Ex-Ethicon Rep Convicted of Charges of Conspiring to Transport Stolen Medical Devices
As a sales rep, you hear rumors of reps selling their trunk stock on the side but we've never heard concrete evidence that reps were actually doing it.
The closest thing we heard was a rep in Miami selling implants to surgeons who would turn around and sell them to hospitals in South America. The story was compelling but we're talking about a story from a sales rep so there could be a lot of embellishment.
Then this story popped up.
Last week, an ex-Ethicon Endosurgery rep was convicted in a South Florida court on charges of conspiring to transport stolen medical devices in interstate commerce, money laundering and other charges.
The indictment came down in 2007 for Kerri L. Kaley and her husband, Brian Kaley, but there was a lengthy period between the Superseding Indictment and the trial due to issues relating to the pre-trial restraint of assets that the Grand Jury had included in the forfeiture allegation of the Indictment.
According to the Indictment, between 1995 and February 2005, Kaley conspired with a group of Johnson & Johnson medical device representatives based in Long Island, New York, in selling medical devices to a Miami-based conspirator who would then pay the Kaley's through a shell corporation in Brian Kaley's name.
On paper, it probably sounded like a good plan to Kaley and her co-conspirators. They would steal significant quantities of prescription medical devices from their accounts in New York and then send them to a partner in Delray Beach, FL, where they would be sold. The products stole from hospitals ranged from sutures to state-of-the-art minimally invasive surgical devices. They would also steal and sell the samples Ethicon provided for them.
It's unclear from the Indictment how the DOJ got on to their scheme but it may have to do with failing to provide proper documentation on their tax returns and the income distributed to the co-conspirators.
The ringleaders of the group, Mr. and Mrs. Kaley, setup shell corporations (BKB Construction Corporation and Window Pro, Inc) in order to hide where the money came from. However, for unknown reasons, she would also deposit the payment checks in her name.
Overall, the crime syndicate of Ethicon reps pocketed over $2.2 million during their medical device crime spree.
Based on the Indictment, it appears the amount of money they were trying to hide become way too overwhelming.
The Kaley's were brazen enough to use this money to pay the co-conspirators, a home mortgage, a home renovation and child care. These expenses and sloppy accounting likely led to the IRS astutely asking second and third level questions before they decided to get the Miami-based Operation Miami Device involved. Yes, that is a real name and their work has led to convictions in over twenty cases of medical device theft and recovered more than $5 million.
Brian Kaley's trial is pending and no trial date has been set.
For Kerri Kaley, her sentencing is scheduled for December 2, 2016 and she faces a prison term of up to 5 years on the conspiracy charge, a maximum sentence of up to 10 years on each of the 5 substantive counts of transporting stolen property, and up to 20 years on the money laundering conviction.
Kaley has already agreed to foreit $500,000 in lieu of facing a forfeiture hearing before the same jury. Her potential fines could result in up to $250,000 for each of the 7 counts.
What's the lesson here? It's not worth it.
Yea, $2M is a lot of money but as a device rep with a large company, there is a good chance you could have $2M in your 401k by the time you are ready to retire. Sure, you won't be living it up with $2M when you're 45 but you also won't be wearing an orange jumpsuit for the rest of your life and miss your children growing up. Like hard drugs, don't do it.