United States v. Doud

UNITED STATES OF AMERICA, v. LAURENCE F. DOUD IIL Defendant.

No. 19 Crim. 285 (GBD)

United States District Court, S.D. New York

February 23, 2023

MEMORANDUM DECISION AND ORDER

GEORGE B. DANIELS, UNITED STATES DISTRICT JUDGE

On February 2, 2022, a jury convicted Defendant Laurence Doud of conspiring to illegally distribute oxycodone and 400 grams or more of fentanyl in violation of 21 U.S.C. §§ 841 and 846, and of conspiring to defraud the Drug Enforcement Administration ("DEA") in violation of 18 U.S.C § 371. Before this Court is Defendant's January 28 2022 Motion for a Judgment of Acquittal Pursuant to Federal Rule of Criminal Procedure 29 or, in the alternative, a New Trial Pursuant to Federal Rule of Criminal Procedure 33. (ECF No. 151.) Defendant's Rule 29 motion is GRANTED as to the jury's finding that his Count One conspiracy to illegally distribute controlled substances involved at least 400 grams of fentanyl, and that finding as to weight is vacated. Defendant's Rule 29 motion is otherwise DENIED and his two convictions stand. Defendant's Rule 33 motion is DENIED in its entirety.

I. EVIDENCE AT TRIAL

Defendant Laurence F. Doud III ("Defendant") is the former chief executive officer of Rochester Drug Cooperative ("RDC"), a now-inoperative wholesale distributor of pharmaceutical products. On April 23, 2019, the Department of Justice announced charges against Defendant, RDC, and RDC's former chief compliance officer, William Pietruszewski, for their participation in a conspiracy to distribute oxycodone and fentanyl to pharmacy customers that RDC's own compliance personnel determined, and reported to Defendant, were dispensing drugs to individuals who had no legitimate medical need for them. At trial, the Government presented evidence regarding several suspicious ordering patterns of customers that RDC ignored, including the customers' purchase of highly-abused controlled substances in abnormally large quantities or their purchase of only controlled substances and nothing else, their acceptance of a high percentage of cash payments from patients, sales to out-of-area or out-of-state patients, and routine fulfillment of controlled substance prescriptions issued by physicians operating outside the scope of their medical practice or specialty. Relying primarily on internal RDC emails and the testimonies of Pietruszewski and another RDC employee, Jessica Pompeo Bouck, the Government also presented evidence that, despite being warned by RDC's compliance and legal personnel about these red flags. Defendant continued to direct the shipment of opioids to these problematic pharmacies with the knowledge that they were diverting.

After two weeks of trial, Defendant was convicted of conspiring to illegally distribute oxycodone and 400 grams or more of fentanyl in violation of 21 U.S.C. §§841 and 846 ("Count One"), and of conspiring to defraud the Drug Enforcement Administration ("DEA") in violation of 18 U.S.C. § 371 ("Count Two")- Defendant filed the instant motion shortly thereafter, arguing that the Government failed to adduce sufficient evidence that these conspiracies existed or, if they did, that Defendant joined them knowingly and intentionally.

II. DEFENDANT'S RULE 29 MOTION

A. Legal Standard for Rule 29 Judgment of Acquittal

Rule 29 of the Federal Rules of Criminal Procedure states that '"the court on the defendant's motion must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." Fed. R. Crim. P. 29(a). The Second Circuit has repeatedly observed that a defendant raising a sufficiency of the evidence challenge bears a heavy burden. See e.g., United States v. Lee, 834 F.3d 145, 152 (2d Cir. 2016), cert, denied, 137 S.Ct. 1599 (2017); United States v. Desnoyers, 637 F.3d 105, 109 (2d Cir. 2011); United States v. Gaskin, 364 F.3d 438, 459 (2d Cir. 2004); United States v. Feliciano, 223 F.3d 102, 113 (2d Cir. 2000). This is because the sufficiency of the evidence standard is "exceedingly deferential," see United States v. Coplan, 703 F.3d 46, 62 (2d Cir. 2012), requiring a court to "view the evidence, whether direct or circumstantial, in the light most favorable to the government and credit every inference that could have been drawn in its favor[,]" United States v. Diaz, 176 F.3d 52, 89 (2d Cir. 1999).

To prove its case, the government is not "required to preclude every reasonable hypothesis which is consistent with innocence." United States v. Chang An-Lo, 851 F.2d 547, 554 (2d Cir. 1988). It must instead "show more than evidence of a general cognizance of criminal activity, suspicious circumstances, or mere association with others engaged in criminal activity." United States v. Archer, 671 F.3d 149, 160 (2d Cir. 2011) (quotation omitted). A court must then "assess the evidence not in isolation but in conjunction .. . and the conviction[] must be affirmed, so long as, from the inferences reasonably drawn, the jury might fairly have concluded guilt beyond a reasonable doubt[.]" Diaz, 176 F.3d at 89-90 (citation omitted). Moreover, "[t]he weight of the evidence is not for us to consider, and thus any lack of corroboration is irrelevant because that speaks to the weight and not the sufficiency of the evidence/' United States v. Burden, 600 F.3d 204, 214 (2d Cir. 2010) (citing United States v. Hamilton, 334 F.3d 170,179 (2d Cir. 2003)).

B. The Proof as to the Existence of, and Defendant's Knowing and Intentional Participation in, the Conspiracy Charged in Count One was Sufficient

Count One charged Defendant with violating the Controlled Substances Act, which makes it "unlawful for any person" to distribute controlled substances "except as authorized." 21 U.S.C. § 841(a). To show guilt on Count One, therefore, the Government must prove that Defendant agreed with others to ship opioids in a manner that he knew or intended was "unauthorized" by law. A defendant unlawfully distributes drugs that are unauthorized by law if he distributes drugs that he knows are being diverted for illegal use. As Defendant himself recognizes, (see ECF No. 199, at 8). a shipment of opioids is "unauthorized" in one of two situations: first, where the distributor did not maintain effective controls against known diversion, 21 C.F.R. § 1307.71(a); or, second, where such shipment was known to be not for a legitimate medical purpose, 21 U.S.C. § 823(b)(5).

Viewed in the light most favorable to the Government, the proof supports Defendant's conviction under either analysis. Starting with the former, the Government presented considerable evidence that Defendant knew what was required to distribute drugs in an "authorized manner," i.e., his obligations to maintain effective controls against diversion, and that Defendant repeatedly directed other RDC employees to conduct business in a way that flouted those obligations. First, the Government brought in Ruth Carter, a former employee with the DEA's diversion control division to explain the parameters of "effective controls." Carter explained that each DEA registrant has specific responsibilities and requirements by which they must abide in order to satisfy their obligation to maintain effective controls against diversion. (Transcript of Trial Proceedings ("Tr.") 88:19-20.) The mere fact that a company holds a DEA license does not necessarily mean they are complying with that obligation. (Tr. 82:17-20.) She explained that a wholesale distributor's (such as RDC) obligation to "maintain effective controls" "require[s]" them to "design a system that identifies to them suspicious orders," and "report those suspicious orders to the DEA upon discovery." (Tr. 89:20-25; see also Tr. 92:5-7 ("the DEA requires the orders be reported because ... the federal law requires they be reported").) Carter also told the jury that distributors are required to investigate any flagged orders to determine whether they are indeed suspicious, and that, "[i]f they cannot dispel the suspicion, [] then they should not ship those orders.^[1] (Tr. 90:1-7; see also Tr. 91:15-92:2 (Q. What is a distributor required to do under the law with respect to suspicious orders? A. Well, the requirements are that they are to review the order, investigate it, and determine if it's suspicious. And if it is suspicious, if they can't dispel the suspicion that originally caused it to be flagged by their system, then they should not ship that order. And they shouldn't ship any subsequent orders until and unless they can dispel that suspicion. So if they never dispel the suspicion, they shouldn't ship the orders to that customer.).)

Second Carter's testimony and other evidence adduced by the Government proved that Defendant was well-aware of these obligations. For example, Carter testified that the DEA regularly reminds distributors, via written correspondence, that they are required to report suspicious orders and refrain from fulfilling those orders. (Tr. 92:14-93:5.) The Government furnished two such letters that the DEA sent RDC in 2006 and 2007. Among other things, these letters reminded RDC of its reporting obligations and its "statutory responsibility to exercise due diligence to avoid filling suspicious orders that might be diverted into other than legitimate medical, scientific, and industrial channels." (Gov't. Ex. 272 (emphasis added); Gov't. Ex. 273.) So as to avoid any doubt as to RDC's obligations under the law, Carter testified that merely having a compliance system does not mean that a distributor is maintaining effective controls against diversion, and she repeatedly emphasized that distributors must actually carry through with their requirements to identify, investigate and report suspicious orders to the DEA and "immediately cease all sales" to any registrants displaying...