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United States v. Cadden

United States District Court, D. Massachusetts

June 6, 2016




         The defendants indicated below[1] seek dismissal of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c) & (d), Counts 1 and 2, and/or the striking of the twenty-five incorporated racketeering acts involving alleged second-degree murder.[2] As previously summarized by the court, the indictment involves the now defunct New England Compounding Pharmacy, Inc., doing business as New England Compounding Center (NECC), and the allegedly contaminated drugs that it compounded and shipped nationwide. Defendants Barry Cadden and Glenn Chin are charged in the indictment with twenty-five acts of second-degree murder involving patient deaths in Michigan, Indiana, Tennessee, Maryland, Virginia, Florida, and North Carolina. The twenty-five patients died after being administered NECC-compounded doses of non-sterile methylprednisolone acetate (MPA), a steroid used to treat pain caused by swollen joints. More than 800 additional patients are alleged to have suffered complications of varying degrees of severity after taking the same drug. Defendant Cadden, a licensed pharmacist, served as NECC’s President. Defendant Chin, also a licensed pharmacist, oversaw NECC’s “Clean Rooms.” Defendants Gene Svirskiy, Christopher Leary, and Joseph Evanovsky were licensed pharmacists who worked in the Clean Rooms. Defendant Alla Stepanets, also a pharmacist, among other jobs worked in the packing area verifying orders prior to shipment. Defendant Sharon Carter served as NECC’s Director of Operations, while defendant Scott Connolly performed the duties of a pharmacy technician.[3]

         In support of their motion to dismiss, defendants make three separate arguments.[4] First, defendants assert that the indictment’s allegation of a “pattern” of racketeering activity is fatally inconsistent. Second, they claim that the indictment fails to properly allege the elements of second-degree murder. And third, they contend that the RICO statute itself is unconstitutionally vague as applied to them in their conduct of the business of NECC.[5]

         In an earlier decision, the court explained what RICO intends in enhancing punishment for engaging in a “pattern of racketeering activity.”

A “pattern of racketeering activity” is defined as the commission of “at least two” related racketeering acts over a span of time. See Schultz v. Rhode Island Hosp. Trust Nat’l Bank, N.A., 94 F.3d 721, 731 (1st Cir. 1996). To demonstrate relatedness, the predicate acts must “have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise be interrelated by distinguishing characteristics and not be isolated events.” Feinstein v. Resolution Trust Corp., 942 F.2d 34, 44 (1st Cir. 1991). There must also be evidence of “continuity” sufficient to show that the predicate acts constituted a “pattern” - “a closed period of repeated conduct” - amounting to a threat of continued criminal activity or [an open-ended] one that is “a regular way of conducting . . . the RICO enterprise.” H.J., Inc. v. N.W. Bell Tel. Co., 492 U.S. 229, 243 (1989). [Finally, ] [p]redicate acts (as listed in the statute) must be pled with particularity, Ahmed v. Rosenblatt, 118 F.3d 886, 889 (1st Cir. 1997), and must be more than a “cause in fact” of a plaintiff’s injury; they must be the proximate cause. Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 266 n.12 (1992).

Cadden, 2016 WL 1948832, at *2 (footnote incorporated).

         Defendants’ argument that the indictment fails to allege a coherent “pattern” of racketeering activity can be summarized as follows. As defendants fairly read the indictment, the purpose of the unlawful enterprise, as reflected in the groupings of the mail fraud acts of racketeering, was to enrich Cadden and Chin and others by marketing substandard drugs manufactured on the cheap. “If [, however, ] Cadden and Chin knew their drugs were so likely to kill people, then they knew such tragic end results would curtail or end their business, and reduce or extinguish the revenues that they allegedly sought to procure through the mail-fraud-based racketeering acts.” Dkt. # 405 at 4. Noting that a RICO pattern must consist of “related” acts, defendants argue that a murderous course of conduct is so irreconcilable with a scheme to defraud that the two cannot coexist “under one ‘pattern’ roof.” Id.

         In an extension of the logic of the argument, defendants contend that even if the predicate acts of second-degree murder can be shown to be related in some fashion to the scheme to defraud, they fail the closed-ended continuity element of RICO by virtue of the fact that the contaminated vials were shipped in May, June, and August of 2012, while NECC ceased doing business in October of 2012.[6] See Giuliano, 399 F.3d at 390 (sixteen racketing acts over a six-month period inadequate to establish closed-ended continuity). Similarly, defendants argue that because the first reports of deaths brought NECC to a screeching halt, open-ended continuity cannot be shown because of the absence of any probability of conduct “showing signs of extending indefinitely into the future.” Efron, 223 F.3d at 16.

         As a general matter, I agree with the government that the law is reasonably well settled (at least in the district courts) that the existence of a “pattern of racketeering activity” is a question of fact reserved for the jury at trial. See Dkt. # 456 at 7. My disagreement with the defendants, however, runs somewhat deeper. I see no compelling reason why a pattern of racketeering activity need satisfy a test of internal coherence or objective consistency. Criminal conduct does not always reflect the most rational of choices or even the most basic calculations of ultimate self-interest. If the government’s allegations prove true, NECC will not be the first criminal enterprise undone by greed or a sense of invulnerability. See Azam Ahmed, How El Chapo Was Finally Captured, Again, N.Y. Times, Jan. 16, 2016, No argument has been made that Cadden and Chin set out to strangle the golden goose. But I expect to hear the government argue that the defendants’ apparent success in cutting corners and enhancing profits without getting caught, led them into a self-deceptive state of impregnability that fed an increasingly reckless and heedless course of conduct.

         This reading of the indictment also answers defendants’ second contention, that the government will be unable to satisfy the continuity test at trial. The murder racketeering acts are simply a restatement of the tragic end results, far exceeding any loss of money or property, of the malfeasances that gave rise to the mail fraud scheme. Consequently, I see no reason why the murder racketeering acts should not be seen as woven into the warp and woof of that conduct as a whole, which in the aggregate spanned some two and one-half years, a period comfortably approximate to the time frames that Circuit Courts have found to satisfy the closed-ended continuity requirement. See, e.g., United HealthCare Corp. v. Am. Trade Ins. Co., 88 F.3d 563, 572 (8th Cir. 1996).[7]

         Cadden and Chin next argue that the indictment is defective for failing “to charge the required element of causation” in a case of second-degree murder. The gist of the argument is that while the indictment specifies the reckless acts and omissions of which Cadden and Chin stand accused, it fails to give explicit guidance as to which act is the “but for” or “legal cause” of death in each of the twenty-five alleged homicides.

The government is required to prove causation as part of the murder [racketeering acts] here. And so they are required to charge it. The defendants Cadden and Chin are entitled to know what they are accused of doing that caused each one of these deaths. Charging them with engaging in a litany of wrongdoing generally at NECC, and then applying that same litany to each of these three contaminated lots of MPA, does not answer that question and does not charge causation.

Dkt. # 405 at 15.

         Defendants’ argument combines an indisputable proposition - that a prosecution for second-degree murder requires proof of a causal connection between a defendant’s reckless acts or omissions and a victim’s death - with a dubious one - that the government is required to plead not only the ...

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