Investigators' Reports

Pharmacy Chief Turns Medicine Thief

by Tamar Nordenberg

The former director of pharmacy at New York City's renowned Columbia-Presbyterian Medical Center is serving out a year-and-a-day prison sentence for selling cancer medicines and other prescription drugs he had stolen from the hospital's pharmacy.

Harry Morelli, 54, of Putnam Valley, N.Y., illegally sold prescription drugs to drug wholesalers from about 1985 to 1993, according to evidence gathered by the Food and Drug Administration's Office of Criminal Investigations. Morelli admitted to at least 45 transactions, for which he got $3,000 to $4,000 each.

"It was not a crime of need but a crime of greed," says Stewart Magee, special agent in charge of OCI's New York field office, which investigated the case.

A former pharmacy school classmate of Morelli's who had bought some stolen drugs from Morelli in the past and was himself under FDA investigation in 1997 told FDA special agents in March of that year about Morelli's thefts. The former classmate-turned-informant said that, for at least seven years, Morelli had stolen expensive drugs from the hospital pharmacy to sell to drug wholesalers and kept 50 percent of the drugs' wholesale value for himself.

An FDA-enforced law called the Prescription Drug Marketing Act prohibits the wholesale distribution of prescription drugs by unlicensed sellers. This measure of accountability is meant to prevent consumers from getting potentially mislabeled, subpotent, expired, counterfeit, or otherwise low-quality drugs.

With the informant's help, OCI in June 1997 set up three undercover buys of Morelli's stolen prescription drugs, including the antidepressant Prozac (fluoxetine hydrochloride), the fertility drug Fertinex (urofollitropin), and the cancer drugs Lupron (leuprolide acetate) and Taxol (paclitaxel).

Each time, Morelli agreed to send prescription drugs to the informant's fictitious business, and the informant would in return pay Morelli about half of the drugs' wholesale value. The informant gave Morelli the address of a Miami mailbox store where FDA had an undercover mailbox, and Morelli sent to that address boxes containing packages of cancer and AIDS drugs, as well as some antibiotics.

In a recorded telephone conversation with the informant, Morelli called the breast cancer drug Taxol the "hottest item around here." He said he had stashed away 30 vials of it and placed an order for another shipment that wouldn't be easily traced back to the pharmacy at the hospital, which is acclaimed for its cancer treatment. The wholesale value per vial of the Taxol was $500, according to the OCI case agent who investigated Morelli.

"He resold only very expensive items with a lot of value in a small package," says the case agent. The estimated wholesale value of one shipment of 2,000 Prozac pills Morelli sent the informant, for another example, was over $4,800.

At least once, OCI found, Columbia-Presbyterian bought from a wholesaler drugs that Morelli had previously stolen from the hospital.

Faced with the government's evidence of his illegal drug sales, Morelli pleaded guilty in April 1998 to the wholesale distribution of drugs without a license.

In sentencing Morelli in September 1998, District Judge Allen Schwartz of the U.S. District Court for the Southern District of New York in Manhattan said the pharmacist had abused his position of trust at the pharmacy and jeopardized the lives of cancer patients who took the resold drugs.

In addition to his prison sentence, the court ordered Morelli to pay a $30,000 criminal fine, $58,000 compensation to Columbia-Presbyterian Hospital, and about $9,000 reimbursement to FDA for the cash the agency laid out for the undercover buys. Morelli also gave up his license to practice pharmacy.

Tamar Nordenberg is a staff writer for FDA Consumer.

Ozone Generators Generate Prison Terms for Couple

by Paula Kurtzweil

"Show us the data," FDA advised a Florida man and his wife who continued to market an unapproved medical device despite FDA warnings to stop. So, when they failed to heed FDA's advice, a federal judge in Florida decided to show them the door--to prison.

Kenneth R. Thiefault and his wife, Mardel Barber, formerly of Jupiter, Fla., were sentenced in the U.S. District Court for the Southern District of Florida in March to prison terms that together total more than eight years and fines that add up to more than $100,000. They illegally distributed ozone generators, devices that turn oxygen into ozone, by claiming that the devices could cure a variety of diseases, including cancer and AIDS. FDA has never approved ozone generators or ozone gas for treating any medical conditions.

They continued to sell the unapproved medical devices, even after FDA informed them several times that FDA approval was necessary to market medical devices or medical gas in this country. This would require the submission of scientific data to support the devices' safety and effectiveness.

Proponents of medical ozone generators believe ozone can kill viruses and bacteria in the body. While ozone is used as a germicide in the cleaning of manufacturing equipment, FDA is not aware of any scientific data that supports the safety or effectiveness of ozone generators for treating medical conditions. In fact, the agency believes that at the levels needed to work effectively as a germicide, ozone could be detrimental to human health.

"These devices keep popping up," says Bob Gatling, a biomedical engineer and director of the program operations staff in FDA's Center for Devices and Radiological Health. "We always tell their makers": 'Show us some data,' but no one ever pursues it."

FDA's knowledge of Thiefault's involvement in ozone generators dates to at least 1990, when Thiefault was interviewed during an FDA criminal investigation of one of Thiefault's associates. This associate was later prosecuted and imprisoned for, among other things, manufacturing and selling ozone generators for treating medical conditions. After release from prison, he returned to making and distributing ozone generators for treating medical conditions but fled the country before he could be prosecuted again.

In April 1990 and January 1991, Thiefault acknowledged in an FDA-obtained written affidavit that medical ozone generators needed to be approved by FDA before they could be marketed. He also wrote that his interest in ozone generators was limited to ozone's "antiviral and antibacterial capabilities in relationship to water for dairy cows, swimming pools and spas."

Thiefault's activities came to FDA's attention again, in January 1993, when officials with Florida's Comptroller's Office shared evidence they obtained during a state securities fraud investigation of Thiefault with FDA's Office of Criminal Investigations. State investigators found that one room in Thiefault's former Lake Park, Fla., home served as a medical treatment center, housing a variety of devices, including a frequency generator on which various frequencies were labeled with the names of diseases. At the high end of the frequencies was "AIDS," followed in descending order by "cancer," "syphilis" and "constipation." This evidence suggested that the business Thiefault operated out of his home, Kanzyme Laboratories, was an unlicensed medical practice.

In early 1993, OCI special agents began to collect evidence, and in July, OCI executed a search warrant at Thiefault's Lake Park home, seizing various records and documents and the generators themselves.

With these pieces of evidence, OCI agents learned that:

Since 1988, Thiefault had been buying components and making ozone generators, selling them for about $4,800 each to customers across the country.
Each ozone generator, contained in a silver metal case, included a medical-grade humidifier and a medical-grade oxygen cylinder with a label that said the cylinder had been converted from medical to industrial grade. The cylinder was fixed into place with Velcro straps and had on the outside of it tubing that could be used to attach urinary catheters.
Thiefault presented himself as a scientist and clinical researcher in a promotional videotape. He is not a doctor and lacks a scientific background.
Thiefault did not have any bank, credit or charge accounts. Instead he funneled proceeds from the ozone generators--estimated to be $1 million--through his wife and other individuals' financial accounts.
Thiefault and his wife touted ozone as a treatment for many diseases, ranging from AIDS and cancer to herpes, hepatitis and gangrene. In the videotape, Thiefault says, "Ozone will cure almost any disease."
Product literature recommended several ways to administer the ozone: by catheter into the rectum, vagina or ear; by breathing in through the nose or mouth; or by absorption through the skin, accomplished by standing naked in a body bag into which ozone is blown.

In addition, OCI special agents learned that since 1988, Thiefault also had been selling illegal drug products called K Z Enzyme, Kanzyme, and Kanzyme II. These products have never been approved by FDA for treating any diseases.

As he did with the ozone generators, Thiefault touted K Z Enzyme and Kanzyme as cures for many diseases. According to promotional literature and Thiefault, the products were plant extracts. FDA laboratory analysis showed that each product contained about 10 percent dissolved substances, such as sugars, amino acids, acetic acid, chloride, phosphate, sulfate, and nitrate. The rest was a combination of water and alcohol.

Kanzyme II was colloidal silver, also an unapproved drug (see "FDA Bans Colloidal Silver Products, Cites Lack of Data" in this issue). Thiefault promoted and sold it as an accompaniment to ozone therapy for treating cancer. Product literature claimed the product replaced the body's store of silver, a substance lacking in cancer patients. However, FDA is not aware of any scientific studies that support this claim.

OCI's investigation, complemented by a multi-year IRS investigation, led in 1998 to a seven-count indictment against Thiefault and Barber. FDA-related charges focused on the couple's involvement with ozone generators and not the unapproved drugs because the devices appeared to be their main business thrust--and source of income, according to OCI.

Following a two-week trial, in November 1998, a federal jury found Thiefault and Barber guilty of mail fraud, wire fraud, and distribution of an ozone generator. They also were found guilty on one count of impeding the IRS.

For illegally selling ozone generators, Thiefault was sentenced to six and a half years in prison, fined $100,000, and ordered to pay $14,400 in restitution. His wife was sentenced to two years and nine months in prison and fined $60,000.

Thiefault and Barber also were ordered to help the IRS compute their back taxes and pay the money due. The judge also banned both from dealing in securities, telemarketing, direct mailings, and nationwide advertising.

Thiefault is now in federal prison in Minnesota. His wife is in federal prison in California. Following their prison terms, they also will serve three years of supervised release.

Paula Kurtzweil is a member of FDA's public affairs staff.

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