Meth precursors, money laundering & mail fraud: Principal of NJ ingredient companies pleads guilty to DoJ charges

The Department of Justice announced that David Romeo, 46, of Washington Township, New Jersey, pleaded guilty to charges of conspiracy to distribute three kilograms or more of meth precursors, money laundering, mail fraud, and introduction of misbranded food into interstate commerce with intent to defraud or mislead. As part of his plea agreement, Romeo agreed to forfeit more than $1.2 million in money derived from his crimes.

Romeo admitted that he was a principal of NJ-based Global Nutrients, Stella Labs and Nutraceuticals engaged in the sale of dietary ingredients intended for use in dietary supplements sold to consumers. 

“The Department of Justice has increased its enforcement efforts against unlawful dietary supplements in recent years,” ​said Benjamin Mizer, principal deputy assistant attorney general and head of the Justice Department’s Civil Division. “This case underlines the need for both consumers and the government to be vigilant in investigating what the American public is ingesting in the guise of weight loss or health enhancement supplements.”​

“A warning to all companies”​

The action was welcomed by Judy Blatman, senior vice president, communications for the Council for Responsible Nutrition. “Consumers are the priority for the dietary supplement industry,” ​Blatman told us. “We’re encouraged by actions taken by the FDA, Department of Justice and other enforcement agencies that hold companies accountable when they break the law. ​

“These kinds of cases should serve as a warning to all companies that there are consequences for serious infractions. At the end of the day, it’s the responsible companies that will be left standing.” ​

Use of cheaper substitutes in place of the dietary ingredients ​

According to the DoJ, starting at least as early as 2003, Romeo directed his employees to use cheaper substitutes in place of the dietary ingredients that had actually been ordered by customers, most of whom were companies engaged in production of dietary supplements.  These substitutes were often sent without the customer’s consent or knowledge.  Romeo and his associates allegedly referred to the substitution of cheaper ingredients as “SOP,” meaning “standard operating procedure.”

As part of the scheme, Romeo admitted that Stella Labs and Nutraceuticals purported to sell a weight-loss ingredient labeled as “hoodia”,   which they claimed had been sourced from the South African plant, Hoodia gordonii​. However, the charging document alleged that the substance being sold by Romeo’s business entities was actually manufactured at a facility in China. As part of his plea agreement, Romeo agreed that the fraud scheme caused a loss of more than $7 million.

“Manufacturing and selling misbranded dietary supplements puts American consumers at risk,”​ said George Karavetsos, Director of FDA Office of Criminal Investigations.  “Our office is fully committed to working with the Department of Justice to protect consumers from public health risks and fraud.”                   ​

Sentencing​

Sentencing is scheduled for May 18, 2016, said the DoJ in a statement. The mail fraud charge carries a statutory maximum sentence of 20 years in prison and a maximum $250,000 fine, or twice the gain or loss caused by the offense.  The misbranding charge carries a statutory maximum sentence of three years in prison.

Romeo and his companies were the subject of a prior action by the Federal Trade Commission (FTC) seeking a court order to prevent the sale of bogus dietary ingredients.  The case (FTC v. Stella Labs, 09-cv-1262 (D.N.J.)) was resolved by a court order barring Romeo from making weight loss claims about supplements he sold.