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United States v. Gurry

United States District Court, D. Massachusetts

January 17, 2019




         On 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 is DENIED.

         I. BACKGROUND

         The 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].

         In 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. [Id.].

         The SSI 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].

         In the 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.


         Federal 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).


         Defendants 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].

         In 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].

         The 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.

         A. The SSI Includes the Elements of a RICO ...

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