Tag-Team Enforcement: After Years of FTC Proceedings, Rhode Island Businessman Pleads Guilty to FDC Act and Tax ViolationsSeptember 25, 2015
By James C. Shehan –
Aficionados of pro wrestling can regale you with the exploits of tag teams like The Bruiser and the Crusher, The Wild Samoans and The Fabulous Freebirds. The moniker FDA-IRS-FTC is far less colorful and mellifluous than those of WWE stars, but proved more than sufficient recently to take down a Rhode Island man accused of distributing unapproved cancer drugs. And therein lies an unpleasant lesson for those facing government enforcement actions.
On September 15th, James Feijo pleaded guilty in federal court in Providence, Rhode Island to selling products not approved by FDA as cancer mitigation and treatment options and to failing to pay ~$220,000 in employment taxes. But government interest in Mr. Feijo began years earlier and in another agency – the Federal Trade Commission.
In September 2008, the FTC announced enforcement actions against 11 sellers of bogus cancer cures. One of these 11 companies was Daniel Chapter One, a company owned by Mr. Feijo and his wife Patricia. Daniel Chapter One was said to market herbal formulations and shark cartilage for the prevention, treatment and cure of cancer, and to mitigate the side effects of radiation and chemotherapy. The FTC announcement noted that Daniel Chapter One also had received an FDA warning letter.
While six of the eleven companies had agreed to settle, Daniel Chapter One was not among them and so the FTC proceeded with a case before one of its administrative law judges. After an administrative trial, the ALJ in August 2009 upheld the FTC charges of deceptive claims and ordered the company and Mr. Feijo to stop making cancer claims for its products unless it could show that the claims were true, non-misleading and based on reliable scientific evidence. In December 2009, the FTC Commissioners unanimously upheld the ALJ.
Mr. Feijo and Daniel Chapter One then asked the U.S. Court of Appeals for the DC Circuit in March 2010 to review the FTC ruling that they were making deceptive claims. In December 2010, the DC Circuit ruled in favor of the FTC. Meanwhile, the FTC asked the Department of Justice to impose civil penalties on Daniel Chapter One and Mr. Feijo for violating the FTC order and in August 2011 the DOJ did so. A DOJ summary judgment motion for liability was granted in September 2012, leading to a final order of injunctive relief, equitable monetary relief in the amount of $1,345,832.43 and a civil penalty award of $3,528,000. In the course of that case, Mr. and Mrs. Feijo were held in contempt of a court order for, among other things, continuing during 2011 to make claim that their products treat or cure cancer.
The Feijos’s continued defiance of the FTC appears to have triggered the government to involve other federal agencies. In April 2014, following an investigation by the Rhode Island FDA Task Force and the IRS’s Criminal Investigation unit, a grand jury indictment issued charging Daniel Chapter One and Mr. and Mrs. Feijo with 18 counts of tax evasion and six of introducing an unapproved new drug into interstate commerce. This was followed by the afore-mentioned plea agreement, under which Mr. Feijo will plead guilty to one count of willful failure to collect, account for or pay a tax, punishable by up to five years imprisonment, and one count of introduction of an unapproved new drug into interstate commerce., punishable by up to one year imprisonment. Sentencing is set for January 12, 2016.
Enforcement activity by any one federal agency is a daunting prospect. But when a tag team of several agencies becomes involved, almost any defendant will be pinned to the mat.