United States v. Scully

• Decision Date: 08 June 2015
• Docket Number: No. 14–CR–208(ADS)(SIL).,14–CR–208(ADS)(SIL).
• Citation: 108 F.Supp.3d 59
• Parties: UNITED STATES of America v. William SCULLY, also known as “Liam Scully”.
• Court: U.S. District Court — Eastern District of New York

108 F.Supp.3d 59

UNITED STATES of America

v.William SCULLY, also known as “Liam Scully”.

No. 14–CR–208(ADS)(SIL).

United States District Court, E.D. New York.

Signed June 8, 2015.

Charles Peter Kelly, United States Attorneys Office, Central Islip, NY, for United States of America.

Katten Muchin Rosenman LLP, by Scott A. Resnik, Esq., Michael M. Rosensaft, Esq., of Counsel, New York, NY, for William Scully, also known as “Liam Scully”.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On April 9, 2014, the Government filed a 73–count criminal indictment against the Defendant William Scully, also known as “Liam Scully” (“Scully” or “the Defendant”), and codefendant Shahrad Rodi Lameh (“Lameh”)(collectively “the Defendants”).

The Government charged the Defendants, as owners and operators of Pharmalogical, Inc. d/b/a Medical Device King and MDK (“Pharmalogical”) with, among other counts, violating the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq. (the “FDCA”), by trafficking in prescription drugs unapproved by the federal Food and Drug Administration (“FDA”), “misbranded” drugs, and counterfeit oncology drugs.

While the Indictment sets forth 73 counts, it is only 35 pages long, with a description of the Defendants' alleged scheme only encompassing 5 pages and with the enumeration of the counts encompassing 23 of those pages.

On October 16, 2014, on referral to United States Magistrate Judge Steven I. Locke, Lameh entered a guilty plea to Counts 1 through 37 of the Indictment, including one count of conspiracy to distribute “misbranded” drugs. He did not plead guilty to introduction of “misbranded” drugs into interstate commerce; receipt of “misbranded” drugs in interstate commerce and delivery thereof for pay; fraudulent importation and transportation of goods; or trafficking in counterfeit oncology drugs.

On October 20, 2014, this Court accepted that guilty plea recommendation. Lameh is currently scheduled to be sentenced on September 18, 2015.

On February 5, 2015, Scully moved for an order (1) striking all counts based on the erroneous notion that a violation of FDA regulations can create criminal liability; (2) suppressing all emails and other evidence obtained through search warrants due to the Government's material misstatements and omissions in the search warrant affidavits and the constitutionally impermissible way that the Government executed the warrants; (3) dismissing count 73 of the Indictment; (4) dismissing count 72 of the Indictment; and (5) directing further discovery and a bill of particulars, which are necessary for defense counsel to prepare its case; and for other such other and further relief as the Court deems just and proper.

On May 15, 2015, the Court held oral argument on the motion, after which the Court reserved decision and scheduled jury selection for Tuesday, January 5, 2016. Scully agreed to a waiver of his speedy trial rights from May 15, 2015 through January 5, 2016.

For the reasons set forth, the Defendant's motion is denied except to the extent the Court grants the requests for the discovery enclosed by the Government in its motion papers; the discovery it represents it will provide; any recorded conversations with Courtney Fitt; and a Bill of Particulars as described below. The Court will now address each part of the instant motion.

I. BACKGROUND

The following facts are drawn from the indictment, the record of the proceedings before the magistrate judges that issued the search warrants, and the parties' submissions in connection with this motion. See United States v. Sanchez, No. 08–CR–0017 (CPS), 2008 WL 1926701, at *1 (E.D.N.Y. Apr. 30, 2008).

A. The May 2012 Affidavits in Support of the Office Search Warrants

In May 2012, the Government took steps to procure a search warrant for the offices of Pharmalogical and MDK, located at 425 Northern Boulevard, Suite 27, in Great Neck, New York. In support of an application for a search warrant of Pharmalogical and MDK's offices, the Government filed an affidavit sworn to and signed under oath by FDA Special Agent Thomas S. Nasiatka (“Nasiatka”).

In that affidavit, Nasiatka stated that based upon an FDA investigation, Pharmalogical and MDK “have been ordering and receiving foreign drugs including cancer and chemotherapy medications such as aloxi, aredia and altuzan as well as botox and related drugs. It has been further determined that these foreign drugs have been sold and/or administered to, among others, cancer patients without their knowledge.” (Doc No. 44, Exh. 20., at ¶ 4.).

Nasiatka described the background of the underlying investigation. Nasiatka stated that, on February 18, 2011, he met with representatives of the New York State Department of Education, Office of Professional Discipline (“OPD”) in Hauppage, New York, who referred a case to the FDA for investigation. As detailed in the affidavit, an unidentified complainant to the New York State Board of Pharmacy advised that he or she had received an unsolicited fax from MDK “offering oncology and rheumatology medications for sale at prices unavailable in the traditional market.” (Id. at ¶ 32.) That fax, which provided MDK's contact number as (877) 321–5567, was attached to Nasiatka's affidavit.

Thereafter, according to Nasiatka's affidavit, a New York State Board of Pharmacy representative, acting in an undercover capacity, phoned MDK at (877) 321–5567 and was advised to call (516) 439–5376. The caller was allegedly told that MDK was affiliated with Pharmalogical, a licensed drug wholesaler in New York State. The undercover caller inquired as to how MDK could sell the advertised drugs at the prices offered. According to Nasiatka, the undercover caller was told, among other things, that MDK could offer these prices as it “had no sales force and shipped the drugs from overseas, as the company itself was located in the United Kingdom.” (Id. at ¶ 33.).

Following this telephone exchange, an OPD representative, also acting in an undercover capacity, phoned MDK at (877) 321–5567, left a message, and was later contacted by an individual who identified himself as Shahrad Rodi Lameh. (Id. at ¶ 34.) When asked about the discount prices, Lameh allegedly responded, among other things, that “these prices could be offered because they purchased drugs from manufacturers all over the world, except Canada.” (Id.).

OPD then attempted to conduct a site inspection of Pharmalogical, which was licensed with OPD, at the Great Neck office. After OPD investigators could not speak to the Defendant because he was unavailable, the Defendant apparently called the investigators and confirmed that Pharmalogical sold “chemo drugs” and that he would provide requested supporting invoice and shipping documents. (Id.). However, according to Nasiakta, Scully never provided these requested documents. (Id.)

Nasiatka further stated that, on February 23, 2011, he accessed the website for the New York State Division of Corporations and confirmed that, on August 24, 2004, Pharmalogical was registered as a domestic business corporation in Suffolk County, New York. (Id. at ¶ 37.) No information was found regarding MDK. (Id.)

Nasiatka also stated that, on February 23, 2011, he accessed the websites for Pharmalogical, www.pharmalogicalinc.com and for MDK, www.medicaldeviceking. com. (Id. at ¶ 38.) The Pharmalogical website offered for sale the advertised supplement “Fibrosolve” and the dermal fillers “Botox” and “Surgiderm.” (Id.) The MDK website indicated that MDK was “Coming Soon” and offered for sale the advertised dermal fillers “Juviderm,” “Surgiderm,” and “Botox.” However, as indicated by Nasiatka, no cancer or rheumatology drugs were offered for sale on either website. (Id.)

On July 7, 2011, Nasiakta again accessed the MDK website and “learned that the site had been updated so that the products offered for sale included 52 different oncology drugs.” (Id. at ¶ 41.)

Nasiatka also stated that, on September 16, 2011, he learned from an unnamed industry representative that an unnamed private investigator had purchased two 5ml vials of Aloxi, an FDA-approved prescription cancer medication, from MDK's website. (Id. at ¶ 42.) The price of $140 per 5ml vial was below the established wholesale price of $371 per vial in the United States. (Id.)

The Aloxi was apparently received by the private investigator on or about September 13, 2011. (Id. at ¶ 43.) A National Drug Code (“NDC”) number, which Nasiatka claimed that all FDA-approved drugs have, was not present on any of the drug boxes or vials. (Id.) The return address information printed on the UPS label was that of Lisa Mingelli, 877–321–5567, MDK, 425 Northern Blvd. Ste 27, Great Neck, N.Y. 11021. (Id.)

Nasiatka further stated that, on September 22, 2011, he learned that other FDA (OCI) offices had ongoing investigations of Pharmalogical and MDK, “as they sold unapproved Botox to medical facilities in their districts.” (Id. at ¶ 44.) In this regard, Nasiatka stated that “[s]everal undercover purchases had been made and it was determined, as in this case, that the Botox manufactured by Allergan was for foreign market distribution only.” (Id.)

Thereafter, according to Nasiatka, FDA Special Agent Peter Orlando conducted surveillance of the Great Neck office, including of vehicles parked in spaces reserved for Pharmalogical employees. Based on this surveillance, Nasiatka inquired of the New York State Department of Motor Vehicles (“DMV”) and “learned that one was registered to William J. Scully and another to Lisa M. Mongelli.” (Id. at ¶ 45.)

Nasiatka further stated that, on November 28, 2011, he directed another FDA/OCI Special Agent to access the MDK website to conduct an undercover credit card purchase of 4 vials of Aloxi 0.25mg. (Id.) Nasiatka stated that “[a]n account was set up using an undercover pharmacy name and address in Madison, New Jersey” and that “[t]he total cost of the credit card purchase was $560.00.” (Id.) An email confirmation was received from the email...