United States v. Kalaba

Opinion

17-331 United States v. Kalaba

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, at 40 Foley Square, in the City of New York, on the 14th day of March, two thousand eighteen.

PRESENT: ROBERT A. KATZMANN, Chief Judge, DENNY CHIN, Circuit Judge, ALISON J. NATHAN,* District Judge.

UNITED STATES OF AMERICA,

Appellee,

v. No. 17-331

PAUL WISEBERG, GERALD WISEBERG, STEPHANIE TOMASINI, LANA WISEBERG, EMMANUEL ANTONIO, DANIEL PODELL, HOWARD HISRCH, LAWRENCE ZASLOW,

Defendants,

ROBERT KALABA,

Defendant-Appellant.

* Judge Alison J. Nathan, of the United States District Court for the Southern District of New York, sitting by designation.

1 For Defendant-Appellant: Jane Fisher-Byrialsen and Kaitlin F. Nares, Fisher & Byrialsen, PLLC, New York, NY.

For Appellee: Shawn G. Crowley, Edward B. Diskant, Daniel B. Tehrani, and Shane T. Stansbury, Assistant United States Attorneys, for Geoffrey Berman, United States Attorney for the Southern District of New York, New York, NY.

Appeal from a judgment of the United States District Court for the Southern District of

New York (Torres, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

Defendant Robert Kalaba appeals from a judgment of the Southern District of New York

(Torres, J.), entered January 24, 2017, convicting Kalaba, following a jury trial, of four counts

related to the illegal distribution of prescription narcotics and sentencing him to principally 84-

months’ imprisonment. We assume the parties’ familiarity with the underlying facts, the

procedural history of the case, and the issues on appeal.

On October 22, 2015, a jury convicted Kalaba and co-defendant Paul Wiseberg of

conspiracy to distribute or illegally dispense—or possess with intent to do so—a controlled

substance, in violation of 21 U.S.C. §§ 841(b), 846 (the “Narcotics Count”); conspiracy to use an

invalid Drug Enforcement Administration (“DEA”) number, in violation of 21 U.S.C. §§ 843(a),

846; and conspiracy to commit money laundering, in violation of 21 U.S.C. § 1956(h) (the

“Money Laundering Count”).1 Kalaba and Wiseberg (collectively “defendants”) were the

1 Kalaba was also charged with conspiracy to distribute, and possess with intent to distribute, promethazine with codeine, in violation of 21 U.S.C. §§ 841(a), 846. He pleaded guilty to this charge and it is not at issue here.

2 manager and owner, respectively, of the Plainfield Pharmacy (“Plainfield”) and two other

pharmacies, one in Manhattan and one in Union City, New Jersey. The government presented

evidence that the defendants’ pharmacies primarily distributed mail-order prescription narcotics

to patients from pain clinics in Florida while ignoring indicia that the patients lacked a legitimate

medical need for the drugs and concealed the proceeds of their business using a series of shell

corporations. Kalaba moved for a post-verdict judgment of acquittal as to the Narcotics Count

and the Money Laundering Count, pursuant to Federal Rule of Criminal Procedure 29(c) or, in

the alternative, for a new trial pursuant to Rule 33. The motions were denied. On appeal, Kalaba

argues that the district court erred in denying the motions because there was insufficient evidence

to convict him of either the Narcotics Count or the Money Laundering Count.

“A defendant challenging the sufficiency of the evidence bears a heavy burden.” United

States v. Kozeny, 667 F.3d 122, 139 (2d Cir. 2011). The court reviews such a challenge de novo,

United States v. Geibel, 369 F.3d 682, 689 (2d Cir. 2004), but the evidence is viewed in the light

most favorable to the government and a jury verdict will be upheld if “any rational trier of fact

could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v.

Virginia, 443 U.S. 307, 319 (1979) (emphasis omitted). A court applies the sufficiency test “to

the totality of the government’s case and not to each element, as each fact may gain color from

others.” United States v. Riggi, 541 F.3d 94, 108 (2d Cir. 2008). In addition, “‘the jury’s verdict

may be based entirely on circumstantial evidence,’” United States v. Santos, 541 F.3d 63, 70 (2d

Cir. 2008) (quoting United States v. Martinez, 54 F.3d 1040, 1043 (2d Cir. 1995)), and the

government is not obligated to “disprove every possible hypothesis of innocence,” United States

v. Abelis, 146 F.3d 73, 80 (2d Cir. 1998) (internal quotation marks omitted), because “the task of

3 choosing among competing, permissible inferences is for the [jury], not the reviewing court,”

United States v. McDermott, 245 F.3d 133, 137 (2d Cir. 2001).

I. Narcotics Count

With respect to the Narcotics Count, Kalaba raises two arguments: first, that the

government failed to show that he distributed prescription painkillers unlawfully because the law

contains a “good faith” exception for medical practitioners and the pharmacies that work with

them; and second, that there is insufficient evidence that he knew about the conspiracy and

agreed to join. As Kalaba’s argument suggests, the Narcotics Count has two elements: (1) the

conspiracy charged in the indictment—to distribute or illegally dispense a controlled

substance—existed, and (2) each defendant knowingly and intentionally joined the conspiracy.

United States v. Anderson, 747 F.3d 51, 60 (2d Cir. 2014). Pursuant to the good faith exception,

for the government to have established unlawful distribution of a controlled substance “the jury

must have found that [Kalaba] knew or reasonably should have known that the doctors and

pharmacists were distributing controlled substances outside the usual course of professional

practice and without a legitimate medical purpose—or, in other words, that these professionals

acted in bad faith.” United States v. Quinones, 635 F.3d 590, 595 (2d Cir. 2011) (internal

quotation marks omitted); see also id. at 594 (“A lay defendant likewise may be convicted of

unlawful distribution of a controlled substance where the defendant relies upon a doctor’s

prescription that he knows or reasonably should have known was invalid.”).

The evidence presented at trial easily satisfied these elements. When Wiseberg purchased

Plainfield in 2011, it was distributing fewer than 5,000 oxycodone dosage units a month; by

2013 that number had increased to 40,000 dosage units. At times, up to 81 percent of Plainfield’s

customers were receiving narcotics and 95 percent of those customers received their prescription

4 via mail. According to the government, this was no accident. Wiseberg previously owned a

Florida pharmacy that was shut down by the DEA and had relationships with pain clinics in

Florida. At trial, Joel Shumack, the owner of one of those clinics testified that his clinic was a

“pill mill”— most of his customers did not need the medication they were prescribed and, as a

result, local CVS and Walgreen pharmacies refused to fill prescriptions issued by his clinic. App.

at 553, 560. When Wiseberg opened Plainfield, Shumack’s clients began filling their

prescriptions there. Kalaba was aware of this arrangement because Shumack called Kalaba to

complain when his clients’ prescriptions were not being filled expeditiously.

Wiretap communications provided further evidence that Kalaba was aware of and

participated in the scheme to distribute narcotics to customers with no legitimate medical need.

In one recorded call, Kalaba remarked to a friend that Plainfield was filling prescriptions for six

people at the same address: “Hoffman has one fucking crew! They’re all going to the same

address! Six of em!” Add. 6. When the caller observed “that’s bad bro . . . ” and advised Kalaba

not to fill the orders, Kalaba said Wiseberg did not want to send the customers their money back

and instructed Kalaba to fill the prescriptions. Id. Kalaba summarized Wiseberg’s motives:

“Greedy, greed, greed, greed, greed, greed.” Id. at 7. The government also presented video

footage, recorded by a cooperator, showing Kalaba and Wiseberg filling prescriptions in the

pharmacy on a day when it was closed. A new pharmacist at Plainfield had become concerned

about the pharmacy’s practices and refused to fill the narcotics prescriptions. Kalaba and

Wiseberg, neither of whom were certified pharmacists, responded by surreptitiously filling 20

narcotics prescriptions without consulting a pharmacist or a prescribing physician. The

government argues that this alone is sufficient to show that Kalaba was acting in bad faith.

5 But there is more: Plainfield’s written procedures instructed customers, “Do not call or

visit the pharmacy or you will not be filled,” and advised “Obtain a money order (no checks,

credit cards, debit cards, cash, Medicaid or any other insurance).” Add. 2. The government’s

pharmaceutical expert testified that these policies raised significant red flags because many states

require pharmacists to provide drug counseling to patients—which they cannot do if patients

cannot contact them—and pharmacies ordinarily have a very high percentage of insurance

payments. The defendants also tried to conceal Plainfield’s activities by using a fake return

address on mail-order prescriptions, failing to disclose any income from Plainfield on their tax

returns, and lying to a DEA agent who paid a visit to Plainfield in September 2012. Kalaba told

the agent that the pharmacy’s customers were mostly diabetes, blood pressure, and HIV patients

and that 85 percent of his billings came from insurance.

In response, Kalaba points to evidence that Plainfield employees called to verify

prescriptions with doctor’s offices, and kept extensive records, including fulfillment agreements

with clients from pain clinics, incident reports regarding customers who failed to comply with

Plainfield’s policies, and letters of necessity for each controlled substance prescription. However,

the government introduced evidence that pain clinics illegally distributing prescription narcotics

commonly “papered their files” to create the appearance of legitimacy, and the pharmaceutical

expert testified that verifying a prescription does not relieve a pharmacist of his or her

responsibility to ensure that the prescription serves a legitimate medical purpose. Similarly,

Kalaba’s emphasis on testimony that Santa Marina Pharmacy (also owned by defendants) used

practices on par with Duane Reade does not negate the evidence of abuse at Plainfield.

Moreover, to the extent that the testimony cited by Kalaba contradicts evidence presented by the

6 government, the task of choosing among competing evidence falls to the jury, not this Court.

McDermott, 245 F.3d at 137.

In sum, viewed in the light most favorable to the government, the evidence shows that

Kalaba knew that Plainfield’s business model was predicated on filling mail-order prescriptions

for “pill mills,” filled prescriptions against the objections of a licensed pharmacist, and did so in

the face of ample indicia that customers lacked legitimate medical need. Accordingly, we find

that there is sufficient evidence to sustain Kalaba’s conviction on the Narcotics Count.

II. Money Laundering

Turning to the Money Laundering Count, Kalaba argues that the government failed to

establish both that a conspiracy to launder money existed and that he agreed to join said

conspiracy. The two elements of a money laundering conspiracy are the existence of a

conspiracy and that the defendant knowingly participated in it. United States v. Garcia, 587 F.3d

509, 515 (2d Cir. 2009). Here, the two objects of the conspiracy charged by the government were

“engaging in financial transactions that involved the proceeds of illegal narcotics transactions”

with the intent either (a) “to promote the carrying on of narcotics transactions” or (b) “to conceal

the nature, location, source, ownership, and control of the proceeds.” App. at 1558 (emphases

added). The evidence is sufficient to sustain Kalaba’s conviction with regard to both objects.

According to testimony from an Internal Revenue Services’ criminal investigator who

reviewed Plainfield’s bank accounts, from November 2011 to October 2013 $2 million dollars

were deposited into Plainfield’s accounts. Kalaba and Wiseberg were both signatories on these

accounts. During that period, Plainfield spent approximately $655,000 in purchasing

pharmaceuticals from distributors, and several of these payments were traced directly to

purchases of controlled substances. Plainfield also made payments directly to Sun Park

7 Pharmacy (“Sun Park”), a corporation registered in the name of Dila Kalaba, the defendant’s

mother. Sun Park, in turn, made payments to Kalaba. Plainfield also transferred approximately

$350,000 to various entities controlled by Wiseberg, including two different shell companies—

Direct Management Services, Inc. and Metrosource, Inc. There was no evidence that any of these

corporate entities provided any goods or services to Plainfield.

The use of Plainfield proceeds to purchase prescription narcotics is sufficient to

demonstrate promotional laundering which involves the “receipt and deposit of laundered funds

. . . made with the intent to promote the specified underlying unlawful activity.” United States v.

Thom, 317 F.3d 107, 133 (2d Cir. 2003). Here, narcotics distribution was the unlawful activity

and the proceeds were used to purchase additional narcotics in furtherance of the illegal scheme.

Id. at 133–34.

The evidence also demonstrates a conspiracy to conceal: as explained above, there is

evidence that the money Plainfield made payable to Sun Park represented the proceeds of an

illegal narcotics distribution conspiracy and that Kalaba knew this. In addition, because the

evidence indicated that Sun Park is a shell company that did nothing to warrant the receipt of

payments from Plainfield, a jury could conclude that the payments from Plainfield to Sun Park,

which were then transferred to Kalaba, were “designed in whole or in part to conceal or disguise

the nature, source, location, ownership, or control of those proceeds.” United States v.

Henry, 325 F.3d 93, 103 (2d Cir. 2003).

We have considered all of Kalaba’s arguments and have found in them no basis for

reversal. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk