Online Pharmacy Defense: What We Did Wasn't (Yet) Illegal

At trial, prosecutors will say there's plenty of evidence pharmacy operators knew they were breaking the law even before passage of federal law spelling that out.

Vanessa Blum

2012-09-28 03:32:14 PM

SAN FRANCISCO — The drugs purchased from Safescripts Online were government-approved medications, the prescriptions signed by a licensed physician. And the world of Internet pharmacies was a virtual Wild West — no federal law applied.

For those reasons, three men charged with illegally distributing drugs through an online pharmacy believed their business passed legal muster, defense lawyers plan to tell a federal jury Monday in opening statements.

The trial commencing before U.S. District Senior Judge Charles Breyer marks a particularly aggressive attempt by Bay Area defense lawyers Christopher Cannon of Sugarman & Cannon; solo practitioner Martín Sabelli; and Joshua Cohen of Clarence Dyer & Cohen to challenge the legal theory used against Internet pharmacies that operated before Congress passed legislation to expressly outlaw such businesses.

To make their case, the defense attorneys want to present some unconventional evidence, such as federal legislation proposed in 2005 and a lawsuit filed by their clients against the U.S. Justice Department prior to their indictment. Also potentially at issue in the high-stakes trial is an advice-of-counsel defense based on emails the men sent their lawyers and guidance they received back while selling prescription drugs online.

"The state of the law was at best unclear during the time when this indictment charges criminal conduct," Cannon wrote in a motion fighting the charges against his client, Safescripts Online owner Christopher Napoli.

A bill introduced in 2005 to crack down on Internet pharmacies required doctors to conduct an in-person patient evaluation before prescribing medications. The law, known as the Ryan Haight Act, passed in 2008.

Just how much jurors should hear about differing interpretations of the law prior to the Ryan Haight Act has been fiercely contested by Assistant U.S. Attorneys Kirstin Ault and Tracie Brown.

The prosecutors contend the defendants knew fulfilling thousands of drug orders based only on online questionnaires was illegal but persisted even after warnings from the U.S. Drug Enforcement Administration.

Napoli, computer systems manager Daniel Johnson and prescribing physician Joseph Carozza wanted to make money and didn't care about complying with medical standards, prosecutors plan to tell jurors.

It was apparently a lucrative business, at least for Napoli: His business brought in at least $22 million in revenues, prosecutors allege.

Federal agents have seized from him a Lamborghini, a Porsche and $1.5 million. (Sabelli, who represents Johnson, suggested in court last week that his client did not make out as well.)

Napoli, Johnson and Carozza are charged with conspiring to distribute and distributing controlled substances outside the scope of professional practice and not for legitimate medical purpose. The main drug sold by Safescripts was phentermine, a prescription diet drug classified as having "a low potential for abuse" compared to many prescription medications. There is no allegation that Safescripts distributed pharmaceuticals classified as having a high potential for abuse, such as the pain relievers oxycodone or methadone.

Napoli and Johnson also face one count of money laundering for contracting with an overseas company to provide credit card processing.

The case marks a significant white-collar prosecution for the district and stems from an investigation where Bay Area drug enforcement agents placed undercover orders for prescription diet pills and received shipments from several Internet pharmacies. So far, prosecutors haven't lost a case. They won convictions against two related defendants in a jury trial before Breyer earlier this year. Four others have pleaded guilty. One defendant died following indictment and another remains a fugitive.

To convict the Safescripts defendants, prosecutors must convince jurors the men acted in bad faith and knew what they were doing was outside the course of usual medical practice.

The standard is a "conceptual mouthful," said defense lawyer Edward Swanson of Swanson & McNamara, who represented an Internet pharmacy operator convicted in March in the related case. "There's a lot in there you can argue both ways," he said.

During pretrial hearings this past week, Breyer wrestled with how to limit evidence in a case where the defendants' state of mind and intentions are critical elements.

Initially, Breyer sided with prosecutors, ruling that defense evidence on proposed legislation and advice received from counsel could only come in if the men testified and were subject to cross-examination.

But later, Breyer confronted questions of fairness. For instance, if prosecution witnesses testified to incriminating documents retrieved from the defendants' computers, would defense lawyers be permitted to conduct cross-examinations about favorable materials on the very same computers, he pondered.

"If in your case in chief, you introduce specific evidence of their state of mind, then I don't know how logically one can draw the line," Breyer told prosecutors.

To which Ault responded: "Their evidence is not admissible and our evidence is."

UC-Hastings law professor Rory Little said evidentiary calls related to evidence of mens rea, or criminal intent, can be tough.

"If you don't let it in, you automatically set up an appellate argument," Little said.

According to court records, Napoli, a resident of Newtown Square, Pa., launched his first online pharmacy in November 2004 and contracted with two physicians to sign prescriptions based on online applications. Johnson managed the computer systems used to run the pharmacy from his hometown in Illinois.

Napoli, who previously owned a dance and music studio, believed he was complying with federal law by having a physician review prescriptions, said Cannon, Napoli's lawyer.

"He tried to be fully legitimate," Cannon said. "He consulted lawyers as he went into this business."

Later that year, agents with the U.S. Drug Enforcement Administration told the physicians working for Napoli that their practice of prescribing medications based solely on online questionnaires was illegal. Both doctors subsequently quit the company, according to court records.

In November 2005, Napoli launched a new Internet pharmacy under the name Safescripts Online and recruited Carozza, a Garden City, N.Y., doctor, to approve prescriptions. In an email exchange cited by prosecutors, Johnson asked Napoli what he wanted for Christmas that year, and Napoli responded, "The DEA off my back and for this business to run for 12 more months."

But the government became an even bigger problem for Napoli in 2006. In February, prosecutors notified Napoli he was the target of a federal grand jury investigation in the Northern District of California, and in March, the DEA closed down the main pharmacy which filled prescriptions for Safescripts.

Napoli began using another pharmacy, which was shut down by the DEA in April for filling Internet drug orders at a rate of 3,500 to 4,000 per day, according to prosecutors.

Napoli then arranged for an intermediary to purchase a pharmacy to fulfill Safescripts orders. Napoli actually ran the pharmacy and hired the same manager from the two shuttered pharmacies, prosecutors allege. That pharmacy operated for two months before it was shut down by the DEA in July.

That month, Napoli and Carozza filed an unsuccessful declaratory judgment action in the Eastern District of Pennsylvania to stop the DEA and the Justice Department from mandating face-to-face prescribing without authorization of Congress. Napoli finally closed his online pharmacy in December 2006, two years before the Ryan Haight Online Pharmacy Consumer Protection Act became law.

In the related trial earlier this year that resulted in convictions, defense lawyers Swanson and Seth Chazin did not offer evidence their clients knew of or considered the pending legislation.

Lawyers for Napoli, Johnson and Carozza say their case is different. The defendants believed they were complying with existing federal law, which did not specifically mandate an in-person evaluation for prescriptions. A new law would not have been needed if Internet pharmacies were already illegal, according to the defense.

"There is a solid foundation for evidence about the Ryan Haight Act at trial, and the government knows it," wrote Cohen, Carozza's lawyer, in a recent brief.

But prosecutors call the pending legislation irrelevant and argue the declaratory judgment complaint amounts to "self-serving statements" made by the defendants once they saw criminal charges on the horizon.

"Napoli's disingenuousness in his court filings actually demonstrates his consciousness of guilt, rather than the reverse," Ault and Brown wrote in their trial memo.

While Safescripts was in business, prosecutors point out, federal law prohibited distributing drugs "outside the scope of professional practice and not for legitimate medical purpose."

The "most damning evidence of guilty knowledge," according to prosecutors, is "the public closure by law enforcement of the fulfillment pharmacies that supplied drugs to the defendants, and the general publicity surrounding the illegality of the industry."

The trial in U.S. v. Napoli is expected to continue through mid-November.