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United States v. Parrino

United States District Court, W.D. Kentucky, Louisville

July 13, 2015

LEO PARRINO, Defendant.


DAVE WHALIN, Magistrate Judge.


This matter comes before the Magistrate Judge on the motion of the Defendant, Leo Parrino, who seeks to vacate, set aside or correct a judgment of conviction entered against him in this Court on May 5, 2013, following his plea of guilty to a misdemeanor charge involving the introduction and delivery for introduction into interstate commerce of misbranded inhalation drugs.[1]

Parrino now maintains that his guilty plea was unknowing and involuntary due to the inadequate legal advice of his retained counsel, attorney Kenneth Plotnik, who allegedly failed to advise Parrino that as a result of his misdemeanor guilty plea Parrino would be subject to five years of mandatory exclusion from all federal healthcare programs such as Medicare and Medicaid.[2] Because Parrino is a pharmacist, his exclusion by the Office of Inspector General (OIG) of the Dept. of Health and Human Services deprived him of his sole livelihood, a civil penalty that he maintains was far and away more severe than his sentence of conviction, which was merely a year of probation along with restitution in the amount of $14, 098.24.

Parrino argues that Padilla v. Kentucky, 559 U.S. 356 (2010) imposed a constitutional duty upon attorney Plotnik to adequately advise him of this dire possibility of mandatory exclusion so that he could intelligently decide whether to accept the plea offer of the Government. He asserts that had he known of the §1320a-7(a)(1) exclusion he would not have chosen to plead guilty, but rather would have proceeded to trial even in the face of possible felony charges and potential restitution order of over $2 million.


Evidence involving Parrino's Sixth Amendment claim of ineffective assistance of counsel was taken on April 14, 2015, at a suppression hearing held before the Magistrate Judge.[3] At the hearing, Parrino testified that for over 40 years, since 1974, he has worked as a pharmacist. Parrino holds a pharmacy license in Indiana, Kentucky, Michigan and Arizona.[4] Beginning in April of 2002, he went to work for National Respiratory Services (NRS) a compounding pharmacy.[5] Parrino worked at NRS as a pharmacist for four years until October of 2006.[6] During this time, he was the only pharmacist employed by NRS. His job at the company involved compounding respiratory medications.[7]

On Nov. 1, 2006, Parrino left NRS to take employment with the K-Mart Corporation where he worked as a pharmacist for over seven years earning approximately $120, 000 per year.[8] Parrino continued working at K-Mart until January of 2014, when the mandatory exclusion imposed by the OIG took effect, at which time K-Mart terminated him after a brief period of leave.[9]

Parrino had been working at K-Mart for approximately 2 ½ years when on Feb. 9, 2009 he was contacted by federal agents of the FBI and the FDA.[10] FDA Agent Mark Bartley and Special Agent Milton of the FBI arranged to meet with Parrino.[11] Special Agent Bartley had earlier been contacted in August of 2008, by Kathleen Culver, an investigator with the Food and Drug Administration for some 23 years.[12] Culver had performed an audit of NRS in May of 2008.[13] Her audit revealed that NRS had been compounding a drug, Budesonide, used in respiratory inhalers and marketed under the name, Pulmicort. Company records showed that the Budesonide compounded at NRS in 2005 had been tested on various occasions and shown to be less than fully potent, or "subpotent.[14]" On other occasions, records of test results had shown the Budesonide in the tested inhalers was above the labeled potency, or "superpotent."

Concerned with the results of her audit, investigator Culver contacted FDA Agent Bartley to advise him what she had discovered at NRS and to obtain contact information for the OIG.[15] Bartley spoke with Culver several times about the subpotent and superpotent Budesonide compounded at NRS.[16] Culver believed that the mislabeled Budesonide had been shipped in interstate commerce by NRS within a 17-18 state area and that it had been billed to Medicare.[17] Armed with this information from Culver, Agent Bartley and FBI Special Agent Milton set out to contact Parrino to discuss NRS. Specifically, Milton and Bartley wanted to know if Parrino, the pharmacist at NRS, had known that subpotent and superpotent Budesonide had been shipped to patients during his employment with the company.[18]

Parrino explained that on the first occasion that he was visited by the two agents, their questions had focused primarily on the day-to-day operations of NRS.[19] Parrino explained to them that he was not a member of management at the company.[20] He had no decision making authority at NRS. He did not own any interest in the company. He likewise had nothing to do with the billing operations at NRS either.[21] Parrino tried to answer all of the agents' questions. According to him, he was never told by either Bartley or Milton that he was the target of a federal investigation.[22] The agents merely thanked him for his cooperation that afternoon and left.

Agent Bartley recalled that Parrino was specifically asked at this first meeting if either subpotent or superpotent drugs had been shipped from NRS.[23] According to Bartley, Parrino denied that any subpotent or superpotent drugs had left the facility. Instead, Parrino allegedly told Bartley that any such mislabeled drugs were destroyed.[24]

In August of 2009, the agents again met with Parrino.[25] On this occasion, they had drug laboratory testing reports obtained from Analytical Research Laboratory (ARL), the Oklahoma testing laboratory routinely used by NRS to test the drugs that NRS compounded, including Budesonide.[26] Postal inspector Paul King and Agent Bartley during this second meeting revealed laboratory test results that confirmed that various samples of Budesonide had tested either subpotent or superpotent.[27] Before he saw the ARL lab reports, Parrino allegedly denied that he knew that any subpotent Budesonide had been shipped out by NRS.[28]

After Parrino viewed the ARL lab reports, he changed his story according to Agent Bartley. Parrino stated to the agents that a small amount of subpotent drugs had been shipped from NRS.[29] Parrino told the agents that he was aware of a limited shipment of subpotent drugs and that he had informed NRS Chief Operating Officer Johnny Perry about the problem.[30] Perry supposedly responded to Parrino that because time was of the essence and drug testing expensive, the small shipment of the subpotent drugs would not be a problem.[31] Agent Bartley later obtained the shipping records to confirm that subpotent drugs indeed had been shipped out of the NRS facility at the time that Parrino was its sole pharmacist.[32] At the end of the second interview, the agents had Parrino prepare a handwritten statement, Government Exhibit No. 1, that indicated Parrino was aware that subpotent medications had been shipped out of NRS during his employment.[33] Parrino also admitted to the agents that on this second occasion he had adjusted the formula for Budesonide on an "as needed" basis.[34]

Parrino acknowledged that he did prepare and sign a written statement at the end of this second meeting with Bartley and the postal inspector.[35] The statement acknowledges that he was aware of a small amount of the drug that was not the proper strength was sent out to patients.[36] Parrino, however, was not responsible at NRS to determine the accuracy of the ARL drug test results for Budesonide, a drug that is in suspension and, according to Parrino, must be well shaken prior to testing due to its stability problems.[37] Accordingly, Parrino had no way of knowing if the tested Budesonide had been properly shaken prior to being chemically analyzed at ARL, if the lot sample submitted was beyond its expiration date, or of the testing equipment accuracy or the training of the employees at ARL. As before, the agents never advised Parrino throughout the second interview that he was the target of the investigation, which he believed was focused on the owner and CEO of NRS.[38]

Matters changed dramatically in May of 2010 for Parrino. In early May, the office of Assistant United States Attorney Lattrecia Jefferson-Webb contacted Parrino to advise him that the prosecutor wished to meet with him and his attorney.[39] Prior to this contact, Parrino had no idea that he might be charged with a criminal offense for his involvement in matters at NRS prior to his departure in October of 2006. Upon being contacted by Webb's office Parrino contacted the only local attorney that he knew, Kenneth Plotnik.[40]

Plotnik had handled some civil matters for Parrino.[41] He agreed to accompany Parrino to the meeting with Jefferson-Webb on May 27, 2010.[42] Plotnik had been licensed to practice law in Kentucky since 1978, and had previously worked as a full-time public defender in state court as well as appointed counsel on criminal cases in federal court.[43] At the meeting, Jefferson-Webb and Agent Bartley laid out the situation for Parrino and Plotnik. The federal government intended to prosecute Johnny Perry of NRS for Medicare fraud and wanted Parrino's assistance in obtaining a conviction.[44] The Government believed that Parrino had knowingly compounded and shipped misbranded drugs. If Parrino agreed to cooperate fully with the Government, the prosecutor explained that Parrino would be charged with a misdemeanor offense and thereby would avoid a potential felony conviction.[45]

Agent Bartley and the other agent present set out the Government's intended proof.[46] This proof included the ARL lab reports showing subpotent Budesonide test results and Parrino's own handwritten statement, both of which led the agents to openly conclude that they had a strong case against Parrino.[47] If Parrino did not cooperate he would be potentially subject to not only a federal felony conviction, but also a potential amount of restitution of more than $2 million.[48] If he did fully cooperate, he would be able to plead guilty to the misdemeanor offense and to substantially reduce any restitution amount.[49]

According to Parrino, he had little or no direct contact from the Government during the following year until August of 2011, when he was formally charged by information with violation of 21 U.S.C. §§331(a), 333(a)(1), 352(a) and 18 U.S.C. §2.[50] During this hiatus, Parrino called attorney Plotnik several times to ask if he had heard anything from the United States since their Memorial Day meeting with Ms. Jefferson-Webb a year earlier.[51] Parrino insists that attorney Plotnik throughout their interaction never made mention of any possible defenses to the charged misbranding offenses that he and Linda Schmidt, his replacement pharmacist at NRS, now faced.[52]

Parrino maintains that Plotnik never discussed the elements of the charges either.[53] Instead, in July or August of 2011, Plotnik contacted Parrino to advise him about the developments with the plea deal.[54] Under the deal, Parrino would agree to plead guilty to a strict liability misdemeanor. In return, he would receive a year of probation, along with a $1, 000 fine and an order of restitution in an amount to be determined.[55] Armed only with this information, Parrino elected to enter a plea of guilty before now retired Magistrate Judge Moyer on Sept.8, 2011.[56]

Parrino testified that attorney Plotnik never advised him that a misdemeanor conviction could require his mandatory exclusion from participation in all federal health programs.[57] No one, according to Parrino, ever discussed this possibility with him before his acceptance of the plea deal.[58] After Parrino pled guilty, matters once again returned to normal until May of 2013, when Parrino received a notice of his possible exclusion from the OIG advising him that he may be suspended from all participation in Medicare or Medicaid billing for five years.[59]

When Parrino received this letter from the OIG he immediately faxed a copy of it to attorney Plotnik and talked with Plotnik about the proper approach to take to preserve his ability to function as a pharmacist.[60] Plotnik, as Parrino recalls, advised Parrino that he disagreed that exclusion was mandatory under 42 U.S.C. §1320a-7(a)(1) given the language of subsection 7(b) of the same statute.[61] Attorney Plotnik wrote to the OIG to express this view - that exclusion was not mandatory, but rather permissive and should not be imposed in Parrino's case given his lack of involvement in the management of NRS.[62] Once Plotnik sent the response to the OIG, Parrino believed that the matter had ...

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