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A Gurnee, Ill., generic drug company with a long history of drug violations was recently found guilty of eight felony counts, including conspiracy to defraud FDA.
In addition, Baldev Raj Bhutani, president of the company, ALRA Laboratories, Inc., was found guilty of seven felony counts, including conspiracy, drug adulteration, failure to comply with good manufacturing practices (GMPs), and interstate shipment of adulterated products. His wife, Neelam Bhutani, the company's quality assurance director, was found guilty of four counts, including conspiracy, drug adulteration, and interstate shipment of adulterated products.
The guilty verdicts were handed down Feb. 12 by a jury in the U.S. District Court for the Northern District of Illinois, Eastern Division. At press time in March, sentencing had been set for June 27.
ALRA manufactures several generic drugs, including: lactulose syrup for treating liver problems; Eryzole (erythromycin ethylsuccinate), an antibiotic; K+10 (potassium chloride) extended-release tablets, for potassium depletion; and Gelpirin, buffered analgesic tablets.
FDA is not aware of any illnesses or deaths caused by the company's products.
From the initial inspection on July 23, 1982, FDA's Chicago district office found that ALRA regularly failed to comply with the agency's GMP requirements. Over the next seven years, FDA continued to follow the company, conducting nine inspections. Deficiencies noted during these inspections led FDA to issue several warning and regulatory letters to the company.
On Aug. 27, 1989, ALRA's former chief engineer contacted FDA investigator Joseph Stojak and told him that the firm was "out of control and disregarding FDA regulations."
The comments were verified during an inspection 10 days later, from Sept. 6 to Oct. 13, 1989. FDA investigators identified serious problems in many of the firm's major operations, including record-keeping, production, process control, packaging, labeling, laboratory controls, written procedures, and training.
The investigators found, among other things:
Investigators also found production records for one lot of lactulose syrup manufactured on Aug. 30 that showed the firm used thirteen 55-gallon (209-liter) drums of lactulose syrup concentrate when master records called for only 10 drums. FDA's Stojak was suspicious because, he said, "Had they used the 13 drums like they said, the syrup would have overflowed the mixing tank."
Stojak also found that the firm had received a shipment earlier that month of sixty 55-gallon drums of lactulose syrup concentrate from Japan. The former engineer had reported that although many of the drums were damaged and possibly contaminated, they were used in production of the firm's product.
During a subsequent grand jury investigation, FDA learned that 36 of the 60 drums received in that shipment had been damaged and possibly contaminated in transport and were leaking lactulose syrup. Bhutani told his employees to stop the leaks by filling the holes using a hot glue gun and then placing duct tape over the holes. The damaged drums of syrup concentrate were then used in the production of the firm's lactulose syrup product, and the finished product was sold to consumers.
On April 30, 1990, FDA issued a warning letter to ALRA, notifying the firm of its need to come into compliance with GMPs.
Another FDA inspection, conducted Jan. 22 to March 5, 1991, found many of the same deficiencies.
On March 19, 1991, U.S. marshals, at FDA's request, seized all of ALRA's finished and in-process prescription drugs at the Gurnee facility. Products stored at ALRA's distributors were placed on "hold"--they could not be sold. The total value of the products was about $5 million.
Bhutani signed a consent agreement on July 9, 1991, allowing the firm to try to recondition the seized products. The same day, he signed a voluntary agreement stating that his firm would refrain from violating GMPs.
Following a March 1991 meeting to determine what action FDA should take against the firm, the agency turned the case over to the Department of Justice's Office of Consumer Litigation. The Justice Department, working with Chicago's U.S. Attorney's Office, initiated a grand jury investigation of suspected criminal activities by the firm.
During the next two years, Justice Department attorneys and FDA investigators Stojak and Gretchen Hartlage collected evidence and information from subpoenaed documents and interviews with current and former ALRA employees.
On Aug. 12, 1993, a federal grand jury returned an initial five-count indictment, charging the company and its owners with misbranding and adulteration of prescription drug products.
Additional FDA and Justice Department investigations of the firm's activities resulted in a 15-count superseding indictment issued Jan. 27, 1994. The grand jury charged ALRA and the Bhutanis with criminal conspiracy; violations of the federal Food, Drug, and Cosmetic Act; mail fraud; wire fraud; and making false statements to FDA.
The case went to trial on Dec. 7, 1995, and the firm was found guilty on Feb. 12, 1996. During the trial, evidence showed that the defendants:
FDA's discovery of the illegal clams led to state charges against J & K Seafood Inc., a New York City distributor, and, in May 1995, to destruction of the shipment, valued at $1,000.
To avoid criminal charges for refusing to pay a $2,000 fine, J & K pleaded guilty out of court last Dec. 5 to a civil stipulation. The firm paid $500 for not having an import permit and $500 for importing uncertified clams. The state suspended the remaining $1,000 fine imposed for importing untagged clams and will drop it June 5 as long as J & K doesn't break the law again.
The case began May 11, 1995, while Janet Feeley and Lawrence Patrick, inspectors with FDA's Buffalo, N.Y., district import operations branch, were working in the agency's office at Peace Bridge, the port of entry in Buffalo. At 3:15 p.m., two men approached Feeley with entry papers for 100 cases of clams from Lobster Island Seafood Co., Toronto, destined for J & K.
"I asked if they owned the truck and clams," Feeley says. "They said yes, and also said they owned the Canadian firm."
Feeley checked to see if the Canadian firm was in FDA's current Interstate Certified Shellfish Shippers List. Updated monthly, the list names shippers who take their clams and other shellfish from approved waters.
Mark Prusak, a compliance officer with FDA's Buffalo district office, explains its importance: "If shellfish are harvested from polluted waters, toxins can accumulate in the edible meat and present a health hazard to the consumer. Public health officials worldwide test shellfish and the waters where they live to ensure high quality. When proper standards are met, shellfish are tagged to indicate they came from unpolluted waters."
One Toronto shipper was on the list. But it wasn't Lobster Island Seafood.
Feeley and Patrick promptly inspected the load.
They saw the truck was unrefrigerated. And while the import papers listed the product as clams, various cartons were labeled as "Live Dungeness Crab," "Live Lobster," and other seafood.
"When we opened the cartons," Feeley says, "lo and behold, we saw what looked to be shucked clams, frozen in bulk in plastic bags." But the bags did not have the tags that FDA requires, she says.
Also, she says, the bags contained water, and the cardboard cases were damp. Unrefrigerated, the product was thawing, indicating it was not maintaining a proper temperature to prevent bacterial contamination.
Feeley collected samples from five cartons. The notice of sampling she issued to the drivers stated that the shipment had to be held intact locally, pending further written notice from FDA. The drivers were allowed to go on to J & K, with the product to be held intact there.
The next day, after reviewing Feeley's inspection report, Prusak notified the Department of Environmental Conservation, the state agency having jurisdiction over the case.
On May 16, FDA detained the shipment at J & K. Since the clams were already considered illegal because they were uncertified, the agency decided not to analyze the samples.
On May 18, Francisco Lopez, a police officer with the New York Department's law enforcement division, visited J & K, obtaining copies of the invoice and other information. Later he paid a surprise visit, he says, "to make sure they still had the clams and that this was a one-chance event, that they weren't getting additional clams."
On May 22, the state served J & K's manager civil summonses for uncertified and untagged clams, ordering the firm to pay fines at a meeting on June 13.
On May 31, New York police officer Karen Staniewski watched as the state destroyed the clams by burying them in a landfill.
June 13 came and went. J & K's president didn't show up at the meeting to pay the fine, so the state issued the company a criminal summons.
Serving the summons, however, proved difficult. For five months, Lopez visited J & K repeatedly to try to do so.
"Every time I went back," he says, "the manager wasn't there. Then on Nov. 21, I went back in plain clothes. I served the summons before he could go anywhere."
On Dec. 3, Lopez got a call from a J & K representative. The firm decided to plead guilty and settle out of court.
--Dixie Farley
Last September, the Court of Appeals for the Fifth Circuit overturned a decision by the U.S. District Court for the Eastern District of Louisiana that barred FDA from destroying the mushrooms, which were processed in China.
At issue had been whether FDA had the authority to seize and dispose of the products, or whether the importer could "reexport" them to another country.
The appeals decision established that goods intended for sale are in "interstate commerce" when they are first offered for entry into the United States, affirming FDA authority to seize and destroy any food products intended for import that violate federal statutes.
U.S. marshals disposed of the mushrooms in the New Orleans city landfill last Feb. 8.
FDA detained the mushrooms, worth $67,800, when First Phoenix Group Limited Inc., of Springfield, N.J., attempted to import the goods in July and December 1992.
Three years earlier, FDA had issued an "import alert" warning agency field offices that canned mushrooms processed in China could contain staphylococcal enterotoxin, a bacterial byproduct that can cause vomiting and diarrhea. FDA had found the toxin in mushroom products from nine Chinese factories.
Though First Phoenix's mushrooms were labeled as being packaged at Taiwan-based Hwa Chen Industrial Corp., a second FDA import alert in July 1992 advised FDA field offices to detain canned mushrooms from Hwa Chen and other Taiwanese manufacturers. These products, FDA said, were being processed and packaged in a Chinese factory and were labeled with Hwa Chen's can codes to dodge the import alert.
Initially, FDA informed First Phoenix that the mushrooms could not be admitted to the United States and that the company could reexport them only under strict conditions. But after laboratory analysis identified staphylococcal enterotoxin in a portion of First Phoenix's mushrooms in late 1992, the agency decided to seize and destroy the product.
First Phoenix contested this action, saying that provisions in the Federal Food, Drug, and Cosmetic Act entitled the company to reexport the mushrooms because the products hadn't yet entered "interstate commerce" when detained.
On Nov. 3, 1993, FDA filed a complaint in the U.S. District Court for the Eastern District of Louisiana seeking condemnation of the mushrooms as adulterated and misbranded. U.S. marshals seized the goods--which had entered the United States in Savannah, Ga., and Long Beach, Calif.--and stored them in a New Orleans warehouse.
The district court, however, dismissed FDA's case on April 19, 1994, and ruled that First Phoenix can reexport the mushrooms. But the court also granted a stay of the judgment, which allowed FDA to continue detaining the mushrooms while appealing the case.
On Sept. 26, 1995, the Court of Appeals for the Fifth Circuit in Louisiana ruled that Congress, in passing the Food, Drug, and Cosmetic Act, intended for FDA to have "the broadest possible authority over imported contaminated goods" and that the agency was within its bounds to seek seizure and disposal of the mushrooms. The court also explained that if "goods are destined for sale in a state other than the place from which they are shipped, then goods are in 'interstate commerce' without the necessity of physically crossing a state boundary." Thus, the mushrooms "undoubtedly constituted an interstate shipment from the moment they left Taiwan," the court ruled.
First Phoenix argued that the mushrooms hadn't yet been placed in "interstate commerce" because "sale of these goods in the United States was prohibited by the FDA." But the court called this claim "impossibly narrow" and said the "goods had been shipped to the United States for the express purpose of sale. ..."
On Jan. 22, 1996, First Phoenix signed a consent decree that released the mushrooms into FDA's custody.
--John Henkel
The investigator said the officials shoved, hit, and further threatened him.
"It was a completely unprovoked assault," says E. Pitt Smith, director of FDA's Buffalo, N.Y., district office. "Fortunately, the investigator was not seriously harmed."
In the U.S. District Court, Northern District of New York, Magistrate Judge David Hurd last Jan. 29 sentenced two brothers, Roger and Anthony Ferris, each to a $1,500 fine, a $25 special assessment, 100 hours of community service, and one year of probation, during which they are to undergo drug testing, as routinely ordered by this district court.
On Aug. 16, 1995, investigator David McNew, with FDA's Syracuse resident post, conducted a routine sanitary inspection of R. Ferris & Sons Inc., a distributor at the Regional Market wholesale produce center, in Utica.
According to McNew, he was accompanied during most of the inspection by Roger Ferris, partner and vice president of the firm.
At one point, McNew found rotten potatoes dumped below the dock at the back of the building and two pallets of bags of rotten potatoes being stored near the dock. When asked about the potatoes, Ferris said people dumped their garbage there at night. McNew told Ferris it was his responsibility to store food under sanitary conditions. Ferris replied it was not his responsibility because the state owned the building.
McNew repeated to Ferris that it was his responsibility to store the food under conditions in which it would not be contaminated. Ferris walked away and entered a walk-in cooler.
About a minute later, he came out of the cooler and went to the office of Anthony Ferris, the firm's president. McNew followed him into the office and said that after Anthony Ferris had finished a phone call, he wanted to talk with them.
When the call was completed, the brothers yelled obscenities. Roger Ferris grabbed the investigator's arm with both hands, yelled, "You finished your inspection," and shoved him to the door, McNew said.
Continuing to shout obscenities, the brothers followed McNew into the warehouse, where he went to get his briefcase. Anthony Ferris repeatedly yelled, "Come on," posturing as if to fight, McNew said. Ferris clenched his fist toward McNew's face, approaching quickly, but was restrained by his brother.
Then, with his hand open, Roger Ferris struck McNew on the side of the head, knocking off his glasses. McNew caught his glasses and put them back on. Ferris immediately struck the side of his head again.
About 6 meters (20 feet) away, Anthony Ferris, holding an object about 1 meter (3 feet) long that McNew said looked like a broom handle or pipe, threatened him, saying, "I'll hurt you so bad."
McNew put his notebook and flashlight in his briefcase, left the building, and walked across the parking lot to his car. Both brothers continued to yell obscenities.
McNew reported the incident to the agency, which immediately notified the FBI and the U.S. Attorney's Office in Syracuse.
FBI agents arrested the brothers the next day. Arraigned on Aug. 18, they pleaded "not guilty." They were released on $10,000 bond but ordered to stay away from McNew.
Over the next few months, the U.S. Attorney's Office began negotiating a plea agreement under the new misdemeanor provision of the law. The brothers signed the agreement Oct. 17.
Enacted in September 1994, the new law amends an existing statute that makes it a crime to assault federal officials. This statute used to have only felony capability, which may have discouraged some prosecutors from charging a felony for a simple assault.
The amendment adds a misdemeanor charge capability, so that simple assaults can now be federally prosecuted. A criminal may be jailed for up to a year and fined as much as $100,000 under the law, if convicted of a simple assault.
--Dixie Farley