Insys Shows RICO As Good for Kapoor As for Whitey Bulger

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By Chris Villani Law360 (January 24, 2020, 7:48 PM EST) -- The landmark racketeering conviction of former Insys Therapeutics Inc. executives shows that the same statute used to prosecute mob boss Whitey Bulger can and should be used against corporate bigwigs, Boston prosecutors told Law360.

The Racketeer Influenced and Corrupt Organizations Act case against Insys founder John Kapoor and his underlings did hit some snags. U.S. District Judge Allison D. Burroughs struck the Controlled Substances Act predicate from the jury verdict and sentenced Kapoor to 5½ years in prison, about one-third of what prosecutors sought.

But in an interview Thursday evening shortly after Kapoor learned his fate, the team that prosecuted the case showed no sign that it would alter its aggressive tack in white collar cases, agreeing with emotional victim impact statements decrying Kapoor as both a "mobster" and a "murderer."

"The roles are similar. The structures are similar," said Assistant U.S. Attorney Fred Wyshak. "In my view, the man who is sitting in the corner office, who is delegating criminal activity to his subordinates, whether he's a mob boss or an executive of a company, there is not much difference there in terms of their roles."

Wyshak is known for prosecuting mob bosses like Bulger and "Cadillac" Frank Salemme. Prosecutors painted Kapoor as a pharmaceutical mob boss throughout last spring's trial, introducing testimony that he favored "loyalty" over "integrity" and had designated Insys' CEO as the company's "fall guy."

"They may have different titles," Wyshak said, "but it's pretty much the same."

That's why he said using the heavy-handed RICO statute was appropriate, even though it presented a novel approach for a case against a drugmaker.

"Using the RICO statute was a good idea," Wyshak said. "More and more, we are using the RICO statute to attack corporations and other enterprises which are not traditionally organized crime."

Assistant U.S. Attorney Nathaniel Yeager said exploring new avenues is necessary to stay one step ahead of those breaking the law.

Some of the office's success, Yeager said, has meant that "criminals have gotten smarter about the way they commit fraud and the way they hurt people, so we have an obligation as prosecutors to find new ways to go after people that do this."

"You'll see, in the future, an effort to change the industry through charging decisions we make," Yeager said.

Wyshak said the charges might look a little different next time and focus on more specific criminal conduct as opposed to a blanket conspiracy charge.

"The idea of 'there will be a next time' is really important,'' added Assistant U.S. Attorney David Lazarus, another member of the Insys prosecution team. "Now that we have these convictions and the RICO statute was successfully used here ... I think, for me, the takeaway is not to be afraid to do big cases."

Ingrid Martin of Todd & Weld LLP, a criminal defense lawyer who was not involved in the Insys case, said the Boston U.S. attorney's office seems to be getting more comfortable with the RICO statute as applied in the white collar context. She pointed to the prosecution of the New England Compounding Center executives behind a deadly fungal meningitis outbreak, which resulted in convictions in 2017, as a high-profile example.

"They have sort of waded through it a couple of times, and they have gained a level of confidence in a statute they were not using very much in the past," Martin said.

Still, she questioned whether the white collar context was the proper application for such a powerful law.

"To brand the entire thing a criminal enterprise, I am not sure that's an appropriate fit," Martin said.

Tracy Miner of Miner Orkand Siddall LLP, who represented former Insys executive Mike Gurry during the trial, credited Judge Burroughs for "seeing through" the RICO label and viewing the case as "a garden variety fraud case." Judge Burroughs was skeptical of the Controlled Substances Act predicate, which accused the Insys executives of intending for the company's powerful fentanyl spray, Subsys, to be prescribed off label. Prosecutors said Friday they planned to appeal Judge Burroughs' decision to nix it.

The sentences Judge Burroughs handed down, 66 months for Kapoor and less than three years for everyone else, demonstrated that the judge's understanding of the case was different from what prosecutors charged, Miner said.

"The legislative history of RICO clearly demonstrates that it was intended to be used for organized crime, or now gang, activities, where a group of people basically ran a criminal enterprise," Miner said. "Groups like the Mafia in the past or MS-13 in the present, where groups get together and conduct their operations through criminal activity."

Peter Horstmann, who represented Insys manager Sunrise Lee, said he was not surprised to hear the enthusiasm among Boston prosecutors for more RICO white collar cases, given their success in the Insys case. But he thought other avenues might be more effective.

"If they were really as concerned about victims as they say, it makes no sense to lock up hardworking people for years at a time during which alleged victims receive nothing," Horstmann said. "Deterrence in white collar cases comes from training companies and providers better to prevent fraud. Much of the alleged fraud in this case could have been prevented or mitigated by one call to the patient or one more records request."

Michelle Peirce, co-chair of the litigation practice at Barrett & Singal PC, said RICO is also problematic because it can put a strain on juries by leading to complex, multidefendant cases.

"It should not be a goal of prosecutors to push the envelope and create new and more exciting means of prosecution," Peirce said. "I know that is absolutely what is done and it will always be done, but I don't care for it and I think that the increased use of RICO falls into that bucket."

The Boston office is also using RICO in prosecuting the "Varsity Blues" college admissions cheating case. During the sentencing last year of a Stanford University sailing coach nabbed in the scheme, U.S. District Judge Rya W. Zobel noted that RICO "was passed to combat La Cosa Nostra, and now it's being used in this particular context. It's a heavy statute."

But prosecutors pushed back Thursday against criticism that the statute is being applied too broadly.

"That's how corporations are set up, to protect the people who run them, and RICO is built exactly for that," Yeager said.

Yeager referenced a past prosecution of the president of a company where the defendant's lawyer showed the jury a map of the United States and argued that the executive was insulated because he was in the corporate headquarters while underlings were committing crimes in other states.

"That's why, if it's done the right way, it's a valuable tool," Yeager said. "Not all the time. It's a very powerful statute. I think it has to be in our arsenal."

The other attorneys for the Insys defendants declined to comment or did not respond to requests for comment.

The case is U.S. v. Babich et al., case number 1:16-cr-10343, in U.S. District Court for the District of Massachusetts.

--Editing by Brian Baresch and Jill Coffey.