Fuerst Ittleman Sponsors the University of Florida’s College of Agriculture and Life Science 8th Annual Golf Tournament

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On May 14, 2010, Wendi Finch May and Kelly Lightfoot of Fuerst Ittleman participated in the 8th Annual College of Agriculture and Life Science (CALS) Golf Tournament at the University of Floridas Mark Bostick Golf Course. Fuerst Ittleman participated as the Blue Sponsor of the tournament. The tournament benefited the CALS Alumni and Friends Scholarship Fund. CALS Alumni and Friends provides a scholarship to a student each year to support that students academic studies. UFs CALS alumni are found in all areas of the food, agriculture and life sciences industries. Fuerst Ittleman works with CALS alumni to provide regulatory and other legal services to the agricultural and life sciences industries. Fuerst Ittleman was pleased to support CALS Alumni and Friends and its scholarship fund. The tournament was a great success and everyone had a great time. For more information on the tournament and CALS Alumni and Friends, please visit http://cals.ufl.edu/alumni/golf.shtml.

ANN TAYLOR ESCAPES FTC ENFORCEMENT ACTION

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On December 1, 2009, the Federal Trade Commissions New Endorsement Guides took effect.  One of the requirements in the endorsement and testimonials guide states that a blogger must disclose any material connection or remuneration received in connection with their review of a product or service.  If such disclosure is omitted the advertiser may be liable for any deceptive or misleading claims made in the blog.

In late January, only weeks after the FTCs New Endorsement Guides went into effect, the retailer of womens apparel, Ann Taylor LOFT, hosted a fashion show to preview the chains summer 2010 collection.  As is customary at these events, the attendees received special gifts.  Furthermore, to stir up excitement the attendees were told that if they blogged about the show they would be entered into a drawing for a gift card.  Sure enough, a few blogs appeared on the web, several of which did not disclose the bloggers “gift card incentive.”  Ann Taylor had placed signs around the event advising all would-be bloggers to disclose the “gift card” incentive in blogs reviewing the fashion show.  However, some bloggers did not see the sign and posted reviews without revealing the gift incentive.  The FTC took notice and launched the first public investigation into “compensated bloggers” since the guides took effect.

After the investigation, the FTC decided to forgo an enforcement action in which it would have sought a monetary penalty from Ann Taylor.  In the April 20th closing letter the FTCs Associate Director, Mary Engle, explained that the FTC was withholding enforcement because  “the January 26, 2010 preview was the first (and, to date, only) such preview event.”  Second, the number of overall bloggers at the event was small with an even smaller subset failing to disclose the gifts.  Third, Ann Taylor “adopted a written policy in February 2010 stating   [Ann Taylor] will not issue any gift to any blogger without first telling the blogger that the blogger must disclose the gift in his or her blog.”  While the letter closes the door on the investigation it stands as a warning to advertisers to be vigilant over how the blog-o-sphere reports on their products and services.

FDA Seeks Comment on Draft Guidance for Industry, Third Parties and FDA Staff; Medical Device ISO 13485:2003 Voluntary Audit Report Submission Program

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This week, United States Food and Drug Administration announced that a new draft guidance, “Medical Device ISO 13485:2003 Voluntary Audit Report Submission Program,” is available for public review and comment.  This new FDA program allows for a medical device manufacturer whose facility is inspected and audited by any of the Global Harmonization Task Force (GHTF) approved systems, like the Canadian Medical Devices Conformity Assessment System or European Union Notified Body, to voluntarily submit the results of that audit to the FDA.  The FDA will then utilize the results of that audit in its risk-based analysis of whether it can remove the firm from its work plan for the next year.  In other words, the FDA will use the audit conducted by the other accredited body to make decisions about which firms it will inspect during the upcoming year.  The Agency will base its decisions on the probability of risk reported in the audit and the type of device manufactured by the firm.  This is a way in which a compliant device manufacturer already audited through another recognized system may avoid an inspection by FDA.  The program benefits FDA, as well, as the program allows the Agency to use its resources to focus on auditing firms that require more oversight.

The International Organization for Standardization (ISO) is a group with representatives from various national standards organizations that promulgates worldwide proprietary industrial and commercial standards.  The medical device ISO 13485:2003 provides quality management system requirements for medical device manufacturers and distributors.  Under this ISO, a firm must demonstrate that it can produce medical devices and related services that are consistently compliant with the regulatory requirements set forth by ISO. The FDA, through the new draft guidance, will use the medical device ISO 13485:2003 to leverage audits performed by other GHTF regulators to assist the Agency in setting risk-based inspectional priorities.

The FDA is utilizing inspections and audits conducted by third parties and other regulators with increasing frequency.  The Agency is employing reliable reports from other regulatory bodies to establish a more efficient work plan.  Under the Medical Device User Fee Modernization Act of 2002 (MDUFMA), the FDA is authorized to train and accredit third parties to perform inspections of eligible establishments that manufacture Class II or Class III devices.  This voluntary program is known as the Accredited Persons AP for Inspections program.  While all firms remain subject to inspection by FDA, eligible manufacturers have the option of requesting inspection by an AP.  Additionally, in 2006, the FDA and Health Canada (HC) announced a pilot multi-purpose audit program (PMAP) allowing qualified accredited persons and auditing organizations under the AP for Inspections program and HCs equivalent program, the Third Party Auditing Organizations, to perform a single inspection that both FDA and HC can use.  The purpose of this pilot program is to evaluate the effectiveness of performing one third party inspection of a medical device firms quality system that would meet the regulatory requirements of both countries.  The pilot PMAP and FDAs new draft guidance evidence the Agencys movement toward recognizing the necessity of comity between international regulatory bodies regarding medical device firm inspections and audits.

Fuerst Ittleman, PL is experienced in handling the compliance matters of medical device manufacturers and distributors.  We also assist pharmaceutical and biotechnology firms with regulatory compliance and import/export requirements.  Please feel free to contact us at contact@fidjlaw.com to discover how we can help your company with medical device manufacture, inspections, importation/exportation, and distribution.

See 75 FR 28257.

Kansas City CPA and Attorney Barred from Promoting Tax Fraud Schemes

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A Kansas City, Missouri federal judge permanently barred former CPA and Nebraska attorney, Allen R. Davison, from promoting tax fraud schemes. The court found that from at least the mid-1990s, Davison had promoted tax-fraud schemes that included arrangements involving sham companies and bogus deductions for the purpose of illegal tax avoidance.

The court order describes schemes Davison set up for clients which included medical practitioners, an insurance broker, and car dealership owners. As provided by the court, Davisons schemes were “deliberately complex” in order to “evade IRS detection.” In attempts to evade detection, Davison fabricated records, prepared documents after the fact to address IRS concerns, and intentionally provided false information to the IRS during client audits. Davison also “deliberately disguised the nature of his work” and “expressed a willingness to change to new and different tax fraud schemes when faced with the heightened IRS scrutiny of older schemes.”

The court found that Davison “deliberately advised his clients to break the law, and helped them go about doing so.” The court provided examples of some of Davisons schemes which included sham management companies whose shares were owed by employee stock option plans and Roth IRAs, bogus chicken “ flock deductions claimed for clients who were not eligible to claim them because they failed to qualify as farmers under federal tax law, and sham corporations set up for the sole purpose of sponsoring pension plans for the benefit of Davisons clients who owned businesses.

John A. DiCicco, Acting Assistant Attorney General for the Justice Departments Tax Division stated that the “nations tax system relies on the integrity of tax professionals.”

At Fuerst Ittleman, PL you can be assured that our professionals will handle your tax matter with professionalism and integrity. Before you hire a professional to handle your financial matters please check their credentials.

If you have any questions or concerns as to the credentials of a financial professional, please contact Fuerst Ittleman, PL at contact@fidjlaw.com.

South Carolina Tax Preparer Fabricated Returns and Directed Refunds to Bank Accounts She Controlled

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Dorothy Lee Anderson of Hopkins, South Carolina was permanently barred by a federal district court judge in Columbia, South Carolina from preparing federal tax returns for others. The court found that Anderson, operating under the name “DL Anderson Tax Service,” fraudulently prepared and filed tax returns using individuals names and social security numbers without their assent, authorization, or knowledge. These fraudulent returns generated substantial tax refunds which Anderson deposited into bank accounts she controlled. The court found that Anderson deposited more than $290,000 in fraudulently obtained refunds and then absconded with over $220,000 of these funds for her personal use. After being tried, the court ordered Anderson to provide her customer lists to the government and mail copies of the court order to her former customers.

The Justice Departments Tax Division has obtained more than 465 injunctions over the past decade to stop tax fraud promoters and tax return preparers. Before hiring a professional to handle your financial records, be sure to inform yourself of their credentials.

If you have any questions or concerns as to the credentials of a financial professional, please contact Fuerst Ittleman, PL at contact@fidjlaw.com.

Compounding Pharmacist Gains Partial Judicial Relief; Still Guilty on Eight

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On April 30, 2010 Judge Marcia S. Krieger, United States District Judge,
District of Colorado dismissed 23 guilty counts against Thomas Bader, a
compounding pharmacist and owner of College Pharmacy in Denver Colorado,
while affirming eight counts and $4.8 million in forfeiture.

The case illustrates many of the nuanced risks involved with compounding
pharmacies, importing and exporting of active pharmaceutical ingredients
(API), compounding and selling high profile drugs such as human growth
hormone (HGH) and anabolic steroids, understanding the subtle distinction
between compounding and manufacturing, and the tenuous interplay between
state compounding laws and the Federal Food, Drug and Cosmetic Act (FDCA).

The case stems back to 2007 when Mr. Bader was charged with illegal
distribution, mail fraud, and conspiracy to facilitate the sale of smuggled
goods. Mr. Bader was importing HGH from China and compounding the API into
finished drug products. As Colorado’s compounding statute is very expansive,
he believed his practice to be protected under state law, and outside the
purview of FDCA.

The federal smuggling charges focused on the fact that imported HGH was from
a non-FDA registered facility and the compounded products thus involved new,
unapproved drugs requiring an NDA under FDCA. Mr. Bader was further charged
with illegal distribution of HGH and testosterone cypionate (a controlled
substance) as both products involved promotion for unapproved uses, illegal
under federal law.

On February 2, 2010 a federal jury found Mr. Bader guilty of 31 counts
including illegal distribution of HGH and controlled substances and unlawful
importation (i.e. smuggling) of HGH. Mr. Bader and counsel then moved to
acquit, or alternatively seek a new trial based on a number of legal
propositions including entrapment by estoppel, violation of due process
rights, erroneous juror instructions, failure to establish a criminal
purpose or intent, and insufficient evidence to support the findings.

Ultimately, on April 29, 2010 Judge Krieger dismissed 23 counts involving
illegal distribution of HGH. The Judge acknowledged a number of Mr. Bader’s
sales were for approved uses of HGH, including some even written for
children. Additionally, Mr. Bader had no way of knowing if the
prescriptions were for permissible uses and thus his actions were protected.

Still, the ruling upheld eight guilty counts. Two smuggling charges were
upheld, as importation of HGH from a non-FDA registered facility was seen as
“contrary to law,” and thus illegal. Simple repackaging or relabeling of a
product may be lawful under state compounding laws; however this
“compounding defense” could not shield Mr. Bader from further provisions of
the FDCA.

Five illegal distribution counts involving HGH were upheld as the use of HGH
as an anti-aging drug is unauthorized and illegal. The lone distribution
charge involving controlled-substances was also upheld, as selling and
promoting testosterone cypionate for muscle building and ant-aging is
illegal. Lastly, the judge affirmed $4.8 million forfeiture in assets based
on the nature of the guilty counts. Sentencing in this matter is scheduled
for June 10, 2010.

In sum, compounding pharmacies may be fully compliant with state law, but be
at great risk under federal law. Pharmacies and suppliers of API should
always consult an attorney and be aware of the risks involved. Fuerst
Ittleman, PL has experience with FDA import and export, pharmacy
compounding, and FDCA matters. Please feel free to contact us at
contact@fidjlaw.com to see how we can help you maintain complete
regulatory compliance with applicable state and federal law.

Spring Treasury Regulatory Agenda

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On April 26, 2010, the Treasury Department unveiled its regulatory agenda as part of the Unified Agenda of Regulatory and Deregulatory Actions covering IRS projects in the corporate tax, international tax, and exempt organizations area.

In the international tax arena, the agenda provides for projects that include guidance on the application of attribution rules to foreign trusts, clarification of the foreign base company sales income rules, and taxable years of foreign corporations. The agenda also includes international guidance projects dealing with US source income effectively connected with a US business and revisions relating to withholding reporting requirements for US source income paid to foreign persons. In the corporate arena, the agenda provides for projects dealing with reorganizations under IRC § 368(a)(1)(E) or (F), recharacterization of certain qualifying income of publically traded partnerships, and interest on deferred tax liability for contingent payment sales pursuant to IRC § 453A. Projects encompassing payments made pursuant to securities lending transactions or sale-repurchase transactions, deferred discharge of indebtedness income, and deferred original issue discount of corporation are also in the works. Finally, with regards to the exempt organizations arena, the IRS is working on guidance addressing charitable contributions of specific motor vehicles, lookback interest and tax-exempt entities, and qualified tax credit bonds.

From: BNA Spring Version of Treasury Regulatory Agenda Details Dozens of IRS Projects in Many Areas 29 TMWR 590

Regenerative Medicine to Grow to a $20 Billion Industry in 15 Years

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Regenerative medicine involves the use of tissues, cells (including stem cells), laboratory-made compounds, and artificial organs to treat injuries and diseases. This approach helps repair specific areas of the body, often without the need for traditional, invasive surgery. For example, research is being conducted to use stem cells to replace cardiac tissue in patients with congestive heart failure. Currently, bone morphogenetic proteins, or BMP, which are genetically modified human proteins that spur bone growth, are being used to help vertebrae fuse back together after certain spine surgeries.

The science and technology of regenerative medicine is expanding at a rapid pace. The current market for regenerative medicine technologies now stands at $1.6 billion, but experts predict that this market could swell to $15-20 billion by 2025. Regenerative medicine is growing so rapidly because it is more efficient and effective for both physicians and patients who will undergo fewer steps in surgery and other medical procedures. Regenerative medicine is growing around the world, with the top five producers of regenerative medicine research coming from the United States, Japan, Germany, United Kingdom, and China. China, specifically, has seen a jump in regenerative medicine from 50 publications in the year 2000 to over 1,000 in 2008.

Virtually every sector of the medical and biotechnology industries stand to expand alongside the worldwide market for regenerative medicine. For instance, the medical device industry will benefit from and aid in regenerative medicine with the development of “delivery systems” for these cellular and other therapies. The delivery systems, such as catheters and similar devices, would allow physicians to repair specific areas of the body with site specific implantation of tissues, cells, or other tissue or cellular-based products. In addition to the domestic demand for delivery systems, this worldwide growth provides a global market for domestic medical device manufactures who can export their devices to meet the needs of foreign regenerative medicine markets.

Fuerst Ittleman, PL has experience with stem cell and other regenerative therapies compliance. We also assist medical device and biotechnology companies with regulatory compliance and export requirements. Please feel free to contact us at contact@fidjlaw.com to see how we can help your company move forward with regenerative medicine therapies.

Miami Medicare Fraud Ring Linked to Check Cashing Stores

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Casual news-watchers may have missed the significance of the seemingly unrelated stories, but the legal and regulatory compliance professionals at FHI clearly saw the connection.As we reported previously, federal law enforcement agencies have increased their enforcement focus on Medicare fraud in the Miami area in a significant way. Under this program, on June 23, 2009, Federal officials in Miami announced that eight defendants were charged in an elaborate Medicare fraud that spanned five states, used 29 fake storefronts, and attempted to steal $100 million from Medicare and Medicare Advantage.

The indictments allege that Michel De Jesus Huarte and the defendants fronted their scam through more than a dozen phony medical clinics throughout the Southeast United States. In many cases, the storefronts were simply post office boxes.

They would submit fraudulent invoices to the government, then use check cashing stores to launder the reimbursements; money is harder to track through these stores than through conventional banks. The fraud group owned two check cashing stores in the Miami area and netted between $30,000 and $80,000 in cash several times a week.

According to government court filings, Huarte paid the fake store owners in cash “with the understanding that (they) would flee to Cuba to avoid law enforcement detection or capture.” Two of the defendants and approximately $30 million are still missing.

This fraud ring is similar to a scheme run through the La Bamba Check Cashing store. In that case, the Benitez brothers were accused of laundering $24 million in Medicare fraud money by using shell companies to cash checks at a local chain of stores. As we reported in our blog, Juan Rene Caro, owner of La Bamba, was recently sentenced in Federal court for using the check cashing store to launder funds from a construction fraud ring involving violations of the Bank Secrecy Act. You can read about the harsh sentence handed down to Mr. Caro here.

Viewed through a single lens, these indictments and convictions mean that the Federal government is not only going after those who perpetrate Medicare fraud, but those who move and launder the funds from these schemes as well. The implications are clear: if you are involved in Medicare fraud activities in any way, the government will be coming for you.

Let Fuerst Ittleman assist your health care company with its regulatory compliance to help protect you against fraud and other illegal activities. Please contact us at 305-350-5690 or contact@fidjlaw.com.

Harsh Sentence for Miami Check-Cashing Store Owner

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The owner of Miami, Florida’s La Bamba Check Cashing store, Juan Rene Caro was sentenced in Federal court on June 23, 2009 to serve 216 months in prison, pay a $250,000 penalty, and forfeit $11 million in assets for his conviction on conspiracy and fraud charges in violation of the Bank Secrecy Act.Caro’s now-defunct store offered illegal check-cashing services to construction companies and other business people seeking to mask the identity of the true recipients of the funds. A company would engage La Bamba to cash a check in the name of a shell corporation, but the real company’s owner would take cash. Most of these companies were local construction companies and subcontractors.

Under the Bank Secrecy Act, financial institutions – including check-cashing stores – are required to file currency transaction reports (CTRs), a notification to the U.S. Department of Treasury, disclosing the identity of parties to a transaction when amounts greater than $10,000 are involved. The financial institution must also verify and record the identity, social security number, or taxpayer ID number of the person benefiting from the transaction.

The companies using La Bamba’s services evaded taxation on an amalgamated total of $132 million. La Bamba profited from the filing of false CTRs by taking a fee of between 3% and 5% for performing such transactions.

U.S. Department of Justice enforcement of CTR requirements has ramped up recently with charges against small and big-time players alike. For example, Newport Beach, California, financier Danny Pang was accused this Spring of structuring transactions to avoid filing CTRs, as were the owners of a small machine shop in Rhode Island who similarly avoided CTRs in order to conceal business receipts and thereby evade taxation.

Although Caro’s attorney called the sentence unfair, comments from the Department of Justice and the Judge Joan Lenard’s hefty sentence indicate broad acceptance of a zero-tolerance attitude towards fraud and financial crimes that harm the American taxpayer. It should also be noted that the prosecution sought a longer prison term and more assets than those ordered to be forfeited by Judge Lenard.

Read the Department of Justice’s posting of the indictment against Mr. Caro for a detailed description of the mechanics of Caro’s crime as well as a list of the assets sought by the government.

For insight and strategies on maintaining compliance with state and federal regulation of financial services, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.