Geoffrey Kaiser, a partner in firm Rivkin Radler LLP, served stints in the criminal divisions of the US Attorney’s Office in two districts in New York. Kaiser said the USPLabs case shows what can happen when federal prosecutors are fully stirred to action.
“The magnitude of this case doesn’t surprise me because I know the Federal government has been taking a close look at this industry. For a while now the government has been devoting resources to prosecuting cases under the Food, Drug & Cosmetic Act,” Kaiser told NutraIngredients-USA.
Intent to defraud
A key facet of the indictment centered on USPLab’s alleged falsification of documentation relating to the use of DMAA and other ingredients. USPLabs was one of the main champions of the ingredient, using it in its pre workout product Jack3D, a major seller. The ingredient was removed from the market by FDA following its association with the deaths of two soldiers. The agency also sent warning letters to a number of companies marketing the ingredient, and in those letters concluded that the ingredient was not legal because was wholly synthetic and there was no credible evidence that it was an extract of the geranium plant, as had been claimed by marketers.
The indictment did not dwell on the purported health questions swirling around DMAA or its dicey regulatory status but rather focused on how USPLab executives and officials at their contract manufacturing partner S.K. Laboratories allegedly colluded to hide what the ingredient was and where it came from. DMAA itself was allegedly imported under false guises and the company also allegedly brought in other illegal ingredients to test them for potential use in supplements and instructed handlers of the ingredients to label them as “green coffee.”
The indictment quotes an e-mail from one of the defendants stating: “China can just doctor us a CofA stating it’s an extract.”
Kaiser said there are a number of ways prosecutors can get their hands on what could become damning documentation.
“The government has a number of ways they can get for example e-mail communications or other documents. You could have a whistle blower who comes to the government with a whole bunch of records including e-mails. The government also has the ability to obtain e-mails either through a search warrant or a subpoena. Under the current law if the e-mail is more than 180 days old they don’t need a warrant,” he said.
Kaiser said the tag team approach in the news conference in which a slew of actions and investigations by several agencies were announced is a typical tactic when government investigators choose to focus on a particular area of concern.
“I think it probably sent shock waves through the industry that the government is bringing this kind of pressure to bear. The message is that companies are not going to be able to continue to cut safety corners or skirt rules with impunity as they are alleged to have done in this case. That’s the whole point of big government initiatives like this; there is a hoped-for deterrent effect,” Kaiser said.
“That is generally true of how government reacts in cases like this. Whenever there is a perceived imminent risk of public harm the government reacts more swiftly and dramatically. The allegations here include liver damage potentially caused by some of these products,” he said.
Kaiser said the penalties in this case are severe. In addition to forfeiture of gains (USPLabs is alleged to have some $400 million worth of the products in the 2008-2013 time frame) there are stiff jail terms attached to these counts.
“The FD&C misbranding and adulteration provisions have both misdemeanor and felony levels, and there could be sentences of up to three years for each count. Wire fraud is up to a 20 year statutory maximum as is relevant to this case. There is a money laundering count in there, too,” he said.
The government also announced a number of additional actions which on a normal news day would have been headline stories of their own. Five civil cases against based on misbranding and adulteration were announced. One of these cases filed against a company doing business as Regeneca Worldwide, involved the use of DMAA in a product and also would appear to be another case of alleged habitually non-compliant business practices. FDA banned this ingredient several years ago based on safety concerns and on the fact that it is deemed to be wholly synthetic, but it continues to show up in the market here and there. Regeneca recalled lots of its RegeneSlim product in both 2012 and 2014 after FDA determined that they contained DMAA. Other cases filed against other companies focused on illegal disease claims to treat cancer, Alzheimer’s disease, herpes, and claims to treat opiate drug withdrawal symptoms. In addition, regulators announced actions against companies marketing weight loss products with fraudulent claims.