In November 2013, Miami-Dade police officers conducted a routine search of a Kendall house and left with a batch of pharmaceuticals.
Over the next six years, that seemingly small-time operation would blow up into an elaborate $78 million prescription drug and money-laundering scheme tapping into what U.S. authorities describe as a thriving black market in high-priced prescription drugs.
A total of 14 individuals have been indicted in Miami federal court in the region’s largest case in recent years of drugs being diverted from legitimate suppliers and resold at high mark-ups to consumers, federal prosecutors say. Five people were indicted in June, while eight pleaded guilty last year. One suspect, Angel Caminero Alvarez, remains a fugitive.
They’re accused of operating a network that dealt in illegally purchased or stolen prescription drugs, mostly to treat HIV, cancer and psychiatric illnesses — often picking them up in random parking lots. Once acquired, prosecutors say, false documentation was created and the drugs were cleaned, counted and repackaged to be resold — first at a wholesale discount to pharmacies and then at market value to the public.
The black market network — labeled by prosecutors as a “pharmaceutical diversion” operation — spanned the country and involved businesses in Florida, Arizona, Delaware, Washington and Puerto Rico. Court records say the operation was active as early as January 2013 through late May 2019.
So far, Mohammad Mehdi Salemi, Leonides Herrera, Frank Alvarez, Kadir Diaz, Jorge Isaac Paiz, Carlos Robin Gonzalez and Adrian Cambara Ortiz from South Florida and other parts of the country have been sentenced after pleading guilty to charges, including conspiracy to launder money, conspiracy to knowingly falsify medical products or documentation and conspiracy to deliver misbranded and adulterated drugs, court documents say.
Prison sentences ranged from three years to just over eight years. Federal prosecutors also are seeking to seize from $50,000 to $3 million in assets from each of the defendants as part of the case, according to court records.
Joshua Ryan Joles of Miami, the chief executive officer of Wholesale Supply LLC, and the last to plead guilty, will be sentenced in July.
“Mr. Joles has accepted responsibility for his actions and is hoping to put this case behind him,” said his attorney, Marissel Descalzo, of Tache, Bronis, and Descalzo in Miami. None of the others convicted or their attorneys could be reached for comment.
Joles and Salemi, the chief executive officer of Wholesalers Group, Inc. and Wholesalers Group LLC, were the first two identified in the case and indicted in October 2019. The companies were used as fronts to divert pharmaceuticals and launder money during their operation, prosecutors said.
To fabricate the legitimacy of the drugs, prosecutors say the crew created documents called “pedigrees,” which are required to show all sales and transfers for prescription drugs. Beginning in 2015, all pedigrees provided to Joles showed how the drugs were purchased directly from the manufacturers, which was inaccurate, prosecutors said.
In reality, the drugs were acquired through theft, burglary and healthcare fraud, according to court records. They were also bought from patients who received them at a discounted rate through Medicare and Medicaid, according to a series of indictments and other court records.
Network members would pick up boxes of drugs by the hundreds in random parking lots or streets across South Florida, records show. Often, they were cleaned with lighter fluid and other chemicals to remove the label, glue and any trace of the prescriptions or previous owners.
Some drugs were past their expiration dates, inaccurately labeled and stored in incorrect conditions, records show.
In the early part of the operation, Joles complained frequently to Salemi that the shipments contained bottles that were clearly defective, mislabeled, had traces of glue or had pedigrees that did not match the lot numbers. Joles said that on one occasion, instead of medicine, a bottle contained pebbles or rocks, according to court records. That led to improvements in the process, authorities say.
When the diverted pharmaceuticals were recounted and packaged, the group would send them out through a FedEx office near the Miami International Airport, records show. Salemi sometimes used return addresses that belonged to other South Florida businesses that were legitimate and had nothing to do with their scheme.
Court documents identify Salemi as a supplier and Joles was his main buyer. Joles said he had a very high demand and could move as many pharmaceuticals as Salemi could supply, according to Joles’ factual statement filed with his plea agreement.
The drugs were then resold to pharmacy purchasers, who authorities say were left with the impression that they were buying the drugs from a legitimate wholesaler. Meanwhile, the patients who unknowingly bought the drugs may have been jeopardizing their own health, prosecutors say. The network’s price was approximately 17% below wholesale acquisition price, the industry standard for wholesale pricing, records show. The group decided that any lower would raise suspicions.
During 2014-2019, Paiz, Diaz, Alvarez, and Gonzalez worked from houses and apartments across Miami-Dade County.
Gonzalez took on much of the data responsibilities for the team, records show. He managed spreadsheets, recorded quantities, and the types of drugs they had for sale. He was told to refrain from discussing the operation over the phone or text messages, so his communication was limited to encrypted apps and disposable phones. He was regularly paid in cash.
Alvarez was the director and tasked with arranging the pickup of the pharmaceuticals, paying Gonzalez, and sometimes giving him directions on how to pick up the drugs.
“When he did so, Gonzalez was usually unaware of who he was obtaining the drugs from, generally getting the boxes of drugs in parking lots,” according to Gonzalez’s factual statement filed with his plea agreement.
‘Drogueria Las Rosas’
In 2014, Paiz agreed to operate and take over one of the companies used for the scheme — “Drogueria Las Rosas” — and was assisted by Salemi. Salemi provided him with business contacts and documents for the operation, according to court records. By mid-2015, Paiz was conducting approximately $1 million in sales per month and had about 7 employees.
In 2016, Diaz took over “Drogueria Las Rosas.” Alvarez passed the information off to Diaz about how to wire transfer proceeds from sales to cover the purchase costs, records show.
None of the network’s accounts actually belonged to a legal pharmaceutical distributor, prosecutors Frank Tamen and Walter M. Norkin said. Instead, they were held by shell companies made to look like legitimate corporations by copying their names.
During the course of dealing in diverted pharmaceuticals, Paiz and Diaz received at least $21 million in gross sales proceeds and transferred a similar amount through various accounts to continue the business.
All of the participants knew their actions were illegal, but some were not aware of the size of the operation, prosecutors said.
The five new defendants indicted last month face charges of of money laundering, mail fraud and conspiracy to traffic in medical products with false documentation. The named defendants are: Stephen Manuel Costa, Leah Solomon, David Ramirez Garcia Sr., Ruben Reynaldo Rodriguez Diaz and Rafael Angel Romero.
Court records reveal little information about the roles of the five new defendants. One detail is that on June 23, 2013, Costa chartered a flight from Trim Air for the purpose of transporting diverted drugs from Florida to South Carolina.
Cases like these are not new to the South Florida area. However, the 14-member operation is the largest seen in recent years. Previously, a team of family members were arrested on charges of carrying out a $25 million drug diversion scheme in Miami Lakes. That same year, a 45-member prescription fraud operation was charged with trafficking oxycodone pills over the course of eight months.
And in 2015, Miami-Dade saw the bust of another large pharmaceutical diversion racket involving five members and over $3.5 million of cash and jewelry seized from the operation.