United States v. United Statesplabs, LLC

• Decision Date: 24 February 2019
• Docket Number: Criminal No. 3:15-CR-496-L
• 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

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 FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

February 24, 2019

MEMORANDUM OPINION AND ORDER

Before the court are Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion and Brief in Support of Their Motion to Suppress all Seized Digitally Stored Date (Doc. 377), filed December 26, 2017;¹ Defendants S.K. Laboratories' and Patel's Motion to Suppress Evidence Seized During the Eleven Month and Apparent Ongoing Search of Their Digital Data (Doc. 381), filed December 29, 2017; Defendants' Joint Motion to Suppress Evidence Seized from the November 6, 2013 Search of 5420 E. La Palma Avenue, Anaheim, California Based upon Overly Broad Warrant and Seizure and Lack of Probable Cause (Doc. 384), filed December 29, 2017; Defendants' Joint Motion to Suppress iPhone and Digital Device Searches as Fruits of Passcode Statements Obtained in Violation of Fifth Amendment (Doc. 385), filed December 29, 2017; and Defendants S.K. Laboratories, Inc. and Sitesh Patel's Joint Supplemental Motion to Suppress Evidence Seized from the November 6, 2013 Search of 5420 E. La Palma Avenue, Anaheim, California Based Upon Overly Broad Warrant and Seizure and Lack of Probable Cause, filed December 29, 2017 (Doc. 386).

Having carefully considered the motions, supplemental briefs, responses, evidence, record, and applicable law, and for the reasons that follow, the court denies Defendants USPlabs, LLC, Jonathan Doyle, Jacobo Geissler, and Matthew Hebert's Motion and Brief in Support of Their Motion to Suppress all Seized Digitally Stored Date (Doc. 377); denies as moot Defendants S.K. Laboratories' and Patel's Motion to Suppress Evidence Seized During the Eleven Month and Apparent Ongoing Search of Their Digital Data (Doc. 381); denies as moot Defendants' Joint Motion to Suppress Evidence Seized from the November 6, 2013 Search of 5420 E. La Palma Avenue, Anaheim, California Based Upon Overly Broad Warrant and Seizure and Lack of Probable Cause (Doc. 384); denies as moot Defendants' Joint Motion to Suppress iPhone and Digital Device Searches as Fruits of Passcode Statements Obtained in Violation of Fifth Amendment (Doc. 385); and denies as moot Defendants S.K. Laboratories, Inc. and Sitesh Patel's Joint Supplemental Motion to Suppress Evidence Seized from the November 6, 2013 Search of 5420 E. La Palma Avenue, Anaheim, California Based Upon Overly Broad Warrant and Seizure and Lack of Probable Cause (Doc. 386).

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 USlabs;² Matthew Hebert ("Hebert"), a co-owner of USPlabs and responsible for product packaging design; CyrilWillson ("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. Defendants USPlabs, Geissler, Doyle, and Hebert are sometimes collectively referred to as the "USPlabs Defendants," and Defendants Patel and S.K. Labs are sometimes collectively referred to as the "S.K. Labs Defendants.

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—that 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 whether 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").³ 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 charges⁴:

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, Hebert, Miles, S.K. Labs, and Patel only), 21 U.S.C. §§ 331(a), 333(a)(2); Doc. 95 at 26. This count alleges that Defendants Doyle, Hebert, Miles, S.K. Labs, and Patel caused the shipment of misbranded OEP-AF in interstate commerce when the food was misbranded under the Food Drug and Cosmetic Act ("FDCA") by using a false label declaring that CA "extract" was an ingredient, even though it was not contained in the product.

Count 10 - Introduction of Adulterated Dietary Supplement into Interstate Commerce, 21 U.S.C. §§ 331(a), 333(a)(1), and 342(f)(1)(A)(I) (as to all Defendants except Willson); Doc 95 at 27. This count alleges that Defendants caused the shipment of adulterated OEP-NF in interstate commerce, as the supplement "presented a significant or unreasonable risk of illness or injury under conditions of use recommended or suggested in labeling."

Count 11 - Conspiracy to Commit Money Laundering (as to Defendants USPlabs, Geissler,

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