Men convicted of marijuana smuggling, bribery, armed robbery, burglary and theft have abandoned those endeavors in favor of a safer, richer business: Wholesaling pharmaceutical drugs in South Florida.
Lax state regulation and mild penalties have allowed at least eight convicted criminals to set up wholesale drug companies and obtain Florida permits to peddle the medicines Americans take daily.
The criminal element in the business has formed a network of companies trading hundreds of millions of dollars in medications, some of it phony, diluted, expired, relabeled or improperly handled, according to documents and state and federal officials investigating the industry.
These outfits also have built connections to supply other local wholesalers who sell to the nation's largest pharmaceutical distributors, turning South Florida into a major source of counterfeit and adulterated medications tainting the mainstream drug supply.
How lucrative can it be? Three wholesalers the state is investigating live in million-dollar homes in Weston's Windmill Ranch Estates neighborhood.
The state has licensed 422 Florida companies as drug wholesalers -- most of them tiny operations, from Miami to West Palm Beach -- plus 978 more who trade here from out of state.
The industry contends that small wholesalers play a legitimate role, holding down drug costs by snapping up overbuys and manufacturer specials at discounts, and reselling them to three huge nationwide firms that distribute about half of the country's drugs.
But investigators say the process has been subverted. Agents have traced deals in which unscrupulous wholesalers paid pennies on the dollar for bogus drugs or for bona fide medicines sold illegally by doctors, pharmacists and patients. The drugs were sold and resold among as many as 10 small wholesalers, each marking up the shipment to make a profit.
A special team of state and federal agents, for more than a year, has been investigating and presenting to a grand jury evidence of illicit trading in prescription drugs in South Florida.
Here are some of the wholesalers who are under investigation or have been arrested:
Michael Allyn CarlowCarlow, 50, has emerged as a major wholesaler selling millions of dollars worth of questionable medications out of his $1.3 million home in Weston, investigators said in documents. He buys and sells using at least a dozen firms run by him or associates in seven states.
Carlow surfaced in the business in 1994, opening Quest Healthcare in Davie. Florida law forbids giving a wholesale license to a felon, but Carlow never mentioned that he had a felony conviction, and regulators never checked.
In June 2000, Carlow and an aide were arrested for buying 83 boxes of a costly, injectable cancer and AIDS drug, Neupogen, from witnesses working with investigators.
Carlow, his partner and the witnesses met on a Miami street corner. Carlow turned over $93,000 and loaded the medicine from the witnesses' trunk into his van. To remain potent, Neupogen is supposed to be refrigerated.
The state sentenced Carlow to 18 months probation and revoked his wholesale license. But he was able to stay in business, according to records.
Barely a month after his arrest, the girlfriend of his longtime associate started a wholesale firm under the name Med RX in Fort Lauderdale. On the day state inspectors visited Med RX, they found Carlow and his friend, Mark Novosel. Investigators say both help to operate the company.
Novosel had been arrested in 1980 as the planner and driver in a burglary that ended in the stabbing death of his elderly Ohio neighbor. His confession to his role was thrown out and the case was dropped, the prosecutor said. In 1998, Novosel was convicted of taking kickbacks and bribing a judge to send patients to substance abuse centers Novosel ran.
Another Carlow associate, David Ebanks, was arrested in Miami in April and found with fake driver licenses with his photos on them. The licenses were in the names of people who had agreed to set up wholesale firms on his behalf in Miami and Texas, allowing him to pose as them, state investigators said.
Carlow had a family member open a Kissimmee company called BTC Wholesale that was little more than an empty office. Carlow actually ran BTC from his house, with a second relative doing the books from her Lake Worth home, documents show.
In January 2002, thieves stole $250,000 of injectable blood medications from Miami wholesaler Biomed Plus. Three days later, Carlow offered the same drugs to the Stone Group, a Boca Raton wholesaler, documents show.
Stone Group sent an employee to fetch the vials at Carlow's house on a Sunday and the next day put them out for sale over the Internet and via mass-issue faxes. Stone Group sold the drugs -- back to Biomed.
It was a sting. Biomed had called the authorities, who were waiting for the delivery. Stone Group employees later told investigators they had picked up $2.2 million of questionable drugs at Carlow's house over three months.
When inspectors checked Stone Group's records, they found receipts for at least $700,000 in medications bought from a Utah firm but delivered from Novosel's house in Fort Lauderdale. Agents said he and his girlfriend ran the Utah company, Optia Medical. Optia also was accused in a 2002 lawsuit of selling part of $8.5 million in a relabeled, counterfeit blood booster called Epogen found at AmerisourceBergen Corp., a huge national distributor.
An Oct. 1 shipment illustrated Carlow's operation.
State agents seized 131 boxes of the anemia drug Procrit, used to treat cancer and HIV/AIDS patients, worth $226,000 in a Miami sting. Tests showed it was 5 percent strength relabled as full strength. They traced it back.
A Carlow associate had obtained or relabeled the drugs and sold them to a Carlow dummy company in Odenton, Md., which shipped them to a Carlow associate in Indiana who was licensed to sell into Florida. The Indiana firm shipped them back to Carlow to be resold again when the package was intercepted, officials said in a search warrant.
"It's classic money-laundering technique," said William Avery, a Medicaid fraud investigator for the state attorney general. "The more layers you put between the good guy and the bad guy, the more protection there is for the bad guy."
Carlow's attorney, Craig Brand, declined to discuss specific allegations, but said Carlow was filing a lawsuit accusing the state of unfairly persecuting him.
"It's easy to throw stones," Brand said. "I look forward to seeing their proof. They haven't done anything, have they? The end of the day is going to be interesting."
José Antonio BenitezBenitez failed as a marijuana trafficker -- he got busted and spent five years in federal prison. Later, he lost his job at a trucking company, then went to jail for trying to defraud his former employer.
But Benitez, 45, made millions as a pharmaceutical wholesaler in North Miami. Even after the state of Florida caught up with him, he set up shop in North Carolina and continued selling into Florida.
When he got his wholesaler license from Florida in July 1999, Benitez had just pleaded guilty to wire fraud in a Mississippi federal court and had recently completed probation from a 1991 conviction for smuggling pot into Key West. Like Carlow, he did not disclose his convictions and no one checked.
Benitez and two partners built their company, Triple J Trading, into a wholesale force, documents show. After 18 months, the state learned of his convictions and revoked his license. But within weeks, his wife, Solange, opened a new Miami company, Brazil-U.S. Trading. Within months, his brother and a Pembroke Pines wholesaler started A&J Trading in Mint Hill, N.C.
"Anyone with a warehouse, an alarm, air conditioning and a refrigerator can get a license," said Robert Penezic, a Florida assistant attorney general overseeing a grand jury investigating the wholesale drug business.
In January 2002, state health inspectors watched a Brazil-U.S. driver deliver $5,000 of AIDS pills to a Davie wholesaler. All had sticky labels, an indication they were relabeled and likely fake, expired or adulterated, documents show.
Inspectors raided Brazil-U.S. and found Benitez. He claimed he was just a consultant. The state seized 145 bottles of adulterated AIDS drugs and cholesterol medications worth $1 million, all with sticky labels, plus common chemicals used to remove labels.
Brazil-U.S. records show it had sold $4 million of drugs to local wholesale and retail outlets, and had bought $6.9 million during five months of 2001 from A&J.
The drugs likely were "purchased from numerous street sources willing to sell their prescription drugs for pennies on the dollar," state officials said in a search warrant. "A&J Trading is a front company and ... Brazil is using A&J's business account to launder proceeds of its illegal operation."
A&J is still open, but Benitez is missing and a fugitive. He violated his federal probation last year by testing positive for cocaine and not showing up at a court-ordered program, federal court records show.
Contacted on his cell phone, Benitez said he would consult his attorney, then said neither he nor his wife would comment.
Laurence D. and Adam P. RunsdorfThe father and son from Boca Raton have been a pharmaceutical team for a decade, and in recent years took in millions as wholesalers. Documents show they were a conduit for counterfeit drugs reaching the drug supply.
Laurence Runsdorf, 63, a career executive in the industry, started the drug manufacturing firm Breckenridge Inc. in 1983 in New Jersey. He moved it in 1992 to Boca Raton, where he lives in a $1.3 million home. His son Adam, 38, was an executive at the company.
Adam Runsdorf got into the wholesale drug trade by opening Stone Group in the same building as Breckenridge.
Stone Group bought drugs with false paperwork from unlicensed sellers, including millions worth at Carlow's house, documents show. Adam resold drugs to his father's company. Breckenridge was a valuable buyer, Runsdorf said in an interview, because it had a contract to sell drugs to giant Amerisource.
State inspectors found 37 invoices from 2001 and 2002 in which Stone Group sold $3.8 million of drugs to Breckenridge. The father's firm then resold the shipments to Amerisource subsidiaries in Alabama, Texas and Kentucky that handle cancer drugs.
At least one of the shipments had a lot number identified as being 5 percent strength but that was relabeled as full-strength.
The shipment's paperwork proved phony, concealing the true source of the drugs. Most likely, officials said, the drugs ultimately went to patients.
The state has moved to revoke the wholesale licenses of Stone Group and Breckenridge; the companies are challenging the actions.
Adam Runsdorf said he had no idea he was buying fake drugs, that the sellers tricked him. "The company that originated the product was out to defraud. It was clearly a premeditated course of action. We were naive and purchased a number of [tainted] products," he said.
His father got involved in the sales only as a favor to him, Runsdorf said, because Amerisource did not have an agreement to buy from the son's firm.
Eddie Mor and Carlos LuisIn Texas, Mor and Luis operate quiet, little pharmaceutical firms. In South Florida, where they live, they are under investigation on suspicion of making and peddling millions of dollars of bogus medications.
The state identifies Mor, 45, and Luis, 56, as a source of 5 percent strength Procrit relabeled as full-strength and sold to national, mainstream distributors. Authorities stumbled onto them by accident.
In April 2002, an undercover agent bought 100 boxes of injectable Epogen (identical to Procrit) and 17 of growth hormone for $509,000 from a Pembroke Pines wholesaler who was under investigation. The Epogen tested fake, documents show.
The wholesaler's records said he got the drugs from Mor's Express RX in Dallas, which got it from Luis's Medex International in Houston. But Florida officials found those offices inactive, with the firms run from South Florida.
A few weeks later, a major regional distributor, Bindley Western, discovered $1.7 million of fake Procrit in a Texas warehouse. The paperwork traced the drugs to the Mor and Luis firms.
Florida inspectors began checking. At a Coral Springs wholesaler, T-N-T Sales, they found Procrit from the phony batch. The owner told them he had bought and resold $2.5 million of drugs from Express RX, most of which he picked up at Mor's $500,000 home in Davie. His paperwork showed Mor got the drugs from Luis.
Agents searched Mor's house and found blood products in his refrigerator, $16,000 cash and $405,000 in uncashed checks.
At Luis's warehouse, agents found 30 boxes of a delicate blood byproduct, Venoglobulin, unrefrigerated in a cardboard box. They found pills with sticky labels, relabeling chemicals and bags of free samples from doctors. At Luis's house, agents found Procrit in his refrigerator and about 900 boxes of pills.
Attorneys for Mor and Luis declined to comment.
José Castillo and Brian HillA red flag went up when state health inspectors made a routine check at a Miami drugstore in February 2002. Six bottles of AIDS pills had sticky labels, indicating tampering. The source: Jemco Medical International.
The next day, according to court documents, agents visited Jemco in a Pembroke Pines industrial park. Nothing was amiss, but they began keeping an eye on the president, Castillo, 39, and vice president Hill, 36.
They noticed Jemco workers on forklifts moving boxes from the front of the warehouse to a rear door. There, they struck illegal gold. In a separate uncooled warehouse, they found $3.5 million of mislabeled and adulterated drugs, including a few items that should have been refrigerated. Castillo told them he did not know where the drugs came from.
Unlike other wholesalers who focused on expensive injectable drugs, Jemco had huge stocks of everyday medications: 100,000 albuterol pills for asthma, 26,000 albuterol inhalers, more than 120,000 vials of ipratropium inhalant and 156 bottles of assorted HIV/AIDS pills and other drugs.
At least 35 shipments had gone to hospitals in Puerto Rico, the state said.
The state suspended Jemco's license, but Castillo and Hill moved to North Carolina and began shipping drugs to Florida. Castillo went into business with closed-down wholesaler Benitez, and state agents saw Hill working at a wholesale firm started by a former Jemco underling.
A Jemco attorney, Ben Metsch of Miami, said the state's accusations were unproven "bull" and said the state unfairly seized the company's inventory, forcing Jemco to file for bankruptcy.
Louis F. Petrillo and Lawrence D. PinkoffPetrillo owned medical clinics. Pinkoff and partners owned pharmacies and drug wholesalers.
Together, they billed the state Medicaid program for $11.6 million worth of Procrit, Neupogen and other medications, then bought the drugs back at pennies on the dollar from their patients and resold them into the drug supply, investigators said in documents.
Petrillo, 62, was the former president of Bayshore Bank in Miami who resigned in 1987 and was convicted for giving a $2 million loan to a firm selling arms to Nicaraguan contras.
Petrillo hired doctors to see AIDS patients at County Line Medical Center in Pembroke Pines and Metro Dade Medical Center in Miami. Every two weeks, 150 patients showed up for "pay day," when they picked up their prescriptions and a $300 check, state documents said.
Patients got their medicine at two pharmacies owned by Pinkoff, 44, of Hollywood. Runners bought back the drugs for cash or pain pills, documents said.
"If they're junkies, they don't want the medicine, they want the money to buy crack," said Avery, the Medicaid agent.
The runners sold the drugs to Pinkoff's wholesale firms in Dania and Hollywood, the state said. The drugs wound up back in drugstores.
"Medicaid, we may have bought the same damn drugs twice, three times," Avery said.
In the pharmaceutical case, Petrillo pleaded guilty to organized fraud and is in federal prison for violating parole on the loan conviction. Pinkoff pleaded guilty to racketeering and was sentenced to two years of house arrest.
Petrillo's lawyer, Ruben Oliva, said Pinkoff lured Petrillo into the scheme. Pinkoff's lawyer, Bernard Cassidy, said Petrillo was the head man.
Bob LaMendola can be reached at firstname.lastname@example.org or 954-356-4526, Sally Kestin at email@example.com or 954-356-4510.Copyright © 2014, Los Angeles Times