Shredded wheat
Feds' case vs. former supplement king sheds light on industry's underbelly
By T.J. QUINN AND MICHAEL O'KEEFFE
DAILY NEWS SPORTS
WRITERS
Sunday, April 22nd 2007, 4:00 AM
The sports supplement business was good to Jared Wheat,
the president of Hi-Tech Pharmaceuticals. During a December 2005 interview with
the Daily News, Wheat said Hi-Tech would earn $40 million that year by selling
powders and pills that build muscle, burn fat and boost energy.
He predicted that the company would rake in twice that much the following
year. Hi-Tech's well-appointed 4,000-square-foot headquarters in Norcross, Ga.,
just north of Atlanta, was a testament to its success. Wheat's office was
adorned with photos and models of his black Ferrari 360 Modena. His other car -
a Jaguar - was parked outside.
Those cars - and a parking lot full of other luxury vehicles, as well as
numerous properties and bank accounts - are now on a list of assets the
government wants to seize. The feds also want Wheat and his associates to pay a
money judgment of at least $19.8 million. Wheat's good times came to an abrupt
end in September, when a federal grand jury indicted Hi-Tech, Wheat and 10 other
people on multiple felony charges, including mail fraud, distribution of
controlled substances and introducing adulterated and misbranded new drugs.
Wheat portrayed himself as a savvy businessman who pushed the limits of the
Dietary Supplement Health and Education Act, the 1994 federal law that
deregulated the supplement industry. He cultivated an image as a rebel backed by
an army of lawyers eager to exploit loopholes in the government's 2004 ephedra
ban.
But prosecutors call him a life-long drug dealer and charged him with
engaging in a continuing criminal enterprise, an anti-Mob statute that could put
him in prison for a minimum of 20 years. The indictment and other documents
filed by prosecutors and investigators lay out some of the most shocking and
sweeping allegations ever leveled against executives in the largely unregulated
supplement industry.
According to an affidavit filed by prosecutors last month, Wheat and his
partners were willing to take drastic steps to protect their empire.
In 2004, Wheat and partners Stephen D. Smith and Tomasz Holda discussed
assassinating a Food and Drug Administration agent who had been investigating
Hi-Tech, according to the affidavit. In the weeks before the grand jury issued
its indictment, the feds say, Wheat and Smith talked about hiring a private eye
to dig up dirt to blackmail assistant U.S. attorney Aaron Danzig. Neither
alleged plot was carried out, but authorities did arrest Holda, a convicted
steroids trafficker, after he purchased a firearms silencer. He later pleaded
guilty to gun charges.
The September indictment claims that Wheat and his associates used
Internet spam to advertise and sell what they claimed were low-cost, generic
medicines from Canada. Instead, the government says they were making a fortune
by selling drugs they mixed up in garbage cans in a filthy house far south of
the border.
"Consumers thought they were getting legitimate and safe prescription
drugs over the Internet from Canada at cheaper prices," said David Nahmias, the
U.S. Attorney for northern Georgia. "In reality, they received adulterated fakes
that were crudely made in an unsanitary house in Belize."
Wheat, Smith and Holda have pleaded not guilty to the charges in the
indictment and strongly denied the murder and blackmail claims. Thomas Spina,
Holda's attorney, called the government's case "a pack of lies."
"You can put the sinister touches that the government has chosen to put
on it, but essentially it's a wire fraud-mail-fraud case, Spina says. "They
continue to take a position that this was some clandestine drug dealer's haven,
when in fact, at least it seems to us, they acted the best they could within the
frame of the law."
Nahmias declined to say why no charges have been filed if his office has
evidence of alleged murder or blackmail plots. But in documents filed by
prosecutors and investigators, the Hi-Tech crowd was hardly a group upstanding
citizens. Among the allegations: - Hi-Tech employees spiked weight-loss products
with ephedra to make them more effective and continued to do so even after the
FDA banned its use in 2004 after it was linked to death of Baltimore Orioles'
pitcher Steve Bechler. Ephedra, a powerful herbal stimulant, had been linked to
more than 150 deaths; - Hi-Tech employees spiked a product called Stamina RX,
which it claimed was a natural supplement to treat erectile dysfunction, with
the active ingredient in Viagra and Cialis; - Wheat and others sold and marketed
a product known as "Verve" that contained GHB, the banned "date rape" drug
linked to scores of deaths in recent years.
Another ingredient was GBL, a cleaning product that converts into GHB
when ingested. Wheat and his crew masked the taste with Kool-Aid, according to a
search warrant affidavit filed by Special Agent Edward Smith of the Drug
Enforcement Administration. The company later marketed the drink as a cleaning
product to confuse investigators. - Hi-Tech employee Brad Watkins sold ecstasy;
the DEA affidavit also claims thousands of fake ecstasy tablets were
manufactured by Hi-Tech and sold on the streets of the United States - Wheat
operated a marijuana trafficking ring during the 1990s that was shut down when
he was arrested in Alabama.
Like Albany District Attorney David Soares' ongoing Internet steroids
investigation, the Hi-Tech case illustrates how the Web has erased national and
state borders, posed new challenges for regulators and turned the supplement
business into an ungovernable marketplace.
The case also shows how the Dietary Supplement Health and Education Act
of 1994 opened the door to a host of unsavory operators more interested in
profits than consumer safety and regulatory compliance. The purpose of the law
was to give Americans access to alternative treatments and medicines, to have
greater control over their diets and health. But the excesses of DSHEA have
created what many experts consider a Wild West frontier where anything goes and
the criminal can often work under the cloak of legitimacy. Patrick Arnold, the
chemist who developed the BALCO steroid THG and androstenedione, the steroid
precursor later made famous as Mark McGwire's favorite supplement, once attended
an industry meeting in the office of U.S. Sen. Orrin Hatch (R-Utah), DSHEA's
co-sponsor.
Former Metabolife owners Michael Ellis and Michael Blevins, who made
millions of dollars from ephedra, were convicted of manufacturing
methamphetamine in the late 1980s.
Robert Occhifinto, the owner of now-bankrupt NVE Pharmaceuticals of New
Jersey, did 18 months in prison for laundering $350,000 in profits after selling
ephedrine to a meth dealer. His company was the target of 114 ephedra-related
lawsuits. Wheat described him as one of his closest friends.
Under DSHEA, supplement makers don't have to prove that their products
are safe or that they even contain what they list on the label. The FDA has to
prove that they are unsafe or mislabeled before removing them from the market.
The law came under fire especially after it took years for the government to ban
ephedra, the weight-loss drug connected to more than 150 deaths before it was
removed from the market.
"I don't want the government telling me I can't take vitamins or certain
supplements," says steroid expert Charles Yesalis, a professor at Penn State.
"But at the same time, the boundary between drugs and supplements has become a
very gray area, and one of he responsibilities of government is to protect the
citizenry."
That's why Nahmias and his prosecutors - aided by a small army of
regulators and law-enforcement agents -- are pursuing one of the most
complicated and wide-ranging cases filed against supplement makers since DSHEA
was passed 13 years ago: Hi-Tech, they say, made millions selling tainted and
potentially dangerous supplements to thousands of Americans.
If prosecutors have their way, the luxury vehicles, the far-flung real
estate holdings, the fat bank accounts and the handsome Norcross headquarters
that gave Wheat the aura of respectability will be gone. If Nahmias and his
staff are successful, Wheat will no longer be able to hold himself out as a
smart, hard-working businessman who snubbed his nose at regulators and bent the
rules. All that will left, if prosecutors have their way, will be a long stint
in a federal detention center.
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