United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO
DISMISS THE SECOND SUPERSEDING INDICTMENT
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE
September 11, 2018, a grand jury returned the Second
Superseding Indictment (“SSI”) against remaining
Defendants Michael Gurry, Richard Simon, Sunrise Lee, Joseph
Rowan, and John Kapoor, charging them with engaging in a
racketeering conspiracy in violation of 18 U.S.C. §
1962(d). [ECF No. 419]. On October 31, 2018, Defendants moved
to dismiss the SSI pursuant to Federal Rules of Criminal
Procedure 7(c) and 12(b)(3)(B). [ECF No. 513]. The Government
filed its opposition to the motion on November 14, 2018, and
Defendants filed a reply memorandum on November 27, 2018.
[ECF Nos. 532, 540]. For the reasons stated below, the motion
following allegations are drawn from the SSI. [ECF No. 419].
Defendants held executive management positions at Insys
Therapeutics, Incorporated (“Insys”), a
pharmaceutical company that manufactured, marketed, and sold
a fentanyl spray called Subsys. [ECF No. 419 ¶¶
16-22]. The SSI alleges that Insys constitutes the enterprise
underlying the RICO conspiracy. [Id. ¶ 1]. It
further alleges that from about May 2012 through about
December 2015, Defendants and their co-conspirators sought to
increase profits for the enterprise and for themselves by
conducting the affairs of the enterprise including through
bribes, fraud, and the illicit distribution of Subsys.
[Id. ¶¶ 23, 26]. The RICO predicates
alleged are mail fraud, wire fraud, honest services fraud,
and violations of the Controlled Substances Act
(“CSA”). [Id. ¶ 24]. Specifically,
the SSI alleges that the Defendants bribed and provided
kickbacks to some practitioners in exchange for the
practitioners prescribing more and increasing the dosage and
number of units of Subsys for new and existing prescriptions.
[Id. ¶ 27]. In some cases, Defendants expressly
required practitioners to write a minimum number of
prescriptions, at a minimum dosage, or for a minimum number
of units, in order to continue receiving bribes and
kickbacks. [Id. ¶ 28]. The bribes and kickbacks
took multiple forms, including being disguised as honoraria
purportedly for practitioners' participation in
educational events regarding the use of Subsys, paying the
salaries of members of the office staff for certain targeted
practitioners, and providing Insys employees to perform
administrative tasks that the practitioners would otherwise
have had to pay someone else to perform. [Id.
¶¶ 29, 46, 48, 54-55].
addition, the SSI alleges that the Defendants, including the
five still scheduled for trial, and other co-conspirators
instructed Insys employees to make false and misleading
representations and omissions to insurers in order to secure
payment for Subsys prescriptions. [Id. ¶ 63].
The SSI further claims that, in order to increase the rate of
payment authorizations for Subsys prescriptions, Defendants
Kapoor, Gurry, and other co-conspirators created a special
unit within Insys that was dedicated to obtaining prior
authorizations for Subsys from insurers. [Id. ¶
64]. At the direction of Defendants Kapoor, Gurry, and other
co-conspirators, employees of this unit made false and
misleading representations to insurers about patient
diagnoses, including about the type of pain being treated and
the patients' prior course of treatment with other
medications, to secure payment authorizations.
also alleges that Defendants Kapoor, Simon, Lee, and Rowan
engaged in conduct to prevent the detection of their illegal
activities by the DEA and others, including by having Subsys
shipped directly to pharmacies to reduce the possibility of
wholesalers reporting suspicious activity to the DEA.
[Id. ¶¶ 71-72].
motion presently before the Court, Defendants assert that the
SSI should be dismissed because it fails to properly charge a
violation of the RICO statute.
STANDARD OF REVIEW
Rule of Criminal Procedure 12(b)(3) allows a defendant to
make a pretrial motion challenging a defective indictment.
“An indictment is legally sufficient if it
‘first, contains the elements of the offense charged
and fairly informs a defendant of the charge against which he
must defend, and, second, enables him to plead an acquittal
or conviction in bar of future prosecutions for the same
offense.'” United States v.
Laureano-Perez, 797 F.3d 45, 60 (1st Cir. 2015)
(citations omitted); see also Fed. R. Crim. P. 7(c)
(requiring a “plain, concise and definite written
statement of the essential facts constituting the offense
charged”). “[T]he indictment may use the
statutory language to describe the offense, but it must also
be accompanied by such a statement of facts and circumstances
as to inform the accused of the specific offense with which
he is charged.” United States v. Savarese, 686
F.3d 1, 6 (1st Cir. 2012) (citing United States v.
Mojica-Baez, 229 F.3d 292, 309 (1st Cir. 2000)).
“When a defendant seeks dismissal of an indictment,
courts take the facts alleged in the indictment as true,
mindful that ‘the question is not whether the
government has presented enough evidence to support the
charge, but solely whether the allegations in the indictment
are sufficient to apprise the defendant of the charged
offense.'” United States v. Ngige, 780
F.3d 497, 502 (1st Cir. 2015) (quoting Savarese, 686
F.3d at 7).
argue that the SSI should be dismissed because it fails to
allege an agreement by Defendants to violate the CSA, to
commit honest services fraud, or to commit mail fraud. [ECF
No. 514 at 1]. Defendants further assert that the SSI fails
to allege a predicate CSA violation because it does not
allege an agreement for physicians to prescribe a medication
to patients who did not need it, [id. at 7-8, 11],
or a predicate honest services fraud violation because it
omits allegations of an agreement for a practitioner to
breach a fiduciary duty or an agreement to deceive patients
about Insys's financial relationships with practitioners,
[id. at 7-8, 13-17]. Finally, Defendants contend
that the SSI fails to allege mail fraud as a predicate act
because it does not allege the use of mails in furtherance of
a scheme to defraud. [Id. at 8, 18- 19].
response, the Government argues that these additional
allegations are not required for a legally sufficient
indictment and that the SSI adequately alleges that
Defendants agreed to conduct the affairs of the enterprise
through an identified pattern of racketeering activity. [ECF
No. 532 at 1-2].
Court finds that the SSI is legally sufficient as it contains
the elements of the RICO conspiracy charge and relevant
factual information to inform Defendants of the charge as
well as to enable them to avoid future prosecutions for the
same offense. See Laureano-Perez, 797 F.3d at 60;
Savarese, 686 F.3d at 7.
The SSI Includes the Elements of a RICO ...