The founders of an herbal company accused of secretly lacing pills with highly addictive prescription drugs have verbally agreed to plead guilty to reduced criminal charges and pay thousands of dollars in fines rather than face jail time, a defense attorney said.
The Orange County district attorney's office is negotiating the plea bargain as it pursues civil penalties of at least $5 million against each of the defendants to reimburse related medical costs that unwitting consumers incurred, along with an order that would prevent them from doing business in California.
The district attorney's moves are being questioned by customers who filed a separate class-action lawsuit against the defunct Brea company, BotanicLab Inc., and founders John Chen; his sister, Sophie Chen; and Allan Wang. BotanicLab -- a small, privately held firm -- made PC SPES, an herbal compound sold as a cancer remedy, and SPES, marketed to help the immune system.
The plaintiffs argue that BotanicLab and its founders are getting a slap on the wrist, and that the government's lawsuit will undermine their chances of recovering damages.
But legal scholars say that it is not uncommon in these types of fraud cases to go after the defendants on two legal fronts. They say the advantages can outweigh the disadvantages.
"You're not putting all your eggs in one basket," said Chapman University law professor Kurt Eggert. "Even if you can't get them jail time, you can get them to pay a hefty fine that might do more good."
The case dates back more than a year and centers mostly on PC SPES, which became popular among prostate cancer patients after respected medical journals published articles saying it appeared to reduce the growth of tumors. Its ingredients were said to be herbal derivatives, including reishi, Baikal skullcap, rabdosia, dyer's woad, mum, saw palmetto, San-Qu ginseng and Chinese licorice.
But in February 2002, the state health department's laboratory found that PC SPES contained elements of the blood-thinning drug warfarin, which is sold as Coumadin, and that a separate compound, SPES, contained the anxiety drug alprazolam, which is sold as Xanax. Both are supposed to be taken under a doctor's supervision.
BotanicLab contended that the products were contaminated during shipments from overseas. The company went out of business in June 2002, saying that it was unable to survive after shelving those two drugs and paying to fight a class-action lawsuit filed by cancer survivors who had used PC SPES.
That same month, consumers were warned to avoid remaining supplies of seven other BotanicLab products because they might also be contaminated with ingredients of prescription drugs.
The Chens and Wang were charged in May with seven felony and seven misdemeanor counts of conspiring to doctor a variety of pills with prescription drugs and falsely promoting them as cancer remedies.
At a hearing this week, prosecutors and defense attorneys told a judge that a plea agreement was being worked out and that both sides expected it to be finalized by next month. A new hearing is set Dec. 18.
Deputy Dist. Atty. Byron Nelson, the lead prosecutor in the case, declined to comment.
Jake Brower, an attorney who represents Sophie Chen, said that under the verbal agreement, the defendants would be spared jail time. The charges would be reduced to a felony and a misdemeanor, and the founders sentenced to probation and ordered to pay about $50,000 in fines each. The corporation would pay a steeper fine, though Brower did not know how much. An attorney representing BotanicLab could not be reached for comment.
"We think it's a fair disposition for everybody, if it goes down like that," Brower said. "There could still be disagreement. But we are all in loose agreement that it's going to be resolved" Dec. 18.
In a separate civil suit filed Oct. 14, prosecutors are seeking a permanent injunction barring the company and its founders from resurrecting their business, and requiring them to reimburse consumers and clients for medical expenses and other damages. Prosecutors are asking that each defendant pay no less than $5 million.
Ron Gottschalk, an attorney representing the plaintiffs in the class-action lawsuit, described the prosecutors' actions as a "sellout."