Company Sentenced in Massive Pharmaceutical Scheme to Defraud, Launder Money
United States Attorney William M. McSwain announced that Dean Volkes, 55, Donna Fallon, 54, both of Long Island, NY, and Devos Ltd., doing business as Guaranteed Returns, also located in Long Island, were sentenced to five years’ incarceration, one year and one days’ incarceration, and five years’ probation, respectively, by U.S. District Judge Petrese Tucker. Additionally, Volkes and Guaranteed Returns were each ordered to forfeit $114,832,445.62 and pay restitution of $95,253,090.05, and Fallon was ordered to pay $515,221.89 in restitution. Volkes, Fallon, and the company were convicted at trial in March 2017 of mail fraud, wire fraud, theft of government property, money laundering conspiracy, obstruction of justice, and false statements in connection with a scheme to steal money from clients who relied on the business to return unused pharmaceutical products.
Photo/Robinraj Premchand
Volkes was the President, Chief Executive Officer, and sole owner of Guaranteed Returns, a reverse pharmaceutical distributor located in Holbrook, New York. Fallon, who is Volkes’ sister, was the company’s Chief Financial Officer. As a reverse distributor, Guaranteed Returns managed the returns of pharmaceutical products for healthcare providers, including numerous hospitals, pharmacies, and long-term care facilities, as well as Department of Defense facilities. Pharmaceutical manufacturers often allow expired drugs to be returned for a refund. Guaranteed Returns handled this process for healthcare provider clients in exchange for a fee based on a percentage of the return value.
The evidence presented at trial proved that from approximately 1999 through 2014, Guaranteed Returns promised its clients that it would hold their “indate” (not yet expired) drug products until they expired, and then return them on the clients’ behalf, in exchange for a fee. Instead, Guaranteed Returns, at CEO Volkes’ direction, stole indated drug products that it received from its clients, returned the drugs to manufacturers, and kept the refund money. Volkes created a system in which he classified clients as either “managed” or “unmanaged.” While both categories of clients were victimized, Volkes reserved special treatment for “unmanaged” clients by stealing what he could from them by ensuring that Guaranteed Returns kept the full value of the returned product for itself. The evidence demonstrated that through this fraud, Volkes and Guaranteed Returns stole more than $100 million from over 13,000 clients, including more than $20 million from numerous medical treatment facilities operated by the U.S. Department of Defense and other government agencies.
The evidence also showed that Volkes, Fallon, and Guaranteed Returns stole clients’ refund money by diverting a percentage of the refunds into internal company accounts, conspired to launder the proceeds of the fraud, and obstructed justice in connection with a grand jury investigation.
“The defendants and their company took advantage of their own clients, stealing millions of dollars, and then committed further crimes by attempting to cover up the fraud,” said U.S. Attorney McSwain. “This kind of fraud netted the defendants exactly what they deserve – a trip to prison. My Office and our law enforcement partners will not allow dishonest businesses like this to steal from customers – which, in this case, included American taxpayers.”
“At each turn, these defendants’ guiding principle was greed,” said Michael T. Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. “For years, they ripped off clients – among them, the U.S. government – to the tune of millions of dollars. They’re now being held accountable for their scheme, and for their brazen attempts to cover it up by obstructing justice. The FBI and our federal partners won’t stand for criminals stealing from the government and the taxpayers who fund it.”
“These sentencings are the direct result of a joint effort by the Defense Criminal Investigative Service (DCIS), the FBI and the U.S. Attorney’s Office, Eastern District of Pennsylvania,” stated Leigh-Alistair Barzey, Special Agent in Charge of the DCIS Northeast Field Office. “The fraudulent conduct in this case was particularly egregious and undermined the integrity of the U.S. Defense Department’s procurement system. DCIS is committed to working with its law enforcement partners to identify, investigative and prosecute individuals and companies who defraud the U.S. Government and the American taxpayer.”
The case was investigated by the Defense Criminal Investigative Service and the Philadelphia office of the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorneys Nancy Rue and Patrick J. Murray.
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