg , 105 F.3d 770, 773 (1st Cir. 1997) ; see also United States v. Barker Steel Co. , 985 F.2d 1123, 1128 (1st Cir. 1993) ().
Implicit in the government's theory was the proposition that, as a matter of law (if not as a matter of real world practice), only two distinct entities crafted new drugs for the market: (1) the classic retail pharmacy (like Walgreens or CVS), where a neighborhood pharmacist received a doctor's patient-specific prescription and then compounded the prescribed ingredients to make the medication, and (2) industrial drug manufacturers (like Merck or Pfizer) that created drugs in bulk and shipped them wholesale to distributors. While state boards of pharmacy had supervisory jurisdiction over the former, manufacturers fell into the exclusive regulatory purview of the FDA.
The indictment alleged three material written misrepresentations by the alleged coconspirators to the FDA. The first, written in 2003 by Barry Cadden, responded to an FDA inquiry with the assertion that NECC was not bound by the FDA's code of good manufacturing practices "since we [NECC] are a compounding pharmacy, not a manufacturer." Indictment ¶ 89. Similarly, in 2007, Cadden objected to any proposed FDA oversight, explaining that NECC "dispenses compounded medications [only] upon receipt of valid prescriptions." Id. ¶ 91.9 Finally, Conigliaro, in an October 1, 2004 letter to the FDA, described NECC as "a small-scale, family-run, compounding-only pharmacy, not a manufacturer." Id. ¶ 90.10 Although Carter was not alleged to have ever communicated directly with state or federal regulators, because of her position as NECC's Director of Operations, she was presumed to have been aware that NECC was using celebrity or fictitious names11 (or names of prior patients) as placeholders to facilitate the bulk shipment of compounded medications to hospitals and clinics.
Conigliaro, joined by the other defendants charged with the Klein conspiracy, first sought to have Count 3 dismissed under Rule 12(b)(3). See Mot. to Dismiss Count 3, Dkt ## 394, 395 (Nov. 13, 2015). He argued that Count 3 failed to allege a violation of § 371 as a matter of law, failed to give adequate notice of the nature of the offense, and that, as applied, § 371 was void for vagueness. The court denied the motion, finding that the grand jury had "more than adequately defined the purpose of the conspiracy: To induce regulatory authorities, including the FDA, into believing that NECC was doing business as a compounding pharmacy when in fact it was in the business of manufacturing drugs." See Mem. and Order, Dkt # 671, at 5 (Sept. 21, 2016). Because a motion to dismiss an indictment is rarely, if ever, an appropriate vehicle to challenge the sufficiency of the underlying evidence, and because the indictment tracked the language of the statute and provided facts "specific enough to apprise the defendant of the nature of the accusation against him," United States v. Serino, 835 F.2d 924, 929 (1st Cir. 1987), no more was required to allow the prosecution to proceed. Cf. United States v. Stepanets , 879 F.3d 367, 370, 372 (1st Cir. 2018) ().
Seven months later, after the verdict in the Cadden trial, Conigliaro (joined by Carter and Stepanets) filed a renewed Motion to Dismiss Count 3, see Dkt ## 1013, 1014 (Apr. 14, 2017). In the renewed motion, Conigliaro argued that the evidence offered and admitted at Cadden's trial "unequivocally establish[ed] that there [was] no discernible federal law defining any clear distinction between a compounding pharmacy and a drug manufacturer," and it was thus "legally impossible for the FDA to be defrauded in the manner the government alleged." Dkt # 1014, at 1-2. In its opposition to the motion, the government insisted that Conigliaro's "legal impossibility argument" was more accurately a factual one "that relies on evidence to be presented to and assessed by a jury at trial." See Gov't's Opp'n, Dkt # 1032 at 8 (May 12, 2017). The government further noted that it could Id. at 9.
In its order of October 10, 2017, see Dkt # 1232, the court noted that, despite the scholarly and judicial dissonance incited by the legal impossibility doctrine, in the...
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