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United States v. Connor

United States District Court, N.D. Oklahoma

November 15, 2019




         The Court has for its consideration the following motions: Defendant Gregory Connor's various motions to dismiss the indictment in whole or in part (Doc. 17; Doc. 19; Doc. 30; Doc. 34; Doc. 46; Doc. 63; Doc. 71); his various motions to suppress certain statements and other evidence (Doc. 24 Doc. 43); his motions in limine (Doc. 21; Doc. 62); and the government's motions in limine (Doc. 40; Doc. 58; Doc. 61). The Court heard evidence and argument related to these motions during a hearing held on October 30 and 31, 2019.

         I. Background

         The investigation giving rise to this case began with a shipment of seven vials carrying botulinum toxin A, a compound better known under its medicinal brand name, Botox. The package, shipped via international mail in January 2017, was set to enter the country via the Customs and Border Protection facility in New York City when it caught the eye of inspectors. Suspecting the package contained unauthorized prescription drugs, the agency detained the shipment and referred it to the Food and Drug Administration for further investigation. The box did not identify the sender, but the shipping label indicated that the parcel was bound for the neurology clinic of Dr. Gregory Connor in Tulsa, Oklahoma.

         A subsequent examination of the parcel's contents confirmed the initial suspicion of customs inspectors, according to the testimony of the FDA officer who performed the examination. According to the officer, information on the vials' packaging indicated that Allergan, the manufacturer, had boxed and labeled the Botox for distribution outside the United States. The FDA has approved the sale of Botox in the domestic market, but the drug is only considered to be FDA-approved when it is packaged and labeled according to FDA regulations. Because Allergan packages the drug differently for different markets, the FDA considers Botox packaged for sale abroad to be an unapproved drug when imported into the United States.

         The ensuing investigation into Dr. Connor culminated with the Second Superseding Indictment (Doc. 53), which accuses Dr. Connor of engaging in a scheme to defraud Medicare by buying Botox at a discount on the international market and then billing Medicare for the full reimbursement rate. According to the indictment, Dr. Connor was not entitled to seek reimbursement at all because Medicare only reimburses for FDA-approved drugs and the Botox he used did not qualify.

         In connection with this alleged scheme, the indictment charges Dr. Connor with 36 counts of healthcare fraud under 18 U.S.C. § 1347. Each of the healthcare fraud counts, enumerated in the indictment as Counts 1 and 7-41, relates to a specific Botox treatment that Connor administered and subsequently billed to Medicare.

         Count 2 of the indictment charges Dr. Connor with receiving a misbranded drug with the intent to defraud in violation of 21 U.S.C. §§ 331(c) and 333(a)(2).

         Counts 3-6 charge Dr. Connor with aggravated identity theft under 18 U.S.C. § 1028A(a)(1). According to the indictment, Dr. Connor used the names and Medicare numbers of four patients without lawful authority in connection with the alleged healthcare fraud scheme. Each count of identity theft relates to a patient who received one of the Botox treatments forming the basis for the healthcare fraud counts.

         II. Motions to Suppress Statements and other Evidence

         Two of Dr. Connor's pretrial motions seek to suppress evidence on constitutional grounds. One seeks to exclude evidence, direct and indirect, obtained as a result of the FDA's search of the January 2017 Botox shipment. (See Doc. 24). The other seeks to exclude statements and other evidence that the government obtained under allegedly false pretenses. (See Doc. 43). “When factual issues are involved in deciding a motion, the court must state its essential findings on the record.” Fed. R. Crim. P. 12(d). The discussion below shall serve as the Court's essential findings on the defendant's motions to suppress.

         A. Summary of the Evidence

         FDA Consumer Safety Officer Cosmon Barrett testified as to the origin of the investigation into Dr. Connor. After customs intercepted the January 2017 shipment bound for Dr. Connor's office, Barrett conducted a warrantless search of the shipment's contents and determined that the Botox was not packaged as required by the FDA for the U.S. market. He then forwarded his findings to a colleague in the FDA's Office of Criminal Investigations, which opened a file on Dr. Connor. Several days later, on January 24th, the agency sent a letter to Dr. Connor's office saying the shipment had been detained because its contents “d[id] not appear to be in compliance” with several listed code sections, but the letter made no reference to a criminal investigation. (Plaintiff's Exhibit (PX) 5).

         When the FDA received no response to the detention notice, the agency refused to admit the package into the country. Packages refused entry into the United States are returned to their country of origin, according to Barrett. The FDA sent notice of the refusal to Dr. Connor's office on February 15, 2017. (PX 6).

         Special Agent Daniel Allgeyer testified that, after receiving the criminal-investigation referral, he and another agent went to Dr. Connor's Tulsa practice on February 1st. After checking in at the front desk, they remained in the waiting room until Connor came out. The agents introduced themselves, and Connor led them back to his office to speak in private. Once in Connor's office, Allgeyer testified, he informed Connor that the FDA had reason to believe that someone had sent him a package containing foreign unapproved medical products. Connor said he recently received a letter saying something to that effect.

         Allgeyer testified that he then began to ask Connor about the Botox he used in his practice. According to Allgeyer, Dr. Connor said he had three to five patients who currently received Botox treatments, which he sourced from a Canadian company called Northwest Pharmaceuticals at a price of about $480 per vial.

         Allgeyer then asked Dr. Connor if he had any Botox on hand. At this, Connor went into another room where the Botox was stored in a refrigerator and returned with a single boxed vial. After going over the various telltale markings on the vial's box, Allgeyer told Connor that the Botox appeared to be FDA approved. Before ending the interview, Allgeyer asked, “do you mind if I take a look inside your refrigerator just for -- you know, my boss is going to want to know if I looked around.” Connor responded, “Sure. Follow me.” Inside the refrigerator, Allgeyer said, he found seven vials of what he identified as “foreign unapproved medical product.”[1]

         Allgeyer testified that, at about this time, Dr. Connor's business manager, Judy Hurst, joined the interview. When Allgeyer told her what Connor had said about the office's Botox purchasing, Hurst confirmed that the company was Canadian but corrected Connor as to the name. The company is called MedicaDepot, not Northwest Pharmaceuticals, she said.[2] The company's price was also more like $380, not $480, and Dr. Connor had eight to ten patients that received the drug, not three to five. Allgeyer testified that, when he asked why the office bought some Botox from a U.S. supplier and some from MedicaDepot, Hurst said some patients' private insurers required the office to buy from a particular pharmacy. For those on Medicare, they bought from MedicaDepot, Hurst said.

         Allgeyer asked Hurst if anything about MedicaDepot had raised any “red flags.” There was something that she did find “a little bit weird, ” she said. A few days earlier, someone from MedicaDepot had called to say that customs had stopped the office's most recent order at the border. In order to ensure that replacement shipment would make it through, the person said, MedicaDepot would send it to her personal address. The replacement shipment had just arrived, Hurst told Allgeyer. Those were the vials he had found in the refrigerator.

         Allgeyer asked Hurst if the office had any receipts for the orders it received from MedicaDepot. She said they did not, but she kept the company's American Express statements, which she annotated with the word “Botox” next to the payments made to MedicaDepot. Hurst showed Allgeyer the statements and also walked him through the office's Medicare reimbursement paperwork. At Allgeyer's request, she agreed to make copies of the relevant documents.

         Before he left, Allgeyer asked Dr. Connor to sign two documents. One form was a waiver stating that Connor “having been advised of [his] right to refuse” granted consent to Allgeyer and his partner to search the clinic and seize “any and all property, materials, documents, or other items that may be used in connection with their law enforcement and investigative purposes, including, but not limited to, any and all misbranded and/or adulterated medical products.” (PX 1). Allgeyer testified during cross examination that, even though the form's language implies that Connor had been previously “advised of [his] right to refuse, ” Allgeyer never actually told Connor or Hurst that they could deny the agents' requests to inspect the clinic's Botox stock or files.

         The other form, an “Acknowledgment, ” stated that Allgeyer had “advised the interviewee” about various federal statutes governing the purchase and administration of prescription drugs, including the statute defining the crime of receiving misbranded drugs. (PX 2). Apart from handing him the form, which was dense with legalese, Allgeyer did explain to Connor that he could be criminally prosecuted for his Botox-purchasing practices.

         Allgeyer testified that he gave Dr. Connor enough time to read the statements and that Connor appeared to do so before signing them and handing them back. Allgeyer did not leave Connor copies of the forms.

         The next day, February 2nd, Allgeyer and his partner returned to Dr. Connor's office briefly to get the copies Hurst promised to make and to ask some follow up questions. Noting that MedicaDepot charged only $380 per unit, Allgeyer asked Connor why his office requested a $600 reimbursement from Medicare. Dr. Connor's response, according to Allgeyer: “Allergan vials cost $600, so we just went with the $600.”

         Investigators returned to Dr. Connor's office for a third and final time on June 1. On that day, Allgeyer told Connor and Hurst that they could ask him to leave at any time and that they did not have to answer any questions if they did not want to. It appears that the primary purpose of the visit was to obtain a written statement summarizing the information Connor and Hurst had given during the prior interviews. Although Connor and Hurst signed the statement, it was written by Allgeyer. The form stated, in pertinent part, as follows:

This information is given by me to let the facts be known. I have not been forced into providing this information, nor have I been promised anything in relation to this investigation.
On this date, Special Agent(s) Daniel Allgeyer and Ana Richardson [and] Randall House [Health and Human Services Office of the Inspector General] of the FDA-OCI interviewed me.
This interview concerned my knowledge of:, Debby [last name unknown] and Dr. Gregory Connor / Neurological Center of Oklahoma's purchase of Botox from MedicaDepot from 2012 until February 2017. Dr. Connor administered Botox received from MedicaDepot via online and over-the-phone orders for patients of neurological disorders. MedicaDepot charged between $360 - $385 per vial and all orders were received at 6585 S. Yale, Tulsa, OK, with exception of one time when an order was received at Judy Hurst's residence in early Feb. 2017. A blast-fax was received by MedicaDepot on or about 09/18/12 and ordering began via online account. Within the last year, MedicaDepot designated us as a “Gold” Customer, and phone orders only were allowed. When requesting the reimbursement from Medicare, we requested the allowable amount. MedicaDepot provided no invoices for orders; we always verified the purchase via our American Express Credit Card. It does not appear that MedicaDepot ever overcharged the price that was discussed.

         (PX 3) (emphasis added to indicate the portions of the form filled in by Allgeyer). Dr. Connor and Ms. Hurst signed their initials next to each line.

         On June 20th, Allgeyer and two other investigators went to Ms. Hurst's residence to interview her alone. After she invited them in, they sat down to talk in her kitchen. They asked many of the same questions they had asked before. “Most of the answers didn't change, ” Allgeyer testified. Before the agents left, “We told Ms. Hurst she was not a target of the investigation at this time, but we did not want that to become - we didn't want that to change.”

         Allgeyer testified that neither he nor his fellow agents ever threatened or intentionally misled Dr. Connor or Ms. Hurst, and that he never made any promises in order to obtain their cooperation. He denies ever telling Connor or any other suspect, “Things will go better for you if you cooperate with us.”

         When Dr. Connor and Ms. Hurst took the stand, they painted a decidedly different picture regarding their interactions with investigators. Although they testified that they cooperated with the investigators voluntarily, Connor and Hurst said they had done so under false pretenses. They testified that Allgeyer initially told them that FDA was investigating illegal Canadian Pharmacies and wanted their help to run a “sting” operation on MedicaDepot.

         Dr. Connor testified that the agents began the interview with an aggressive posture, saying they “came in and basically said, ‘We're investigating Canadian companies and we want to inspect your Botox.'” The way Allgeyer said it, Connor testified, “implied that he had the right because he was coming from the FDA.” Instead of demanding to see the Botox immediately, however, Allgeyer went with Connor back to his office and spent the next several minutes talking to him about Canadian pharmacies that were shipping unapproved prescription drugs into the United States, going into great detail about their business model, including how the pharmacies were really fronts for Middle Eastern money interests.

         Throughout this process, Connor testified, he had no reason to think that he was the subject of the investigation. He testified that he never received the detention notice that the FDA sent after it intercepted the January 2017 shipment of Botox, and he denied saying that he had received it when asked by Allgeyer.

         Connor and Hurst also provided a materially different account of how Allgeyer came to know of the allegedly unapproved Botox in the refrigerator. Connor and Hurst testified that, when Hurst joined the conversation, the only vial of Botox that Allgeyer had was the one Connor had brought to him. Hurst said that Allgeyer asked her if there was any other Botox, and she told him about the shipment MedicaDepot sent to her house. She then retrieved the Botox from the freezer and gave it to the agents. Asked whether Dr. Connor knew that this lot of Botox was in the freezer, Hurst said, “Probably not. I mean, it was back up in the freezer, so he couldn't see it.” Hurst testified that Dr. Connor did not participate in the Botox ordering process or regularly handle the shipments.

         At the end of the first meeting with investigators, Connor said, he signed the waiver and acknowledgment forms without reading them because he had patients waiting. In any case, he said, he did not think it mattered because the agents already had the Botox they were looking for and the target of the investigation was the Canadian pharmacy, not him. Allgeyer never explained what they meant and did not leave him a copy. On cross-examination, Connor said he was given an opportunity to read the forms but had chosen not to.

         Between the February and June meetings with investigators, Hurst and Connor testified, they were still under the impression that they were cooperating with an FDA investigation into Canadian pharmacies. That began to change, they said, when the agents returned in June and asked them to sign the formal statement described above. Connor said that he did not pay much attention to the content of the statement at the time because he did not know its purpose. He was still operating under the assumption that he was cooperating with an investigation into the pharmacy. Nevertheless, he said, after the agents left, he and Hurst had misgivings, so they decided to include an addendum to their statement in the package of documents that the agents had requested. The note, written by Hurst, read as follows: “Here is all the records you requested. We were wanting to add to the form we filled out yesterday. That since MedicaDepot packing was in Allergan box we were not aware this was not FDA approved.” (DX 6).

         Although Hurst testified that she and Dr. Connor agreed to write the note together, Allgeyer testified that he specifically asked Hurst about the note when the agents interviewed her alone at her house. During that interview, he testified, she said that she alone decided to write the note and had not conferred with Dr. Connor about it beforehand.

         Hurst testified that the agents were generally polite and reported only one occasion where she felt that they were trying to coerce her. As the agents were wrapping up the June 20th interview in her kitchen, she said, they made a veiled threat. “They told me that I had a beautiful home and I had a nice car sitting out there, and they would hate to have - for me to lose what I had. So if I had anything additional to say about Dr. Connor, this was the time to do it.” Allgeyer denied making the remark.

         B. Motion to Suppress Evidence from the January 2017 Search (Doc. 24)

         This motion seeks to suppress any evidence obtained, directly or indirectly, from the search of the January 2017 shipment of Botox. Dr. Connor argues that the evidence should be suppressed because the FDA searched the package without a warrant.

         The Fourth Amendment protects against unreasonable searches, and courts determine whether a search was reasonable by weighing the degree to which the intrusion was necessary to promote legitimate government interests. United States v. Pacheco, 884 F.3d 1031, 1041 (10th Cir. 2018). Warrantless searches are generally unreasonable unless an exception applies. Id. at 1041-42.

         In this case, the government executed its search as the package entered the country via international mail. When a search is conducted at the border rather than the interior, “the Fourth Amendment's balance of reasonableness is qualitatively different . . . .” United States v. Uribe-Galindo, 990 F.2d 522, 525 (10th Cir. 1993) (quoting United States v. Montoa de Hernandez, 473 U.S. 531, 538 (1985)). In United States v. Ramsey, the Supreme Court said that border searches are effectively reasonable per se:

That searches made at the border, pursuant to the long-standing right of the sovereign to protect itself by stopping and examining persons and property crossing into this country, are reasonable simply by virtue of the fact that they occur at the ...

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