Why it matters: Charging corporate executives under criminal RICO in this situation where deaths occurred as a result of alleged improper drug compounding and regulatory violations is an unusual application of the racketeering statute. If the government is successful in this case, will we see an expansion of criminal RICO charges to other situations where industrial, business and commercial misconduct or lax controls result in deaths?

Detailed discussion: In 2012, there was a nationwide outbreak of fungal meningitis. Of the 751 cases reported in 20 states, 64 patients in 9 of those states died. It was determined that the outbreak was caused by contaminated vials of preservative-free methylprednisolone acetate (MPA) that were manufactured by the New England Compounding Center (NECC), a compounding pharmacy located in Massachusetts.

On December 17, 2014, the U.S. Attorney’s Office for the District of Massachusetts unsealed a 131-count indictment in the case of U.S. v. Cadden et al., 1:14 cr-10363, charging 14 individuals connected with NECC with a variety of charges, including racketeering, mail fraud and violations of the Food, Drug and Cosmetic Act (FDA). NECC’s owner, Barry J. Cadden, and its supervisory pharmacist, Glen A. Chin, were additionally charged with 25 RICO predicate acts of second-degree murder under the laws of seven states.

In a press release issued at the time the indictment was unsealed, the government said that Cadden and Chin showed an “extreme indifference to human life” when they authorized the manufacture and distribution of MPA, which they knew to be manufactured in an “unsafe manner and in insanitary conditions, and authorized it to be shipped out anyway, with fatal results.” The government alleged in the indictment that this “extreme indifference to human life” satisfies the second-degree murder laws of the seven states where the deaths took place and thus these murders constitute the necessary predicate racketeering acts under RICO.

These 25 predicate acts on the part of Cadden and Chin were further charged in the indictment to be part of a broad racketeering scheme by NECC and its marketing arm, which served as an ongoing “enterprise” that, among other things, worked together to knowingly manufacture, sell and distribute a variety of drugs in an unsafe and unsanitary manner and shield its illicit operations from FDA oversight, all for the common purpose of obtaining money through false pretenses.

This high-profile case is one to watch as it wends its way through the courts. While civil RICO has been used by the government and private litigants in a wide variety of cases where predicate acts of mail and wire fraud are alleged, criminal RICO is typically used as a tool by the government against organized crime, street gangs and other organized criminal activity. If the government is successful in this case, will we see cases where lax business and commercial controls leading to deaths are charged under criminal RICO? The government may be fighting an uphill battle in proving that the specific elements of RICO apply in this case, however. Were the alleged 25 second-degree murders “predicate acts” in furtherance of an “enterprise” that had a common purpose of engaging in a continuous course of criminal conduct? We shall watch and see.

Click here to read the indictment in U.S. v. Cadden et al., 1:14 cr-10363 (D. Mass).

For more on this matter, refer to the press release issued on 12/17/14 by the U.S. Attorney’s Office (District of Massachusetts).