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PharmaCare Charged With Dealing in Stolen Property
Daily Business Review
August 21, 2008
The Web site for PharmaCare Health Services told retailers it aimed to be their "secondary source of health & beauty care products."
But federal prosecutors charge the Sunrise, Fla.-based company specialized more in the five-finger discount of shoplifting on a grand scale.
"Defendants bought and sold approximately $7.9 million of stolen over-the-counter medications and health and beauty aids, which had not been legitimately obtained," said the nine-count indictment unsealed Aug. 13.
The Internal Revenue Service and other agencies busted a shoplifting ring that was allegedly run by two brothers who marketed the stolen medications and other drugstore products.
PharmaCare Health Services stored, packaged, cleaned and distributed the medications and other products to retail businesses. It used professional shoplifters -- known as boosters -- to steal the merchandise, according to the indictment naming seven defendants.
The stolen products included teeth-whitening strips, razor blades and expensive creams, according to Ellie Michaud, spokeswoman for the Internal Revenue Service in West Palm Beach, which tracked the money in the operation.
Products were stolen from Walgreens, Target, CVS and Rite Aid, she said. She did not know what medications were targeted.
Nasir "David" Khan, his brother Asif "Jordan" Khan and their former brother-in-law Michael Spencer ran the company, the indictment alleges.
The company name may have played on a well-known business. PharmaCare is CVS's pharmacy-benefits manager and is the fourth-largest in the industry.
David Khan served as controller and operator of PharmaCare Health Services, while Jordan Khan ran the warehouse. Spencer allegedly traveled to purchase stolen goods.
Also indicted was Duane Schneider, who was listed as the owner but was nothing but a front man as David Khan controlled the business behind the scenes, the indictment said.
On the supply end, three North Carolina men were named in the indictment: warehouse owner Edward Joseph Smith, his employee James Edward Foy and alleged fence Michael Todd Dagnen.
The indictment from the office of U.S. Attorney Alex Acosta charges transportation of stolen goods, sale and receipt of stolen goods, money-laundering conspiracy and fraud conspiracy.
U.S. Magistrate Judge James Hopkins in West Palm Beach on Friday granted bond to Schneider and Spencer but not to the Khan brothers, finding they were flight risks as natives of Pakistan.
David Khan's attorney, Larry McMillan, a partner with Donet McMillan & Trontz in Miami, argued his client and Schneider had similar roles and should be treated equally.
"They have essentially assimilated to the American way of life, and our argument was that they are not a flight risk," McMillan said after the bond hearing. "This is where they have decided to raise their families and live."
McMillan said the Khans plan to fight the charges in the case assigned to U.S. District Judge Donald Middlebrooks in West Palm Beach.
The phone has been disconnected at PharmaCare's Sunrise office.
"These raids and these arrests have essentially driven PharmaCare out of business," McMillan said. His client was arrested last week.
Assistant U.S. Attorney Laurence Bardfeld, who signed the indictment, didn't mention the retailers that purchased PharmaCare products at Khan's bond hearing.
But the indictment outlined a professional shoplifting system involving products sold to fences.
"There can be multiple levels of fences," the indictment reads. "Lower level fences obtain smaller amounts of stolen products from boosters, and higher level fences obtain larger amounts of stolen products from lower level fences."
PharmaCare Health Services worked as a wholesaler, buying stolen and damaged items in bulk quantities, prosecutors charged.
"The products were cleaned. The goods were repackaged and re-labeled in order to create the appearance that the product had been purchased directly from the manufacturer," the indictment reads. "The defendants routinely removed, discarded and destroyed the security tags and other identifying marks or labels."
IRS investigators detailed company financial transactions, listing about 30 checks and invoices for merchandise dating back to Jan. 2, 2004 -- one for $151,125 for EDS Wholesale owned by Smith. He had a warehouse in Bessemer City, N.C., and a storage facility in Grover, S.C.
It wasn't exactly a sophisticated operation, at times.
The Khans allegedly transported more than $100,000 cash in a locked briefcase and a gym bag to pay Smith and Foy.
The indictment said Dagnen had a storage locker at a storage facility off I-85 in North Carolina where Foy -- at Smith's direction -- would retrieve stolen merchandise. Smith and Foy paid for Dagnen's merchandise by leaving cash in the locker, the indictment states.
Prosecutors charge the company also was supplied with stolen goods by Mid-Ohio Wholesale in Columbus, Ohio, but no one from that company has been charged.
However, Ahmad Almansour of Jordan, the owner of Mid-Ohio Wholesale, was charged with interstate transportation of stolen property in 2005. He was sentenced to five years for transportation of stolen merchandise in interstate commerce and conspiracy.
The business netted $9 million in gross sales, according to court documents.
Michaud said the IRS worked with the FBI, Broward sheriff's office and U.S. Immigration and Customs Enforcement on the investigation. She said the IRS's contribution involved "providing the financial expertise to follow the money trail and seizing the profits of illegal activities."
