FLORIDA’S NEW STEM CELL LAWS: UNBURDENED BY WHAT HAS BEEN

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On July 1, 2025, Florida’s new “Stem Cell Therapy” legislation became effective, adding Fla.Stat. § 458.3245 to Florida’s Medical Practices statutes and § 459.0127 to Florida’s Osteopathic Medicine statutes. Florida’s new stem cell laws follow a similar Utah law passed in 2024, but Florida’s higher median age and population size will inevitably create a much larger market and far greater public attention.

The new Florida law allows physicians to administer “stem cell” products derived from human tissue (including birth tissue but excluding aborted fetuses) to patients for orthopedics, pain management, and wound care. The law requires product manufacturers to register with FDA and become certified by one of four listed accrediting organizations, but does not require the “stem cell” products to be FDA approved. In this way, and as I will explain in more detail below, the Florida law and federal law are at loggerheads.

This conflict between state and federal law is more than academic, and should be understood by physicians adding “stem cells” to their practices and patients seeking “stem cells” for their injuries. Fortunately, the recent history of “stem cells” in the United States is rich with data to inform those important decisions.

Twenty Years of Regulatory History, In Brief.

Following an eight-year regulatory process, the United States Food & Drug Administration (“FDA”) finalized its “stem cell” regulations in 2005. Those regulations are found at 21 CFR Part 1271, titled “Human Cells, Tissues, and Cellular and Tissue-Based Products,” (“HCT/Ps”), and  govern most medical products derived from human tissue and intended for the treatment of patients in the United States.

Part 1271 covers an expansive array of HCT/Ps – including birth tissue, skin, bone, bone marrow, and many others – and creates regulatory categories for each based on the tissue source, the type and extent of manufacturing, and the intended use. Speaking generally, FDA takes a “tiered, risk based approach” to regulating HCT/Ps: the more “homologous” the tissue is to its intended use (e.g., skin allografts for wound covering versus fat derived cells for autism), and the less processing is involved (cleaning and sizing versus chemical digestion and culture expansion), the more likely it is that FDA will allow the product onto the market without FDA approval. Critical to this discussion, FDA requires “allogeneic” HCT/Ps (meaning, tissue derived from a donor and administered to a different person) which either have a systemic effect or are “dependent upon the metabolic activity of living cells to achieve [their] primary function” to be approved before they can be marketed and administered to patients in the United States. See, 21 CFR § 1271.10(a)(4)(i).

Over the years, FDA has amplified its position on “stem cell” products derived from donated birth tissue through guidance,  consumer alerts,  web postings, and warning letters, and enforced consistently against many of the products the new Florida law allows, including  exosomes, umbilical cord blood, Wharton’s jelly, and amniotic tissue. FDA’s position is clear: when birth tissue products are marketed as either “cellular” or otherwise “dependent upon the activity of cells” to achieve their intended function, they must be approved prior to commercialization, and companies manufacturing, distributing, or using them without approval violate federal law.

Of course, the violations called out by FDA are not merely technical. In many instances allogeneic “stem cell” products have presented real risks to patients, either because they were genuinely dangerous or contained no beneficial properties. As an example, in 2019 FDA issued a  warning letter to Liveyon Labs, which had manufactured and distributed unapproved umbilical cord products which sickened numerous patients and ultimately resulted in the founder being sentenced to prison. Earlier this year, the Federal Trade Commission (“FTC”) and the attorney general of Georgia obtained a permanent injunction and $5M judgment against the Stem Cell Institute of America and its founders stemming from their false and unsubstantiated “stem cell” advertisements on a national scale. Meanwhile, there has been no shortage of press coverage, with “false hope” being a common refrain.

“Stem cells” or stem cells?

Another key takeaway from the last twenty years is that “stem cells” are not always stem cells, at least as actual stem cells are understood by biologists and implied by patients.

To a cell biologist, a stem cell is a specific type of living cell that can renew itself, develop into different cell types in the body, and multiply in the laboratory when provided with proper nutrients. Ideally, when actual, living stem cells are injected into the body, they can self-renew and “regenerate,” allowing for the repair of cartilage and the regrowth of damaged joints and organs. These characteristics are unique to stem cells, and again, they must be alive to multiply and regenerate.

However, over time, the scientific understanding of the term “stem cell” gave way it becoming marketing jargon. The federal district judge in Stem Cell Institute of America proves this point by defining “stem cell therapy” as involving “the injection of shots with products containing cells or growth factors derived from birth tissue, including amniotic tissue or fluid, placenta, Wharton’s jelly, umbilical cord blood, adipose tissue, and bone marrow.” In other words, even to a federal court judge, a “stem cell” product need not contain actual stem cells. Instead, if the product is derived from human tissue and contains any type of cell or growth factor – living or dead – the product is a “stem cell” product.

Meanwhile, no less than three studies have been published showing that the “stem cell” products widely available on the market do not contain stem cells at all.

First, in 2019, a study in the American Journal of Sports Medicine examined amniotic fluid products from seven companies and found that none contained live stem cells in spite of the presence of dead nucleated cells. This study therefore concluded that the amniotic fluid products should not be considered “stem cell” therapies, and cautioned researchers to “use caution when evaluating commercial claims that products contain stem cells.”

Second, in 2020, a study in the Cartilage journal reviewed nine products derived from amniotic membrane and arrived at the same conclusion. Here, the authors noted that although these products contained a variety of proteins and could have some beneficial effect in orthopedic applications, the actual method of action was unknown, and none contained live or otherwise viable cells which might justify calling them “stem cell” products.

Finally, in 2021, another study in the American Journal of Sports Medicine reviewed five commercially available products derived from umbilical cords, arrived at the same result, and concluded that whatever therapeutic benefit could be derived was likely due to the presence of proteins or non-viable cells. Again, however, these “stem cell” products contained no actual stem cells.

Unburdened by what has been.

To summarize, “stem cell” products derived from donated birth tissue have proliferated in the United States over the past twenty years in spite of FDA’s unambiguous position that, without approval, they violate federal law. Likewise, although these products are called “stem cell” products, they often contain no actual stem cells, and achieve a therapeutic benefit through proteins or dead cells, or simply by lubricating and cushioning. Thus, in many, many instances, off-the-shelf “stem cell” products are not really stem cell products – in spite of the risks companies take on by commercializing them.

The new Florida “stem cell” law is unburdened by this well-established history and, for the most part, disregards it. For starters, the law does not specifically define “stem cells” or require “stem cell” products to contain actual stem cells. Instead, the law defines “stem cell therapy” as a “treatment involving the use of afterbirth placental perinatal stem cells, or [HCT/Ps]…” Thus, so long as the product is derived from birth tissue or another HCT/P, the product can qualify as a “stem cell” therapy under Florida law.

Similarly, although the new Florida “stem cell” law requires manufacturers to provide doctors with an “analysis report” showing that the products contain “viable or live cells” at the time of manufacturing, the law does not require the “viable or live cells” to be stem cells and does not define “viable or live.” Consequently, the “analysis report” may include cells other than actual stem cells, and characterize them as “viable or live” when, in reality, they are  mostly dead. These are exactly the issues discussed by the studies discussed above.

The law also requires physicians to inform their patients in writing that “stem cell” products have “not yet been approved by FDA.” Physicians must also include this caveat in all of their advertising. However, given the history described above, this “informed consent” requirement might be incomplete, or worse, deceptive, for two reasons:

– The informed consent gives patients an incomplete understanding of the federal regulatory status of these products. In short, a patient might read that a product has not “yet” been approved by FDA and believe that to be the end of the matter. However, the law does not require the patient to be informed that the products actually violate FDA’s regulations, which could be even more relevant to the patient’s choice of treatment. Advising the patient of the former factor but not the latter might create an incomplete sense of security.

– The informed consent falsely assumes that an FDA approval application has been submitted for the product. The Florida laws require the informed consent to advise patients that  products “have not yet” been approved by FDA. By using the word “yet,” the law assumes that FDA approval is forthcoming, but in reality, manufacturers under the new Florida stem cell law are not even required to seek an approval. Only FDA registration is required, which is an exponentially lower barrier to market. In contrast to Florida’s “stem cell” law, Florida’s Right To Try Act, for patients with “terminal” medical conditions, requires products to have an approval application pending with FDA.

In addition to its inherent conflict with federal law, Florida’s new stem cell law is irreconcilable with preexisting Florida law – namely the Florida Drug and Cosmetic Act, which treats violations of federal law as violations of Florida law. So, for instance, if a person selling “stem cell” products in Florida violates federal law because his products lack FDA approval, he also violates Florida law. The new Florida stem cell law provides nothing in the way of reconciliation.

These gaps in the new Florida “stem cell” laws were easily foreseeable by the Florida legislature when the laws were being drafted and passed, and each presents potential risks to patients – either because patients are not receiving what they expected, or because the products are harmful. The Florida Board of Medicine now has the authority to implement the “stem cell” law through rulemaking, and it should consider these defects in the laws when choosing how to proceed.

Parting thoughts.

The best analog for the new Florida “stem cell” laws is cannabis legalization in the United States beginning with California’s Proposition 215 in 1996. Indeed, just as California “legalized” a federally banned substance within its own borders, so too has Florida with
“stem cell” products which FDA treats as adulterated, misbranded, unapproved new drugs.

Many good things have come with state legalization of cannabis, both in terms of commerce and patient access. The Florida law has similarly commendable intentions: greater access to potentially helpful therapies from licensed physicians for patients who might otherwise travel outside of the United States to receive care.

However, the cannabis industry has trudged a steep path since legalization. The United States Supreme Court has long since blessed DEA’s enforcement authority over cannabis companies operating in accordance with state law, and the government has used that authority routinely since then. Here, federal enforcement will remain an evergreen threat, so physicians should proceed with caution when incorporating “stem cells” to their practices.

Hopefully, the new Florida law will push FDA to modernize its HCT/P rules, much like the Justice Department did to its marijuana enforcement priorities beginning in 2013. Legalization in Utah is one thing, but legalization in Florida might be too big for FDA to ignore. As I argued in 2017, “FDA cannot enforce this problem away. FDA now finds itself with a distributed, decentralized drug manufacturing industry, and too few resources to know where all the participants are.” With the horse officially out of the barn, and an HHS commissioner who has promised to end FDA’s “suppression” of stem cells, FDA’s right next move might be to support state stem cell initiatives. I shared my thoughts on how it might do so in 2021, and to its credit, Florida’s new “stem cell” law includes several of the building blocks I called for at the time.

Supreme Court Justice Louis Brandeis once wrote in 1932 that “a single courageous state may, if its citizens choose, serve as a laboratory, and try novel social and economic experiments without risk to the rest of the country.” Florida endeavors to do precisely that with its new stem cell law. But there is no shortage of cases since that time endorsing the federal government’s efforts to crack down on entirely intrastate activity, and that risk is very real for Florida’s stem cell experiment. Whether FDA and Florida go to battle or find a middle ground is to be determined, but for the time being practitioners and patients must be mindful of what has been when deciding on treatments now available under Florida’s “stem cell therapy” law.

Realtors’ tip: If you want that house, come with cash.

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By Rebecca San Juan
September 13, 2021

In South Florida’s super-charged real estate market, cash gives buyers a leg up — and those offers are rising faster than the newest condo buildings in Brickell.

For one Peruvian couple — like so many others — there was never even a second thought about how they would do their deal. They came with cash and bought a $4.85 million condo unit at the Miami Beach condo hotel 1 Hotel & Homes South Beach in June, according to the buyer’s representative, Romina Grinberg, a Realtor Associate at Brown Harris Stevens.

“In this market, they [sellers] are expecting cash buyers,” she said. “It’s important that your buyer is as aggressive as possible. Cash is always better because it’s not contingent on a buyer getting a loan and getting approved.”

Cash buyers comprised 41% of all deals in June in Miami-Dade County, compared with 26% in the same month last year, according to the Miami Association of Realtors. In Broward County, cash buyers made up 48% of all transactions in June versus 27% in June 2020.

The volume of cash buyers exceeded the national average of 23%, according to data from the National Association of Realtors.

With an influx of new arrivals from across the country, Realtors told the Miami Herald that buyers are striving to beat the competition in the intensely competitive market by appealing to sellers with the faster, fewer hassles and more certain process that comes with cash.

“Sellers dictate this to some degree,” said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty. “Buyers want to remove as many obstacles as possible to the seller.”

Some Realtors and experts are predicting that the number of cash deals is only going to increase in the months and years ahead.

While cash buyers may sometimes have the edge over purchasers with traditional financing like a mortgage, they are now finding that their main competition is, in fact, other cash buyers.

One of Compass Realtor Ivan Chorney’s clients competed against two other prospective buyers for a single-family home on the Venetian Islands that had been on the market for only 24 hours. Chorney’s client offered $16.7 million cash.

“Unfortunately, we lost that one,” recalled Chorney. The seller opted for $17.1 million in cash.

“Often is the case,” he said, “that people need to experience a little bit of pain to put their best foot forward at the next opportunity.”

Wesley Ulloa, a Realtor, sold her Coral Gables residence of 11 years in July. She scrambled to find a new house for her, her husband and a baby on the way. After losing out multiple times, Ulloa found that just the offer to pay in cash gave her an edge.

For her fifth bid on a home — a 2-story Spanish-style house in Coral Gables — Ulloa signed a contract saying she didn’t need financing, an indication to the seller that she’d pay in cash. However, she secured a loan commitment ahead of her scheduled closing at the end of September and got the place.

“The opportunity is that you’re going to get the property and you could still get the loan,” she said.

It’s not only people from other states who are coming to Southern Florida armed with cash, it’s also buyers from abroad, said Gay Cororaton, senior economist and director of housing and commercial research at the National Association of Realtors.

“[Domestic] boomers are retiring with significant equity,” Cororaton told the Herald. “We know Florida is the No. 1 destination for foreign buyers. Half of those buyers will go to Miami. In Miami, about 23% of the market is foreign buyers, [nearly] 10 times the rate nationally of 3%.”

Grinberg said she saw an uptick in foreign cash buyers begin a few months ago. At the start of the year, most of her buyers came from New York and California. Now, most are from Argentina, Mexico and Peru.

Miltiadis Kastanis, a Realtor Associate for Douglas Elliman, who has six prospective clients looking to buy in Miami from Austria, Germany and the United Kingdom, said foreigners go with cash for a good reason.

“They are likely to buy in cash because it’s easier for Europeans to close a deal in cash,” Kastanis said. “It’s not easy for them to get lending in the U.S.”

Miami remains a hot spot for Europeans, Kastanis said, since, “culturally, they like our international flare. It’s a familiar yet different setting for them. Europeans are drawn to the culture and climate of Miami.”

Cash-only deals offer several benefits, including speeding up the closing process, which can be attractive to some sellers looking for quick action, as well as reducing the likelihood that a deal could fall through if a potential buyer doesn’t get the financing they were seeking.

“If you go to someone that is going with a mortgage versus cash, you’d go with cash, because, if they [the financed buyer] can’t get a mortgage, you’d have to go back to the market again,” Shuffield said. “You don’t know for sure if someone would qualify for a loan.”

“The opportunities for the buyer is that they can prioritize their offer over other offers,” said Florida Atlantic University professor and real estate economist Ken H. Johnson. “Cash offers have fewer inspection periods; less due diligence will be requested by the buyer.”

Some cash buyers, eager to seal the deal, may have to live with common issues that can reduce the value of a home, including a roof in need of repair, damaged air conditioning system, or plumbing problems.

“For most cash buyers, they are buying as is,” Johnson added. “Other buyers [with a mortgage] would have either moved onto another property or offered less.”

Sellers in cash-only deals should proceed with caution, he advised.

“The sellers have people lining up for their home,” he said. “During the negotiation process, you want to verify that the people have the cash on hand.”

If possible, sellers and their brokers may want to check where the funds are coming from since there exists some risk of money laundering, said Andrew Ittleman, founder and partner of the downtown Miami-based law firm Fuerst Ittleman David & Joseph.

“If we are talking about someone coming to a closing with a big briefcase with money, that’s a red flag,” Ittleman said. “[But] if we are talking about John Smith and he’s going to make a wire transfer from his [U.S.] bank account to the closing agent, we can have a level of confidence that his bank has done some vetting on him. They know he has some legitimate source of income to support that purchase.”

Strengthening the Stem Cell Industry Through Better Regulation

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By Andrew Ittleman
April 06, 2021

After Congress adopted the 21st Century Cures Act in 2016, giving the U.S. Food and Drug Administration (FDA) authority to streamline the approval process for qualifying regenerative medicine advanced therapies (RMATs), FDA announced a new regulatory framework for the regenerative medicine industry.

The policy’s framework included new and revised guidance documents, as well as a period of “enforcement discretion” that has allowed industry participants to engage with FDA to determine if they needed to apply for FDA marketing authorization. As the end of the enforcement discretion period approaches, regulators must provide additional assistance to the RMAT industry to ensure its further development.

FDA’s Center for Biologics Evaluation and Research regulates stem cell and other regenerative medicine products, but last year was also tasked with overseeing vaccine and drug development for COVID-19. Under the original FDA policy, the period of enforcement discretion would have ended in November 2020, but likely due to the COVID-19 crisis, FDA announced that it would extend the period through May 2021.

During the enforcement discretion period, FDA has designated 52 products so far for its RMAT approval process. FDA approved one such product earlier this year, a positive sign that it is fulfilling its mission under the 21st Century Cures Act to approve cellular products for the treatment of complex, previously incurable conditions.

Nevertheless, compliance has been slower than expected, and in spite of its enforcement discretion, FDA has continued to act against “bad actors,” typically in the form of warning letters to manufacturers and promoters of products derived from donated birth tissue, as well as public safety notifications and consumer alerts. It was no surprise when FDA—and the Federal Trade Commission (FTC) in some instances—began targeting unapproved stem cell products advertised as miracle cures for COVID-19.

Consequently, a binary picture of the RMAT industry has developed, with legacy biotech firms seeking FDA approvals at one end of the spectrum, sellers of snake oil on the other, and not much in between.

But this picture is incomplete. In reality, there is much more to this industry—such as licensed practitioners who have safely treated patients with their own tissue for years—and these practitioners have found themselves caught in the crossfire, with the media routinely lumping them into the pool of bad actors.

But are the practicing physicians treating their patients at many major institutions breaking the law? Of course not.

In addition to defining what products are regulated, FDA regulations also exempt certain procedures, such as when a doctor uses autologous platelet-rich plasma or bone marrow concentrate to treat certain conditions.

When doctors perform these exempted medical procedures, the question of whether they do so responsibly is answered by “the quintessentially state-law standards of reasonable medical care,” which also define whether physicians have sufficient data and provide remedies in the event of malpractice.

Nor are these physicians “experimenting” on their patients. Medical procedures are developed differently than mass-produced drugs, and mostly without the large pre-market trials called for by the media. As an example, doctors have treated patients using coronary artery bypass grafts for 100 years, and the procedures have continually evolved based on physician research in clinical settings.

Another exempted procedure, a parathyroidectomy with subsequent implantation of a portion of the tissue to preserve parathyroid function, was first studied in the early 1970s on 29 patients in a clinical setting and reported in 1975. Based on that initial study, the procedure soon became “a widely accepted technique” and is now expressly exempt from FDA regulation.

Of course, these exempted procedures also occupy a different portion of the market than regulated cellular products. For instance, concentrated autologous bone marrow may be an optimal treatment modality for patients suffering from minor orthopedic conditions and is already available at a relatively low cost.

For patients with more severe or acute injuries, however, culture-expanded cell-based treatments are likely a better option, but only one has been approved since 1997. That product, which involves culture-expanded cartilage-derived cells, costs over $40,000. Due to its high price, the product is not reimbursable for patients with mere osteoarthritis. This phenomenon is common among approved drugs.

In sum, for all of its dimensions, the regenerative medicine industry is defined poorly, and better regulatory support is needed for it to mature. FDA should take the following regulatory steps with permanence and structure in mind.

First, FDA should continue honoring its mandate under the 21st Century Cures Act by designating and approving RMAT therapies with the urgency they deserve.

Second, FDA should recognize its role as a federal regulator, well suited to continue enforcing against bad actors, and particularly those manufacturing and distributing unapproved birth tissue products in interstate commerce.

Third, FDA must recognize its limitations. As a federal regulator, it is poorly suited to oversee and regulate every doctor in the country, as those “police powers” have historically been left to the individual states.

Fourth, in May, FDA should end its era of enforcement discretion. The industry has had sufficient time to study FDA regulations and establish compliance.

Finally, to balance its resources and priorities, it is critical that FDA invites the individual states, medical boards, and accrediting organizations to pitch in on its regulation of the industry. Indeed, state laws typically define and govern the standards for medical procedures, but state laws defining and governing regenerative medicine procedures are at best underdeveloped. To bridge this gap, FDA should establish partnerships similar to those that help it shoulder its massive burden of regulating food, animal food, eggs, blood banks, medical devices, and mammography facilities.

The Mammography Quality Standards Act (MQSA) is a sound analog. In 1990, the U.S. General Accounting Office determined that most mammography facilities lacked adequate quality assurance programs and were providing images of unacceptable quality. In response, the MQSA authorized FDA to publish quality standards and create accrediting bodies to inspect facilities and enforce FDA’s quality standards. The MQSA remains the law today, and FDA’s MQSA Inspection Contract Program features 42 contracts with state, local, and territorial agencies, as well as the American College of Radiology.

FDA can create a similar partnership program for the exempt and lower risk portions of the regenerative medicine industry with the following key features:

  • Accreditation bodies, including state agencies and nonprofits with explicit standards for the certification process and the accrediting bodies themselves;
  • Quality standards, including quality assurance and control programs at each facility for patient safety purposes;
  • Procedural and informed consent standards, including those I outlined in an earlier essay;
  • Certificate and recertification requirements, mandatory for any facility providing regenerative medicine services in the United States;
  • Application for a certificate, requiring facilities to provide detailed explanations of the procedures available, the equipment used, and background information for key personnel;
  • Data standards, including the extent to which physicians may use shared or “pooled” data for the substantiation of health claims;
  • Inspections, detailing the manner by which FDA’s partners must inspect certified facilities; and
  • Sanctions, including monetary fines, suspensions, and revocations to punish violations.

By taking these actions, FDA will preserve its resources, provide individual states the direction they need to exercise their police powers, and allow the regenerative medicine industry to reach its true potential.

Miami Lawyer Leads Startup’s COVID-19 Screening Device to FDA Approval

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By Raychel Lean
April 06, 2021

Andrew S. Ittleman

A first-of-its-kind screening device for identifying COVID-19 biomarkers has secured emergency approval from the U.S. Food and Drug Administration, with the help of Miami’s Fuerst Ittleman founding partner Andrew S. Ittleman.

It took a year of “elbow grease, communication and patience” to get to this point, according to Ittleman, who said he’s learned the importance of building rapport and respect with the FDA, as it navigated a public health emergency.

To read more, click here.

Foreign-Sourced Injectables and the Ever Present Risk of FDA Enforcement

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By Andrew S. Ittleman
November 2, 2020

The following article was written by Andrew Ittleman for the November 2020 edition of  MedEsthetics Magazine. We repost the article here with MedEsthetics Magazine’s permission.

My first interaction with MedEsthetics Magazine was in 2013. That year, I lectured at the annual AACS Scientific Meeting in Las Vegas about a recent case involving counterfeit Avastin, an infused cancer drug, and how it impacted the medaesthetics industry. In that case, a group of Canadian online pharmacies had distributed the counterfeit product to hundreds of physicians in the United States, who then administered it to patients and, in many cases, were reimbursed by Medicare and Medicaid. Some of those doctors were criminally prosecuted, and all of their names were posted on the FDA’s website, even though none of them knew they had done anything wrong. Of course, as I also discussed in that lecture, it was around that same time that I started receiving calls from doctors who were having their own uncomfortable interactions with the U.S. government as a result of their purchase and use of injectable products from the same group of Canadian pharmacies. Many of those doctors were dermatologists and cosmetic surgeons, and Medesthetics Magazine featured my lecture in its April 2013 issue.

There have been ebbs and flows in the story between then and now, but for the most part it has continued unabated. The cases I have handled for dermatologists and cosmetic surgeons have typically begun when the doctor received an unsolicited fax or email from a company claiming to be a pharmacy and offering discounted prices on injectables, including a variety of fillers and, most often, Botox. Intrigued by the lower price, the doctor purchased the products, they were delivered via next day air, an admin at the office unpacked and stored them with the rest of the clinic’s injectables, and the doctor used them on his patients. Unlike the Avastin case, in every case I have seen, the products have worked just fine, the patients were as satisfied as ever, and the doctor naturally reordered, sometimes again and again without a single adverse incident. Nothing to see here, right?

Unfortunately, no, there’s always more to the story, which is why I have to get involved. There are two main problems: the law, and the ease with which these cases rise to the surface.

First, the law. Remember the unsolicited fax the doctor received? Well, it turns out it came from a pharmacy in Canada. But the product was fine, right? Yes, the product itself was fine, but it was intended for a market other than the United States, such as Canada, the UK, Turkey or Pakistan, and if the doctor himself unpacked it he may have seen that the labeling was different than what he was used to, and may have even been in a foreign language. And had the doctor been an FDA lawyer, he may have understood that when FDA approves a product, it also approves the product’s labeling, so the law treats these foreign versions of approved injectables as unapproved when they enter the country and arrive at the practice. The doctor has violated the law without even knowing it.

Second, the facts. These cases have typically risen to the surface in one of two ways. In some instances, sales reps for the injectable manufacturers have noticed a discrepancy between the volume of products sold to the doctor by the sales rep and the total number of products in the doctor’s inventory. From there, the sales reps have reported the discrepancy to the manufacturer, who then reports it to FDA, who then initiates an investigation, in many cases resulting in prosecution. This trend was reported in a 2016 Reuters Special Report called “Botox Police” which described “low morale” at FDA as a result of the volume of these cases involving no criminal intent on the part of the targeted doctors. In more instances though, these cases have risen to the surface when FDA has cracked down on the Canadian pharmacies distributing the unapproved versions of the products in the United States. Most notably, in 2012 FDA and INTERPOL launched “Operation Pangea V” in which FDA seized customer information from one such group of pharmacies and then posted the names of 250 U.S. doctors on fda.gov. There have been six more Operation Pangeas since then, which reached their crescendo with the U.S. government’s criminal conviction of Kristjan Thorkelson, the Canadian citizen who started the Canada Drugs Online Pharmacy Network. Of course, Mr. Thorkelson was prosecuted in Montana, which was where the unapproved versions of the products were smuggled to be shipped by next day air to the unwitting American purchasers.

These cases, which continue to this day, reveal important phenomena. Primarily, even beyond injectable products, there is still a strong incentive to purchase foreign sourced drugs because they are less expensive. Foreign governments can set price controls for drug products, even Botox, but the United States government cannot, so manufacturers make up the difference here. The Trump Administration has sought to create a legal pathway for the sale of certain foreign sourced drugs in the U.S., but faces regulatory hurdles and bipartisan political opposition. For its part, Allergan has announced that “legalizing prescription drug importation is a highly dangerous way to help people afford their medicines…”

Next, the number of these cases, and the duration of this story, reveals the ease with which they can be prosecuted. In short, when a doctor imports unapproved drug products into the United States, he commits a federal misdemeanor, whether he knows it or not. Under the Food, Drug & Cosmetic Act (FDCA), the “Park Doctrine” – which is named after a 1975 Supreme Court case called United States v. Park – allows the government to seek a misdemeanor conviction against individuals for alleged FDCA violations without proving that the individual was even aware of the violation. Instead, the government need only establish that the violation occurred and that the individual could have prevented or corrected it, a far lower burden for a less serious criminal violation, typically resulting in no prison time.

Even though these misdemeanor cases are less serious than felony cases involving intentional conduct, they can still have grave consequences, especially for doctors. Primarily, doctors are required to report these cases to their medical boards, which can lead to separate sanctions related to their licenses and reputation. Additionally, these misdemeanor cases can lead to collateral cases filed by the U.S. Department of Health and Human Services, resulting in restrictions on the doctors’ ability to receive reimbursements from Medicare and Medicaid, and even to work for other companies that do. And finally, these cases tend to settle quickly, because the threat of fraud and money laundering charges looms behind each of them. In short, keeping in mind that the doctors’ patients were likely never told that they would be injected with an unapproved version of a familiar product, it takes little effort for the government to ratchet the unwitting misdemeanor violation up to a felony fraud violation, and to the extent the doctor deposited the proceeds of that fraud into a bank account, money laundering allegations can also follow. For obvious reasons, these cases rarely, if ever, go to trial.

However, the FDCA does recognize a “good faith” defense to the misdemeanor charges, but establishing good faith requires real due diligence on the doctor’s part. For starters, doctors should be aware that all entities that distribute drug products in the United States are required to register with FDA, and in many instances the individual states, so the doctor would be wise to check on those registrations before purchasing from an unfamiliar distributor. Even if the distributor can survive the initial due diligence, the doctor – as opposed to an admin – should inspect the product’s packaging and confirm that it is, in fact, the U.S. version of the familiar product. The packaging itself, the language in which it is written, and dosing recommendations are all critical features. Finally, to the extent there is any lack of familiarity with the seller, the doctor can request a “guaranty,” in which the seller certifies in writing that the product complies with U.S. law. Of course, none of these efforts provides complete protection from enforcement, but they can lower the risk of worst case scenarios.

In sum, doctors are always free to explore new and less expensive injectable options for their practices. However, FDA has pursued these cases against doctors for the past 8 years with no signs of relenting. So long as this trend continues, doctors should keep in mind the ever present risk of enforcement, and conduct thorough due diligence of all new distributors before even considering injecting their products into patients.

What to Know About Prelaw College Majors

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A prelaw major isn’t the only or even necessarily the best option for future lawyers, experts say.

By Ilana Kowarski
June 25, 2020

A COMMON MISCONCEPTION among law school hopefuls is the belief that they must pursue a college major that is law-related, but J.D. admissions experts say nothing could be further from the truth.

A prelaw major is not mandatory for admission to law school, experts emphasize, and it’s not even available at many undergraduate institutions. Because colleges often refrain from offering professional degrees and instead focus on traditional academic disciplines like history and chemistry, schools that offer a prelaw major are the exception to the norm, according to experts.

Prelaw college majors are designed to prepare aspiring lawyers for law school, and these majors often include an eclectic combination of humanities and social science classes ranging from philosophy to political science. An undergraduate prelaw curriculum may also include seminars on specific areas of law like constitutional law, and it could include classes on topics relevant to the practice of law such as rhetoric, public policy, psychology, sociology, accounting or economics.

Although this field of study touches on many subjects that might be intriguing to aspiring attorneys, there are other concentrations that can provide a solid foundation for a legal education, experts say, noting that an undergraduate degree in nearly any field can set the stage for a law degree.

One reason aspiring lawyers have so much flexibility when choosing what they study is that law schools do not expect incoming students to have specific content knowledge, explains attorney Jeffrey Molinaro, a partner with Fuerst Ittleman David & Joseph, a Miami-based business law firm.

“There is no real set curriculum, and there is no real knowledge base that is tested on the entrance exam for law school,” Molinaro added, referring to the Law School Admission Test, or LSAT. “It’s a skill-based test.”

Current and former law school admissions officials encourage prospective law students to take college courses that they find most compelling, as long as those classes are challenging. They stress that unlike medical schools, which will consider applicants only if they have completed certain prerequisite classes such as organic chemistry, law schools typically do not instruct candidates about the undergraduate courses they should take.

Christine Carr, a law school admissions consultant with Accepted and former associate director of J.D. admissions at Boston University School of Law, observes that college students tend to do well when they focus on subjects they enjoy.

“The choice of major should not be made solely ‘because it will look good on a law school application and show that I am interested’ – that is what the personal statement is for,” she wrote in an email, adding that college students may join their school’s prelaw society regardless of their major.

Anna Ivey, founder of Ivey Consulting and former dean of admissions for the University of Chicago Law School, says law schools don’t “have any special preference” for prelaw majors.

“Admissions officers are mostly agnostic when it comes to choice of major and indeed try to assemble a class with a variety of different backgrounds and areas of expertise,” Ivey wrote in an email. “And in a moment of candor, they would probably also tell you that they don’t consider pre-law majors to be all that analogous to what you do in law school, and that it’s better to wait until you get to law school to study law.”

Some law school faculty members discourage aspiring lawyers from pursuing prelaw majors.

“A prelaw major doesn’t provide particular subject matter skills, and may therefore be a wasted opportunity,” Nora V. Demleitner, the Roy L. Steinheimer, Jr. Professor of Law at Washington and Lee University School of Law in Virginia, wrote in an email. “After all, in today’s law practice lawyers often benefit from subject matter knowledge, such as acquired in data science, health, art, forensics, depending on the practice area. Why limit your exposure and interest to law only?”

David Jacoby, an adjunct professor of law at Fordham University School of Law in New York City and a partner at the Culhane Meadows corporate law firm, notes that college may be a future lawyer’s last opportunity to study a subject besides law.

There is also a risk that someone who begins college as a prelaw major might discover later that he or she doesn’t want to become a lawyer, Jacoby adds. He warns against exclusively taking law-related classes. “You’re sort of narrowing your options to a considerable extent at that point.”

Victoria Turner Turco, founder and president of Turner Educational Advising, suggests that not all prelaw programs are equivalent. Aspiring lawyers should steer clear of vocationally oriented and technically focused prelaw majors that are designed to train paralegals.

If someone does opt for a prelaw degree, it should be a traditional liberal arts degree that will cultivate the intellectual habits necessary for legal practice, says Turco, who managed a prelaw and professional development program at Georgetown University in the District of Columbia for more than a decade.

Admissions data collected and reported by the Law School Admission Council reveals that in the 2019-2020 academic year, law school hopefuls who majored in prelaw and related fields such as law, political science and legal studies did not receive the highest LSAT scores on average, nor did they have the highest law school acceptance rates among majors.

Kellye Testy, the LSAC’s president and CEO, says she takes a “pretty neutral” view on prelaw majors since her opinion is that aspiring lawyers can benefit from any rigorous undergraduate program that is taught by excellent faculty.

“No matter what somebody’s teaching, you’ll learn more from a great teacher. It doesn’t matter the subject.”

Banks Cash In On PPE, But Risks Could Haunt Them

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By Al Barbarino
June 19, 2020

U.S. banks are facilitating a flurry of deals to bring personal protective equipment into the country from China and elsewhere in exchange for hefty fees, but inherent risks could come back to bite them as regulators continue to expose underlying fraud.

Presiding over these anything-but-ordinary deals can be a risky business, with “know your customer” due diligence increasingly difficult when sorting through a newfound market that the latest headlines suggest is rampant with fraud, attorneys say.

“Everyone in the world has their hair on fire to get these masks and the rest of the PPE,” said Andrew S. Ittleman, a founding partner of Fuerst Ittleman David & Joseph. “With so much more risk of fraud out there … the banks certainly have their work cut out for them.”

The PPE deals often include a web of entities, including brokers in the U.S. calling on relationships in China to access the products. Banks may provide so-called back-to-back letters of credit that guarantee the payments — one bank for the U.S. buyer, and a foreign bank for the seller — which attorneys say could prove problematic down the road.

Ittleman said his work dealing with PPE transactions has made him aware of at least one “very large bank” on the U.S. side executing letters of credit on the deals.

“I would imagine that a bunch of the bigger [banks] are involved too,” he said. “There are going to be all sorts of fees for the letters. … They’re not doing it as a charity. They’re doing it because they have the capabilities and they know how to make money doing it.”

While the attractive fees may be enticing, banks could find themselves in a vulnerable position as they seek to comply with KYC and anti-money laundering rules around customers who may have little to no experience selling PPE.

“They were selling Chinese widgets in the United States yesterday. They were selling plastic flowers or ping pong tables,” Ittleman said. “That requires a lot of trust on behalf of the bank to work with the broker to make sure everything is being conducted the way it should be.”

Regulators have begun to expose fraud in this newfound booming market for PPE. This month, the U.S. Department of Justice charged a Chinese manufacturer with producing and exporting nearly half a million misbranded and defective masks to the U.S. And 3M has now filed at least a dozen lawsuits accusing companies of everything from price-gouging legitimate 3M products to selling counterfeit masks.

Last week, New York State Attorney General Letitia James brought a suit against a Buffalo-area businessman for “soliciting the state of New York” and hospitals across the country with “fake offers of critically needed PPE.” And in late May, a New Jersey used car salesman was arrested and charged in federal court with running a $45 million scheme to sell price-gouged N95 face masks to New York City.

While no banks were indicated in the cases, actions — most likely from the DOJ’s civil division — could start trickling down in the coming weeks or months as more fraud is exposed and the role of banks in any potential transactions is uncovered, attorneys say.

While these types of investigations typically begin with the alleged fraudsters, investigators will ultimately explore all facets of the transactions, said William Barry, a member of Miller & Chevalier who assists clients with a range of financial compliance and regulatory issues.

This will include whether the bank was knowingly involved in its customer’s scheme, if it was “willfully ignorant” of wrongdoing, and if it took the necessary KYC and AML precautions.

“Step one will be to look at the actual suspected fraudster,” Barry said. “Step two is to get the bank’s help in understanding the transaction record. Step three, they’ll consider whether the bank’s processes were deficient or worse than deficient in connection with the fraudulent conduct.”

“The primary risk area is letters of credit and any looseness in those relationships,” he added. “Of course, any bank is interested in having that customer relationship and the fees that it generates, but may not do sufficient diligence to understand who the beneficiary of the letter of credit is or who the client is.”

Community to mid-sized banks are at risk, as many of them lack the safety net of “sophisticated electronic risk monitoring systems” that are commonplace at larger banks, Barry said. But he added that larger banks could face still issues, as their automated processes could fail to identify the PPE transactions as materially significant.

Instances of criminal activity, such as a bank employee being involved directly in a fraudulent scheme, would fall into an entirely separate, and rarer, bucket, experts say.

Clifford Stanford, a partner with Alston & Bird LLP’s bank regulatory team and former assistant general counsel at the Federal Reserve, echoed that most potential penalties will come down to whether KYC and AML standards have been met, with more aggressive action taken if systemic issues are found.

“If it’s systemic … that’s when you start to see banking regulators and the DOJ coming after banks,” he said. “If a bank has failed in performing that KYC and AML discipline and has allowed transactions to move through without appropriate monitoring or reporting, they could also be swept up in a broader review.”

Despite the growing instances of PPE fraud coming to light, attorneys noted the bad apples aren’t representative of the broader lot of legitimate brokers who are simply businesspeople looking to make deals.

Rachel Wolkinson, a partner in Brown Rudnick LLP’s white collar defense and government investigations group, said she’s worked with a number of well-intentioned brokers seeking legal assistance as they look to nail down prospective PPE transactions.

“I don’t know why the bank wouldn’t want to deal with them,” she said, noting many brokers are sophisticated, informed and well-intentioned. “I think it really is going to be very specific to the individual broker. Not every broker is a shady cat looking to exploit the COVID pandemic. Just because you are entrepreneurial, that doesn’t make you a criminal.”

–Additional reporting by Rachel O’Brien and Bill Donahue. Editing by Philip Shea and Marygrace Murphy.

Ex-Boca school counselor who pushed fentanyl spray for Insys is heading to prison

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By John Pacenti
January 23, 2020

Alec Burlakoff was the sales mastermind of a conspiracy to pay doctors “speakers fees” so they would prescribe Subsys in higher amounts and greater doses.

Alec Burlakoff — the one-time Boca Raton high school counselor who masterminded a bribery scheme to get doctors to prescribe a potent fentanyl spray — was sentenced to 26 months in prison on Thursday in a Boston courtroom, benefiting from flipping against the owner of the company.

Burlakoff, 45, had a checkered past at previous pharmaceutical companies before helping turn Arizona-based Insys Therapeutics into a Wall Street juggernaut, birthing his bribery scheme in South Florida.

As vice president of sales, he recruited strippers, waitresses and cheerleaders to be sales reps to lure doctors into prescribing the deadly fentanyl spray Subsys by paying them for bogus speaking engagements. He and Insys funneled $16.3 million into doctors’ pockets over 2½ years.

All of this occurred as the nation struggled in the grip of a crippling opioid crisis. As a result, Insys became the subject of a congressional hearing and its own episode on CNBC’s “American Greed.”

“I didn’t think of who we were at Insys, and how unethical what we were doing was,” Burlakoff told U.S. District Judge Allison Burroughs in Boston on Thursday. “The only thing I could think was how could I keep up with the fast and furious pace necessary to get ahead.”

Burlakoff’s metamorphosis to hapless victim of greedy Big Pharma was belied by the fact he once bragged that he took his sales tactics from the movie “The Wolf of Wall Street.”

He also dressed up as a giant bottle of Subsys for a rap video played at a sales conference. The video urged Insys sales reps to get doctors to prescribe fentanyl at the highest, most addictive dose.

Burlakoff threatened to fire any rep who could not get their doctors to write at least one script per day, according to a federal lawsuit.

The higher the dose, the more money Insys made for a drug that costs $1,800 retail for 30 spray bottles at its lowest strength and as much as $6,000 at its highest dose.

Insys made $500 million in 2014 and 2015 under Burlakoff’s guidance. Subsys sales rose 3,200 percent. The company filed for bankruptcy in 2019.

“This was an offense of greed,” Burroughs said. The judge previously called Burlakoff one of the “co-architects” of the Insys bribery and fraud conspiracy.

Burroughs told Burlakoff he will have “to live with the fact that some of these other people got swept into this because you recruited them.” She then gave him six more months than prosecutors requested.

What was missing in Burlakoff’s sentencing were the patients who suffered immeasurably under the addictive drug. At least 908 patients died with Subsys the primary suspect in their deaths, The Palm Beach Post reported in its multipart 2018 investigation, “Pay to Prescribe: The Fentanyl Scandal.”

The fentanyl spray was approved by the FDA only for cancer pain, but doctors under the Burlakoff plan prescribed the spray for routine back pain, migraines and intestinal disorders.

Prosecutors asked Burroughs to “hold your nose” and give Burlakoff a 20-month sentence, far less than other executives and doctors in the scandal, because he had testified at trial against Insys’ owner and chairman, John Kapoor, who got 5½ years in prison Thursday.

“The conduct of the Insys’ executives was nothing short of evil, Alec Burlakoff being a central actor,” said attorney Richard Hollawell, who is suing Insys on behalf of a family who lost a daughter, Sarah Fuller, to Subsys.

“I do commend him for being the first to step up and cooperate. His cooperation helped with Kapoor’s conviction and those of many others.”

Unlike in the Burlakoff sentencing, seven victims and family members of victims who were prescribed the spray gave emotional statements to the court concerning Kapoor.

“Far too many people have died, or like me, have had their lives changed, at the hands of your greed and cruelty,” said one victim, Paul Lara. “It’s unrealistic to believe that Insys Therapeutics executives could not see the results of their behavior.”

Burlakoff certainly got off easy considering that the judge called him one of the “co-architects” of the bribery and fraud conspiracy.

Other executives, even those who pleaded out, received sentences between 27 and 33 months.

Sunrise Lee — a West Palm Beach stripper turned Insys sales Siren — was sentenced to a year in prison on Wednesday. She once gave a doctor a lap dance and she was a regional sales manager for Insys.

Doctors have also been prosecuted. Leading the pack are Alabama’s Dr. Xiulu Ruan and John Patrick Couch. They are serving 21- and 20-year prison sentences for their role in promoting Subsys and other opioid scams.

Florida doctors, some who netted hundreds of thousands of dollars in speaker fees, have largely escaped the wrath of federal prosecutors.

Insys paid Florida physicians more than $2.1 million from August 2013 through 2015 The Post analysis of Medicare data showed. Florida topped the nation for Subsys claims in 2014 and 2015.

Burlakoff brought the sham speaker programs from his previous job at Cephalon, which settled with the Justice Department for $425 million for pursuing off-label prescriptions of its fentanyl lollipop and two other drugs.

Before that, he was fired from Eli Lilly and Co., a pharmaceutical giant, and as a sales rep in Palm Beach and Broward counties. He and two other salespeople sent unsolicited Prozac through the mail.

But Burlakoff attorneys and supporters told the judge the man who once counseled teens and coached them at basketball at Pine Crest School in Boca lost his way when his brother committed suicide by cop after gunning down his wife on a Boca Raton street.

In a letter to the judge, a friend of Burlakoff’s said after his brother’s death “his thinking was a little out of whack.”

“This shocking trauma took place in October 2013 when Mr. Burlakoff was in the midst of the conspiracy at Insys,” attorney Joshua Ruby wrote in a sentencing memorandum. “Tellingly, Dr. Kapoor ordered Mr. Burlakoff to return to work after only a matter of days of grieving.”

Burlakoff caved to Kapoor’s win-at-all-cost culture at Insys, Ruby told the court, and “let his drive and competitiveness — which had served him so well as a coach — overcome his judgment.”

Burlakoff pleaded guilty to a single count of racketeering conspiracy in November 2018, setting up his dramatic testimony in Kapoor’s trial.

Federal prosecutors in Boston used a landmark approach, charging Insys executives under the Racketeer Influenced and Corrupt Organizations Act. RICO is a charge often reserved for mob bosses and drug lords.

Miami attorney Andrew Ittleman said for years opioid companies operated with impunity in breaking the law.

The Insys prosecutions, Ittleman said, “may very well be a bellwether for future prosecutions in the opioid industry, especially as the public learns more about it on an almost daily basis,” he said.

Bloomberg and USA TODAY contributed to this story.

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He Knew All About Money Launderers. The U.S. Says He Joined Them

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By Bob Van Voris and Jonathan Levin
November 20, 2019

Bruce Bagley, an international studies professor, knew all about how corrupt Venezuelan officials were moving vast sums into South Florida. He cultivated contacts with Latin American policymakers, top criminal lawyers and U.S. anti-money-laundering officials. And, prosecutors say, he knew how to get a taste for himself.

Bagley, a 73-year-old white-bearded University of Miami academic who wrote about drug trafficking and international organized crime, was charged this week with helping move about $3 million into the U.S. from Venezuela and taking a 10% cut.

Colleagues and neighbors expressed shock that a man known for his scholarship and care of his disabled wife could be arrested on such charges. But it was easy to see how Bagley — who in recent years had narrowly escaped a foreclosure sale — could have put his expertise to practical use, said John Polga-Hecimovich, a U.S. Naval Academy professor who knew him through academic networks.

“In the course of where he lives and in the research he does, I’m sure he came into contact with figures like the ones he’s accused of coming into contact with,” Polga-Hecimovich said Tuesday. “It’s plausible.”

Bagley’s lawyer, Daniel Forman, said his client would be vindicated. Bagley, who was placed on leave by the University of Miami, is free on a $300,000 bond.

His indictment Monday hinted at how Venezuelan’s vast corruption has seeped into South Florida, where officials associated with Nicolas Maduro’s and Hugo Chavez’s regimes have parked cash and bought real estate.

This year, the U.S. government auctioned off one such cache from Alejandro Andrade, a former Venezuelan treasurer who pleaded guilty to taking more than $1 billion in bribes. The sale included prize-winning show horses and mansions.

Criminals for years have concealed money stolen from state oil company Petroleos de Venezuela SA, the nation’s main source of income and foreign currency, American prosecutors have said. In September, a former company president was charged in Houston with money laundering in a probe of a $1 billion bribery scheme. A former Venezuelan government official and a former officer at Corpoelec SA, the state power company, were charged in June with taking bribes to award $60 million in business to Florida-based companies.

Intimate Acquaintance

It’s a milieu Bagley knows well. Testifying as an expert defense witness in a Miami cocaine-trafficking trial last month, he told jurors about his constant efforts to keep abreast: teaching six times a year in Colombia, talking with colleagues at professional conferences, scouring newspapers and government reports.

“I sometimes interview people in jail here in Miami and in other parts of the United States,” Bagley testified. “I try to use all the sources that are available to me, but it’s often, because it’s a clandestine and often-violent industry, sometimes difficult to get all the information that you need.”

Bagley is a native Californian who first saw the drug trade up close as a Peace Corps volunteer in Colombia, he told jurors. He got his undergraduate degree at the University of California, Berkeley, then a master’s and a Ph.D. from the University of California, Los Angeles.

He taught in Colombia and at the Johns Hopkins University School of Advanced International Studies before moving to Miami, where he recently finished his 30th year. He’s taught a generation of academics, government and law enforcement officials, published books and articles and testified as an expert about 100 times.

“He’s an icon,” said Jonathan Rosen, a political scientist who said he’s published books with Bagley and counts him as a mentor. Rosen described Bagley as somebody with a “big personality” and a boisterous laugh.

“He could retire any time,” Rosen said. “He does this because he really loves it.”

Laugh Line

Every year, Bagley teaches a course on drug trafficking, he told the trial jurors.

“He always said, ‘This is not a how-to course,’” said Miami lawyer Erick Cruz, a former student who was also the defense attorney in the cocaine trial, in which his client was convicted.

It wasn’t immediately clear why an academic with a reputation cultivated over decades would launder money.

Bagley supports his wife, who was disabled after a stroke. He lost a foreclosure judgment of $660,000 in 2014 after he and his wife defaulted on a mortgage, court records show. The bank allowed them to sell the property for less than they owed.

Bagley doesn’t own his current home in Coral Gables, part of a gated area tucked beside mangroves and Biscayne Bay, according to property records. On Tuesday, two SUVs were parked in the driveway. Bagley left the house at 9:23 a.m. in a blue button-down shirt, carrying a thick manila envelope and a book, and drove off in his black Nissan Rogue, declining to answer questions.

Almost 1,400 miles southeast, Venezuela is mired in a yearslong political and economic crisis caused by Maduro’s misrule and a decline in oil prices. The nation is a gallery of socialist showpieces in various stages of completion. Railway projects lead nowhere and an expansion of the hydroelectric dam system has been halted even as residents go without power.

The money that Bagley laundered, U.S. prosecutors said, was skimmed from such public works projects and the professor took a cut as it passed through his accounts.

He opened a bank account using a company he owned, taking in 14 payments from November 2017 to October 2018, according to the indictment. The payments came from Swiss and United Arab Emirates accounts held by a “purported food company” and a wealth management firm, prosecutors said. They accused Bagley of withdrawing 90% as cashier’s checks payable to an account held by an unnamed person and transferring the rest to his own account.

Even after the bank account was shut down for suspicious activity in October 2018, Bagley opened a second one in December, where he received money twice, prosecutors said.

The professor, as prosecutors told it, took chances of which he should have been aware: He was a consultant for FinCEN, a bureau of the Treasury Department that fights laundering. The sums were sometimes moved in chunks of more than $200,000, large enough to draw investigators’ attention.

That would leave “a pretty clear documentary trail leading to where the dead bodies are buried,” said Andrew Ittleman, a Miami defense lawyer.

Former student Nilda Garcia said Bagley inspired her to get her doctorate and she now teaches about trafficking herself at Texas A&M University.

“He’s been like a big inspiration in my life,” she said.

Garcia laughed when she remembered his office, full of books and papers from floor to ceiling. “It was insane,” she said.

“When someone is really that brilliant, sometimes the simple things are hard to do.”

The case is U.S. v. Bagley, 19-cr-00765, U.S. District Court, Southern District of New York (Manhattan).

— With assistance by Fabiola Zerpa

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Disclosure requirements for all-cash purchases have been eased — slightly

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By Rebecca San Juan
November 13, 2019

South Florida remains under the government microscope for all-cash transactions. But it — and other regions — are getting a break when it comes to purchases made by publicly traded companies.

The change came Friday when Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Treasury department, updated and renewed its transparency requirements for all-cash real estate transactions in South Florida.

Beginning in 2016, Treasury issued a “geographic targeting order” requiring title insurance companies to identify the person or people behind shell companies that pay cash for residential real estate above $300,000 in select metropolitan areas. FinCEN renews its GTO every six months.

Florida’s counties Miami-Dade, Broward and Palm Beach are the only ones in the state required to file such disclosures. Counties in eight other states are also on the list, including in Texas, New York, California, Hawaii, Nevada, Washington, Massachusetts and Chicago.

But at least one Miami Realtor says the change will hurt efforts to curb money laundering through real estate purchases.

 

Andrew Ittleman

“Writing something into regulation is a difficult process. That’s the reason why FinCEN hasn’t done so yet,” said Andrew Ittleman, attorney and partner at Miami-based Fuerst Ittleman David & Joseph.

 

“It’s good lobbying from publicly traded companies,” said Jeff Morr, chair of the Master Brokers Forum and partner with Rubin + Morr group at Douglas Elliman. “It defeats the purpose of the legislation. Investors can now launder money through publicly traded companies.”

Pushback from publicly traded companies led FinCEN to eliminate the requirement, said Andrew Ittleman, attorney and partner at Miami-based Fuerst Ittleman David & Joseph. But, Ittleman said, public company filings show who owns and manages the business and how it earns money.

“That information can be found elsewhere,” said Ittleman.

As for whether the legislation has curbed money laundering in real estate, Ittleman said, “It’s hard to say. Theoretically, this can still happen in the US” — but is less likely in metros covered by the GTO disclosure requirements.The GTO program began March 2016 as a way to stem money laundering. Federal agents looked to monitor transactions in cities with high concentrations of cash real estate purchases by foreigners, starting with Miami and Manhattan. The department ordered insurance companies to identify the true owners of shell companies that paid $1 million or more in cash for homes in Miami-Dade and $3 million or more for homes in Manhattan. The program limits later changed to require disclosure of purchases of $300,000 or more in South Florida.

The regulation has impacted real estate purchases in Miami-Dade. A 2018 study found a 95% drop in the amount of money spent by foreign companies on all-cash purchases. The decline began immediately after the rule took effect.

Looking forward, Ittleman said the GTO renewals will likely continue every six months until a permanent regulation is put in place. U.S. Senator Marco Rubio tried to take the policy national in 2018.

Said Ittleman, “Writing something into regulation is a difficult process. That’s the reason why FinCEN hasn’t done so yet.”

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