After two-week trial, federal jury found Miller and his company both guilty of conspiracies involving racketeering, mail and wire fraud, and money laundering, in addition to substantive mail fraud and conspiracy against the United States.
A federal jury convicted David Jess Miller and his company, Minnesota Independent Cooperative (“MIC”), of a wide array of charges relating to the unlicensed and fraudulent distribution of prescription drugs, announced United States Attorney Stephanie M. Hinds; Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp; Internal Revenue Service, Criminal Investigation (IRS-CI), Special Agent in Charge of the Oakland Field Office Darren Lian; U.S. Postal Inspection Service (USPIS) Pittsburgh Division Inspector in Charge Lesley Allison; and U.S. Food and Drug Administration Office of Criminal Investigations (FDA-OCI) Special Agent in Charge of the Metro Washington Field Office George A. Scavdis. The verdicts were handed down after a two-week trial before the Hon. Charles R. Breyer, Senior U.S. District Judge.
“The health and safety of American patients are critical, and Americans are entitled to trust that the prescription drugs they take are safe,” said U.S. Attorney Hinds. “Those who undermine the safety of the prescription drug supply chain for their own gain by laundering diverted drugs put those patients at risk, and they will be prosecuted.”
“FDA is responsible for oversight of the prescription drug supply chain; when criminals breach the security around that chain, patients can no longer be assured of the safety or effectiveness of the stolen drugs that are returned illegally to the legitimate supply pipeline,” said Special Agent in Charge Scavdis. “We will continue to pursue and bring to justice those who would put the public health at risk through their criminal actions.”
“When medical practitioners prescribe and patients receive medication, their focus should be on the effectiveness of the medication for the intended treatment and not the authenticity or legitimacy of the pills they get from pharmacies. The speedy guilty verdict shows the community’s intolerance of those who betray this basic trust in our healthcare system for greed and personal enrichment. IRS Criminal Investigation is committed to work with our law enforcement partners to dismantle and disrupt these criminal schemes and to instill trust and confidence in the system,” said Special Agent in Charge Lian. “I truly commend the case agents and the trial team who worked tirelessly on this case to bring justice to light.”
“The illegal conduct of David Miller was reprehensible,” said FBI Special Agent In Charge Robert Tripp. “He and his co-conspirators undermined safeguards designed to protect the public, reintroduced diverted prescription drugs into the supply chain, and compromised patient safety for personal gain.”
The trial was the result of indictments filed in two separate districts—the Northern District of California and the Southern District of Ohio. The convictions included charges handed down in a second superseding indictment by a grand jury in the Northern District of California on February 11, 2016, and by a separate indictment handed down on May 6, 2015, in the Southern District of Ohio. Both indictments involved additional defendants and charges that were not presented at the trial.
The evidence at trial established that Miller, 58, of Santa Ana, Calif., was at the center of a vast racketeering enterprise responsible for the fraudulent distribution of hundreds of millions of dollars’ worth of diverted prescription drugs, including instances in which Miller and his co-conspirators distributed tampered medication that posed a health risk to consumers. The scheme targeted brand-name prescription drugs designed to treat HIV, hepatitis C, mental disorders, and various other serious conditions. Miller and MIC lied to their customers about the nature and sources of the prescription drugs being sold, falsely claiming that the drugs had been maintained in the safe, federally and state-regulated supply chain. The evidence at trial established that Miller and his company agreed with many others, including Mihran Stepanyan, 37, and Artur Stepanyan, 45, to conduct the affairs of their wide-ranging and long-lasting criminal enterprise. The evidence established that the enterprise, operating primarily out of Southern California and Minnesota, was responsible for distributing diverted prescription drugs to unsuspecting pharmacies throughout the county. In finding Miller guilty, the jury concluded that he played a role in promoting the racketeering conspiracy. For example, as the owner and operator of MIC between 2007 and 2015, Miller bought approximately $157 million of diverted prescription drugs from codefendants Mihran Stepanyan and Artur Stepanayan. Miller and MIC also knew that the Stepanyans were not licensed to sell prescription drugs and that the Stepanyans procured their drugs from street suppliers. Miller and MIC nevertheless purchased the diverted drugs from the Stepanyans and lied to their customers about the sources and nature of those drugs.
Further, the jury concluded Miller engaged in a money laundering conspiracy. The evidence established that Miller and others laundered hundreds of millions of dollars between approximately 2007 and 2015 to promote their criminal activities and to conceal the nature of their scheme. For example, to hide the fact Miller was paying the Stepanyans for the illegally sourced drugs they were distributing, Miller made payments to the Stepanyans’ company GC National Wholesale through companies in Puerto Rico he controlled. As to another supplier, Miller authorized payments to accounts held in the names of various front companies at banks in multiple countries. In this way, Miller and his co-conspirators sought to obscure the illicit sources of MIC drugs and to conceal the true identities of the suppliers.
In sum, at the conclusion of the trial, Miller was convicted of one count of racketeering conspiracy, in violation of 18 U.S.C. § 1962(d); one count of conspiracy to commit mail, wire, and bank fraud, in violation of 18 U.S.C. § 1349; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); ten counts of mail fraud, in violation of 18 U.S.C. § 1341; and one count of conspiracy to engage in the unlicensed wholesale distribution of drugs and making false statement to the FDA, in violation of 21 U.S.C. §§ 331(t), 333(b)(1)(D), 353(e)(2)(A), and 18 U.S.C. § 371.
Miller remains out of custody pending sentencing. Miller faces a maximum statutory term of life in prison; however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The Stepanyans and 38 other defendants have pleaded guilty to their respective roles in the conspiracies.
Assistant United States Attorneys Claudia Quiroz, Andrew Dawson, and Chris Kaltsas are prosecuting the case with the assistance of Kevin Costello. The prosecution is the result of an investigation by the FBI, the IRS, the FDA, and USPIS. The United States Attorney’s Office notes the extraordinary contributions and commitment of IRS-CI Special Agent Bryan Wong in this case.Adulterated Drug Tampering FDA Fraud Healthcare Fraud HIV Money Laundering Patient Harm Pharmacy Crime RICO Wholesalers