By Sindhu Sundar
November 24, 2015

Law360, New York — Chicago’s latest complaint accusing major pharmaceutical companies of downplaying the risks of long-term use of opioid painkillers has a stronger chance of surviving the pleading stage, as attorneys say new details focusing on doctors the drugmakers allegedly worked with to promote the drugs will likely persuade a court to allow the city to press its case.

The city filed a more than 300-page second amended complaint this month to include more detailed allegations about schemes by the individual drugmakers, which includeJohnson & Johnson, Purdue Pharma Inc., Actavis PLC and Endo Health Solutions Inc. Chicago’s original suit had broadly described campaign efforts since the 1990s in which the drugmakers spent “hundreds of millions of dollars” to create a veneer of scientific discourse appearing to support the long-term use of opioids, which have drawn controversy amid regulatory scrutiny of prescription drug abuse and overdoses.

U.S. District Judge Jorge Alonso had slashed the city’s suit in May, finding that although the U.S. Food and Drug Administration‘s oversight of the drugs doesn’t interfere with the court’s ability to determine whether they were deceptively marketed, the city hadn’t pled enough details. Specifically, the court found that the city had not identified any “Chicago doctor or consumer” to whom each defendant made misrepresentation.

More than a third of the city’s amended complaint is devoted to allegations about the conduct of individual defendants, and it attempts to highlight the doctors that the drugmakers allegedly paid to give speeches about the opioids that downplayed the risks of long-term use. The complaint also details findings from interviews with doctors in Chicago who claimed the drugmakers’ sales representatives “routinely omitted any discussion about addiction and overdose death and frequently overstated the benefits of opioids.”

The defendants have already fought back, saying in a filing Friday that the suit still lacks specifics, but attorneys think the amended suit has enough material to live to see another day. The court may be inclined to allow the case to proceed to discovery in order to give the city a chance to bolster its claims rather than cull the suit at this point, they say.

“More often than not, when it seems like it could be a close call, the judge will allow the case to move forward into discovery proceedings,” said Andrew Ittleman of Fuerst Ittleman David & Joseph. “It might not be a perfect way of resolving these issues, but more often than not, especially when your plaintiff is Chicago and the court is the Northern District of Illinois, the district court judge is likely going to allow the city its day in court.”

The city has generally accused the drugmakers of engaging in tactics including funding “seemingly neutral and credible” groups to devise treatment guidelines sent to doctors to encourage them to prescribe the drug for chronic pain.

In its amended complaint, Chicago has attempted to include more detail, claiming, for instance, that sales representatives for J&J unit Janssen Pharmaceuticals Inc. falsely told doctors in the city that its opioid Nucynta was not being abused. It also included details about meals certain doctors in the city had on Janssen’s dime, and the dates of those meetings.

Plaintiffs attorneys in particular believe that such details can help Chicago overcome the strict pleading standards for such injury claims.

“The pleading standards are fairly stringent, so whether you’re a city or a private individual you need to plead with specificity,” said Bill Curtis of the plaintiffs firm Curtis Law Group.

“And I think Chicago’s complaint, which has more than a hundred pages’ worth of factual allegations about marketing materials, and studies, and dates of meetings, is very specific,” he said. “It isn’t just saying all opioid drugmakers did all these bad things; the city broke it into sections for each company, and it was very precise. I’d be very surprised if the judge said this wasn’t enough.”

Once past the initial stages, Chicago would also have the challenge of clearly demonstrating the damages it has suffered, attorneys say. Although its claims are similar to federal government False Claims Act suits over drug marketing, the suit is still relatively unusual, because it has been brought by a city, attorneys say.

While the government directly pays for drug reimbursements through federal health insurance programs such as Medicare and Medicaid, cities often administer such health care programs differently, attorneys say. The city claims it offers coverage for prescription drugs to employees and retirees under health plans that it self-insures.

“It’ll come to an issue of whether Chicago shows that it suffered direct harm,” said Nicholas Harbist of Blank Rome LLP. “I think Chicago’s legal theory is a little more nuanced and novel than the traditional theory that the federal government FCA suits have.”

Janssen Pharmaceuticals Inc. and Johnson & Johnson are represented by Charles C. Lifland and Carolyn J. Kubota of O’Melveny & Myers LLP and Michael P. Doss and Scott D. Stein of Sidley Austin LLP.

Purdue is represented by R. Ryan Stoll and Patrick J. Fitzgerald of Skadden Arps Slate Meagher & Flom LLP.

Teva Pharmaceuticals USA Inc. is represented by Tinos Diamantatos of Morgan Lewis & Bockius LLP.

Endo Health Solutions is represented by Peter V. Baugher and Kristen E. Hudson ofSchopf & Weiss LLP.

Actavis PLC is represented by Nicholas M. Marietti of K&L Gates LLP.

The case is City of Chicago v. Purdue Pharma LP et al., case number 1:14-cv-04361, in the U.S. District Court for the Northern District of Illinois.

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By James Whittaker
October 13, 2015

Providing banking services to a growing number of legitimate marijuana operations in the U.S. would still be considered money laundering in the Cayman Islands, an international expert warned Friday.

Speaking at the AML/Compliance and Financial Crime Conference on Friday, Miami lawyer Andrew Ittleman outlined the regulatory nightmare facing banks that offer financial services to marijuana businesses – legal in certain states, but technically still considered drug trafficking under federal law.

As Jamaica moves toward legalization of cannabis, Mr. Ittleman believes other Caribbean countries will follow suit. The anti-money laundering specialist said they should look to the U.S. as an example of how not to do it.

The conflict between U.S. state and federal laws on marijuana is creating issues for growers and sellers, as well as for banks that do business with them.

The federal government still technically considers the profits from marijuana business to be the proceeds of crime.

While banks are permitted to offer services to such businesses, many are shying away from doing so because of the strict regulatory environment.

The conflict is also an issue for any Cayman Islands banks or investment funds that want to move into the legal marijuana business.

“Because the sale and consumption of cannabis is still a crime in the Cayman Islands, a bank providing financial services to [a] licensed marijuana business would be deemed to be money laundering,” Mr. Ittleman, a partner at Fuerst Ittleman David & Joseph, told the Cayman Compass.

“Whether there is going to be enforcement of that is a whole different issue,” he said.

He believes the impasse is creating more problems than it solves, putting an unreasonably high cost of business on legitimate marijuana startups and forcing them to the black market for financing.

Answering questions at the event, organized by Global Compliance Solutions, at the Marriott resort, Mr. Ittleman said governments and financial services regulators needed to find a better way of dealing with such high-risk businesses.

He said the marijuana trade was big business with $3 billion in legal sales last year and a further estimated $40 billion in black market sales. As more of that business becomes legitimate, he says there will be huge opportunity for financiers.

But draconian “know your customer” requirements, including the filing of suspicious activity reports, are holding back banks from getting involved.

“There is huge opportunity here for somebody,” Mr. Ittleman said. “The cannabis phenomenon is not going away. It is developing a foothold in Jamaica. It is fair to assume, given the popularity of the drug in the Caribbean, that other countries are going to start seeing what is happening in Jamaica and saying, ‘us too.’

“There is an opportunity to build an industry that will create jobs, but there are legal issues that governments will have to be mindful of.”

Mr. Ittleman drew comparisons with current issues around money transfer services in Cayman, where the cost of compliance with a toughening regulatory environment has been cited as one of the reasons banks are pulling out of the business.

He believes banks and regulators need to build programs for high-risk businesses as opposed to kicking them out.

“It is not enough just to throw out high-risk business and allow the black market to take over.” 

Providing a full suite of banking services, from payroll to credit, and charging to do so would allow banks to have the inside information required to meet compliance requirements and recoup some of the costs, he predicted. 

While cannabis remains a Schedule I drug in the U.S., the environment will be “uncomfortable” for banks, he said. But once the smoke clears and the protocols for handling investments and profits in the legal marijuana industry become clear, he says there is enormous opportunity.

“Someone is going to get very rich,” he said.

To view original article, click here.

By Nathan Hale
July 13, 2015

Faced with a surge in tax refund check fraud in South Florida, the Financial Crimes Enforcement Network on Monday issued a geographic targeting order for the region’s check cashers, temporarily enhancing identification requirements for customers to deter and help prosecute these crimes.

The GTO, which takes effect Aug. 3 and will run through Jan. 30, with the possibility of renewal, will affect check cashers in Miami-Dade and Broward counties when cashing federal tax refund checks in excess of $1,000.

The power to issue a geographic targeting order, or GTO, has been in the arsenal of the U.S. Department of the Treasury bureau since 1988 under the Bank Secrecy Act, but it has been used rarely until recently. Only a few have been issued in the last few years, but this is the second for South Florida, with FinCEN also targeting electronics exporters in an April order aimed at curtailing money laundering by prominent drug cartels such as Mexico’s Sinaloa and Los Zetas.

“For South Florida, it’s significant,” said Andrew S. Ittleman, a partner at Fuerst Ittleman David & Joseph PL, whose practice focuses, in part, on anti-money laundering compliance. “Two within several months in the same region, when there have only been a handful in history — it’s a big deal.”

Under the current order, check cashers handling the covered transactions — either U.S. Treasury tax refund checks or third-party checks issued in connection with anticipated tax refunds of more than $1,000 — will have to obtain a copy of the customer’s valid government-issued identification, which must match the name of the check’s original payee; a clear digital photograph taken at the time of the transaction (surveillance video images will not suffice); the customer’s phone number; and the customer’s original thumbprint.

These records must be retained for five years past the last day the order is in effect and made available in a reasonable amount of time to FinCEN or other law enforcement or regulatory agencies.

“Our unique authorities, such as the ability to issue GTOs, enable us to partner with law enforcement in attacking stolen identity tax refund fraud from every angle,” FinCEN Director Jennifer Shasky Calvery said in a statement. “This GTO will help ensure that the perpetrators of these schemes can no longer hide their face while our national treasury is looted and innocent victims spend countless hours and personal expense working with government to reclaim their true identities.”

A typical one of these schemes involves a criminal using stolen identification information to file a fraudulent tax return. The criminal or an accomplice then cashes the refund check, usually using fake identification to evade capture when the fraud is discovered, according to FinCEN.

“It is a very big issue in South Florida and has been for the last 4 to 5 years,” said Jed Dwyer, a Miami-based partner at Greenberg Traurig LLP and a former federal prosecutor.

“I think that it is a comparatively easy and not very dangerous criminal endeavor,” he added, noting that authorities have been seeing people who were involved in other criminal activities, such as the drug trade, getting involved in these schemes since they require little more than a stolen social security number.

FinCEN’s announcement stressed that the order does not mean that it has made any finding about any check casher’s knowledge of these schemes, but it also made clear that failure to comply could carry consequences, including civil or criminal penalties without limitation.

The bureau, with help from the Internal Revenue Service and the U.S. Attorney’s Office for the Southern District of Florida, set the order to coincide with a time of year outside of tax-filing season, when authorities are concerned criminals are trying to catch financial institutions off guard.

Describing it as a period “in which the proportion of fraudulent tax refund transactions is high, but the total volume of transactions is relatively low,” FinCEN said this should help minimize the burden on affected cash checkers while snaring higher-risk transactions.

The burden will still be significant, Ittleman said, opining that the GTO is designed ultimately to eliminate these transactions.

“It is burdensome, it is difficult, it is confusing, and it’s all of those things by design,” he said, adding, “This order is designed to disincentivize check cashers from cashing those type of checks at all.”

Dwyer agreed that the easiest way to comply is to stop cashing tax refund checks over $1,000, but he said he thinks the requirements to maintain these additional records — while likely the biggest burden — will also help authorities address a big challenge in gathering evidence for trials.

“I think this order is really intended to aid them in their prosecutions,” he said.

Having seen two GTOs issued for South Florida just a few months apart, Dwyer and Ittleman both said more could be in store for the future.

“The only question that remains for me is, is this two of two or two of many many more?” Ittleman said, noting that FinCEN has clearly put Miami under the microscope right now.

Dwyer said the recent orders are the product of a perfect storm of federal law enforcement focusing on this type of fraud, an upswing in their occurrences, and FinCEN on the regulatory side becoming more aggressive and working more closely with the law enforcement side of government.

“They’re realizing that each brings something to the table that they can use,” he said.

 

By Nicholas Nehamas
July 13, 2015

 

Federal officials are cracking down on a form of tax fraud that is hugely popular in South Florida.

Crooks can use stolen identities to claim bogus tax refunds thanks to a lack of oversight by the Internal Revenue Service.

But the Financial Crimes Enforcement Network on Monday announced a new temporary measure to combat the fraud. The order applies specifically to Miami-Dade and Broward counties, which have the highest rates of identity theft and tax-refund fraud in the country.

Under the new rules, check cashing stores in Miami-Dade and Broward will have to record more information about customers cashing a tax refund over $1,000, including a copy of their ID, a digital photograph, a phone number and a thumbprint. The order goes into effect on August 30 and will remain in force until January 30, 2016.

“This [order] will help ensure that the perpetrators of these schemes can no longer hide their face while our national treasury is looted and innocent victims spend countless hours and personal expense working with government to reclaim their true identities,” Jennifer Shasky Calvery, director of FinCEN, said in a statement.

The new measures will likely make it too risky for criminals to cash ill-begotten refund checks, said Andrew Ittleman, a Miami-based attorney whose practice focuses on white collar criminal defense and anti-money laundering compliance.

But the fraud is often accomplished with pre-paid debit cards from financial services companies that the criminals load with tax refunds, making checks unnecessary.

“There are lots of different ways of getting criminal proceeds into legitimate forms of commerce,” Ittleman said.

“Ultimately, FinCEN might be playing a game of whack-a-mole, just moving the racket from paper checks to the pre-paid cards,” he continued. “So is it going to completely eliminate the tax refund fraud? No. But they may well eliminate this variety of it.”

The regulation is known as a “geographic targeting order” because it singles out a specific region of the country for heightened enforcement. It is the second such order issued against South Florida in recent months.

In April, FinCEN cracked down on 700 electronic export businesses in Miami-Dade that may have been used to launder proceeds from the drug trade and other criminal enterprises.

To view original article, click here.