The verdict followed a six-week trial. Hi-Tech was also found guilty of laundering millions of dollars in proceeds from the fraudulent scheme.
“After two prior federal felony convictions, Wheat yet again put profits over product quality and consumer safety by forging documents purporting to show that an independent, third-party audit company had certified Hi-Tech as complying with Good Manufacturing Practices,” said U.S. Attorney Theodore S. Hertzberg, in a press release from the U.S. Attorney’s Office for the Northern District of Georgia. “As a result of the defendants’ deceit, Hi-Tech received millions of dollars from customers who relied on the fabricated documents.
“The defendants’ fraudulent scheme was uncovered through years of dedicated investigation and collaboration among law enforcement partners, and the verdict signals that companies that lie will face stern consequences.”
Wheat faces a maximum of 20 years of imprisonment followed by three years of supervised release.
Hi-Tech faces a fine of up to twice the value of the criminal proceeds involved in the offenses, which could total nearly $10 million, and probation of up to five years.
The sentencing hearing has not yet been scheduled.
The list of allegations
According to Hertzberg, the charges and information presented at trial, Wheat and Hi-Tech retained a reputable third-party audit company in November 2010 to inspect its facilities for compliance with dietary supplement Good Manufacturing Practices (GMPs). The audit report allegedly listed 75 categories that were not compliant with GMPs, which corresponds to approximately 40% of the total criteria. These violations reportedly included “gaps and holes in facility doors that could permit rodents to enter, products exposed to dust and other contaminants before packaging and critical lapses in its product specifications and testing for both raw materials and finished products”, according to the release.
Instead of fixing these quality and safety issues, however, Wheat and Hi-Tech were alleged to have fabricated a certificate in March 2011 purportedly issued from a company called PharmaTech Consulting stating that Hi-Tech complied with GMP. The defendants listed a former attorney of Wheat in Belize as the general manager of PharmaTech and forged the attorney’s signature on the certificate.
The defendants did not disclose that PharmaTech was owned by Wheat, had conducted no inspection or audit of Hi-Tech, and was not an independent third-party auditor, according to the U.S. Attorney’s Office for the Northern District of Georgia.
In addition, Hi-Tech was alleged to have doctored the inspection report issued by the third-party audit company to make it appear that PharmaTech had issued a favorable audit report. Specifically, after the legitimate audit report revealed 75 GMP deficiencies, Hi-Tech changed each category from “Not Acceptable” to “Acceptable” and listed PharmaTech as the auditor.
Hi-Tech also fabricated FDA Certificates of Free Sale export certificates, which indicate that food products are marketed in the United States and eligible for export, by altering dates and product names. Hi-Tech allegedly sent fraudulent PharmaTech audit reports and GMP certificates, as well as Certificates of Free Sale, to its customers on dozens of occasions between 2011 and 2013.
The U.S. Attorney’s Office for the Northern District of Georgia stated that, in many cases, customers forwarded the fraudulent documents to foreign regulators, which permitted Hi-Tech products to be sold abroad based on the fabricated certifications of its compliance with GMP. From March 2011 through April 2013, customers who received the fraudulent documents paid at least $4,763,292 to Hi-Tech.
‘The expected outcome for any business engaging in this illegal activity’
“Making fraudulent claims about FDA-regulated products shows a reckless disregard for public health and safety,” said Acting Special Agent in Charge Kelly McCoy from the FDA Office of Criminal Investigation. “We remain committed to pursuing and bringing to justice those who misrepresent key aspects of their products to unsuspecting customers.”
“Hi-Tech’s conviction for money laundering provides the expected outcome for any business engaging in this illegal activity,” said Demetrius Hardeman, special agent in charge of IRS criminal investigation at the Atlanta Field Office. “IRS-CI special agents are experts at following the money to uncover the various money laundering schemes carried out by business entities or criminals to hide illegal profits, including their use of layering, cyber laundering, and shell companies.”
Legal representatives for Mr. Wheat and Hi-Tech Pharmaceuticals were contacted for comment but did not reply prior to publication.
