IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN ...

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

:

UNITED STATES OF AMERICA

:

v.

:

CRIMINAL ACTION

:

:

NO. 14-574

DEVOS LTD. d/b/a GUARANTEED RETURNS, et al.

: :

MEMORANDUM

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TABLE OF CONTENTS

I. FACTUAL AND PROCEDURAL BACKGROUND ..................................................... 4 A. Superseding Indictment And Charges ............................................................................. 4 B. Eight-Week Jury Trial; Convictions; Rule 29 Motion For Judgment Of Acquittal; Rule 33 Motion For New Trial ................................................................................................. 6 C. Fraudulent Indate Drug Schemes And Other Fraudulent Drug Schemes ................... 7 1. Pharmaceutical Returns Company .............................................................................. 7 2. Pharmaceutical Indates ................................................................................................. 8 3. Fraudulent Indates Schemes (Counts 1 Through 40) ................................................. 9 4. Defendants' Other Schemes ........................................................................................ 14 5. Obstruction Of Justice And False Statements (Counts 55 Through 64)................. 16 6. Theft Of Government Property (Count 53); Money Laundering Conspiracy (Count 54) ............................................................................................................................. 18

II. STANDARD OF REVIEW ............................................................................................. 18 A. Rule 29 Motion For Judgment Of Acquittal ................................................................. 18 B. Rule 33 Motion For New Trial........................................................................................ 19

III. DISCUSSION ................................................................................................................... 20 A. Rule 29: Motion For Judgment Of Acquittal ................................................................ 20 1. Counts 1 Through 40: Mail And Wire Fraud In Connection With The Indate Fraud Scheme ...................................................................................................................... 20 2. Counts 41 Through 52: Mail Fraud In Connection With The Hidden Fees .......... 53 3. Count 53: Theft Of Government Property ................................................................ 64 4. Count 54: Money Laundering Conspiracy ................................................................ 75 5. Jury Forfeiture Verdict ............................................................................................... 89 6. Counts 55 Through 64: Obstruction Of Justice ........................................................ 92 7. Counts 56 Through 61: Evidence Of Donna Fallon's Obstruction Of Justice ....... 94 8. Counts 62, 63, And 64: Evidence Of Dean Volkes's Obstruction Of Justice ......... 97 9. Counts 62, 63, And 64: Ron Carlino's Guilty Plea ................................................. 109 10. Count 55: Evidence Of Dean Volkes's And Guaranteed Returns's Conspiracy To Obstruct Justice ................................................................................................................. 110 B. Rule 33: Motion For New Trial .................................................................................... 111 1. Alleged Juror Misconduct, Sixth Amendment Right To An Impartial Jury ....... 111

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2. Preclusion Of Contract Law Professor's Expert Testimony On The Law........... 120 4. Alleged Prosecutorial Misconduct: Dismissal Of Indictment Not Warranted; Purported Discovery Delays Did Not Rise To The Level Of A Brady Violation; Prosecutor Reference To Exhibit Not In Evidence Not Sufficient Reason To Order New Trial..................................................................................................................................... 134 5. Admission Of Evidence And Defendants' Motion For Severance......................... 146 6. Counts 41 Through 52: Alleged Constructive Amendment ................................... 149 C. Alleged Prejudicial Spillover ........................................................................................ 152 IV. CONCLUSION .............................................................................................................. 152

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Tucker, J.

January 17, 2019

Before the Court are Defendants' Motions for Judgment of Acquittal and, in the

Alternative, a New Trial (Doc. 344), the United States' Response to Defendants' Post-Trial

Motions (Doc. 359), Defendants' Reply in Opposition thereto (Doc. 370), and all letter briefs

filed by Defendants. Upon careful consideration of these submissions, Defendants' Motions for

Judgment of Acquittal and, in the Alternative, a New Trial are DENIED.

I. FACTUAL AND PROCEDURAL BACKGROUND1

This case involved a number of decade-long, insidious fraud schemes perpetrated by a

pharmaceutical returns company and its brother and sister corporate officers. After an eight-

week jury trial, the jury found the Defendants guilty for defrauding their customers, including the

United States Department of Defense ("DOD"), of nearly $180 million.2 The underlying fraud

schemes engendered other criminal activity, including conspiracy to launder the proceeds of the

fraud, attempts to obstruct justice by lying to federal agents, concealing computer hard drives,

deleting data from company computers, and theft of government pharmaceuticals that were part

of the Government's system of supplying drugs to various army hospitals and medical facilities.

A. Superseding Indictment And Charges

On February 11, 2016, a Grand Jury returned a Superseding Indictment against

Defendants charging Guaranteed Returns, Dean Volkes, and Donna Fallon with various crimes

committed in connection with their operation of their pharmaceutical returns company. The

Superseding Indictment charged Defendants as follows:

1 All citations to trial exhibits will be designated as "GX" for Government Exhibit followed by the exhibit number or "DX" for Defense Exhibit followed by the exhibit number. 2 GX 70-30 (showing that by October 2014 $179,907,751.23 worth of pharmaceutical refunds that were to be passed through to Guaranteed Returns's customers, was, instead, taken by Guaranteed Returns).

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Fraudulent Indate Schemes Counts 1 through 23 charged Guaranteed Returns and Dean Volkes with wire fraud in violation of 18 U.S.C. ? 1343; Counts 24 through 40 charged Guaranteed Returns and Dean Volkes with mail fraud in violation of 18 U.S.C. ? 1341;

Other Fraudulent Schemes Counts 41 through 52 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with mail fraud and attempt to commit mail fraud in violation of 18 U.S.C. ?? 1341 and 1349;

Theft Of Government Property Count 53 charged Guaranteed Returns and Dean Volkes with theft of government property in violation of 18 U.S.C. ?? 641, 2;

Money Laundering Conspiracy Count 54 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with conspiracy to commit money laundering in violation of 18 U.S.C. ? 1956(h);

Obstruction Of Justice And False Statements Count 55 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with conspiracy to obstruct justice in violation of 18 U.S.C. ? 371; Count 56 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with obstruction of justice in violation of 18 U.S.C. ?? 1512(c)(1) and 2; Count 57 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with obstruction of justice in violation of 18 U.S.C. ?? 1512(c)(1) and 2; Count 58 charged Guaranteed Returns, Dean Volkes, and Donna Fallon with obstruction of justice in violation of 18 U.S.C. ?? 1519 and 2;

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