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United States v. Rigo

United States District Court, S.D. New York

January 17, 2017

UNITED STATES OF AMERICA Plaintiff,
v.
BLADIMIR RIGO, Defendant.

          Attorney for Plaintiff UNITED STATES ATTORNEY OFFICE, SDNY, One Saint Andrew's Plaza By: Edward B. Diskant, Esq.

          Attorneys for Defendant SPEARS & IMES LLP., By: Joanna C. Hendon, Esq. Alicia K. Amdur, Esq.

          OPINION

          ROBERT W. SWEET U.S.D.J.

         Defendant Bladimir Rigo ("Rigo" or "Defendant") was sentenced by this Court to 38 months of incarceration and ordered to pay $2.9 million in restitution upon his guilty plea to conspiracy to commit healthcare fraud and to commit adulteration and distribution of prescription medication. On appeal of his sentence, the Second Circuit Court of Appeals remanded the case to this Court for reconsideration of the loss amount attributable to Rigo, directing the Court to make particularized findings as to the foreseeability and scope of the criminal activity ascribed to Rigo. Upon the facts and conclusions set forth below, the loss attributable to Rigo is $2.9 million.

         I. Prior Proceedings and Facts

         Familiarity with the prior proceedings and facts set forth in the Court's prior opinions is assumed. See United States v. Rigo, 86 F.Supp.3d 235 (S.D.N.Y. 2015); see also United States v. Rigo, No. 13 Cr. 897 (RWS), 2015 WL 2240309 (S.D.N.Y. May 12, 2015). A summary of relevant facts is set forth below.

         On November 14, 2013, Rigo was charged in a two-count indictment. Count One charged Rigo with conspiracy to commit healthcare fraud and Count Two charged Rigo with conspiracy to commit adulteration and unlawful wholesale distribution of prescription medications.

         The charges stem from Rigo's participation in a large-scale scheme to obtain various prescription medications- typically those prescribed to treat HIV and AIDS-which had previously been dispensed to individuals in Newark, New Jersey and elsewhere, and then to attempt to cause these bottles to re-dispensed as "new" to unsuspecting patients. The drugs involved in this scheme were not controlled substances, but rather brand-name pharmaceuticals used exclusively by patients with valid prescriptions and for which the price tags, almost always paid by insurance programs such as Medicaid, ran into the thousands of dollars per bottle.

         The scheme worked, in general terms, as follows: first, the lowest level participants in the scheme (the "Insurance Beneficiaries") filled prescriptions for month-long supplies of drugs at pharmacies throughout the country, including in the Southern District of New York and the Newark, New Jersey area. These Insurance Beneficiaries were typically HIV or AIDS patients who paid little or no money of their own for the drugs in question because their insurance plans, typically Medicaid, footed the bill. The Insurance Beneficiaries then sold their bottles of medication for cash at locations like street corners and bodegas to other participants in the scheme, referred to in the investigation as "Collectors." Collectors, in turn, sold the second-hand bottles to "Aggregators" who bought large quantities of second-hand drugs from multiple Collectors. Eventually, the second-hand drugs made their way to corrupt distributors and pharmacies willing to re-dispense these secondhand drugs to unsuspecting consumers.

         Health care benefit programs, such as Medicaid, were defrauded twice in this scheme. On the front end, health care benefit programs were fraudulently induced into paying for these drugs under the false representation that the drugs were for the sole intended use of the program beneficiary, i.e., the Insurance Beneficiary. On the back end of the scheme, participants fraudulently concealed the true, illegitimate source of the bottles thereby fraudulently inducing health care benefit programs to pay for the exact same bottles a second time.

         Rigo participated in this scheme as an Aggregator based in Newark, New Jersey. From at least 2000 up until his arrest in 2013, Rigo purchased large numbers of these bottles of second-hand medications before selling them to even high-level scheme participants for cash. To facilitate his activities, Rigo employed workers who would act as Collectors and purchase bottles of second-hand medications from the Insurance Beneficiaries. Among others, Rigo employed Arcadio Reyes-Arias and Rogelio Leyba who, for a period of approximately five years from at least 2000 through about 2005, bought significant numbers of bottles of these medications for Rigo to resell. After that time period, both Reyes-Arias and Leyba went off on their own, opening their bodegas from which they continued to work in furtherance of the the scheme with Rigo and others.

         To make the scheme work, the bottles purchased by Rigo and others needed to be "cleaned"; that is, the patient labels affixed when the bottles were initially dispensed to the Insurance Beneficiaries needed to be removed so that the bottles would appear to be new. To "clean" the bottles, Rigo and his coconspirators doused the medication bottles with lighter fluid or a similar chemical to melt off the initial patient label. As inspection of bottles recovered during the investigation confirmed, this process of "cleaning" was inherently dangerous: testing of the bottles showed that the "cleaning" materials freguently seeped into the bottles and contaminated the pills themselves with chemicals known to be dangerous or even fatal if swallowed.

         Rigo was arrested on September 17, 2013 and pleaded guilty to his participation in the conspiracy on April 23, 2014 without an agreement with the Government.

         In October 2014, this Court held a hearing pursuant to United States v. Fatico,603 F.2d 1053 (2d Cir. 1979) focused on the issue of the loss amount properly attributable to Rigo. The Government called three witnesses. One of its witnesses was Reyes-Arias, who testified pursuant to a cooperation agreement with the Government and who, as noted above, worked for and then with Rigo as part of the conspiracy for many years prior to their arrests. As the Court heard from each of the witnesses at the Hearing and from Rigo himself via a consensual recording made during the investigation, Rigo was a large-scale Aggregator in the scheme between at least 2000 and his arrest in 2013. During that time, Rigo aggregated bottles of these second-hand ...


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