Attorney General Sessions Applauds China for Restricting Two Fentanyl Precursors

Today Attorney General Jeff Sessions applauded the Chinese government for announcing that it would restrict two chemical precursors to fentanyl.

“Synthetic opioids are killing thousands of people in communities across this nation, and we know that many of these substances originated in China,” Attorney General Sessions said. “President Trump and I have repeatedly brought up this issue with the Chinese government, and we are working to restrict the flow of these drugs to our country.  I am pleased to see China taking steps that will protect not just their own people from this poison, but the American people, too. I hope that China will continue to take steps like this and eventually schedule all fentanyl analogues, just as the DEA is doing.”

In 2017, China scheduled a number of fentanyl-class substances, including carfentanil, furanyl fentanyl, valeryl fentanyl, acryl fentanyl, U-47700, MT-45, PMMA, and 4,4’ DMAR.  Last week, China’s Ministry of Public Security announced that, effective Feb. 1, NPP and 4ANPP, substances that can be used to make illicit fentanyl, would also be scheduled.

U.S. Department of Justice and Chinese officials maintain frequent contact to collaborate and share data on the threat from fentanyl-class substances.  Information-sharing includes scientific data, trafficking trends, and sample exchanges. This dialogue has resulted in more effective methods for identifying deadly substances for government control.

Attorney General Sessions and Deputy Attorney General Rosenstein both requested China’s scheduling action in meetings with then-State Councilor Guo Shengkun of the Chinese Ministry of Public Security.  Deputy Attorney General Rosenstein met with then-State Councilor Guo in Beijing, China on Sept. 25, 2017 and the Attorney General met with him in Washington, D.C. on Oct. 3 and 4, 2017. 

In October, Deputy Attorney General Rosenstein announced the first-ever indictment of Chinese nationals for attempting to distribute massive quantities of synthetic opioids in two different regions of the United States.

It is estimated that, in 2016, more than 20,000 Americans (link is external) were killed by overdoses of fentanyl or fentanyl analogues, making these the deadliest drugs in America.  According to the U.S.-China Commission, a majority of the fentanyl products in the United States originated in China.

Former CFO of Arthrocare Corporation Sentenced to Prison for Role in $750 Million Securities Fraud Scheme

The former chief financial officer (CFO) of ArthroCare Corporation, a publicly traded medical device company based in Austin, Texas, was sentenced today to ­­50 months in prison for his role in orchestrating a fraud scheme that resulted in shareholder losses of over $750 million.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney John F. Bash of the Western District of Texas and Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field office made the announcement.

Michael Gluk, 59, of Austin, was sentenced by U.S. District Court Judge Sam Sparks of the Western District of Texas, who also ordered Gluk to pay a $50,000 fine and to forfeit $677,804.

On June 14, 2017, Gluk pleaded guilty to a superseding information charging him with one count of conspiracy to commit wire and securities fraud.  As part of his guilty plea, Gluk admitted that he conspired with others to falsely inflate ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving ArthroCare’s distributors.  He further admitted that he and other co-conspirators caused ArthroCare to file a Form 10-K for 2007 and Form 10-Q for the first quarter of 2008 with the U.S. Securities and Exchange Commission (SEC) that materially misrepresented ArthroCare’s quarterly and annual sales, revenues, expenses and earnings.  As part of his plea, Gluk further admitted that he provided false testimony in proceedings before the SEC and in federal district court.

The fraud scheme at ArthroCare began in 2005 and continued until 2009.  Gluk admitted that he and his co-conspirators determined the type and amount of product to be shipped to distributors based on ArthroCare’s need to meet Wall Street analyst forecasts, rather than distributors’ actual orders.  Gluk and others then caused ArthroCare to “park” millions of dollars’ worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter.  ArthroCare reported these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

ArthroCare’s distributors agreed to accept shipment of millions of dollars of products in exchange for special conditions, including substantial, upfront cash commissions, extended payment terms and the ability to return products, allowing ArthroCare to falsely inflate revenue by tens of millions of dollars, Gluk admitted.  Gluk admitted that he and his co-conspirators caused ArthroCare to acquire its largest distributor, DiscoCare, specifically to conceal from the investing public the nature and financial significance of ArthroCare’s relationship with DiscoCare.

Gluk’s earlier conviction was overturned by the U.S. Court of Appeals for the Fifth Circuit.  Gluk subsequently pleaded guilty and cooperated against co-conspirator, Michael Baker, the former CEO of ArthroCare, who was convicted at trial on Aug. 18, 2017 of one count of conspiracy to commit wire fraud and securities fraud, seven counts of wire fraud, two counts of securities fraud and two counts of making false statements.  On Nov. 3, 2017, Baker was sentenced to 240 months in prison.

Co-conspirators David Applegate and John Raffle, both former senior vice presidents of ArthroCare, pleaded guilty to multiple felonies in 2013 in connection with their participation in the scheme.  On Aug. 29, 2014, Raffle was sentenced to 80 months in prison and Applegate was sentenced to 60 months in prison.

This case was investigated by the FBI’s San Antonio, Austin Resident Agency Office.  The case is being prosecuted by Securities and Financial Fraud Unit Chief Benjamin D. Singer, Assistant Chief Henry P. Van Dyck and Trial Attorney Caitlin Cottingham of the Criminal Division’s Fraud Section.

Texas Man Sentenced to 15 Years in Prison for Hate Crime

Nigel Garrett, 21, was sentenced today to 15 years in prison for assaulting a man because of the victim’s sexual orientation, the Justice Department’s Civil Rights Division, the U.S. Attorney’s Office of the Eastern District of Texas, and U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives’ Dallas Division announced.

According to the plea agreement, Garrett admitted that he, Anthony Shelton, and Chancler Encalade used Grindr, a social media dating platform for gay men, to arrange to meet the victim at the victim’s home. Upon entering the victim’s home, the defendants restrained the victim with tape, physically assaulted the victim, and made derogatory statements to the victim for being gay. The defendants brandished a firearm during the home invasion, and they stole the victim’s property, including his motor vehicle.

A federal grand jury previously had returned an eighteen-count superseding indictment, against Garrett, Shelton, Encalade and Cameron Ajiduah, that included charges for hate crimes, kidnappings, carjackings, and the use of firearms to commit violent crimes. The indictment also charged the defendants with conspiring to cause bodily injury because of the victims’ sexual orientation during four home invasions in Plano, Frisco, and Aubrey, Texas, from January 17 to February 7, 2017. Anthony Shelton, Chancler Encalade, and Cameron Ajiduah subsequently pleaded guilty to hate crime charges from this indictment, and all three await sentencing. 

“Hate crimes are an attack on a fundamental principle of the United States to be free from fear of violence because of your sexual orientation, gender identity, race, color, religion, or national origin,” said Acting Assistant Attorney General John Gore of the Civil Rights Division. “The Department of Justice is committed to using every tool at its disposal to combat this type of violence.”

“Violence, in any form, is an affront to the American principles of freedom and safety that our communities are entitled to,” said Acting U.S. Attorney Brit Featherston. “The Department of Justice has made prosecution of violent crime a priority.  The Eastern District of Texas, in prosecuting this case and others like it, intends to demonstrate that this priority is something more than just a slogan.”

The investigation is being conducted by the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives, the Plano Police Department, and the Frisco Police Department.  The case is being prosecuted by Assistant U.S. Attorney Tracey Batson of the U.S. Attorney’s Office for the Eastern District of Texas and Trial Attorney Saeed Mody of the Civil Rights Division.