The U.S. Attorney’s Office
District of Eastern Pennsylvania released the below information regarding the
conviction of a former Defense contractor:
PHILADELPHIA – Dean Volkes,
53, and Donna Fallon, 52, of Long Island, NY, and Devos Ltd., doing business as
Guaranteed Returns, located in Long Island, were convicted Wednesday on charges
of mail fraud, wire fraud, theft of government property, money laundering
conspiracy, obstruction of justice, and false statements, announced Acting
United States Attorney Louis Lappen. Volkes and Fallon face substantial
sentences of incarceration, as well as a three-year period of supervised
release. All three defendants face a possible fine and mandatory payment of
full restitution. For Volkes and Guaranteed Returns, restitution is anticipated
to be approximately $180 million. Additionally, the jury today ordered
defendant Dean Volkes to forfeit bank accounts totaling $127 million.
Volkes was the President,
Chief Executive Officer, and sole owner of Guaranteed Returns, a reverse
pharmaceutical distributor located in Holbrook, New York. Fallon, who is
Volkes’ sister, was the company’s Chief Financial Officer. As a reverse
distributor, Guaranteed Returns managed the returns of pharmaceutical products
for healthcare providers, including numerous hospitals, pharmacies, and
long-term care facilities, as well as Department of Defense facilities.
Pharmaceutical manufacturers often allow expired drugs to be returned for a
refund. Guaranteed Returns handled this process for healthcare provider clients
in exchange for a fee based on a percentage of the return value.
The evidence at trial proved
that from approximately 1999 through 2014, Guaranteed Returns promised its
clients that it would hold their “indate” (not yet expired) drug products until
they expired, and then return them on the clients’ behalf, in exchange for a
fee. Instead, Guaranteed Returns, at CEO Volkes’ direction, stole indated drug
products that it received from its clients, returned the drugs to
manufacturers, and kept the refund money. Volkes created a system in which he
classified clients as either “managed” or “unmanaged.” The company returned the
indated product that it received from all of its clients. For customers that
Volkes designated “unmanaged,” however, Guaranteed Returns kept the full value
of the returned product for itself. The evidence demonstrated that through this
fraud, Volkes and Guaranteed Returns stole more than $180 million from over
13,000 clients, including more than $20 million from numerous medical treatment
facilities operated by the U.S. Department of Defense and other government
agencies.
The evidence also showed that
Volkes, Fallon, and Guaranteed Returns stole clients’ refund money by diverting
a percentage of the refunds into internal company accounts. In fall 2010,
Volkes caused the company’s IT staff to write a computer program that allowed
Guaranteed Returns to skim a portion of clients’ refund money from both expired
and indated products through a computerized accounting adjustment. The CFO,
Donna Fallon, then implemented this program over a dozen times, resulting in
the theft of approximately $500,000 in just five months.
The jury also found that
Volkes, Fallon, and Guaranteed Returns had conspired to launder the proceeds of
the fraud. Specifically, the evidence showed that when the defendants returned
drugs to the respective manufacturers for refunds, they intentionally combined
drugs that had been stolen with drugs that had not been stolen. Consequently,
as the defendants knew and intended, the payments that the manufacturers made
to the wholesalers would comprise commingled funds – i.e., refunds for drugs
that the defendants had stolen from clients, which refunds the defendants
intended to keep and did keep for themselves, were commingled with refunds for
drugs that were not stolen and that would be forwarded to clients as the
defendants were required to do. Afterward, the defendants transferred millions
of dollars in commingled funds through the company’s accounts to accounts
controlled by Volkes.
Finally, the evidence at
trial showed that the defendants obstructed justice in connection with a grand
jury investigation. As part of an unrelated investigation, a grand jury
subpoena had been served on Guaranteed Returns, requiring the production of
various records. In March 2010, Volkes met with his IT department and
instructed them to delete data called for by the subpoena and then to obtain a
wiping program to ensure that deleted data could not be forensically recovered,
which they did. Volkes then directed the head of the company’s IT department to
falsely inform federal investigators that this deletion was part of a routine
data purge, which he also did. In the same timeframe, March 2010, Fallon
concealed from the investigators that in January 2010 she had received the
computer hard drives of two former employees whose emails and documents were
covered by the subpoena. The investigators discovered Fallon’s concealment and
false statements when the hard drives were found locked in a cabinet in
Fallon’s office during a judicially-authorized search of the company’s office
in April 2011, during which the Federal Bureau of Investigation and Defense Criminal
Investigative Service seized almost 30 servers, over 20 computers, and hundreds
of boxes of documents.
“The defendants and their
company betrayed the trust of their numerous clients through a complex fraud
scheme that cheated these victims of $180 million,” said Lappen. “The verdict
in this case, which is the culmination of years of work, makes clear that this
office and its many law enforcement partners will continue to devote
substantial resource to prosecute large scale health care fraud and hold these
dishonest businesses and their officers accountable.”
“This long-running scheme
appears fueled by sheer greed,” said Michael Harpster, special agent in charge
of the FBI’s Philadelphia Division. “The defendants’ boldness is really
something to behold: doing business under the company name ‘Guaranteed
Returns,’ while merrily pocketing refunds due to clients – among them, the U.S.
government.”
The case was investigated by
the Defense Criminal Investigative Service and the Philadelphia office of the Federal
Bureau of Investigation. It is being prosecuted by Assistant United States
Attorneys Nancy Rue and Patrick J. Murray.
No comments:
Post a Comment