PAUL DANIEL BOTTOMLEY, ATTORNEY FOR PLAINTIFF UNITED STATES OF AMERICA FOR THE DISTRICT OF 0F MONTANA BUTTE DIVISION UNITED STATES OF 0F AMERICA,

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1 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 1 of 14 JESSICA T. FEHR JESSICA T. FEHR Assistant U.S. Attorney U.S. Attorney s Office nd Avenue North, Ste Billings, MT Phone: (406) FAX: (406) jessica.fehr@usdoj.gov ATTORNEY FOR PLAINTIFF UNITED STATES 0F AMERICA ATTORNEY FOR PLAINTIFF UNITED STATES OF AMERICA IN THEUNITED STATES DISTRICT COURT FOR THE DISTRICT OF 0F MONTANA BUTTE DIVISION UNITED STATES OF 0F AMERICA, CR BU-DLC vs. VS. Plaintiff, OFFER 0FFEROF PROOF PRO0F PAUL DANIEL BOTTOMLEY, BOTTOMLEY Defendant. S:\crim\2011R00518\Final S:\crim\2011ROO518\FinaI Bottomley Offer of Proof.wpd 1 Prootwpd 1

2 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 2 of 14 Plaintiff, United States of America, by and through its counsel of record, Jessica J T. Fehr, Assistant U.S. Attorney for the District of Montana, Montana hereby files its Offer of Proof. THE CHARGE The defendant, PaulDaniel Bottomley, has been charged by Information with With one count of misprision of a felony in violation Violation of 18 U.S.C. 54. This offense carries a maximum punishment of three years imprisonment, a $250,000 S fine, 1 year supervised release, and a $100 S100 special assessment. PLEA AGREEMENT There is a plea agreement in this case; Case; Bottomley will plead guilty in this case Case and waive Waive formal presentment of an Indictment to a Grand Jury. The United States presented any and all formal plea offers to the defendant in writing. Writing. The plea agreement entered into by the parties and filed with With the court represents, in the government s view, View, the only and most favorable offer extended to the defendant. See Missouri v. Frye, 132 S.Ct (2012). S:\crim\2011R00518\Final S:\crim\2011R0O518\FinaI Bottomley Offer of Proof.wpd 2 Prootwpd 2

3 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 3 of 14 ELEMENTS OF THE CHARGE T0 WHICH DEFENDANT WILL PLEAD ELEMENTS OF THE CHARGE TO WHICH DEFENDANT WILL PLEAD In order Order for the defendant to be found guilty of the charge Charge of misprision of a felony, as charged in Count I of the Indictment, in violation Violation of 18 U.S.C. 54, the United States must prove each of the following elements beyond a reasonable doubt: First, the principal committed and completed the felony alleged; Second, that the defendant had knowledge of the crime committed by the principal; Third, the defendant failed to t0 notify authorities; and Fourth, the defendant took steps to conceal the crime. ANTICIPATED EVIDENCE If this case Case were Were tried in United States District Court, the United States would prove the following: In April of 2010, the Food and DrugAdministration, Office of Criminal Investigations (FDA-OCI) began to investigate a source of supply for unapproved oncology (cancer) drugs Montana Health Care Solutions (MHCS). FDA-OCI learned Iearned of an individual in Belgrade, Montana, Montana PAUL DANIEL BOTTOMLEY, who Who was distributing 3 3

4 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 4 of 14 misbranded and unapproved cancer drugs throughout the United States. BOTTOMLEY's company was called Montana Health Care States. BOTTOMLEYS company was called Montana Health Care Solutions, Inc. (MHCS). The business was opened in MHCS was operated out of Belgrade, Montana. The investigation uncovered that BOTTOMLEY imported The investigation uncovered that BOTTOMLEY imported misbranded and unapproved cancer drugs from foreign countries and sold those drugs to t0 American physicians all of which Which violates Violates the Food, Drug, and Cosmetics Act (FDCA) of the United States. The prescription drugs distributed by the defendant were Were new drugs under 21 U.S.C (p) that required approval by the U.S. Food and DrugAdministration Administration (FDA) under 21 U.S.C before they could be imported intothethe United States. The foreign prescription drugs distributed by BOTTOMLEY were Were not typically the versions Versions that the FDA had approved for use in the United States, because, among other things, the drugs labeling information did not conform to the FDA approved labeling for the United States versions. Versions. For example, the labelingforfor the foreign versions Versions failed to contain the NationalDrug Code numbers, which Which are part of the FDA approved labeling for versions Versions approved for use in the United States. In addition, some of the S:\crim\2011R00518\Final S:\crim\2011ROO518\FinaI Bottomley Offer of Proof.wpd 4 Prootwpd 4

5 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 5 of 14 drugs receivedby BOTTOMLEY contained additional non-english language labeling, including use and dosage instructions, and he then removed the non-english language labeling before distributing the drugs to physicians. For example, in September of 2008, undercover purchases of an oncology drug called Zometa (manufactured by Novartis) were Were made from BOTTOMLEY and MHCS. MHCS s reported price for Zometa from BOTTOMLEY and MHCS. MHCS s reported price for Zometa was far below the normal wholesale Wholesale price. The labeling accompanying the Zometa revealed that the product was made for distribution in the United Kingdom, Ireland, and Malta, and manufactured by a Novartis subsidiary in Germany. BOTTOMLEY's BOTTOMLEYS conduct allowed unapproved prescription drugs to be imported and distributed throughout the United States. Additionally Additionally, during the course of the investigation, a package addressed to MHCS was detained at the JFK J International Mail Facility. On June 04, 2008, a mail shipment addressed from an address in Great Britain DE 142 VWV, and addressed to PAUL BOTTOMLEY/MONTANA HEALTHCARE SOLUTIONS was detained. The shipment contained Oxaliplain OXaliplain and Docetadxel ; DocetadXel ; both are 5 5

6 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 6 of 14 intravenous injectable chemotherapy drugs for the treatment of specific cancers. BOTTOMLEY was sent a Notice of FDA Action letter, dated cancers. BOTTOMLEY was sent a Notice of FDA Action letter, dated July J 15, The Notice stated the products in the packages were Were subject to refusal of admission into the United States for appearing to t0 violate Violate terms of the FDCA. The Notice stated that if BOTTOMLEY believed the products actually complied with With the law, law he could contact a compliance officer with the FDA. BOTTOMLEY never contacted a compliance officer with the FDA. BOTTOMLEY never contacted a compliance officer with With the FDA. In October of 2010, BOTTOMLEY sold MHCS to t0 Canada Drugs, Ltd. (hereinafter Canada Drugs ), an internet based pharmacy corporation located in Winnipeg, Manitoba, Canada. Canada Drugs is owned by Krisjtan Thorkelson. Rockley Ventures, Ltd. (hereinafter Rockley Ventures ), a Canada Drugs subsidiary, was based in Barbados and was managed in large part by Tom Haughton. Rockley Ventures paid BOTTOMLEY $5 million for MCHS. Canada Drugs, Ventures paid BOTTOMLEY S5million for MCHS. Canada Drugs, Rockley Ventures, and the related companies retained BOTTOMLEY's BOTTOMLEYS company s name, domain name, any stock on hand, hand and his physician distribution list. While the companies continued to solicit and distribute to BOTTOMLEY s previous customers using his company s distribute to BOTTOMLEYs previous customers using his company s 6 6

7 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 7 of 14 name and letter head, head the companies significantly increased the number and type of drugs offered to the physicians. BOTTOMLEY was also to remain as an advisor to Rockley Ventures, Canada Drugs and relatedcompanies following the sale of MHCS. BOTTOMLEY was paid $10, ,000 per month for his advisory services Services by the companies. In his advisor capacity, BOTTOMLEY occasionally made sales calls Calls to physicians and dealt with shipment issues. On one occasion, BOTTOMLEY traveled to Tennessee, on issues. On one occasion BOTTOMLEY traveled to Tennessee, on behalf of Canada Drugs and its related companies, companies to t0 work Work with With Volunteer Distribution on their mail-order shipping of pharmaceuticals on behalf of the companies. BOTTOMLEY s BOTTOMLEYS continued involvement involvement in MHCS after the purchase of his company was confirmed through N.T., N.T. office manager for an oncologist in California that was a prior customer of BOTTOMLEY and MHCS. On September 09, 2011, N.T. received an BOTTOMLEY and MHCS. On September 09, 2011, N.T. received an communication from a contact at MHCS. On the , a carbon copy was sent to BOTTOMLEY. N.T. provided law enforcement with three copies of checks from the medical practice to MHCS. The checks were Were payments for oncology drugs purchased by the medical group from 7 7

8 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 8 of 14 MHCS. Two of the checks were Were deposited in accounts associated with BOTTOMLEY. The third check was deposited at Canada Trust, located in Winnipeg, Canada. In December of 2011, N.T. made a consensually monitored telephone call Call to t0 MHCS at the number provided on the invoices the practice had received. The telephone call was answered by a woman. Woman. N.T. asked the individual that answered the phone about correspondence stating that MHCS was located in Canada. The individual replied that, that Paul s [Bottomley] company quite some time ago was bought by the company that I work Work for and we're We're located in Canada. When N.T. asked about BOTTOMLEY being at the company, Canada. When N.T. asked about BOTTOMLEY being at the company the individual said, he [BOTTOMLEY] is and he isn t, isn t he still sort of corresponds with With us and still works Works with With us and still works Works with With all of you guys but he, he I guess no longer owns the company, company but he is still involved, he's still very Very much involved. involved. The individual further stated, He s still involved involved with With it, he still goes to t0 the clinics and everything. Our mailing address is now in Canada because Paulno longer has the space that he used to rent so now all the checks are coming up to us. 8 8

9 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 9 of 14 N.T. requested a copy of the company s wholesale license, the individualresponded, Our wholesale license, it s for our distributor in the UK we We just sell through the US. The individualfurther stated, No, N0, allthe products just come from the UK, that s really where Where our wholesale Wholesale license is we We just we We also have our warehouse pretty much our wholesale license we We provide for our UK facility our warehouse Warehouse is in the states is for the US clinics but our wholesale Wholesale license is for the UK. UK, When N.T. asked the individual if the drugs were FDA approved, she responded, None of the drugs we We sold were Were ever FDA approved, even when When Paul [BOTTOMLEY] was selling it, all the drugs when When sale that s why Why they were Were European or for UK sales, they re English, but they re for Europe right, FDA is only ever in the United States. That s why Why you were Were able to get the prices that you were getting. This is from way Way before Paul [BOTTOMLEY] ever, how Paul s always been running it. The individual did not have an answer about further FDA approval, but said BOTTOMLEY could call Call N.T. to discuss the FDA approval of the drugs being shipped to the medical practice. On January 13, 2012, FDA-OCI received information from the United Kingdom Medicines and Healthcare Products Regulatory 9 9

10 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 10 of 14 Agency (MHRA), United Kingdom, regarding a potential counterfeit oncology drug known as AVastin Avastin (marketed in Turkey as Altuzan). AVastin Avastin is a prescription drug that requires a uniform cold temperature during shipment. AVastin Avastin is a prescription drug that is typically intravenously infused into cancer patients. MHRA informed FDA-OCI that they had became aware of a United Kingdom wholesaler Wholesaler that purchased 167 packs of AVastin Avastin 400 mg from a supplier in the European Union (EU). The United Kingdom wholesaler Wholesaler shipped 41 of the identified packs of AVastin Avastin to Volunteer Distribution ("Volunteer"), a company located in Gainesboro, Tennessee. Volunteer Distributionhada a pharmaceutical distribution contract with With QSP, a subsidiary company of Canada Drugs. Volunteer Distribution received received oncology drugs with With the understanding that they would ship those drugs to clients once they were Were provided with With a client and packing list. Normally, Volunteer Distribution would receive receive a quantity of oncology drugs from the United Kingdom which Which were Were stored until the client and packing list were Were received. received. The packing list would specify the names of clients, Clients, their mailing address and the drugs they were Were to receive. receive. The 10 10

11 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 11 of 14 packing list also included Montana Healthcare Solutions in the upper left-hand corner with a symbol associated with With MHCS. Initial preliminary analysis conducted by MHRA with With the United Kingdom wholesaler Wholesaler indicated at minimum the potential existence existence of counterfeit labeling on the AVastin Avastin in question. A subsequent lab analysis of the AVastin Avastin determined the drug to be counterfeit the substance seized and tested did not contain any of the active drug ingredient bevacizumab that is found in legitimate versions Versions of Altuzan and AVastin. Avastin. It was determined that Volunteer Distribution had already shipped 36 of the 41 packs of AVastin. Avastin. The 5 remaining packs of the counterfeit AVastin Avastin were Were shipped back to the United Kingdom wholesaler. The counterfeit AVastin Avastin was shipped to Volunteer Distribution from frorn a company identified as River East Supplies, Ltd. ( River East ), which Which is located in the United Kingdom. Following a review of the Volunteer Distribution records FDA- OCI was able to identify customers that received oncology drugs from Volunteer including the counterfeit AVastin. Avastin. Numerous physicians or practice managers were Were interviewed by law enforcement about their purchases form MHCS. Most interviewed stated that their point of S:\crim\2011R00518\Final S:\crim\2011ROO518\FinaI Bottomley Offer of Proof.wpd 11 Prootwpd 11

12 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 12 of 14 contact was PAUL BOTTOMLEY, who Who was a sales representative for MHCS. The physicians and practice managers interviewed confirmed that the drugs they received from Volunteer were Were sent pursuant to orders they placed with With MHCS, and that payments for the shipments were made to MHCS for the drugs receivedfrom Volunteer. Some physicians and practice managers admitted to law enforcement that they knew the drugs were Were foreign versions Versions of United States approved products based on the price being charged as well as the packaging. For example, MHCS charged $1,700 81,700 per vial Vial for Avastin Avastin, when When the product would Would normally cost nearly $2,300 32,300 per vial. Vial. Some physicians admitted that although they knew the drugs were Were foreign, unapproved versions Versions of U.S. prescription drugs, they still billed insurance programs the prices they would Would bill for U.S. prescription drugs. At the time of the shipments of the counterfeit Avastin into the United States, MHCS was owned and operated as a subsidiary of Canada Drugs and Rockley Ventures. Canada Drugs and Rockley Ventures were Were responsible for the shipment of misbranded, adulterated S:\crim\2011R00518\Final S:\crim\2011R0O518\FinaI Bottomley Offer of Proof.wpd 12 Prootwpd 12

13 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 13 of 14 and counterfeit drugs into the United States, allin violation Violation of the FDCA. Although BOTTOMLEY had no involvement in the importation or Although BOTTOMLEY had no involvement in the importation or distribution of the counterfeit Avastin, BOTTOMLEY did become aware of the distribution of the counterfeit Avastin by January J of By that date, BOTTOMLEY would have been aware and had concerns about the pedigree and purity of the drugs that were being imported and sold by Canada Drugs and Rockley Ventures. In particular, BOTTOMLEY was aware at that time that Canada Drugs particular, BOTTOMLEY was aware at that time that Canada Drugs and Rockley Ventures were Were importing and distributing misbranded and unapproved drugs in violation Violation of federal law. law. On January 31, 2012, BOTTOMLEY left a message with With N.T. s medical group and followed up with With an to t0 N.T. On February 2, 2012, BOTTOMLEY sent N.T. an . Although BOTTOMLEY was 2012, BOTTOMLEY sent N.T. an . AlthoughBOTTOMLEY was aware at that time that Canada Drugs and Rockley Ventures were Were importing and distributing misbranded and unapproved drugs in violation Violation of federal law and that there were Were legitimate concerns about the pedigree and quality of the drugs, he made no mention in his about his knowledge or his concerns. Rather, the primarily 13 13

14 Case 2:13-cr DLC 2:13-cr-OOOO4-DLC Document 7 Filed 04/19/13 Page 14 of 14 concerned the billing status Status of N.T. and stated that he was heading overseas for a short time period. BOTTOMLEY stated that his overseas for a short time period. BOTTOMLEY stated that his day-to-day involvement in MHCS had dwindled in the past 18 months BOTTOMLEY stated since he sold his part of the company in BOTTOMLEY stated that the current owners used him on a consulting basis from time to time, and he could help with the medical practice s practicäs issues when he returned to the United States. Finally, BOTTOMLEY also failed to returned t0 the United States. Finally, BOTTOMLEY also failed t0 notify authorities of the fact that Canada Drugs and Rockley Ventures were Were importing and distributing misbranded and unapproved drugs in violation Violation of federal law. DATED this 19th day of April, MICHAEL W. COTTER United States Attorney /s/ Jessica T. Fehr JESSICA T. FEHR Assistant U.S. Attorney S:\crim\2011R00518\Final S:\crim\2011ROO518\FinaI Bottomley Offer of Proof.wpd 14 Prootwpd 14