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United States v. Muoghalu

August 9, 2010

UNITED STATES OF AMERICA
v.
BENJAMIN MUOGHALU



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

On April 9, 2009, a jury convicted Defendant Benjamin Muoghalu ("Muoghalu") of conspiring to solicit and receive illegal kickbacks in violation of 18 U.S.C. § 371, soliciting and receiving illegal kickbacks in violation of 42 U.S.C. § 1320a-7b(b)(1)(B), and engaging in a scheme to defraud and deprive Aventis Pharmaceuticals ("Aventis") of money and property and Provena St. Joseph's Medical Center in Joliet, Illinois ("St. Joe's") of its right to his honest services in violation of 18 U.S.C. §§ 1341 and 1346. After trial, and days before Muoghalu was to be sentenced, the Government disclosed documents relating to its investigation of Aventis. Pursuant to Federal Rule of Criminal Procedure 33, Muoghalu moves for a new trial based on this newly-disclosed evidence or, in the alternative, for an evidentiary hearing. For the reasons set forth below, the Court denies Muoghalu's Motion.

BACKGROUND

I. The Investigation and Indictment

In April of 2003, two Aventis employees, Katy Kennedy ("Kennedy") and Frank A. Matos ("Matos"), filed in the United States District Court for the Northern District of Illinois a sealed qui tam lawsuit against Aventis. The case was originally assigned to Judge Charles P. Kocoras. (See United States ex rel. Kennedy v. Aventis Pharmaceuticals, Inc., No. 03 C 2750.) In their sealed complaint, Kennedy and Matos alleged that Aventis violated the False Claims Act, 31 U.S.C. § 3729 et seq., by marketing one of its drugs-a blood-thinner called Lovenox-for off-label use, thus causing physicians to submit false claims to Medicare for reimbursement. (See No. 03 C 2750, R. 8, Am. Compl. ¶¶ 3-5.)*fn1 "Off-label" marketing is the communication of information relating to a product not contained in the Federal Drug Administration's ("FDA") approval labeling. (Id. ¶ 3.) Kennedy and Matos also claimed that Aventis's behavior resulted in patient deaths and that Aventis offered things of value to physicians and other customers to convince them to prescribe Lovenox. (Am. Compl. ¶¶ 5-6.) On December 21, 2006, after three years of investigation into the civil claim, the United States declined to intervene on Kennedy and Matos's behalf and Chief Judge Holderman lifted the seal as to the Amended Complaint and all matters occurring after his order lifting the seal. (See No. 03 C 2750, R. 21.) The case was then reassigned to Judge Matthew F. Kennelly. (See No. 03 C 2750, R. 25.)

During the course of its investigation into Kennedy and Matos's claims, the Government uncovered the criminal conspiracy at issue here. In 2001, Muoghalu was the pharmacy director at St. Joe's and a member of St. Joe's Pharmacy and Therapeutics Committee ("the Pharmacy Committee"). (Tr. at 723-24, 638.) A hospital's Pharmacy Committee is typically comprises physicians and is chaired by the director of pharmacy and is responsible for deciding which products are available for physicians in the hospital. (Tr. at 389, 638, 722-25.) This list of available products is known as the hospital's formulary. (Tr. at 388.) Muoghalu's co-conspirator, Joseph Levato ("Levato") was an area business manager for Aventis who managed ten sales representatives responsible for selling Lovenox to hospitals in the Chicago-west region, including St. Joe's. (Tr. at 371, 381, 386.) As an area business manager, Levato reported to the regional director, Steve Ross ("Ross") (Tr. at 378.)

Levato knew that Muoghalu was the pharmacy director at St. Joe's, (Tr. at 388.), and as the pharmacy director, Muoghalu had a role in deciding which products would be on the hospital's formulary. (Tr. at 388-90.) In Spring of 2001, one of the sales representatives in Levato's territory told Levato that Muoghalu was considering replacing Lovenox with a blood-thinner made by one of Aventis's competitors, a drug called Fragmin. (Tr. at 391.) Levato was worried that if Muoghalu succeeded in making this change, it could affect the sale of Lovenox in the other Provena System hospitals and in hospitals around the country. (Tr. at 391-92.) Levato told Ross and, in response, Ross assembled a task force of Aventis employees. (Tr. at 393.) As members of the task force, Levato and sales representative, Sherri Beale ("Beale"), met first with Muoghalu and then with his boss, Frank Butler, seeking to convince Muoghalu and Butler to keep Lovenox on St. Joe's formulary. (Tr. at 397-400.)

Shortly after the meeting in the hospital, Levato and Muoghalu met again, this time without Beale and outside of the hospital-at a Chinese restaurant near Joliet. (Tr. at 400-401.) At this meeting, Muoghalu told Levato that he was still considering replacing Lovenox with Fragmin, but that Levato could make the issue go away if he bought Rolex watches for Muoghalu and his wife. (Tr. at 402.) Levato told Muoghalu that he could not get him the watches and instead suggested that Muoghalu earn the money instead by doing speaking events for Aventis. (Tr. at 402-403.) Muoghalu indicated that he was interested in the speaking events and Levato told him that he would have Beale arrange them. (Tr. at 403.) After his meeting with Muoghalu, Levato told Beale to set up speaking events for Muoghalu in her territory. (Tr. at 404.)

Muoghalu, however, was not satisfied and was still considering removing Lovenox from St. Joe's formulary. (Tr. at 405.) In the Summer of 2001, Muoghalu contacted Levato, complaining that Beale had not arranged speaking engagements as quickly as Muoghalu had hoped. (Tr. at 405-06.) Muoghalu and Levato met in Muoghalu's office and, after discussing the Lovenox issue, Muoghalu again told Levato that he could make the problem "go away," this time in exchange for $20,000 in cash. (Tr. at 406.) Levato told Muoghalu that he could not meet this request, but he told Muoghalu that he would discuss the problem with his boss, Ross. (Tr. at 407.)

In response, Ross suggested that he, Levato, and Muoghalu meet for dinner to discuss the Lovenox issue. (Tr. at 407-08.) The three men met at Sullivan's Steakhouse in Naperville, Illinois. (Tr. at 408.) At dinner, Ross asked Muoghalu what his position was on the switch from Lovenox to Fragmin and Muoghalu responded that he was still considering the switch. (Tr. at 409-10.) After some discussion, however, the three reached an agreement in which Ross and Levato would approve ten payments of $2,000 each to Muoghalu. (Tr. at 410-13.) In return, Muoghalu agreed to call the director of pharmacy at each St. Joe's branch hospitals and recommend the continued purchase of Lovenox. (Tr. at 411-13.) Knowing that it would be illegal to pay Muoghalu for recommending the purchase of Lovenox, Ross told Levato to disguise the $2,000 payments to Muoghalu by creating false "speaker events" in Aventis's computer system. (Tr. at 412-14.) These "events" in turn would generate ten checks in the amount of $2,000 each. (Tr. at 413, 487-95.) When Levato told Muoghalu that he only had $18,000 left in his expense account, Muoghalu agreed to accept nine checks instead. (Tr. at 412.) Levato delivered the first nine checks himself. (Tr. at 433.) Both Muoghalu and Levato understood that Muoghalu would not actually be speaking at any of these events. (Tr. at 412-13.)

In 2002, Aventis transferred Levato to a different Chicago-area territory, and two other sales representatives, Shari Lendy ("Lendy") and Kathy Prieto ("Prieto"), took charge of the St. Joe's account. (Tr. at 433, 449, 517.) Lendy and Prieto both understood that as the director of pharmacy, Muoghalu held significant influence over the formulary at St. Joe's. (Tr. at 518-19, 551-52.) Once they took over the account, Lendy and Prieto were told by two different supervisors, one of them Ross the other Shetal Bahel, to input false speaking events in the Aventis computer system to generate payments to Muoghalu. (Tr. at 549, 552, 520-21.) Lendy and Prieto did as they were directed, causing Aventis to issue seven checks, totaling $14,000, to Muoghalu. (Tr. at 553-59, 521-27.) Lendy and Prieto each delivered some of the checks to Muoghalu. (Tr. at 527, 559-61.) Like Levato, both Lendy and Prieto understood that Muoghalu was not going to speak to earn this money and neither coordinated, scheduled, or attended these or any other events involving Muoghalu. (Tr. at 512, 527-29, 553, 561.) None of Muoghalu's scheduled "speaking events" actually took place, (see, e.g., Tr. at 578-99.), and Lovenox remained on St. Joe's formulary. (Tr. at 433.) Muoghalu received a total of $32,000 from Aventis employees. (Tr. at 829.)

As a hospital manager, Muoghalu was not allowed to accept money from an outside entity unless he disclosed it on annual conflict of interest forms. (Tr. at 639-40, 644-68, 725-27.) He was also required to inform the hospital if he accepted money from a pharmaceutical company. (Tr. at 645-68.) Despite being informed of these regulations, Muoghalu did not disclose his payments from Aventis or the fact that he had an agreement to speak for Aventis. (Tr. at 644-68, 717, 727.)

On November 14, 2007, nearly a year after the Amended Complaint in Kennedy and Matos's case was unsealed, the grand jury returned a four-count indictment against Muoghalu and Levato. Specifically, the grand jury charged Muoghalu and Levato with conspiring to solicit, pay, and receive kickbacks, in violation of 18 U.S.C. § 371, and engaging in a scheme to deprive Aventis of money and property and St. Joe's of Muoghalu's honest services in violation of 18 U.S.C. §§ 1341 and 1346. The grand jury also charged Levato with paying kickbacks in violation of 42 U.S.C. 1320a-7b(b)(2)(B), and Muoghalu with soliciting and receiving kickbacks in violation of 42 U.S.C. 1320a-7b(b)(1)(B).

II. Discovery and Trial

On November 28, 2007, the Government disclosed to Muoghalu: (1) statements Muoghalu had made to investigators; (2) bank records and other documents; (3) documents the Government received from third parties; and (4) memoranda of interviews with Aventis employees, including Kennedy, Matos, and another former Aventis employee, Julie Fitzpatrick ("Fitzpatrick"). (See R. 98, Ex. A.) The interview memoranda stated the name of the civil case that gave rise to Muoghalu's prosecution, the case number, and information that supported Kennedy and Matos's allegations. (See id.) Specifically, the interview memoranda detailed allegations of rampant off-label marketing of Lovenox, patient deaths resulting from the use of Lovenox, and misuse of company expense accounts-including giving physicians things of value in exchange for prescribing Lovenox. (Id.) The memoranda also set forth Levato's alleged role in these activities. (Id.)

On May 12, 2008, after Levato agreed to cooperate with the Government, it sent Muoghalu another set of documents, including a memorandum summarizing Levato's proffer. (See R. 98, Ex. B.) Levato stated at his proffer that he had never previously engaged in kickbacks. (Id.) In total, the Government turned over nearly 1900 pages of documents relating to the United States Department of Health and Human Services ("HHS") and the FDA's investigation of Muoghalu, Levato, and Aventis. (See R. 98 at 3.)

On December 11, 2008, Levato pleaded guilty to one count of conspiracy to pay kickbacks in violation of 18 U.S.C. § 371. (R. 26.) Muoghalu elected to take his case to trial. Prior to trial, the Government moved to exclude "any evidence or argument that this case is motivated not by defendant's violation of the Anti-Kickback and mail fraud statutes, but by off-label marketing of Lovenox by Aventis sales representatives." (R. 30; R. 98, Ex. C.) Because the indictment against Muoghalu was limited to charges of a kickback scheme, not charges of off-label marketing, the Government argued that the Court should exclude as irrelevant any argument or evidence about off-label marketing by Muoghalu or by Aventis employees, including Levato. (Id.) The Court granted the Government's Motion. (R. 43; R. 98, Ex. D.)

Despite the Court's ruling, at trial Muoghalu's attorney twice brought up the Government's broader investigation into Aventis's activities. During his opening statement, Muoghalu's attorney stated that "the evidence will show that the Government was investigating Mr. Levato. They were investigating Aventis, because of a number of illegal activities that the company...." (Tr. at 359.) The Court sustained the Government's objection based on its prior ruling on the Government's motion in limine. (Tr. at 360.) Muoghalu's attorney also asked FDA Special Agent Tom Harkness ...


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