[00:00:10] Speaker 02: And we'll have argument next in United States against Miller. [00:00:26] Speaker 02: Mr. Klein. [00:00:28] Speaker 01: Good morning, Your Honor. [00:00:30] Speaker 01: May it please the court? [00:00:31] Speaker 01: My name is John Klein. [00:00:32] Speaker 01: I represent the appellant, David Miller, and I'd like to reserve five minutes, if I may. [00:00:37] Speaker 02: Just keep an eye on the clock. [00:00:39] Speaker 01: I will. [00:00:41] Speaker 01: Mr. Miller's conduct, as proven at trial, violated federal criminal law. [00:00:48] Speaker 01: Count 14 demonstrates that. [00:00:51] Speaker 01: That count charged a conspiracy to make false statements within the jurisdiction of the FDA. [00:00:58] Speaker 01: It also charged unlawful distribution of prescription drugs without an appropriate state license. [00:01:06] Speaker 01: Mr. Miller's conduct fit that charge. [00:01:10] Speaker 01: The evidence at trial supported it. [00:01:13] Speaker 01: He doesn't challenge that on appeal. [00:01:16] Speaker 01: So whatever this court does in this case, Mr. Miller will remain convicted on count 14. [00:01:22] Speaker 01: The problem is the government didn't stop with charges that fit Mr. Miller's conduct. [00:01:29] Speaker 01: It added on mail and wire fraud charges, mail fraud charges and a wire and mail fraud conspiracy charge, under a theory that this court had rejected in Brookhousen and that this court rejected again more recently in Milheiser. [00:01:47] Speaker 01: And then it piled on top of the mail fraud charges [00:01:52] Speaker 01: a RICO conspiracy charge and a money laundering conspiracy charge. [00:01:59] Speaker 01: That is exactly the kind of overcharging, prosecutorial overreach that the Supreme Court of the United States and this court have been resisting and pushing back against at least since McNally versus United States and particularly in the context of mail and wire fraud. [00:02:20] Speaker 01: You have McNally in 1987. [00:02:23] Speaker 01: You have the Cleveland case in 2000. [00:02:25] Speaker 01: You have the Skilling case. [00:02:27] Speaker 01: You have the Kelly case. [00:02:29] Speaker 01: You have the Ciminelli case. [00:02:30] Speaker 01: And now before the Supreme Court is the Koussis case. [00:02:34] Speaker 01: Case after case after case, from this court we have Bruckhausen. [00:02:39] Speaker 01: We have more recently Yates. [00:02:41] Speaker 01: We have Milheiser. [00:02:43] Speaker 01: In case after case after case, the courts have told the government not to stretch the mail and wire fraud statutes beyond their proper bounds. [00:02:52] Speaker 01: And in case after case after case, the government has insisted on doing so. [00:02:57] Speaker 01: And this is one of those cases. [00:03:00] Speaker 01: And so what we're asking the court to do is not to exonerate Mr. Miller or to give him a good conduct medal. [00:03:08] Speaker 01: We're asking the court to [00:03:10] Speaker 01: hold the mail and wire fraud statute within their proper bounds as set. [00:03:15] Speaker 02: So suppose somebody, imagine somebody goes on eBay and he offers for sale a baseball glove and he accurately describes its size and shape and manufacturer has a picture. [00:03:28] Speaker 02: And then he goes on to say, this glove was previously owned by Willie Mays, but that part's a lie. [00:03:38] Speaker 01: Is that wire fraud? [00:03:40] Speaker 01: Well, there are two levels of answer to that. [00:03:43] Speaker 01: First of all, it would be up to a jury to decide whether the lie about Willie Mae's prior ownership was an essential aspect of the transaction. [00:03:54] Speaker 01: I think that would go directly to the value of the glove. [00:03:58] Speaker 01: a regular old glove might be worth ten bucks. [00:04:02] Speaker 01: A glove owned by Willie Mays would be worth thousands of dollars. [00:04:06] Speaker 01: That's a huge difference. [00:04:07] Speaker 01: That's not this case. [00:04:09] Speaker 02: Setting aside for a moment your instructional challenges, why [00:04:15] Speaker 02: couldn't have properly instructed jury on the evidence before it conclude that this case is exactly that because drugs that were at a proper chain of custody from the manufacturer to the ultimate purchaser are worth more than drugs that were stored in somebody's office in a pizza restaurant. [00:04:35] Speaker 01: Because it's the quality of the drugs that matters. [00:04:41] Speaker 01: It is the quality of the drugs. [00:04:42] Speaker 01: And the evidence here showed that these were [00:04:47] Speaker 01: Real drugs in the original packaging, sealed, high quality. [00:04:52] Speaker 01: They were. [00:04:54] Speaker 02: There was also evidence. [00:04:55] Speaker 02: I mean, the jury might have believed that. [00:04:58] Speaker 02: But there was also evidence that when you don't have the proper chain of custody, you don't know whether they're safe. [00:05:06] Speaker 02: And the storage conditions might not have been what the storage conditions were supposed to be. [00:05:11] Speaker 02: And in at least some cases, the drugs weren't actually [00:05:16] Speaker 02: what it said on the label. [00:05:17] Speaker 02: And so from all of that, you could infer that drugs with the kind of chain of custody that was actually present here are worth less than ones with the known verified appropriate chain of custody. [00:05:30] Speaker 01: Well, there was a lot of speculation about what might or might not have been wrong with these drugs, but there wasn't any evidence that that actually was the case. [00:05:38] Speaker 01: The government, after years of investigation, found a handful of bottles that had problems. [00:05:44] Speaker 01: What the government never showed and never attempted to show and could not have shown is that Mr. Miller's company's bad bottle rate, if I can call it that, was worse than the bad bottle rate for the authorized distributors, the regular course of conduct. [00:06:00] Speaker 01: We presented evidence at trial that McKesson, one of the authorized distributors, had bad bottles, got a warning letter from the FDA for selling bad bottles to Rite Aid and Albertsons. [00:06:12] Speaker 01: That's not to throw stones at McKesson. [00:06:14] Speaker 01: It is to say that in any operation like this, there will be a small number of errors. [00:06:21] Speaker 01: Mr. Miller's company's error rate was no higher, not shown to be any higher. [00:06:26] Speaker 02: Is that? [00:06:26] Speaker 02: I mean, if you tell somebody, I'm selling you one thing, and you actually give them a different thing, do you think it's a defense to fraud to say, well, the thing I gave you, which wasn't what I told you I would be giving you, [00:06:39] Speaker 02: you know, had the same value as the thing you thought you were getting? [00:06:43] Speaker 02: Well, I mean, because that seems like a requirement of a financial loss, which Shaw says is not a requirement, right? [00:06:52] Speaker 01: It's not a requirement that there actually be a loss. [00:06:55] Speaker 01: It's a requirement that economic loss be contemplated as part of the scheme. [00:07:00] Speaker 01: And that's, by the way, the issue that CUSISIS will decide in the next few months. [00:07:06] Speaker 01: to have a scheme to defraud under the mail and wire fraud statutes must contemplated harm to a property interest be an object of the scheme. [00:07:16] Speaker 01: It was not the object of this scheme. [00:07:18] Speaker 01: There is no evidence at all of that. [00:07:21] Speaker 01: So it's not a question of loss, although there was no loss here. [00:07:24] Speaker 01: As a matter of fact, the victims in the case bought these drugs from Mr. Miller, sold them to consumers at a profit, [00:07:34] Speaker 01: even after Mr. Miller got charged and they were aware of the allegations in this case, they never went back to the consumers and said, oh, by the way, we owe you a refund. [00:07:43] Speaker 01: So economic harm was never the object of this. [00:07:47] Speaker 01: And so in answer to your question, no, it is not a mail or wire fraud offense to sell something through deception unless [00:08:00] Speaker 01: the object of the scheme is to cause economic harm. [00:08:04] Speaker 01: That's the point of Takalov, it's the point of Milheiser, and your honor I know was on that panel. [00:08:10] Speaker 01: You don't have a male, you may have other crimes, and in fact here you do on count 14, but you don't have male and wire fraud unless harm to an economic interest is an object of the scheme. [00:08:23] Speaker 02: Do you think it would be, [00:08:26] Speaker 02: Stating the proposition, as you just stated, it seems very close to the question presented in CUSISIS. [00:08:33] Speaker 02: Do you think it would be appropriate for us to hold this case for that? [00:08:36] Speaker 01: I do. [00:08:36] Speaker 01: I didn't. [00:08:39] Speaker 01: A month and a half ago when the government conceded that the materiality instruction was correct, I took a different view. [00:08:46] Speaker 01: I wanted the case to get resolved quickly. [00:08:49] Speaker 01: I think at this point, Koussisis, it's argued December the 9th. [00:08:54] Speaker 01: There'll be a decision probably in the spring. [00:08:56] Speaker 01: No matter what the court does, Mr. Miller, who is incarcerated now, he's going to have to serve time on count 14 so that I can see no harm to him from having the court wait for Koussisis. [00:09:11] Speaker 01: And Koussisis, it can go one of two ways the way I see it. [00:09:16] Speaker 01: Well, there's a third way, but let me talk about how I think Cusissus might come out. [00:09:21] Speaker 01: Cusissus may hold, and certainly the petitioner has made, in my view, a strong argument for this, that contemplated economic harm is a requirement for mail and wire fraud. [00:09:31] Speaker 01: If that's the holding in Cusissus, Mr. Miller wins. [00:09:34] Speaker 01: And he doesn't just win on the instructional challenge, he wins on the judgment of acquittal, in my view. [00:09:41] Speaker 01: The other way Cusissus could come out is the way the Solicitor General is arguing. [00:09:46] Speaker 01: which is contemplated harm to an economic interest is not a requirement to have a scheme to defraud under the mail and wire fraud statutes, but to prevent those statutes from expanding to cover every manner of contractual dishonesty, you have to have this heightened materiality standard, the very essence of the bargain. [00:10:09] Speaker 01: I asked for that instruction in Mr. Miller's case. [00:10:11] Speaker 01: I took it straight out of the Solicitor General's brief and seminary. [00:10:15] Speaker 01: the Solicitor General in Koussis has made exactly the same argument, and that's why the government has confessed error in this case on that instruction, because the government didn't want to be inconsistent with the position it was taking in Koussis and the Supreme Court. [00:10:30] Speaker 01: So let's say the Supreme Court sides with the Solicitor General. [00:10:36] Speaker 01: It presumably will agree that that heightened materiality standard applies, and if it does, [00:10:43] Speaker 01: Mr. Miller doesn't get a judgment of acquittal because I think a reasonable jury could come out either way on that. [00:10:49] Speaker 01: But he would have a Sixth Amendment right to a jury finding under a proper instruction on that element. [00:10:56] Speaker 02: So the government has suggested that the failure to give that instruction was harmless. [00:11:01] Speaker 02: What's your response to that? [00:11:02] Speaker 01: Well, my response to that is severalfold. [00:11:04] Speaker 01: Number one, under this court's decision in the United States versus McHenry, which is cited in the [00:11:12] Speaker 01: volley of 28-J letters, the government waived that issue by not raising it in its brief. [00:11:18] Speaker 01: The arguments didn't change from the brief to the reply brief. [00:11:25] Speaker 01: Milheiser supported Mr. Miller's arguments, but it didn't change them. [00:11:29] Speaker 01: The arguments are the same. [00:11:30] Speaker 01: The government elected not to raise harmless error. [00:11:34] Speaker 01: In Milheiser, this court declined to [00:11:37] Speaker 01: first of all, recognize that the government hadn't raised harmless error and declined to do so suesponte, I don't think the court should do it suesponte here. [00:11:45] Speaker 01: In Milheiser, the court said that only happens in extraordinary cases and typically where the element at issue is undisputed. [00:11:58] Speaker 02: Millheiser was a sufficiently significant change that their failure to raise it before Millheiser could be excused. [00:12:08] Speaker 02: What's your response on the merits of the argument? [00:12:10] Speaker 01: My response on the merits is that materiality was hotly contested in this case. [00:12:15] Speaker 01: It was, I argued it in closing, the evidence from Stephanie Kornichuk, who was one of the main victim witnesses in this case, I thought bore very heavily on whether the deception here, the falsehood, was material. [00:12:32] Speaker 01: Ms. [00:12:32] Speaker 01: Kornichuk was the representative of a company called Genoa Health, which had a lot of pharmacies [00:12:42] Speaker 01: from Mr. Miller's products were sold in four states and 12 pharmacies. [00:12:47] Speaker 01: She figured out, she was pretty sophisticated. [00:12:50] Speaker 01: She went online where the manufacturers of drugs maintain lists of authorized distributors and she looked for BNY, the Puerto Rican company. [00:12:59] Speaker 01: It wasn't there. [00:13:00] Speaker 01: She contacted the FDA, talked to an FDA agent. [00:13:03] Speaker 01: This is in 2010, before she's ever doing business with Mr. Miller. [00:13:08] Speaker 01: The FDA agent had been investigating Mr. Miller's company for years at that point. [00:13:14] Speaker 01: Knew all about it. [00:13:17] Speaker 01: without quite warning her off, suggested that Mr. Miller was a bad actor and not somebody that she should be doing business with. [00:13:24] Speaker 01: She did business with Mr. Miller anyway. [00:13:26] Speaker 01: She did business with him for two years. [00:13:28] Speaker 01: She did $20 to $25 million worth of business. [00:13:32] Speaker 01: And by the way, when she testified at trial, she didn't report any problems whatsoever with Mr. Miller's product. [00:13:39] Speaker 01: So to me, that goes pretty strongly to materiality. [00:13:44] Speaker 01: Now, the government certainly would have its arguments at a trial on materiality. [00:13:50] Speaker 01: But to say that that is harmless beyond a reasonable doubt, I don't think the court can get there. [00:13:56] Speaker 01: And by the way, one other thing. [00:13:58] Speaker 01: After I argued materiality, citing Ms. [00:14:00] Speaker 01: Kornichuk's testimony in closing, the government got up in rebuttal. [00:14:05] Speaker 01: It put up a slide showing the weaker, [00:14:09] Speaker 01: materiality instruction, the one that was inadequate in Milheiser, and it argued to the jury, and I'm paraphrasing here, but it's quoted in our brief, this really isn't that high of a standard. [00:14:19] Speaker 01: This is not a high bar that we have to cross, this materiality. [00:14:24] Speaker 01: You can find it pretty easily. [00:14:28] Speaker 01: The fact that the government was able to get up and make that argument in rebuttal, in response to my argument focusing on Ms. [00:14:34] Speaker 01: Kornichuk and focusing on other aspects of the record as well, [00:14:38] Speaker 01: was very damaging, and to say that that whole series of events, the improper instruction, the government's reliance on that instruction in rebuttal, the government's argument to the jury, you don't really have to find anything much here to find materiality, that that's harmless beyond a reasonable doubt, I don't think the court can do that, even if the government had raised it, which it did not. [00:15:04] Speaker 02: Can you address the one of the instructions that you wanted was about [00:15:09] Speaker 02: would have told the jury that accurate information on the source of the drugs does not constitute property. [00:15:16] Speaker 02: And assuming that to be a correct statement of the law, why do you think it was necessary for the district court to give that? [00:15:25] Speaker 02: I mean, was there any suggestion that accurate information might have constituted property? [00:15:30] Speaker 01: That was not the government's property argument at trial. [00:15:35] Speaker 01: That I readily acknowledge. [00:15:38] Speaker 01: The problem is, [00:15:39] Speaker 01: The accurate information theory and the fraud and the inducement theory morph into each other very easily, because on one hand, you don't have any economic loss. [00:15:53] Speaker 01: You don't have any intent to cause economic loss. [00:15:55] Speaker 01: And a jury, a court for that matter, like in Bruckhausen, can very easily look at that and say, well, there's no economic harm here, so what's the property interest? [00:16:06] Speaker 01: There's no intent to cause economic harm. [00:16:08] Speaker 01: And that the easy next step, you see it in Seminale, you see it in Bruckhausen, you see it in Sadler, the Sixth Circuit case, is you sort of elide those two things. [00:16:20] Speaker 01: You move readily from harm to a property interest like money to a property interest like information, accurate information, the right to control. [00:16:31] Speaker 01: And I was worried at trial. [00:16:34] Speaker 01: that the jury was going to go there, because there was no evidence that these people suffered any harm or that Mr. Miller intended to cause them any economic harm. [00:16:44] Speaker 01: They all made a profit. [00:16:45] Speaker 01: And so the easy next step for a jury is to think, well, sure, they made a profit, but they didn't have this information that they needed, and that's the property. [00:16:55] Speaker 01: That's what I was worried about. [00:16:56] Speaker 01: And if you look at the way the cases play out, where one theory morphs into another so readily, I think it was a valid concern. [00:17:04] Speaker 02: You're down to about three and a half minutes. [00:17:06] Speaker 02: Yes, I'll play with the rest of my time. [00:17:07] Speaker 02: And we'll hear from the government. [00:17:14] Speaker 02: Mr. Chan. [00:17:14] Speaker 00: Good morning, Your Honors. [00:17:16] Speaker 00: May it please the Court, my name is Mary Jean Chan, and I represent the United States in this appeal. [00:17:20] Speaker 00: Miller's scheme here was to pass off diverted drugs harvested from the streets that were stored in haphazard conditions as prescription drugs that had remained in the regulated state-licensed chain, supply chain. [00:17:36] Speaker 00: This is not what his customers, hundreds of pharmacies across 38 states, wanted. [00:17:41] Speaker 00: They testified to this. [00:17:43] Speaker 00: over and over again at trial. [00:17:44] Speaker 00: This is not what they thought they were buying. [00:17:46] Speaker 00: This is not what he offered them to purchase. [00:17:49] Speaker 00: And this is paradigmatic fraud. [00:17:52] Speaker 00: This is not a situation such as Koussisou's. [00:17:55] Speaker 00: It's not a situation such as Simonelli. [00:17:57] Speaker 00: It is not a situation where the government's theory was ever on a services fraud or just a deprivation of accurate information. [00:18:05] Speaker 00: This court should resist the defendant's [00:18:08] Speaker 00: attempt to shoehorn the facts of this case into those very different scenarios. [00:18:16] Speaker 00: And it should find that the jury instructions here allowed the jury to properly convict the defendant on counts one to 13. [00:18:23] Speaker 00: In any case, the evidence was overwhelmingly in support of their convictions. [00:18:28] Speaker 00: To begin with, the object of the scheme for wire fraud and mail fraud has to be money or property. [00:18:35] Speaker 00: It is true that right now, the QCC court will be looking at whether net pecuniary loss is a requirement, but that is not the current case of the law. [00:18:44] Speaker 00: The current situation and the current state of the law requires only that there be an object of money or property, and that is manifestly met here where Miller's scheme was to get these people to buy these pharmacies to purchase from him. [00:19:00] Speaker 00: these drugs that were diverted drugs that he misrepresented. [00:19:04] Speaker 00: In terms of materiality, I should just clarify that the government didn't concede that it was erroneous for the court not to give Miller's proposed instruction of materiality. [00:19:16] Speaker 00: clarifying that the language that we used on pages 38 to 39 of our answering brief was overbroad in saying that there was no legal basis because that was no longer true when Milheiser subsequently came down and said specifically that the nature of the bargain language was something that was important in looking at the correct scope of a scheme to defraud. [00:19:40] Speaker 00: And that language in Milheiser was something that this court adopted for the first time from several other circuits, the Second Circuit, the 11th Circuit, the Sixth Circuit, but it had not previously been part of this court's case law. [00:19:54] Speaker 00: So Milheiser. [00:19:56] Speaker 02: I noticed that your 28-J letter is cited in the government's brief in Cusissus, which is, I'm not sure I... [00:20:05] Speaker 02: Recall a case where the government's Supreme Court brief cited a Court of Appeals 28 jail letter. [00:20:12] Speaker 02: I take it we are to infer from that that it's not just the developments in this circuit, but that is reflective of the position of the United States as to what the materiality element is. [00:20:26] Speaker 02: Is that right? [00:20:27] Speaker 00: The Solicitor General has taken a consistent position with respect to materiality in the Seminelli brief as well as the Koussisi brief. [00:20:36] Speaker 00: And there was concern, because it had been raised in the briefing in Koussisi, that the government's position, in this case Miller, might be read to be inconsistent with that position, and that is [00:20:50] Speaker 00: something that we wanted to clarify was not the case. [00:20:53] Speaker 00: The government speaks with one voice here. [00:20:55] Speaker 00: However, materiality with respect to the instruction [00:20:58] Speaker 00: was not required here because, as Milheiser explained, that type of instruction can cure an overbroad government theory. [00:21:07] Speaker 00: That was what was presented in Milheiser, where there was an overbroad theory of fraud. [00:21:12] Speaker 00: There was not such an overbroad theory of fraud here. [00:21:15] Speaker 00: This is quintessential fraud, where you had Miller representing, like a snake oil salesman, that what he was selling the pharmacies was one thing when it was really something else. [00:21:28] Speaker 00: And characterizing the essential quality of that drugs having traveled in the regulated supply chain as information and that the fact that that was information should be therefore putting it into the other category of the right to accurate information. [00:21:46] Speaker 00: would basically completely cannibalize the fraud statute and put everything in that category because any characteristic about a product could be characterized in some fashion as information about that and therefore characterized as about the right to accurate information. [00:22:06] Speaker 00: But that's not the situation here. [00:22:09] Speaker 00: What we have here is the core of fraud, where what Miller represented that he was selling was not actually what he was selling. [00:22:17] Speaker 02: So is it your position that the essence of the bargain materiality instruction [00:22:24] Speaker 02: was a correct statement of the law, but it was nonetheless unnecessary to give it here because the evidence just didn't support it? [00:22:31] Speaker 02: Is that what you're saying? [00:22:33] Speaker 00: That's basically it, Your Honor. [00:22:34] Speaker 00: In Milheiser, this court said that there was an overbroad theory of fraud and then looked to see whether the jury instructions could save that. [00:22:41] Speaker 00: And if there had been such a nature of the bargain or essence of the bargain jury instruction, then it would have saved that overbroad theory because it would not have allowed the jury to convict [00:22:51] Speaker 00: on misrepresentations that didn't go to the actual price or the quality of the toner. [00:22:58] Speaker 02: But why isn't it... I mean, I take it his position is, well, my misrepresentations really didn't go to the quality of the goods because, like, my goods were, you know, these drugs were just as good and all this. [00:23:12] Speaker 02: So why isn't that a factual question that needed to be presented to the jury so that they could decide, you know, whether you're right or whether he's right about that? [00:23:21] Speaker 00: Well, I think the instructions that were here allow the jury to do that because there was a requirement to find that the defendant intended to deceive and cheat his customers. [00:23:32] Speaker 00: And here, based upon his theory, [00:23:34] Speaker 00: If what he had said, if the customers actually knew that the pedigree was false, if they didn't really care about it, then there was no real deceit. [00:23:44] Speaker 00: And there was also no cheating, because they knew what they were getting was what he was actually giving them, as opposed to what he said. [00:23:51] Speaker 00: But the terms of what he sold, the terms of what MIC and Miller sold, were drugs that had legitimate pedigrees. [00:24:00] Speaker 00: In fact, part of the deal, [00:24:02] Speaker 00: was that when you got an invoice for the drugs that you purchased, you could go online and then find the pedigree. [00:24:09] Speaker 00: And that is what pharmacist after pharmacist testified that they did. [00:24:12] Speaker 00: When they received their shipments, they would go online and check the pedigree to make sure that it lined up because they were required to. [00:24:19] Speaker 00: So the value of the drugs was immensely lower to the extent that it had any value for these pharmacists. [00:24:26] Speaker 00: And that's not even including the extra trouble it took some of them as the court is likely aware. [00:24:34] Speaker 00: There were a number of instances starting in 2009 where at least in the record that shows where pharmacists reported or customers reported that the drugs that they received were not things that were supposed to be in there. [00:24:50] Speaker 00: One child [00:24:51] Speaker 00: got three times the strength of Billify that he was prescribed, a mood-stabilizing drug. [00:24:58] Speaker 00: There were customers or patients who received HIV medication when they were supposed to be being treated for hepatitis B. Over and over you have these situations. [00:25:09] Speaker 00: And what these pharmacists did when they received this was they tried to track down the source of the problem. [00:25:15] Speaker 00: And that goes to the heart of why this was such a problem in terms of what Miller was doing and why there was really no evidence to support that what the customers got was what they expected to get and that there was the price, the price or the price discount was the only thing and the only thing that was central to the bargain or transaction here. [00:25:38] Speaker 00: These were not even the terms of what Miller offered. [00:25:40] Speaker 00: Miller understood, and the evidence showed this overwhelmingly, that these pedigrees were important. [00:25:46] Speaker 00: In fact, when Ara Karapedian first reached out to him and they were about to do business as a supplier with the medication, sorry, I have the wrong person in mind. [00:25:59] Speaker 00: I mean David Kongesberg. [00:26:01] Speaker 00: When he first reached out to Miller, or Miller and he were put in touch, Miller's first question to him was, do you have pedigree for these drugs? [00:26:09] Speaker 00: Because Miller understood that pedigree was extremely important to the transaction of pharmaceuticals. [00:26:15] Speaker 00: It is a specific regulated industry, and it held a special meaning. [00:26:20] Speaker 02: Mr. Klein told us [00:26:25] Speaker 02: forgetting the name of the witness, but there was a witness who said, you know, we kept on buying, and so one can infer that at least some of the buyers maybe didn't care. [00:26:36] Speaker 02: What's your answer to that? [00:26:37] Speaker 00: My answer to that is, first of all, that Judy Rumpler is the pharmaceutical representative for QL Med, and that is the one, the pharmacy that was charged in counts five to 12, all but two of the male fraud counts. [00:26:53] Speaker 00: And she very specifically testified that as to her and her company, her pharmacy, they cared, that they cared that the pedigrees are available and she would not have done business with any supplier that could not provide pedigrees. [00:27:07] Speaker 00: And that is at volume eight of excerpts of record, pages 1,666 to 69. [00:27:14] Speaker 00: So that's as to her. [00:27:16] Speaker 00: So when we're talking about customers, that is one particular customer. [00:27:20] Speaker 00: So whatever Stephanie Kornichuk did or did not do in some ways does not undermine what decision Ms. [00:27:27] Speaker 00: Rumpler made. [00:27:28] Speaker 00: However, Stephanie Kornichuk's testimony is not exactly as my [00:27:35] Speaker 00: friend on the other side has represented it. [00:27:37] Speaker 00: She represented that she was very caring about pedigrees, and that is why she kept trying to chase down to see whether these pedigrees were legitimate. [00:27:46] Speaker 00: And ultimately, when she was not able to get a good answer, because instead of satisfying her questions, David Miller flew up to Seattle and took her and her husband to a Mariners game with very good seats [00:27:58] Speaker 00: She decided this is not good, I feel very uncomfortable about this, and I am going to stop doing business with MIC. [00:28:04] Speaker 00: In fact, at excerpts of record, volume 3, page 576, there is an interaction where MIC wanted to expand business with her and said, let me give you some discounts, hopefully that will change [00:28:19] Speaker 00: change your calculus, and her response very succinctly said pedigree is the key. [00:28:24] Speaker 00: And shortly thereafter, she stopped doing business with MIC and David Miller because pedigree was important to her. [00:28:30] Speaker 00: Justin Chan from Premium Pharmacy in Queens, New York, where there was a problem also, said that the reason they did business with secondary distributors was mostly because of the availability of product. [00:28:46] Speaker 00: not just pricing. [00:28:47] Speaker 00: Pedigree is critical, he said. [00:28:58] Speaker 00: said the same thing. [00:29:00] Speaker 00: He would not buy drugs from any wholesaler that did not provide legitimate pedigree, excerpts of record, volume three, 507 to 08. [00:29:07] Speaker 00: So you had pharmacist after pharmacist say that this was extremely important to them. [00:29:14] Speaker 00: And of course, this was something that was required by law. [00:29:18] Speaker 00: And you had experts, Michael Ignacio from the California Board of Pharmacy, as well as Karen Rothschild, [00:29:23] Speaker 00: from the FDA testify as to the requirements of the Prescription Drug Marketing Act. [00:29:29] Speaker 00: You had the manufacturer Gilead testify to this. [00:29:33] Speaker 00: Amerisource Bergen, a primary wholesaler, testified to this. [00:29:38] Speaker 00: Alexander Solomon, one of the suppliers of the illicit drugs, explained [00:29:43] Speaker 00: that the pedigree is important because you needed a pedigree in order to, quote, make a sale. [00:29:49] Speaker 00: Miller knew that pedigrees are important. [00:29:51] Speaker 00: Email after email that was introduced through Special Agent Tovey explained that he internally with MIC [00:29:57] Speaker 00: and other people that he was dealing with talked about pedigrees and the importance of pedigrees and how to satisfy customers over their need for pedigrees. [00:30:07] Speaker 02: So if we conclude that he was entitled to an essence of the bargain materiality instruction, all of this evidence that you've just described, I guess, goes to whether the absence of the instruction was harmless. [00:30:22] Speaker 02: What do we do with the fact that you didn't argue harmlessness until your 28-J letter? [00:30:28] Speaker 00: Well, I think, first of all, you can find that we did implicitly make the argument in our answering brief because we talked a lot about the evidence. [00:30:36] Speaker 00: Secondly, we did make it explicitly. [00:30:38] Speaker 00: And so this court should find that any delay was inadvertent. [00:30:42] Speaker 00: And it was partly because Milheiser really crystallized the issue. [00:30:46] Speaker 00: As I mentioned before, even though the argument was made by the defendant, Milheiser is the first time that this court specifically imported or adopted the nature of the bargain language. [00:30:58] Speaker 00: And that, I think, our circumstance, and that was the first time that the government should have picked up on this. [00:31:04] Speaker 00: We should have discussed it in our answering brief, but it was not, it was not, and it was not really brought into this case until the reply brief in which basically every single page of the defendant's brief [00:31:18] Speaker 00: cited it. [00:31:19] Speaker 00: And so when it was put in sharp relief, the government answered that and explained why we think that harmless beyond reasonable doubt here, even if that instruction should have been given, which we don't think so, should not compromise the integrity of these jury verdicts. [00:31:36] Speaker 00: The other thing I would say is that even if this court finds that it needs to look at the heightened standard [00:31:43] Speaker 00: that it applied in the Milheiser and Yates cases with respect to sort of suespante, we believe that we meet that standard. [00:31:52] Speaker 00: The length and the complexity of the record, it's not that complex. [00:31:55] Speaker 00: It's really a very straightforward, simple case, as the district court repeatedly said. [00:31:59] Speaker 00: It's a straightforward theory. [00:32:01] Speaker 00: There are many pages of it, of course, but it's not a particularly onerous record. [00:32:07] Speaker 00: The harmlessness is certain, and it shouldn't be debatable. [00:32:09] Speaker 00: As I said, every single person who testified really was categorical in saying that the pedigrees were central to the value proposition that David Miller made to his customers. [00:32:22] Speaker 00: Retrying with the additional Milheiser-based jury instructions would not result in a different verdict, while it would require a costly new trial. [00:32:31] Speaker 00: And also, it wouldn't really make too much of a difference in the sentence, because as [00:32:39] Speaker 00: Miller just noted, he is not contesting Count 14, which by itself brings with it a 60-month sentence. [00:32:45] Speaker 00: I should also say with respect to the Harmless Beyond Reasonable Doubt standard, Your Honors, that Mr. Miller was able to make the arguments that he wants to make with the existing jury instructions. [00:32:58] Speaker 00: He repeatedly said that he didn't cheat the [00:33:02] Speaker 00: Clients because they wanted a cheap drug and that is what he gave them and that they really didn't care too much about the pedigrees because they must have been focused on the price and again the fact that Excuse me the jury instructions require that Miller be found to have deceived and cheated on [00:33:23] Speaker 00: that he had a scheme to defraud really encompasses that theory. [00:33:27] Speaker 00: And that is why, for example, in this court's unpublished decision in Hanson, this court found that where you didn't have an overbroad theory, such as in Milheiser, [00:33:38] Speaker 00: You don't have to look at the jury instructional question because you don't need the instructions to cure. [00:33:43] Speaker 00: Even right now with the Ninth Circuit model jury instructions which now import the language from Milheiser, it is not something that is a definition of one of the elements. [00:33:55] Speaker 00: It is extra commentary which helps to delineate the proper scope of a scheme to defraud. [00:34:00] Speaker 00: What we have here is the heartland of what the fraud statutes were intended to criminalize and penalize. [00:34:09] Speaker 02: Before you sit down, can you address the suggestion that the case be held for the Supreme Court's decision in Custis's? [00:34:20] Speaker 00: I don't think it's necessary, Your Honor, because again, Cassisi is different in terms of the fact pattern. [00:34:27] Speaker 00: In that case, we don't have the quintessential situation where you have somebody selling something that is not what is purported to be. [00:34:35] Speaker 00: It is more of the contracting type of a scenario where the [00:34:41] Speaker 00: the qualifications of the person who is bidding or trying to seek work are not what they represent it to be. [00:34:48] Speaker 00: So there is a question about whether net pecuniary loss is a requirement in that context, but I think that is only in that context as opposed to what we have here, which is just traditional property fraud. [00:35:04] Speaker 00: We don't have to wait for that. [00:35:05] Speaker 00: But if this court feels more comfortable waiting, of course, the government would have no objection to that. [00:35:13] Speaker 00: With that, we ask for an affirmance. [00:35:15] Speaker 00: Thank you. [00:35:21] Speaker 01: In Milheiser, the court found an over-broad fraud theory, and it found an over-broad fraud theory because the government's theory was that if you lied to get someone to enter into a contract to buy a product from you, even if you gave them full value, that was mail and wire fraud. [00:35:42] Speaker 01: That was exactly the government's theory here. [00:35:44] Speaker 01: We quote repeatedly in our brief from the government making exactly that argument in its closing argument and again in its rebuttal. [00:35:53] Speaker 01: The over broad theory in Milheiser is the same over broad theory here. [00:35:59] Speaker 01: The Milheiser District Court gave the, what I'll call the weak materiality instruction. [00:36:06] Speaker 01: So did the District Court here. [00:36:08] Speaker 01: This court held in Milheiser that heightened materiality standard was necessary to cabin the over-broad fraud theory. [00:36:18] Speaker 01: Exactly the same is true here. [00:36:21] Speaker 01: The heightened materiality standard is necessary to cabin the over-broad fraud theory. [00:36:29] Speaker 01: The government says Koussisis is different than this. [00:36:33] Speaker 01: Koussisis is a fraud in the inducement case. [00:36:35] Speaker 01: It has the same pattern that you have here. [00:36:38] Speaker 01: Someone uses deception to enter into a contract. [00:36:43] Speaker 01: They provide full value. [00:36:46] Speaker 01: And then the question is, is that enough for mail and wire fraud? [00:36:52] Speaker 01: Koussis says no. [00:36:53] Speaker 01: Koussis, the petitioner, says no, that the object of the scheme has to be to cause economic harm. [00:37:00] Speaker 01: That's exactly what we're arguing here. [00:37:02] Speaker 01: The Solicitor General says you don't have to intend to cause economic harm or have that as the object, but you do have to have this heightened materiality standard. [00:37:12] Speaker 01: Well, we've got both ends covered here because we asked for that heightened materiality standard which Milheiser adopted. [00:37:20] Speaker 01: If the court adopts either of those views, Mr. Miller should prevail here. [00:37:25] Speaker 01: The court should not find the error harmless here. [00:37:28] Speaker 01: It was not harmless. [00:37:29] Speaker 01: It was certainly not harmless beyond a reasonable doubt. [00:37:32] Speaker 01: Materiality was hotly contested. [00:37:34] Speaker 01: Yes, pharmacists came in and said, if we'd known this, we wouldn't have bought it. [00:37:39] Speaker 01: Of course, they're going to say that at this point. [00:37:42] Speaker 01: The same thing happened in Milheiser. [00:37:44] Speaker 01: Witnesses came in and said, oh, if I'd known the true facts instead of the false facts, I wouldn't have bought the product. [00:37:51] Speaker 01: That wasn't enough to lead this court to find harmless error, and it shouldn't be here either. [00:37:56] Speaker 01: Mr. Miller has a Sixth Amendment right to a jury determination on the critical issues in his case based on proper jury instructions. [00:38:05] Speaker 01: He did not get proper jury instructions. [00:38:08] Speaker 01: And certainly he should get an opportunity to present his arguments to a jury and get a determination by a jury. [00:38:20] Speaker 02: Thank you. [00:38:21] Speaker 02: Thank you. [00:38:21] Speaker 02: Thank both counsel for their helpful arguments in this case and the case is submitted.