Two Drug Suppliers Plead Guilty in Nationwide Prescription Drug Diversion Scheme

The Department of Justice announced that a California man and a New Jersey man pleaded guilty today in U.S. District Court in Cincinnati in connection with the prosecution of a nationwide prescription drug diversion scheme. 

Fernando Galan, 50, of Simi Valley, California, pleaded guilty before U.S. District Court Judge Timothy S. Black to one count of conspiracy to distribute prescription drugs without a wholesale license.  The department also unsealed the case against David Konigsberg, 58, of East Hanover, New Jersey, who pleaded guilty on June 22 to one count of conspiracy to commit mail and wire fraud for his participation in the drug diversion scheme.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Special Agent in Charge Antoinette V. Henry of the U.S. Food and Drug Administration’s Office of Criminal Investigations (FDA-OCI) Metro Washington, D.C., Field Office and Assistant Inspector in Charge Christopher White of the U.S. Postal Inspection Service’s (USPIS) Cincinnati Field Office announced the two guilty pleas.

“Prescription drug diversion compromises the integrity of America’s drug supply chain,” said Principal Deputy Assistant Attorney General Mizer.  “This extensive investigation demonstrates that the Department of Justice will protect American consumers by prosecuting those who violate federal law by selling diverted drugs.”

“The sale of illegally diverted prescription drugs creates unacceptable public health risks,” said U.S. Attorney Stewart.  “Patients purchased what they believed were FDA-approved prescription drugs that had remained in regulated distribution channels intended to protect against misbranded, adulterated, sub-potent, improperly handled, counterfeit and stolen products.  Instead, these customers received drugs of unknown quality and origin.”

Galan and Konigsberg participated in the sale of illegally diverted prescription drugs to David Miller and his company, Minnesota Independent Cooperative (MIC).  On May 6, David Miller and MIC, along with Artur Stepanyan and Mihran Stepanyan, were indicted in the Southern District of Ohio and charged with one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud and one count of conspiracy to make false statements and to distribute prescription drugs without a wholesale license.  Those charges are still pending.  Galan and Konigsberg are the sixth and seventh co-conspirators to plead guilty for their participation in the drug diversion scheme involving Miller and MIC. 

Miller and MIC sold the prescription drugs obtained through Galan and Konigsberg – along with multiple other illegal sources – to wholesale and retail customers throughout the United States, including in the Southern District of Ohio.  Miller and MIC are alleged to have created fraudulent pedigree documents falsely stating that they had purchased the drugs from B&Y Wholesale, a company in Puerto Rico.  These false pedigrees covered up the illegitimate sources of the drugs – various illicit suppliers, including Konigsberg and Ricardo Jurado, a Miami supplier – and falsely stated that B&Y was an authorized distributor of the prescription drugs.

Galan

According to court documents, from July 2007 through October 2012, Galan facilitated the sale of millions of dollars of illegally diverted prescription drugs.  Galan, who owned a restaurant in Rosemead, California, acted as a middleman in the sale of diverted prescription drugs from Ricardo Jurado, a drug supplier in Miami, to Miller and MIC.  Neither Jurado nor Galan was licensed to engage in the wholesale distribution of prescription drugs.  Jurado has also been charged for his role in this conspiracy. 

In connection with facilitating the sale of the diverted drugs, Galan forwarded wiring instructions from Jurado directing Miller to send payments to at least 13 different bank accounts at banks in Mexico, Nicaragua, Canada, Florida and other locations.  During the course of the conspiracy, Miller and MIC wired more than $30 million to the bank accounts specified by Galan.  From June 2009 through July 2012, Galan received between $550,000 and $1 million in commission payments on the drug sales.  

Konigsberg

According to court documents, from 2008 through February 2104, Konigsberg sold illegally diverted prescription drugs to Miller and MIC.  Doing business as Preferred Inc., Konigsberg received prescription drugs from another supplier, who obtained the drugs from illicit street sources in New York and New Jersey at substantial discounts off of the wholesale price.  Konigsberg then offered the drugs to Miller and MIC for a profit.  

At Miller’s direction, Konigsberg included false notations on the invoices he provided to Miller indicating that Konigsberg had purchased the drugs from a large wholesale distributor.  As Konigberg and Miller both knew, Konigsberg had obtained the drugs from illegal sources, not from the large distributor.

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This matter is being investigated by FDA-OCI and the USPIS.  Assistant U.S. Attorneys Anne L. Porter and Christy Muncy of the Southern District of Ohio and Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch are representing the United States in these cases.