United States v. United Statesplabs, LLC

• Decision Date: 05 October 2018
• Docket Number: Criminal No. 3:15-CR-496-L
• Citation: 338 F.Supp.3d 547
• Parties: UNITED STATES of America v. USPLABS, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08)
• Court: U.S. District Court — Northern District of Texas

338 F.Supp.3d 547

UNITED STATES of America

v.USPLABS, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08)

Criminal No. 3:15-CR-496-L

United States District Court, N.D. Texas, Dallas Division.

Signed October 5, 2018

Errin Martin, John J. de la Garza, III, Lea A. Carlisle, Mark Joseph Tindall, U.S. Attorney's Office, Dallas, TX, David O'Donald Sullivan, Patrick Raymond Runkle, US Department of Justice, Washington, DC, for United States of America.

Michael John Uhl, Fitzpatrick Jacks Smith & Uhl, Michael P. Gibson, Carl D. Medders, Burleson Pate & Gibson LLP, Richard B. Roper, III, Andrew Christian Cookingham, Jasmine Selia Wynton, Jennifer Rudenick Ecklund, Thompson & Knight LLP, S. Cass Weiland, Squire Patton Boggs (US) LLP, Joseph L. Shearin, Law Offices of Joe Shearin, Robert L. Webster, Law Office of Robert L. Webster, Dallas, TX, David B. Smith, David B. Smith, PLLC, Alexandria, VA, Arwa BenOmran, David Fragale, Galen Kast, Patrick Linehan, Reid Weingarten, Steptoe & Johnson LLP, Washington, DC, Christopher Niewoehner, Francis Sohn, Steptoe & Johnson LLP, Chicago, IL, Joseph Mark McMullen, Law Offices of Joseph M. McMullen, Patrick Quinn Hall, Law Offices of Patrick Q. Hall, San Diego, CA, for USPlabs, LLC (01), Jacobo Geissler (02), Jonathan Doyle (03), Matthew Hebert (04), Kenneth Miles (05), S.K. Laboratories, Inc. (06), Sitesh Patel (07), Cyril Willson (08).

MEMORANDUM OPINION AND ORDER ACCEPTING IN PART AND REJECTING IN PART FINDINGS AND RECOMMENDATIONS OF THE MAGISTRATE JUDGE

Sam A. Lindsay, United States District Judge

Before the court are:

1. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, Kenneth Miles, S.K. Laboratories, Inc., and Sitesh Patel's Motion to Dismiss Count Ten (Doc. 220);

2. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Motion to Dismiss Counts Nine and Ten for Unconstitutional Vagueness (Doc. 221);

3. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Counts Two Through Four of the First Superseding Indictment as Untimely (Doc. 293);

4. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Cyril Willson's Motion to Dismiss Count 7 (Doc. 379);5. Defendants USPlabs, LLC, Jacobo Geissler, Jonathan Doyle, Matthew Hebert, S.K. Laboratories, Inc., Sitesh Patel, and Kenneth Miles' Joint Motion to Dismiss Counts 5, 8, and 9 (Doc. 383);

6. Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion to Dismiss Count 6 (Doc. 387);

7. Defendant Kenneth Miles' Motion to Dismiss Count Nine and Ten (Doc. 392); and

8. Defendant Cyril Willson's Motion to Dismiss Count 5 and Motion to Adopt In-Part Codefendants' Motion to Dismiss Counts 5, 8, 9 (Doc. 394).

(sometimes collectively, "Defendants' Motions to Dismiss"). Pursuant to 28 U.S.C. § 636 (b)(1)(B), the court referred Defendants' Motions to Dismiss to United States Magistrate Judge Renée Harris Toliver for findings and recommendation. See Order of Reference (Doc. 343); Order of Reference (Doc. 436). On June 13, 2018, Magistrate Judge Toliver submitted her Amended Findings, Conclusions, and Recommendation of the United States Magistrate Judge (Doc. 477) ("Report"). Defendants and the Government have filed objections to the Report. See Docs. 478, 480, 482, 483, 485, and 488. After careful consideration of the objections, record, and applicable law, and having conducted a de novo review of those portions of the Report to which objections were made, the court, for the reasons that follow, overrules Defendants' objections, sustains the Government's objection, and accepts in part and rejects in part the Report.

I. Factual Background

A. The Defendants

Defendants are USPlabs, LLC ("USPlabs"), a dietary supplement own-label distributor based in Dallas, Texas; S.K. Laboratories, Inc. ("S.K. Labs"), a California corporation that manufactured USPlabs' supplements and consulted on supplement formulation; Jacobo Geissler ("Geissler"), a co-founder, co-owner, and chief executive officer of USPlabs; Jonathan Doyle ("Doyle"), a co-founder, co-owner, and president of USPlabs; Matthew Hebert ("Hebert"), a co-owner of USPlabs responsible for product packaging design; Cyril Willson ("Willson"), also known as "Erik White," a consultant to USPlabs, formerly a co-owner; Kenneth Miles ("Miles"), USPlabs' compliance officer; and Sitesh Patel ("Patel"), a vice-president and employee of S.K. Labs.

B. The Indictment

On January 5, 2016, the Government filed an 11-Count Superseding Indictment ("the Indictment") (Doc. 95) against Defendants. The charges in the Indictment stem from Defendant USPlabs' sale of dietary/weight loss supplements, which were manufactured by Defendant S.K. Labs. Doc. 95 at 5-6. The Indictment generally alleges that Defendants conspired to import and sell synthetic dietary supplements, but falsely marketed the products as plant-based under the theory that federal regulatory agencies would be less likely to question the importation of plant extracts, and retailers would be more likely to sell such products. Doc. 95 at 6. The Indictment further alleges that, during the conspiracy, certain Defendants created false documentation to import a synthetic substance—1, 3-dimethylamylamine, known as DMAA—which they represented was a geranium plant extract. According to the Indictment, certain Defendants then used the DMAA in some of their supplements, which thereafter became best-selling products. Doc. 95 at 7, 14-15.

It is further alleged that when DMAA became the subject of controversy in the dietary supplement industry, USPlabs, through Defendant Geissler, began importing other chemicals under false labels to determine if they could be used in new dietary supplements. Doc. 95 at 9. Two such ingredients were aegeline, a synthetic version of an extract from a tree native to India, and the pulverized roots of a Chinese herb, cynanchum auriculatum ("CA"), both of which USPlabs is alleged to have purchased from China using fake certificates of analysis ("COA").¹ The first aegeline-containing version of one of Defendants' supplements was OxyElite Pro "New Formula" ("OEP-NF"). Doc. 95 at 9-10. The second version of the supplement contained both aegeline and CA and was called OxyElite Pro "Advanced Formula" ("OEP-AF"). Doc. 95 at 10.

As alleged in the Indictment, in the fall of 2013, an outbreak of injuries was reported to be associated with USPlabs' aegeline-based products after numerous consumers in Hawaii experienced liver-related symptoms, including liver failure. Doc. 95 at 11. Following an inspection by the United States Food and Drug Administration ("FDA"), USPlabs agreed to cease distributing the OEP products, but is alleged to have instead pushed sales as fast as possible. Doc. 95 at 11. The Indictment also alleges that USPlabs issued a press release falsely stating that the ingredients in OEP had been researched and showed no negative liver effects, even though Defendants Geissler and Willson knew that a study had shown such negative side effects. Doc. 95 at 11. Eventually, Geissler instructed that both aegeline and CA be removed from the product going forward. Doc. 95 at 11.

The Indictment contains the following charges² :

Count 1 – Conspiracy to Commit Wire Fraud (as to all Defendants except Miles), 18 U.S.C. §§ 1343, 1349 ; Doc. 95 at 12-17. This count involves Defendants' alleged use of false shipping labels, false COAs, and false shipping documentation to support misleading product labeling in relation to statements that the respective supplements contained "natural" DMAA derived from geranium and CA "extract" (as opposed to CA "root").

Counts 2-5 – Wire Fraud , 18 U.S.C. § 1343 (as to all Defendants except Miles); Doc. 95 at 18-19. These counts involve Defendants' alleged transmission in interstate commerce, by means of wire communications and writing, of false and fraudulent COAs, instructions to create false documents, and other fraudulent statements contained in e-mails.

Count 6 – Obstruction of an Agency Proceeding (as to Defendants USPlabs, Geissler, Doyle, and Hebert only), 18 U.S.C. §§ 2, 1505 ; Doc. 95 at 20-21. This count charges that, during the FDA investigation regarding whether an outbreak of liver injuries was associated with USPlabs' products containing aegeline, Defendants USPlabs, Geissler, Doyle, and Hebert continued to distribute OEP products despite representing to the FDA that they would cease distribution, and attempted to impede the FDA's investigation by failing to provide material information about OEP, the anticipated shipments of OEP, and promotional activities for OEP.

Count 7 – Conspiracy to Introduce Misbranded Food into Interstate Commerce with an Intent to Defraud and Mislead , 18 U.S.C. § 371 ; 21 U.S.C. §§ 331(a), 333(a)(2) (as to all Defendants except Miles); Doc. 95 at 22-24. This count alleges that certain Defendants conspired to avoid law enforcement attention and match imported substances with false product labeling by instructing Chinese chemical sellers to falsely label numerous chemical powders they sent to USP, including "geranium flower powder extract" and CA root "extract."

Count 8 – Introduction of Adulterated Food into Interstate Commerce with an Intent to Defraud and Mislead (as to Defendants USPlabs and Geissler only), 21 U.S.C. §§ 331(a), 333(a)(2) ; 18 U.S.C. § 2 ; Doc. 95 at 25. This count alleges that Defendants USPlabs and Geissler, aiding and abetting each other, with the intent to defraud and mislead, caused the shipment of misbranded OEP-AF in interstate commerce by using a label falsely declaring that CA "extract" was an ingredient, even though it was not contained in the product.

Count 9 – Introduction of Misbranded Food into Interstate Commerce (as to Defendants Doyle,

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