Charges Announced In $70 Million Drug Diversion Case

Attorney General Spitzer announced today that eight individuals and six companies have been charged with trafficking in tens of millions of dollars worth of black-market prescription medications. A related civil suit filed by the Attorney General’s office seeks the recovery of more than $70 million from these defendants and from an additional 30 individuals and entities which received or laundered the proceeds of this criminal activity.

Six defendants and six companies have been charged in an indictment returned by a Nassau County Grand Jury. Two other defendants face charges in felony complaints filed in Nassau County District Court. All of the indicted defendants face conspiracy and drug diversion charges. Some also face money laundering counts.

The charges are part of the Attorney General’s ongoing investigation into the unlawful purchase, sale and distribution of diverted and compromised prescription medications. The investigation has included collaborative efforts with federal and state law enforcement agencies across the nation and has resulted in charges previously filed in federal court in Utah and in other cases in New York.

The indictment and filed complaints announced today allege the existence of a criminal conspiracy that operated from approximately March 2002 to approximately April 2005, in which the conspirators illegally obtained prescription medications, including unused medications and medications stolen from manufacturers, sold the drugs to wholesalers in New York, Utah and Texas and then illegally resold the diverted drugs to pharmacies in New York and elsewhere for sale to retail customers. In addition, the indictment alleges that some of the defendants used numerous companies and entities to launder the millions of dollars in proceeds from the sale of diverted prescription medications. The diverted pharmaceuticals in these cases primarily consisted of expensive HIV/AIDS medications and also included medications stolen from the pharmaceutical manufacturer, Pfizer, Inc.

"Prescription drug diversion on this scale and at this level corrupts our nation’s pharmaceutical delivery system. The drug diversion industry flourishes because there are weaknesses in the wholesale and retail markets which invite unscrupulous individuals to profit at the expense of consumers," Spitzer said. "By pursuing cases such as this, our Medicaid Fraud Control Unit helps to insure that millions of taxpayers dollars are not spent on black market pharmaceuticals and that our citizens can rely on the integrity of their prescription medications."

The indicted defendants were charged in an indictment that was unsealed before Judge John Kase, County Court, Nassau County. The 129 count indictment charges the defendants variously with multiple counts of Criminal Diversion of Prescription Medications and Prescriptions in the First Degree, a class C felony, Money Laundering in the Second Degree, a class C felony, Conspiracy in the Fourth Degree, a class E felony, and Scheme to Defraud in the First Degree, a class E felony. The felony complaints filed in Nassau County District Court also allege counts of Criminal Diversion of Prescription Medications and Money Laundering. A full list of the charges and the defendants is attached.

Among those charged are:

Anand Kumar Jaiswal, 59, of Glen Head, a licensed pharmacist and the owner of Medwin Pharmacy in Maspeth, New York, was indicted and charged with conspiracy, scheme to defraud, and multiple counts of diversion and money laundering. It is alleged that Jaiswal illegally supplied large quantities of diverted medications to Mohamed Shafeek and others and that he received more than $20 million from Shafeek in payment for these medications. It is further alleged that Jaiswal directed Shafeek to pay for these drugs by funneling money to various companies controlled by Jaiswal, including multiple companies engaged in the perfume industry. Judge Kase set Jaiswal’s bail at $2.5 million.

Mohammed Saeed Kahn aka "Sahi", 54, a resident of Dix Hills, and a principal of the Rockaway Levonia Pharmacy, Inc., in Brooklyn, New York, was indicted and charged with conspiracy, scheme to defraud and multiple counts of diversion and money laundering. It is alleged that Kahn supplied large quantities of diverted medications to Mohamed Shafeek and others, that he received more than $3 million from Shafeek in payment for these medications and that he directed Shafeek to pay for these drugs by funneling money to a company affiliated with Kahn. Judge Kase set Kahn’s bail at $10 million.

Lakhram Mangar, aka "Larry", 44, a resident of Queens and a licensed pharmacist was indicted and charged with conspiracy, scheme to defraud and multiple counts of diversion and money laundering. It is alleged that Mangar supplied large quantities of diverted medications to Mohamed Shafeek and others and that he received more than $12 million in payment for these medications. To disguise the nature of these transactions and these payments, Mangar instructed Shafeek to make these payments to a variety of companies connected to Mangar. His bail was set at $750,000.

Amer Hussain, 29, a resident of Whitestone, the owner of pharmacies located in Manhattan and Queens, and his father, Chaudhry Hussain, 62, also a resident of Whitestone, were both charged with conspiracy, scheme to defraud and multiple counts of diversion and money laundering. It is alleged that these two defendants unlawfully sold stolen and diverted medications to defendant Mangar. Amer Hussain’s bail was set at $2.5 million, while Chaudry Hussain’s was set at $150,000.

Mohamed Shafeek 54, of Nassau County, was charged in a felony complaint with diversion and money laundering, and his former girlfriend, Patricia Rodriquez, 50, of Nassau County was charged in a felony complaint with conspiracy and diversion. It is alleged that Shafeek, Rodriquez and others purchased tens of millions of dollars worth of diverted pharmaceutical products, including stolen and unused medications that had been previously prescribed to patients, and cleaned up those products to make them look new and unused. They then used a Queens pharmaceutical wholesale company which they controlled, PRNY Enterprises, Inc., to illegally sell the diverted drugs to others, including pharmaceutical wholesalers in Utah (PDRX Marketing LLC) and Texas (TXRX, Inc.). In April of 2005, as part of this ongoing investigation, federal authorities in Utah charged PDRX and its owners with crimes relating to the illegal distribution of the drugs provided to PDRX by defendants Shafeek and Rodriquez.

om Martino, 35, of Ft. Lauderdale, who was the owner of defendant TXRX, Inc., a Texas-based pharmaceutical wholesaler was indicted for conspiracy, scheme to defraud and multiple acts of diversion. It is alleged that he knowingly and unlawfully purchased diverted medications from Shafeek and others and that he paid Shafeek more than $27 million for these drugs which he in turn sold to pharmaceutical retailers in New York and elsewhere. Martino is in custody in Florida on an unrelated case, and is awaiting extradition.

The charges against the defendants are merely accusations, and they are presumed innocent until and unless proven guilty.

The charges announced today are a continuation of two previously announced investigations. The first phase of the investigation was conducted by the Attorney General’s Medicaid Fraud Control Unit and his Organized Crime Task Force and the New York State Department of Labor. This investigation, which focused on individuals who trafficked in counterfeit products and diverted medications, produced indictments and arrests announced in August of 2004. To date, 11 defendants have been convicted as a result of that investigation.

The second phase of the investigation, which resulted in the prosecution of the Utah wholesaler, PDRX Marketing, Inc., was conducted by the Medicaid Fraud Control Unit together with the United States Attorney’s Office District of Utah; the Food and Drug Administration Office of Criminal Investigations; the Internal Revenue Service Criminal Investigation Unit; the United States Federal Bureau of Investigation and the Medicaid Fraud Control Unit for the State of Utah. All of these agencies contributed significantly to the prosecutions announced today. To date, the Utah prosecution has resulted in three convictions.

Attorney General Spitzer expressed his gratitude to all agencies that have and are participating in these investigations as well as the Nassau County Police Department, Old Westbury Police Department, New York State Banking Department, New York State Education Department, Pfizer, Inc., and Serono, Inc.

Today’s cases are being prosecuted by Special Assistant Attorneys General Glenn M. Jones and Lara A. Stingley of the Medicaid Fraud Control Unit, under supervision of Unit Chief Monica Hickey-Martin, First Assistant Attorney General Peter M. Bloch, and Deputy Attorney General William Comiskey. The civil matter is being handled by Special Assistant Attorney General James Cudden of the Civil Enforcement Unit of the Medicaid Fraud Control Unit under the supervision of Director Paul J. Mahoney. Assisting in the investigation are Senior Special Investigator Al Maiorano and Special Investigator Robert Crook, under the direction of Medicaid Fraud Control Unit Chief Vito Spano; and Senior Special Auditor Investigator Kyle Velazquez, Associate Special Auditor Investigator Patricia Iemma, Special Auditor Investigator Nicole Vento and Special Auditor Investigator Lisa Close, under the supervision of Principal Special Auditor Investigator Richard Porto.


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