Reverse Pharmaceutical Distributor and Execs Hit with Heavy Penalties for Fraudulent Scheme

A Long Island-based reverse pharmaceutical company, along with two of its top executives, were hit with large fines and ordered to pay some $94 million in restitution by a federal judge following their convictions on a number of charges, including mail fraud, wire fraud, theft of government property, money laundering conspiracy, obstruction of justice, and false statements.

Because a number of drug manufacturers permit the return of expired drugs for a refund, companies known as reverse pharmaceutical distributors have developed to manage large-scale returns of expired drugs for healthcare entities in exchange for a percentage on the return value. In this case, Devos Ltd., which did business as Guaranteed Returns, managed the return of expired drug products for a number of hospitals, pharmacies and long-term care facilities, in addition to the Department of Defense.

Evidence presented at the 2017 trial indicated that from 1999 through 2014, Dean Volkes, the former President, CEO and sole owner of Guaranteed Returns, along with his sister Donna Fallon, Guaranteed Returns’ CFO, stole the pharmaceutical products of clients that had engaged the company to return for refund their expired drugs and retained the refunds for the benefit of themselves. Through the scheme, Volkes and Fallong managed to steal over $100 million from over 13,000 clients.

Volkes and Fallon were sentenced to five years and one year and a day, respectively, in federal prison. The sentences came in addition to sizable forfeiture and restitution orders levied on the siblings and on Guaranteed Returns. Volkes and Guaranteed Returns were each ordered to forfeit over $114 million and pay restitution of $95 million, and Fallon was ordered to pay over $515,000 in restitution.

“The defendants and their company took advantage of their own clients, stealing millions of dollars, and then committed further crimes by attempting to cover up the fraud,” said U.S. Attorney McSwain. “This kind of fraud netted the defendants exactly what they deserve – a trip to prison. My Office and our law enforcement partners will not allow dishonest businesses like this to steal from customers – which, in this case, included American taxpayers.”