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Intellectual Property Rights
07/07/2008

Chinese Internet distributor convicted of trafficking in fake prescription drugs

HOUSTON - The owner of Pacific Orient International Ltd. was convicted on Thursday of trafficking in counterfeit goods and trafficking in counterfeit pharmaceuticals. This case was investigated by U.S. Immigration and Customs Enforcement (ICE).

Kevin XU, 36, the owner and operator of Orient Pacific International, a corporation located in the Peoples Republic of China, was accused of using the Internet to advertise and distribute counterfeit prescription drugs including Plavix, Casodex, Zyprexa, Aricept and Tamiflu for distribution in the United States. After a four-day trial in the court of Judge Sim Lake, Xu was found guilty on all nine counts contained in the indictment, which included one count of conspiracy, and three counts of misbranding pharmaceutical drugs, and four counts of trafficking in counterfeit drugs.

Xu met undercover agents from ICE and the U.S. Food and Drug Administration's Office of Criminal Investigations July 24, 2007 when he arrived in Houston to discuss future shipments of counterfeit and misbranded drugs from China. The drugs were shipped to undercover officers and bore lot numbers identical to those involved in major product recalls in the United Kingdom, also provided by Xu. Xu offered to provide 10,000 boxes of counterfeit drugs and produce counterfeit U.S. market packaging. At the conclusion of the meeting Xu was arrested.

According to the criminal complaint filed in July 2007, Xu also met with an undercover ICE agent in Thailand in March 2007 and agreed to provide a variety counterfeit pharmaceutical drugs to introduce into the legitimate pharmaceutical market in the United States. Xu sent several shipments of misbranded pharmaceuticals to the undercover agent April through July 2007.

"ICE worked closely with the FDA's Office of Criminal Investigations (OCI) to put a quick end to this crooked Internet pharmacy scheme," said Robert Rutt, special agent in charge of the ICE Office of Investigations. "However, the public should be wary of any prescription drugs bought through the Internet. As we've seen with this case, these Internet sales can be compromised."

The nine-count indictment alleged that Xu and others conspired to export counterfeit pharmaceutical drugs from the Peoples Republic of China for distribution in the United States from July 2006 to July 2007. After receiving orders for counterfeit pharmaceuticals over the internet, Xu and others shipped the pharmaceuticals to the United States. According to the indictment, the counterfeit drugs, manufactured and dispensed from a non-FDA approved facility, were misbranded, in that the labeling on the blister pack containing the counterfeit drugs falsely represented them to contain the genuine product.

On the conspiracy charge, Xu faces a maximum sentence of five years in prison and a $250,000 fine. Each of the three misbranding counts carries a maximum sentence of three years imprisonment upon conviction and a $10,000 fine. Each of the five trafficking charges carries a maximum punishment of 10 years in prison and a $2 million fine.

Xu was remanded to custody of U.S. Marshals Service pending sentencing which is scheduled for Sept. 26. Xu has been in federal custody without bond since his arrest in July 2007.

ICE and the U. S. Food and Drug Administration's OCI investigated the case. Assistant U.S Attorney Samuel Louis, Southern District of Texas, prosecuted this case.