Alaska Injury Law Blog

U.S. District Court Judge Arthur Spiegel sentenced the remaining employees of Berkeley Premium Nutraceuticals this week, each receiving prison sentences. The Berkeley executives, Greg Cossman (former President), Susan Cossman (Warshak's sister), Shelly Kinmon (Sales Director), James Teegarden (Chief Operating Officer), Michael Wagner (Financial Officer), and Steven Pugh (Warehouse Manager) received sentences ranging from 12 to 13 months. Berkeley's accountant, William Bertemes, and its bookkeeper, Sam Grote, cooperated with authorities and drew the lightest sentences of one month in prison.

Berkeley's in-house counsel, Paul Kellogg, was the last of those convicted to be sentenced. He also received a sentence of a year and a day. Despite his professional training, Kellogg claimed that he was following the orders of Steve Warshak, Berkeley's President, and did not realize what he was doing was wrong. (Surely he couldn't have been clueless when he told a night manager to hide potentially damning evidence from FDA inspectors and had it returned to the warehouse when they left.)

All told, 11 Berkeley executives and employees were convicted on fraud, money laundering, and conspiracy charges.

One might ask why the authorities didn't just shut Berkeley down. Well, they can't. Berkeley is not a pharmaceutical company, and the fake sexual enhancement supplement was not a drug, so the FDA has a more limited reach. Instead, the company, (like other diet supplement companies falsifying clinical research, spiking supplements with pharmaceuticals, selling supplements containing toxic contaminants, or mislabeling the amounts of active ingredients) is regulated under DSHEA, the Dietary Supplement Health And Education Act, which is toothless and requires that the FDA prove that the product is harmful before a supplement can be taken off the market (whereas drug companies must first prove to the FDA a product is safe and efficacious before it can be placed on the market).

While the regulatory authorities must be applauded here, this company is not a remarkable exception in the diet supplement industry. This industry is riding out well in front of the posse, and this won't change unless DSHEA is changed.

Sources:

Cincinnati.com

Cincinnati.com

Brandweek.com

DSHEA

Alaska Injury Law Blog, August 28, 2008

Alaska Injury Law Blog, February 22, 2008

Steve Warshak, the founder of Berkeley Premium Nutraceuticals, has been sentenced to 25 years in prison and ordered to pay $93,000 in fines. He had been convicted in February on 93 counts of conspiracy, fraud and money laundering. His mother, Harriet Warshak, was sentenced to 2 years in prison arising from her conviction for conspiracy, bank fraud and money laundering. U.S. District Court Judge S. Arthur Spiegel, also ordered Warshak, his mother, and the company to forfeit more than $500 million in ill-gotten gains. Several other employees will be sentenced this week.

Most of the charges relate to the sale of Enzyte, a supplement supposedly capable of boosting male sexual performance. The company, however, falsified medical studies, used fraudulent bank documents, and ran up charges on the credit cards of customers, while refusing to give refunds or stop serial transactions on the cards.

The company's logo included the Latin phrase suffragium asotas, which Warshak claimed translates to English as "enhanced sexuality". He may have meant to use the phrase suffragor asotis, an awkward way of saying, "refuge for the dissipated". Perhaps that is what the Big House will be for him.

We applaud the prosecutors in this case as these kinds of prosecutions are long overdue in this industry.

And we're relatively certain Smilin' Bob ain't smilin' no more.

Sources:

Alaska Injury Law Blog, February 22, 2008

Cincinnati.com, August 27, 2008

Cincinnati FBI

Wikipedia

The Jounal of the American Medical Association reported today that the toxic metals lead, mercury, and arsenic have been detected in traditional Ayurvedic medicines being sold in the United States. Of the 230 products evaluated by x-ray spectroscopy, detectable levels of the toxic metals were found in 20.7% of the products. The contaminants were found in products manufactured in India and in the United States, but 95% of the contaminated products were being sold by US websites. Most troubling, 75% of the manufacturers claimed to be using Good Manufacturing Practices.

Source:

JAMA, August 27, 2008

With increased attention being put on improper financial influences in medicine, by both the lay and professional press, you may be wondering how you can find out if your doctor is getting brown paper bags of cash from Big Pharma or a medical device manufacturer. The next time a doctor recommends a drug or a medical device, check with the Association for Medical Ethics to see if your doctor has improper financial ties with the manufacturer. As a result of a U.S. Department of Justice settlement with four medical device companies, Zimmer, Inc., DePuy Orthopaedics, Inc., Biomet, Inc., and Smith & Nephew, Inc., these back door consulting agreements must now be made public. (See our earlier post about this: Financial Ties) The Association for Medical Ethics maintains a searchable database that will tell you if your doctor is on the payroll of the company whose product he has just recommended: www.ethicaldoctor.org. Some of the information is shocking: two physicians listed made more than $8 million each from Dupuy Orthopaedics.

Now that's a fact you would want to know before the doctor operated, isn't it?

Sources:

New York Times, March 22, 2008

CNN: August 21, 2008

Association For Medical Ethics

Three executives of Hi-Tech Pharmaceuticals, Inc. of Norcross, Georgia have pleaded guilty to conspiracy and fraud charges for illegally selling prescription drugs. President and CEO, Jared Wheat, Vice President, Stephen D. Smith, and company co-founder Tomasz Holda admitted to conspiring to import and distribute adulterated, mislabeled and unapproved new drugs, and to commit mail and wire fraud. The company was selling via the internet generic forms of Xanax, Valium, Ambien, Vioxx, Zoloft, Viagra and Cialis manufactured in their lab in Belize without requiring a prescription.

As a result of the plea bargain, the government dropped assertions that the company was spiking its diet supplements with ephedrine alkaloids after the FDA's 2004 ban on the marketing of ephedra products. See Alaska Personal Injury Law Group's litigation over this practice of illegal spiking of diet supplements, Talbert v. E'ola Products, Inc.. Also absent were the earlier assertions that the executives had conspired to murder an FDA agent and blackmail a former US attorney general. (Holda also pled guilty to ordering a silencer over the internet.) They face prison terms up to 5 years each, with fines of as much as $250,000, and the company itself faces fines as much $500,000. In June, a different federal court issued a preliminary order against the company for FTC violations for deceptive advertisements of weight loss and sexual performance products. Among the company's diet supplement products is Lipodrene, a weight loss product, and Stamina-Rx, a sexual stimulant.

Wheat had previously been arrested for selling ecstasy, and Holda had been convicted of steroid possession with intent to distribute. The FTC had also previously accused the company of falsifying medical research regarding sexual impotent products.

This conviction follows on the heels of two recent convictions of other diet supplement executives involving the President of Metabolife, Michael Ellis, and the President of Berkeley Nutraceuticals, Steve Warshak, Metabolife CEO Headed To Prison; Smilin' Bob Ain't Smilin' No More: Herbal Company President Convicted

Sentencing is scheduled for October 21, 2008.

Sources:

Four "Hi-Tech Pharmaceuticals" Case Defendants Plead Guilty to Importing and Distributing "Knock-Off" Prescription Drugs

Norcross Company President Pleads Guilty To Conspiracy

From Diet Supplements To Illegal Internet Pharmacy

Online Pharmacy Ordered To Pay FTC $15.8 Million

The Alaska Personal Injury Law Group recently obtained a favorable ruling on a matter of great importance for aviation law in Alaska. Apparently reversing a prior contrary decision, the Federal District Court ruled that aviation wrongful death and personal injury claims cannot normally be transferred ("removed") from Alaska State Courts to the Federal District Court at the request of the defendant.

The Alaska Personal Injury Law Group (APILG) has extensive experience in the area of aviation accident litigation. APILG Attorney Neil O'Donnell, representing Port Heiden resident Ted Matson, filed a wrongful death action for the loss of Mr. Matson's wife in the crash of a Peninsula Airways ("PenAir") Piper Saratoga near Port Heiden. The wrongful death action was filed in the Alaska Superior Court in Naknek, the court closest to Port Heiden and closest to the aircraft crash site. PenAir, however, transferred ("removed") the case to the Federal District Court in Anchorage arguing that a recent Ninth Circuit decision, Montalvo v. Spirit Airlines, 508 F.3d 464 (9th Cir. 2007), made all aviation-related wrongful death and personal injury claims removable to federal court. The Federal District Court in Alaska had previously agreed with this argument in another aviation personal injury case (not handled by the Alaska Personal Injury Law Group) that had been removed from the Alaska Superior Court in Bethel. Alexie v. Hageland Aviation, Case No. 4:07-cv-0031-RRB.

The effect of the Alexie case would have been to allow any defendant to transfer any aviation-related death or injury claim out of the Alaska State Courts and into the Federal District Court in Anchorage, Fairbanks or Juneau. Plaintiffs in rural Alaska often want their cases heard in local state courts for both practical and strategic reasons. For example, local rural jurors appreciate the importance of lost subsistence services, often a major portion of a rural plaintiff's economic damages. Juries in federal court must also reach a unanimous verdict. Since the plaintiff has the burden of proof, one or two "holdout" jurors can derail what would otherwise have been a persuasive and successful claim. In contrast, juries in Alaska State Courts can return a verdict based on the vote of only 10 of the 12 jurors.

The Alaska Personal Injury Group was able to convince the Federal District Court that the correct rule is that aviation wrongful death and personal injury claims are not normally removable from state court to federal court. The Federal District Court accordingly ruled that "for the reasons argued by plaintiff," Mr. Matson's case must be returned to Alaska State Court.

Another reason to question what your doctor and the FDA tell you about the safety and efficacy of any drug has now come to light. The Annals of Internal Medicine has just reported that Merck used the unsavory tactic of a "seeding trial" in its development of Vioxx. (This has come to light as a result of Vioxx litigation, and is not data the public would know if only the FDA, rather that the courts, were looking over Merck's shoulder.) A seeding trial is carried out by a drug manufacturer just prior to or shortly after FDA approval of a new drug. Ostensibly, such a clinical trial is completed for the obvious medical research benefits, for example post-approval surveillance for safety and efficacy. In reality, there is an unspoken agenda: to get the drug in as many physicians' hands as possible, enlisting them as investigators while picking up the support for monitoring and paperwork. The physicians receive the prestige of participating in a drug trial as clinical investigators and are financially reimbursed, and the drug manufacturer is familiarizing physicians with the drugs, thereby shortening the path to profitability, or "accelerating uptake" in the parlance. Such trials should be initiated for a legitimate research purpose, not as a pretext for profit.

The guidelines imposed by science, the FDA and institutional review boards are there for a purpose--to be sure that evidence-based science guides critical decisionmaking. When medical journals, the FDA, and the public are deceived with these kinds of tactics, the credibility of the system is corroded. Such deception cannot be permitted to stand without penalty by the FDA, and Merck should be subjected to professional and public scorn.

It is a difficult enough proposition for science to drive decisionmaking in America today. Too often, politics and the mythical thinking justifying the herbal phenomenon win the day. When money corrupts the scientific process, its credibility is undermined and the public increases its distrust of conventional medicine. Simply put: seeding trials are a pernicious practice that should never be permitted.

If you can't trust the guys in the white coats, who can you trust?

Source:

Seeding Trials: Just Say "No"

The ADVANTAGE Seeding Trial: A Review of Internal Documents

The NTSB has issued its findings as to the cause of the July 24, 2007 de Havilland Beaver airplane crash near Ketchikan. The crash killed the pilot and four passengers. The NTSB faulted the FAA's supervision of tour operators and recommended a system of weather information to aid pilots in making in-flight decisions. While Taquan Air Service's pilot had commerical aviation experience, he had only 7 hours of flight time in Alaska when he was hired. The NTSB found that the pilot improperly continued VFR flight in IFR conditions and did not adequately evaluate the deteriorating weather conditions.

Source:
Anchorage Daily News:
http://www.adn.com/news/alaska/story/494553.html

National Transportation Safety Board:
http://www.ntsb.gov/ntsb/brief.asp?ev_id=20070801X01084&key=1

The Bush Administration has consistently sought to undermine consumer-oriented regulatory practices in favor of corporate interests. If it could also take a shot at plaintiffs and their demon trial lawyers, all the better. One of its more spectacular successes was the Supreme Court's recent decision in a medical devices case, Riegel v. Medtronic, which stands for the proposition that the FDA's approval of a medical device should preempt any litigation against the manufacturer in state claims by someone the product injures. As expected, every defendant with any conceivable preemption argument is now injecting that defense into products liability and negligence claims all across the country. FDA and Mercury Regulation;FAA Regulation. The Alaska Personal Injury Law Group just defeated a similar move by a defendant arguing that the FAA's regulation of aircraft should preempt state claims against an air carrier.

The Supreme Court will next consider the application of the preemption doctrine in an injury claim against Wyeth by a Vermont guitarist who lost her arm below the elbow after she was injected with Phenergan, a nausea medicine. Wyeth v. Levine, Docket No. 06-1249. At issue is Wyeth's claim that it should be immune from suit because of the FDA's approval of Phenergan's label. It reasons that the FDA's regulatory approval should be enough to preempt the plaintiff's claim that the manufacturer failed to warn about the dangers of IV injection of the drug. Remarkably, The New England Journal of Medicine has joined 47 state attorneys general and two past FDA commissioners in submitting amicus briefs to the Supreme Court warning that the FDA lacks the ability to serve "as the sole guarantor of product safety".

It is well known that the FDA simply cannot know all the risks of a product or warning label it approves. This is especially true when the manufacturer intentionally skews clinical trial results, Newsday, Annals of Internal Medicine or otherwise keeps product risks from the FDA to achieve the lucrative benefits that come with the approval of a new drug or device, NEJM, Synthes Story. The FDA is not constituted to truly regulate this industry, and it cannot get to bedrock truth the way litigation can. Often, the FDA does not act until litigation proves the product's dangers and makes public the evidence the manufacturer kept from the FDA when the drug or device was approved. Talbert v. E'ola Products, Inc.. If Big Pharma succeeds in the Wyeth matter, millions of Americans will be at risk from dangerous drugs. Without the protections of the legal system, their claims will be unrepresented, and corporate interests will run roughshod over the FDA. At this juncture, Congress will likely have to act to restore the balance of regulatory and legal interests the courts previously forged in protecting the rights of individuals to pursue state claims when injured by dangerous products approved by the FDA.

It is an extraordinary testament to how far off course the Bush Administration has taken American administrative agencies that a national medical journal must file an amicus brief in the highest court in the land to state the obvious. (Remember, "Well, Mr. President, torture is illegal...) Up has become down in American jurisprudence courtesy of the Bush Legacy. Hopefully, legal analysis and not political agendas will guide the Court when it decides Wyeth.

Oral argument before the Court is to be held on November 3, 2008.

Alaska is the only state where the party that prevails in litigation is regularly entitled to recover partial attorney fees and litigation costs from the losing side. For an injured individual, this can mean that a major portion of their attorney fees and costs will effectively be paid by the defendant at the end of the case. Personal injury plaintiffs often greatly benefit from this rule.

Defendants, however, can make use of this rule by making an "offer of judgment." If the injured plaintiff does not obtain a judgment that is at least 95% or more of the defendant's "offer of judgment," the plaintiff has to pay a portion of the defendant's attorney fees and litigation costs.

Evie Rhodes found herself in the latter unhappy situation in an automotive personal injury case recently decided by the Alaska Supreme Court. Rhodes v. Erion. (This case was not handled by the Alaska Personal Injury Law Group.) Erion admitted negligently rear-ending Rhodes' car but disputed the amount of the damages. Erion made an "offer of judgment" of $30,000 early in the case which Rhodes rejected. Rhodes ultimately obtained a judgment against Erion after trial of $27,016 -- only 90% of the $30,000 offer. This meant that Erion, the negligent driver, was now the "prevailing party." The court ordered Rhodes to pay Erion $42,263 in attorney fees, which amount completely offset Rhodes' judgment and left Rhodes owing Erion $17,411. As the Alaska Supreme Court mildly put it, "the result in this case was less than ideal from Rhodes' perspective."

At the Alaska Personal Injury Law Group, we often see clients who greatly benefit from Alaska's unique attorney fee rule. Rhodes v. Erion is a reminder that Alaska's attorney fee rule functions as a litigation "risk multiplier" for both sides.