Jerrod Nichols Smith, one of three people indicted in 2013 for a drug wholesaling scam in Tennessee, was convicted last week of 15 counts of mail fraud and one count of making false statements to the FDA.
Smith, who faces up to 20 years in prison and a $250,000 fine for each count of mail fraud and five years in prison and a $250,000 fine for his conspiracy and false statements to the regulatory agency, will be sentenced later this year.
He and his co-defendants, Charles Jeffrey Edwards and Brenda Elise Edwards, were indicted in January 2013 and charged with running a 32-month, $50 million drug diversion scheme. The defendants allegedly purchased pharmaceuticals from a network of street collectors who obtained the drugs on the streets of New York and Miami from individuals who had legitimate prescriptions.
Federal prosecutors said the trio, who are all from Houston, used fake businesses to create pedigrees and a paper trail. Charles Edwards and Brenda Edwards pleaded guilty in 2014 to making $14 million in profits by taking "diverted" drugs and selling them back into the U.S. supply chain. They are expected to be sentenced at a later date, according to a release posted on the FDA website.
To cover their tracks, the three used another partner who set up a front business in Texarkana, Arkansas, called Tristate Management Group. The drugs would be run through Tristate to create a provenance, then shipped to Nashville, where they were repackaged, prepared with fake pedigrees and then sold to pharmacies.
When drugs are diverted in such a manner, there is no way of knowing whether they have been stored properly or expired and so become unsafe or ineffective. In some cases, they have turned out to be counterfeit. Additionally, they compete with the sales of legitimate products and can tarnish the reputations of manufacturers.