United States v. Ihenacho

2013 | Cited 0 times | First Circuit | June 17, 2013

United States Court of Appeals For the First Circuit

No. 12-1278





Defendant, Appellant.

No. 12-1661





Defendant, Appellant.


[Hon. Richard G. Stearns, U.S. District Judge]


Lynch, Chief Judge, Selya and Howard, Circuit Judges.

Michelle L. Dineen Jerrett, Assistant United States Attorney, with whom Carmen M. Ortiz, United States Attorney, and Shelbey D. Wright, Assistant United States Attorney, were on brief, for appellee in No. 12-1278.

David M. Lieberman, Attorney, U.S. Department of Justice, with whom Carmen M. Ortiz, United States Attorney, Shelbey D. Wright, Assistant United States Attorney, Michelle L. Dineen Jerrett, Assistant United States Attorney, Mythili Raman, Acting Assistant Attorney General, U.S. Department of Justice, and Denis J. McInerney, Acting Deputy Assistant Attorney General, U.S. Department of Justice, were on brief, for appellee in No. 12-1661. Brian M. LaMacchia, with whom David J. Apfel and Goodwin Procter LLP were on brief, for appellant Baldwin Ihenacho. Daniel J. Cloherty, with whom Victoria L. Steinberg and Collora LLP were on brief, for appellant Gladys Ihenacho.

June 17, 2013

LYNCH, Chief Judge. Baldwin and Gladys Ihenacho are

husband and wife, and were the owners and operators of a

neighborhood pharmacy in Dorchester, Massachusetts. Baldwin and

Gladys were convicted of dispensing and shipping drugs to customers

pursuant to invalid online prescriptions for Internet pharmacy

operations over a period from 2006 to 2008. Those operations were

headquartered in the Dominican Republic.

Baldwin pled guilty to nearly all of the charges against

him (the remaining charge was dismissed) and was sentenced to 63

months in prison. On appeal, he challenges the application of the

fraud sentencing guideline to him. The most serious challenge,

which we ultimately reject, is to the district court's calculation

of the loss caused by his offenses. That calculation goes to the

applicable guideline sentencing range and increased the length of

his sentence.

Gladys went to trial and a jury convicted her of eight

counts, including for distributing controlled substances,

international money laundering, and conspiracy. She was then

sentenced to thirty days' imprisonment. On appeal, she challenges

the sufficiency of the evidence supporting her convictions,

particularly disputing whether the government proved that she knew

her pharmacy was dispensing drugs pursuant to invalid

prescriptions. The evidence was ample.

We affirm Baldwin's sentence and Gladys's convictions.



In considering a sentencing appeal that follows after a

guilty plea, we take the relevant facts from the plea agreement,

the change-of-plea colloquy, the presentence investigation report

(PSR), and the transcript of the sentencing hearing. United States

v. Fernández-Cabrera, 625 F.3d 48 , 50 (1st Cir. 2010). In

contrast, in evaluating a claim that the evidence was insufficient

to support a conviction after trial, we consider "the facts in the

light most favorable to the verdict." United States v. Poulin, 631

F.3d 17 , 18 (1st Cir. 2011). We describe the facts relevant to

Baldwin's guilty plea and sentence. We recount the relevant facts

from Gladys's trial in the light most favorable to the jury's


A. Facts Relevant to Baldwin's Guilty Plea and Sentence

Baldwin was born in Nigeria in 1953 and immigrated to the

United States, became a U.S. citizen, and obtained his pharmacist's

license in Massachusetts. He owned and operated Meetinghouse

Community Pharmacy ("Meetinghouse"), a building containing a

pharmacy in Dorchester, from 1994 to 2008.

1. Baldwin's Agreements with Global Access Group and Golden Island Investment

Between September 2006 and November 2008, Meetinghouse

filled thousands of online drug orders for several Internet

pharmacy operations, including two located in the Dominican

Republic: Global Access Group ("Global Access") and Golden Island


Investment ("Golden Island"). Baldwin conspired with Jack Palasy

and Tony Reyes as to Global Access, and Reyes and others as to

Golden Island, to distribute controlled and non-controlled

substances to persons who ordered them online by filling out

questionnaires via these Internet pharmacies. The pharmacies

provided drugs without valid prescriptions.

Under federal Drug Enforcement Administration

regulations, prescriptions for controlled substances are not

effective unless "issued for a legitimate medical purpose by an

individual practitioner acting in the usual course of his

professional practice." 21 C.F.R. § 1306.04(a). A pharmacist has

a corresponding responsibility for the proper dispensing of

controlled substances. Issuing prescriptions based solely on

online questionnaires falls outside the usual course of medical

practice, making such prescriptions invalid. See United States v.

Lovern, 590 F.3d 1095 , 1101 (10th Cir. 2009) (collecting cases).

As to penalties, a "person knowingly filling such a

purported prescription . . . shall be subject to the penalties

provided for violations of the provisions of law relating to

controlled substances." 21 C.F.R. § 1306.04(a). These provisions

of law make it "unlawful for any person knowingly or intentionally

. . . to manufacture, distribute, or dispense, or possess with

intent to manufacture, distribute, or dispense, a controlled

substance." 21 U.S.C. § 841(a)(1). For offenses, such as


Baldwin's, involving "any controlled substance in schedule III,

such person shall be sentenced to a term of imprisonment of not

more than 10 years." Id. § 841(b)(1)(E)(i).

Baldwin dispensed both controlled substances and non-

controlled substances based on Internet orders. With respect to a

drug, whether controlled or non-controlled, which is "not safe for

use except under the supervision of a practitioner licensed by law

to administer such drug," the act of dispensing a drug without a

valid prescription "shall be deemed to be an act which results in

the drug being misbranded while held for sale" under 21 U.S.C.

§ 353(b)(1). Section 331(a) prohibits "[t]he introduction or

delivery for introduction into interstate commerce of any . . .

drug . . . that is adulterated or misbranded." If any person

"commits such a violation with the intent to defraud or mislead,

such person shall be imprisoned for not more than three years."

Id. § 333(a)(2).

2. The Internet Pharmacies' Operations

To purchase drugs by way of Global Access or Golden

Island, customers would go to Internet pharmacy websites operated

by Global Access or Golden Island and enter their names, addresses,

and credit card information, and answer a limited online

questionnaire.1 Each website's operator would then either (1)

1 This questionnaire asked for information such as age, weight, height, medical allergies, other medications being taken, and whether the customer was pregnant.


forward this information to doctors who would, without seeing the

customer, approve the orders for a fee, or (2) use the names and

electronic signatures of a doctor or doctors to indicate approval

of the orders, even though the approval was without these doctors'

authorization.2 Customers submitting orders to Global Access and

Golden Island were not seen by and had no interaction with the

doctors who purportedly approved their orders.

The "approved" orders were then sent to pharmacies,

including Meetinghouse, for the prescription drugs to be dispensed.

For each customer, Meetinghouse would download from the Global

Access and Golden Island websites: (1) a mailing label; (2) a drug

information label; and (3) a drug order that would remain with the

pharmacy. The drug information labels included the name of the

dispensing pharmacy and of the physician who had purportedly

prescribed the drug. Once the pharmacy filled the vials for an

order, it would affix the drug information labels to the vials and

place the vials in an express mail package along with an insert

concerning the medication that was provided by Global Access or

2 At Baldwin's change-of-plea hearing, he conceded that he had constructive knowledge "that it was highly, highly unlikely that a doctor who . . . is a legitimate doctor in one state could prescribe drugs in 50 states," and that doctors "were not actually visiting with or seeing the patients for whom they were making the prescriptions." He denied having constructive or actual knowledge that "doctors' identities [were] being used where the doctors themselves were not signing off" on prescriptions for Global Access and Golden Island.


Golden Island. The pharmacy would then attach the mailing label

and send the package to the customer.

Many customers of online pharmacies could not obtain

these medications by valid prescriptions and so choose these

pharmacies. Many of Meetinghouse's Internet customers had drug

addictions that were exacerbated by the easy availability of

prescription drugs that could be purchased via the Internet without

valid prescriptions from a physician.

At Meetinghouse, Baldwin, three regular employees, and

several temporary employees dispensed and distributed prescription

drugs for Global Access and Golden Island customers. Baldwin

exercised decision-making authority over how drug orders would be

filled and how much Meetinghouse would accept from the Internet

pharmacies for dispensing drugs. The drugs Meetinghouse shipped to

customers were not adulterated or counterfeit and were chemically

consistent with the substances that they purported to be.

Meetinghouse purchased the drugs wholesale from manufacturers, and

received both a dispensing fee from Global Access and Golden Island

of between $5.25 and $30 per order, and reimbursement for the cost

of the drugs prescribed.

3. The Scale of Meetinghouse's Internet Operations

At the height of Meetinghouse's Internet operations, it

filled twenty-five percent of its prescriptions for walk-in

customers, while seventy-five percent of its drug orders were for


Internet pharmacies. According to Meetinghouse's records, it

dispensed over a million pills to Global Access and Golden Island

customers -- including more than 900,000 pills of Schedule III or

Schedule IV controlled substances -- and about 3.4 million pills to

Internet customers in general.

To pay the Ihenachos for dispensing drugs pursuant to

online orders, Global Access wired $1,883,950 to Meetinghouse bank

accounts and Golden Island wired $311,221.27 into accounts

registered to Meetinghouse or to Gladys. These wire payments

originated in the Dominican Republic. Three other Internet

pharmacies, for whose activities the Ihenachos were not charged but

which constituted relevant conduct, wired $1,039,677.63 to Baldwin,

Baldwin's brother in Nigeria (upon the Ihenachos' instructions),

and Meetinghouse as payment for filling online orders for

controlled and non-controlled substances. The Ihenachos or their

designees thus received $3,234,848.90 in total from all of the

Internet pharmacy operations with which they were involved.3

When several banks closed bank accounts registered to the

Ihenachos or Meetinghouse because of suspicious activity, the

Ihenachos opened new accounts at different banks and instructed

their co-conspirators at Internet pharmacy operations to structure

transfers of money so as to attract less attention from the banks.

3 Baldwin emphasized at his plea hearing that "the lion's share of this money is money that's actually used to buy the pharmaceuticals that are then dispensed."


4. Baldwin's Knowledge of the Illegality of the Operations of Global Access and Golden Island

Baldwin was aware that the drugs that Meetinghouse

dispensed for Global Access and Golden Island were being sold via

the Internet. Indeed, Baldwin and his employees logged onto the

Global Access and Golden Island websites to download orders for


While Baldwin raised some questions about the legitimacy

of the operations, he continued to fill prescriptions. In

September 2006, Baldwin noted in an email to Palasy the fact that

only one doctor appeared to be approving orders for all of Global

Access's customers "no matter [in] which state the patient is

located," and that this violated federal law unless "this doctor is

registered in all USA states." He nonetheless continued to fill

prescriptions. In a November 2006 email to Palasy, Baldwin stated

that he had been informed by "the DEA [Drug Enforcement

Administration] and the Massachusetts Board of Pharmacy . . . that

Internet prescription is illegal" because "[t]here is no doctor

patient contact." Baldwin continued asking Palasy questions about

Global Access's operations until the spring of 2007, but then

ceased questioning Palasy while continuing to dispense drugs for

Global Access. Baldwin made no attempt to verify that the

prescriptions Meetinghouse was filling for Global Access and Golden

Island were valid.


Between the summer of 2007 and the summer of 2008,

Baldwin received letters from the DEA and the states of New

Hampshire, Arkansas, Missouri, and Utah, each of which warned him

that Internet pharmacy operations were illegal. Baldwin also

received a letter from individuals in Hawaii stating that they were

going to report him to the Attorney General of Massachusetts for

his Internet pharmacy activities. Baldwin ordered his employees at

Meetinghouse to stop shipping to all six of these states, but only

those states. He otherwise continued filling Internet orders for

controlled substances for Global Access and Golden Island even

after receiving these letters.

B. Additional Facts Relevant to Gladys's Convictions

Gladys, born in 1966, is also a native of Nigeria. She

married Baldwin in 1984, immigrated to the United States, obtained

a nursing license, and became a U.S. citizen.

1. Golden Island's Operations

At Gladys's trial, the government presented evidence as

to the Internet pharmacy operations of Global Access, Golden

Island, and Meetinghouse that mirrored the information presented in

Baldwin's guilty plea hearing, PSR, and sentencing hearing.

Because Gladys was ultimately only convicted of offenses involving

Golden Island (and not those involving Global Access), we focus on

that evidence.


Tony Reyes was the CEO of Golden Island Investments, and

Golden Island ran a website through which customers could order

prescription drugs without interacting with or being examined by a

physician. Every Golden Island prescription had purportedly been

approved by the same physician: a Dr. Naomi Burr. However, Dr.

Burr testified at trial that she had never worked for Golden

Island, approved prescriptions for Golden Island, or examined

Golden Island customers.

2. The Agreement Among Baldwin, Gladys, and Reyes

The government introduced an email from Baldwin, and

referring to Gladys, which described Meetinghouse's agreement with

Golden Island:

You see, Tony had told me even before he left Jack [Palasy] that he wanted to open his own business and that he wanted my help in buying and shipping orders for him. . . . In fact, I told Tony that I will get back to him because I needed to consult with my partner in this business, my wife who owns 60 percent of the shares of our pharmacy. I did not get back to Tony and I did it on purpose because I wanted to see how serious he was. He more like called me everyday regarding this issue. I eventually spoke with my wife who vehemently refused to do anything with anyone who knows Jack Palasy.[4] I did my best to convince her that it is not fair to prejudge anyone or get the impression that because A and B are related, therefore, if A is bad then B must be bad. I put up a good argument and eventually convinced my wife. Meanwhile, Tony kept calling and in several of our conversations, he said to me: I am not Jack, and I will never treat you the same way Jack treated you. Just ship

4 There was evidence that Gladys was upset with Palasy because he sometimes failed to pay Meetinghouse for dispensing and shipping Global Access's Internet drug orders.


30 orders per day for me, and I will pay you $55 per order.

Meetinghouse dispensed and shipped hundreds of packages of

prescription drugs on behalf of Golden Island.

3. Gladys's Management and Ownership of Meetinghouse and Involvement in its Internet Operations

Gladys incorporated and opened Meetinghouse with Baldwin

in 1994. At that time, she owned a 50% stake in the corporation

and was listed on its articles of incorporation as treasurer and

co-director. Gladys later increased her ownership of Meetinghouse

to 60%. Though Gladys relinquished her position as an officer of

Meetinghouse in 2001, she continued to present herself as an

officer in corporate resolutions and signature cards for

Meetinghouse bank accounts.

Gladys was involved in Meetinghouse operations before it

began dispensing drugs through online orders. She sometimes signed

employee paychecks, and was in charge of the pharmacy when Baldwin

traveled overseas. Baldwin traveled overseas on several occasions,

including to Nigeria, between September 2006 and November 2008.

Once Meetinghouse began filling Internet orders in 2005, Gladys's

involvement in its operations increased. She visited Meetinghouse

more frequently, called to make sure Internet prescriptions had

been filled, and told employees not to ship Internet prescriptions

to certain people or states. She also counted pills and put them

in vials to fill Internet orders.


Gladys had a prominent role in managing Meetinghouse's

Internet business, including its operations for Golden Island.

Between late August and early October 2008, Gladys sent four

different emails to Reyes concerning Golden Island in which she

complained that wire payments to Meetinghouse had been delayed,

demanded that more payments be made, and threatened to delay

shipment of orders if payments were not received.

Moreover, in emails to Reyes concerning Golden Island,

Baldwin referred to Gladys as his "partner in this business." He

explained that in his absence she would "run the financial aspects

of my business as well as helping out with making sure that your

orders are filled and shipped." Baldwin instructed Reyes that

Golden Island payments should be sent both to Gladys's account and

Baldwin's business account.

Between 2006 and 2008, Golden Island wired a total of

$311,221.27 into accounts held by Meetinghouse, Baldwin, and

Gladys, including $10,000 wired directly into Gladys's personal

account on September 19, 2008. Between October 2006 and October

2008, Gladys personally received $272,795 from Meetinghouse

accounts and receipts.

4. Gladys's Receipt of the Missouri Warning

As said, several states sent warnings to Meetinghouse

stating that Internet pharmacy operations were illegal. These


included an August 12, 2008 cease and desist warning from the

Missouri Board of Pharmacy, which said:

The Missouri Board of Pharmacy is in receipt of an investigation report involving Meeting House Community Pharmacy, 248 Bowdoin Street, Dorchester, MA 02122, based on a Missouri consumer's on-line purchase of a prescription drug via the Internet. Specifically, a Missouri consumer completed a patient questionnaire on the "www.pillsless.net" website, and subsequently received #90 Carisoprodol 350 mg. The prescription label and enclosed receipt showed the prescription was dispensed by Meeting House Community Pharmacy, 248 Bowdoin Street, Dorchester, MA 02122.

. . .

Meeting House Community Pharmacy is, or was, actively engaged in a continuing course of conduct whereby prescription drug orders ("prescriptions") are dispensed based solely on an on-line questionnaire, with no physician-patient relationship. There was no physical evaluation of the individual seeking the drug product, nor was there any direct communication between that individual and the prescriber.

The pharmacist-in-charge of the pharmacy and/or owner of the pharmacy knew or should have known that prescriptions obtained in this manner are not created pursuant to a valid prescriber/patient relationship. Therefore, such prescriptions are invalid.

Baldwin was traveling when Meetinghouse received the

Missouri cease and desist warning. Gladys was informed that the

warning letter had arrived, and came and picked it up from the

pharmacy. On the envelope in which the Missouri warning was

enclosed, Gladys wrote the following5:

5 At trial, the government surmised in its closing argument that Gladys had written these notes during a phone conversation with Baldwin.


Communicate to the sender of this letter to inform that pharmacist not available until next wk tuesday so they can note & give more time to respond to letter

. . .

(1) which state DR writes from

(2) Contact Matt or Paul or Tom & fax letter to them

(3) Have all displayed medicines for online & put them away[;] Can display Motrin antibiotics on counter[;] Put away all the on line meds out of site [sic]

(4) Pack box all rejected envelops [sic] & label for credit send down stairs

Gladys wrote to the Missouri Board of Pharmacy on August 18, 2008,

asking for an extension of time to respond to the warning. On

August 20, 2008, Baldwin sent a letter to the Board stating that he

had "immediately ceased any kind of pharmacy practice to any

Missouri resident what so ever."

Until November 2008, Meetinghouse continued to ship

orders for Internet pharmacies to states as to which it had not

received warning letters. In particular, Meetinghouse sent

prescription medications to five Golden Island customers in

September 2008. After receiving the warning letter from the

Missouri Board of Pharmacy, Gladys sent emails to Reyes demanding

payment from Golden Island, and received a wire payment of $10,000

from Golden Island.



On March 31, 2011, a grand jury returned a third

superseding indictment against Baldwin, Gladys, and five other

defendants. With respect to Global Access, Baldwin and Gladys were

charged with: one count of conspiracy to misbrand drugs, in

violation of 18 U.S.C. § 371; and five counts of misbranding drugs,

in violation of 21 U.S.C. §§ 331(k), 333(a)(2), and 353(b)(1).

With respect to Global Access and Golden Island, Baldwin and Gladys

were charged with the following counts for each Internet operation:

one count of conspiracy to distribute and dispense controlled

substances, in violation of 21 U.S.C. § 846; five counts of

distributing and dispensing controlled substances, in violation of

21 U.S.C. § 841(a)(1); one count of conspiracy to commit

international money laundering, in violation of 18 U.S.C.

§ 1956(h); and five counts of international money laundering, in

violation of 18 U.S.C. § 1956(a)(2). Gladys and Baldwin were also

charged with one count of engaging in a continuing criminal

enterprise, in violation of 21 U.S.C. § 848.

A. Baldwin's Guilty Plea and Sentence

On August 18, 2011, Baldwin pled guilty to all charges

except for the count of conducting a continuing criminal

enterprise. At Baldwin's sentencing, the court applied an 18-level

enhancement for fraud to Baldwin's base offense level, using the

"gross figure" for the revenues Baldwin received from his offenses


rather than "adjust[ing] to reflect . . . the cost of doing

business." Baldwin challenged whether the fraud guideline was

applicable to his offenses at all, and if so whether gross revenues

were an appropriate basis for applying the guideline, but the court

rejected his objections. The court applied two more enhancements

urged by the government and rejected two other proposed

enhancements. It applied a two-level adjustment downward for

acceptance of responsibility, and stated that it was "puzzled by

the government's insistence that the one point additional

adjustment downward for acceptance of responsibility not be


The court then pronounced sentence:

So if I applied my calculation to the Guidelines, they actually come out pretty much where I would come out under 3553(a); that is, a sentencing range based on an offense level adjusted, as I see it, of 26, which would counsel a 63- to 78-month sentence.

I cannot award the additional point, which I otherwise would have, for acceptance of responsibility, but I can sentence at the lowest end of the guideline range, and that is the sentence I am going to impose; that is, a sentence of 63 months.

Baldwin timely appealed the court's judgment.

B. Gladys's Trial, Conviction, and Sentence

Following a fourteen-day trial, a jury convicted Gladys

of one count of conspiracy to distribute, dispense, and possess

with the intent to distribute controlled substances; five counts of

distributing and dispensing controlled substances; one count of


conspiracy to commit international money laundering; and one count

of international money laundering. Each of these counts concerned

the Golden Island Internet pharmacy and involved offenses that took

place at least in part after August 2008, when Gladys received the

Missouri warning letter. The jury found Gladys not guilty of all

the remaining counts, which concerned the other Internet pharmacy,

Global Access.6 Gladys filed a post-trial motion for acquittal or,

in the alternative, for a new trial, which the district court


The court sentenced Gladys to 30 days of confinement --

with 20 days deemed served and the remaining 10 days to be

satisfied by home detention -- and 3 years of probation. Gladys

timely appealed the judgment of conviction. She does not appeal

from her sentence.


Baldwin challenges his sentence on two separate grounds:

(1) the district court should not have sentenced him under the

fraud guideline, and (2) the court erred in determining the amount

of loss for purposes of the fraud guideline.

6 At the close of the government's evidence, the district court granted Gladys's motion for acquittal on the count of conducting a continuing criminal enterprise.


A. Application of the Fraud Guideline

We review the court's interpretation and application of

the Guidelines de novo. United States v. Innarelli, 524 F.3d 286 ,

290 (1st Cir. 2008). Baldwin concedes that the fraud guideline,

U.S.S.G § 2B1.1, "applied as a technical matter" to his case, but

argues that the court erred in applying the guideline because his

case was "never about fraud." He is wrong.

Baldwin pled guilty to violations of 21 U.S.C. §§ 331(k)

and 333(a)(2). Appendix A to the U.S. Sentencing Guidelines

prescribes that the appropriate guideline for these offenses is

either U.S.S.G. §§ 2N2.1 or 2B1.1. In turn, § 2N2.1 provides that

"[i]f the offense involved fraud, apply § 2B1.1." U.S.S.G.

§ 1B1.2(a) states that a court should "[d]etermine the offense

guideline section in Chapter Two (Offense Conduct) applicable to

the offense of conviction (i.e., the offense conduct charged in the

count of the indictment or information of which the defendant was


As we explained in United States v. Almeida, 710 F.3d 437

(1st Cir. 2013), "where the guidelines specify more than one

offense guideline for a particular statutory offense and no plea

agreement stipulates to a more serious offense, the district court

must select the most appropriate guideline based only on conduct

charged in the indictment," id. at 438. We reject Baldwin's

assertion that the court should have ignored the indictment and


instead focused on his version of "the facts of the case" in

selecting the applicable guideline. The third superseding

indictment charged that Baldwin, "with intent to defraud and

mislead, misbranded drugs while held for sale after shipment in

interstate commerce, and caused the misbranding of drugs while held

for sale after shipment in interstate commerce" (emphasis added).

The district court did not err in applying U.S.S.G. § 2B1.1 based

on the conduct charged in the indictment.

B. Calculating Loss for Purposes of the Fraud Guideline

Baldwin next argues that the district court erred in (1)

finding that his offenses had caused a "loss" within the meaning of

U.S.S.G. § 2B1.1(b)(1), and (2) calculating the amount of this loss

based on Meetinghouse's gross receipts from the Internet pharmacy

operations. We review the court's findings of fact at sentencing,

including its calculation of the amount of loss, for clear error,

Innarelli, 524 F.3d at 290, but review the court's definition of

"loss" and its determination of the appropriate method for

calculating loss de novo, United States v. Antonakopoulos, 399 F.3d

68 , 82 (1st Cir. 2005).

1. Determining That Victims Suffered a Loss

U.S.S.G. § 2B1.1(b)(1) provides that a defendant's

offense level should be increased based on the amount of loss.

Baldwin argues that the government failed to show that his victims

-- the customers to whom Meetinghouse dispensed drugs pursuant to


Internet orders -- suffered any loss, since the drugs dispensed

were not counterfeit and his customers did not expect the drugs to

be dispensed pursuant to a valid prescription.

We reject this argument, as have other courts. The

victims did suffer a loss. Meetinghouse dispensed drugs to

Internet customers in vials with labels bearing the name of a

licensed pharmacy -- i.e., Meetinghouse -- and the name of the

purported prescribing physician, along with inserts concerning the

medication. From the face of it, the consumers had received

entirely legally prescribed drugs. But in fact, they had not. See

United States v. Bhutani, 266 F.3d 661 , 670 (7th Cir. 2001)

("[T]here was indeed loss to consumers because consumers bought

drugs under the false belief that they were in full compliance with

the law."); see also United States v. Chatterji, 46 F.3d 1336 , 1342

(4th Cir. 1995) (explaining that "[w]e have little doubt that

economic loss would exist" where "a drug . . . is something less

than it is represented to be").

In addition, from the record and the PSR, it is clear

that many of these transactions would never have taken place in the

absence of the fraud because the patients could not and would not

have received a prescription had they seen a legitimate physician.

The government sent out potential victim letters to 21,122 separate

Meetinghouse customers. Responding victims or family members

reported that many victims had histories of drug addiction which


had been made worse by the ease with which they could order drugs

from Internet pharmacies. The PSR took the position that Internet

"pharmacies lack quality assurance and accountability and their

products pose a serious danger to the buyers/customers, who are

often addicted to the medications they seek and for which they

could not obtain a valid prescription." The government took the

same position in its sentencing memorandum.

2. Determining the Loss Amount

The PSR took the position that the loss could be

reasonably determined and that it was the $3.2 million paid to the

Ihenachos by Internet pharmacies, without a discount for the sums

defendants paid to drug wholesalers to procure the drugs. It also

noted that if "gain" to the defendant were used, the sum would be

less (and the guidelines range less).

Application Note 3(B) to U.S.S.G. § 2B1.1 states that

"[t]he court shall use the gain that resulted from the offense as

an alternative measure of loss only if there is a loss but it

reasonably cannot be determined" (emphasis added). There was no


discussion of use of loss versus gain at the sentencing hearing.7

The court held that:

I do agree with Probation that the gross figure is the appropriate figure, rather than one adjusted to reflect, as we would if this were a tax issue, the cost of doing business. And I say that in the sense that all of the sales were fraudulent, at least insofar as the drugs that were distributed that were represented to be lawfully branded and lawfully distributed, when the defendant knew well that they were not, knew that that was not the case.

We read this as an acceptance of the PSR's loss determination,

based on all sales being fraudulent.

Baldwin argues that "it is possible the district court

used a calculation of Ihenacho's purported 'gain' as a surrogate

for 'loss,'" and that "the district court erred by treating

Ihenacho's gross receipts rather than his net profits as the

measure of 'gain.'"8 The difference in figures affects which

7 After sentencing, defense counsel stated:

If you apply the fraud guideline, by virtue of the cross- reference in 2N2.1, and you go back to 2B1.1, you have applied an 18-point enhancement by virtue of a gain in excess of $3 million. Passing for the moment even on whether or not -- whether that's appropriate, which I think that's an inappropriate measure of gain as a matter of law, you don't get to gain -- you can't use gain under 2B1.1 --

The court, in response, stated that it had made its decision. 8 The cost of ordering drugs from wholesalers is the only cost Baldwin seeks to have deducted from the gross receipts. He asserts that using this method, his profits were between $557,951.80 and $948,360. The government asserted before the district court that the proper amount of Baldwin's profits was actually $1.2 million.


guidelines range is applicable.9 As said, the court did not

purport to use gain. The fact that the court used gross receipts

does not itself mean the court used gain.

The government defends on two grounds. The first is that

there was no clear error in the district court's use of a loss

figure of the $3.2 million the Ihenachos received, by way of the

Internet pharmacies, from the customers whose prescriptions their

pharmacy had filled. See Innarelli, 524 F.3d at 290. The court

need only make a reasonable estimate of the loss. U.S.S.G. § 2B1.1

cmt. n.3(C).

The second argument is that even if the court used "gain"

to the defendant as the measure, the $3.2 million may be thought to

be the appropriate gain. That line of argument is, of course,

undercut by the statement in the PSR that if gain were used it

would be less than the loss. We have no need to reach the


The Guidelines say, at Application Note 3(A)(i) to

U.S.S.G. § 2B1.1, that "loss is the greater of actual loss or

intended loss," and that "'[a]ctual loss' means the reasonably

9 If we accept that profits and not gross receipts are the proper measure of loss in this case and use Baldwin's calculations, a 14-level enhancement should have applied under U.S.S.G. § 2B1.1(b)(1), leaving Baldwin with a sentencing range of 41 to 51 months. Using profits and the government's calculation, a 16-level enhancement would have applied under § 2B1.1(b)(1) and Baldwin's sentencing range would have been 51 to 63 months.


foreseeable pecuniary harm that resulted from the offense."10 We

have endorsed a pragmatic, fact-specific approach, stating that

"loss should be calculated using the entire price paid for the

product, unreduced by any offsetting value," if "the product

misrepresented by the defendant is worthless." United States v.

Gonzalez-Alvarez, 277 F.3d 73 , 77 (1st Cir. 2002) (applying

U.S.S.G. § 2F1.1, the former fraud guideline).

Following on this theme of worthlessness, the government

cites to cases which involve goods or services that were determined

to have no value. See United States v. Byors, 586 F.3d 222 , 226

(2d Cir. 2009) (in investment fraud case, deducting defendant's

costs inappropriate where his "expenditures, legitimate or not,

conferred nothing of value and no benefit on his victims, who were

10 Application Note 3(F) to U.S.S.G. § 2B1.1 provides, in relevant part, as follows:

(v) Certain Other Unlawful Misrepresentation Schemes. -- In a case involving a scheme in which (I) services were fraudulently rendered to the victim by persons falsely posing as licensed professionals; (II) goods were falsely represented as approved by a governmental regulatory agency; or (III) goods for which regulatory approval by a government agency was required but not obtained, or was obtained by fraud, loss shall include the amount paid for the property, services or goods transferred, rendered, or misrepresented, with no credit provided for the value of those items or services.

The government refers to this but does not argue to us, and did not argue before the district court, that Baldwin's offenses involved any of these schemes. We do not reach the issue of whether this application note applies to these facts.


his investors and creditors"); United States v. Milstein, 401 F.3d

53 , 74 (2d Cir. 2005) (per curiam) ("The district court may

permissibly reason that contaminated medicine is worthless to the

consumer."); United States v. Schaefer, 291 F.3d 932 , 944 (7th Cir.

2002) (defendant entitled to no credit for value of misrepresented

artwork where "the frame and matting surrounding counterfeit or

misrepresented cheap cels have no market value other than scrap

value"); Gonzalez-Alvarez, 277 F.3d at 78 (where milk had been

adulterated by adding contaminated ground water and salt, "the

value of the milk . . . was zero as a matter of law"); United

States v. Marcus, 82 F.3d 606 , 610 (4th Cir. 1996) (drug worthless

where its formula had been altered, potentially "affect[ing] the

bioequivalence or therapeutic value of the drug," "[g]iven the

unchallenged finding that consumers would not purchase a drug of

unknown safety and efficacy at any price").

The issue is complex because the victims of the scheme

got exactly what they wanted -- prescription drugs for which they

had not received proper prescriptions. They were complicit in the

fraud and, in that sense, the drugs were not worthless to them.

Nonetheless, we find the loss calculation to be reasonable for two

interrelated reasons.

To the extent that the drugs had value at all in this

context, it was quite limited. There is the dangerous and harmful

nature of medications dispensed without valid prescriptions. There


is no reason to think these vials of drugs with labels had an

after-sale retail value.

Moreover, it is reasonable to think that, but for the

existence of these Internet pharmacies allowing customers to obtain

drugs without valid prescriptions, these payments (or most of them)

would not have been made at all. Many of Meetinghouse's customers

online could not have gotten prescriptions for these drugs

otherwise. Many had histories of drug addiction. Their abuse was

made easier and more serious due to the easy availability of

prescription drugs that could be purchased via the Internet without

a valid prescription from a physician. At least some of

Meetinghouse's Internet customers had been unable to obtain valid

prescriptions from their physicians for the drugs they ordered. In

general, many customers of Internet pharmacies would be unable to

obtain valid prescriptions for the drugs they order. That being

so, it was reasonable for the district court to use the $3.2

million figure as a loss amount to determine the guidelines range.

See United States v. Munoz, 430 F.3d 1357 , 1371 (11th Cir. 2005)

(court need not reduce loss amount by proportion of satisfied

customers where "the number of individual victims who were

satisfied was arguably difficult to determine").


Gladys challenges the sufficiency of the evidence

supporting her convictions for distributing controlled substances,


conspiracy, and money laundering. We review a preserved challenge

to the sufficiency of evidence de novo, considering "whether any

rational factfinder could have found that the evidence presented at

trial, together with all reasonable inferences, viewed in the light

most favorable to the government, established each element of the

particular offense beyond a reasonable doubt." United States v.

Willson, 708 F.3d 47 , 52 (1st Cir. 2013) (quoting Poulin, 631 F.3d

at 22) (internal quotation marks omitted).

A. The Sufficiency of the Evidence Supporting the Convictions for the Substantive Distribution Offenses

The jury convicted Gladys of five counts relating to the

distribution of controlled substances to Golden Island customers on

five occasions in September 2008. Gladys argues that the evidence

was insufficient to show that she knew that Golden Island was

issuing invalid prescriptions for Meetinghouse to dispense, and

that she dispensed these prescriptions herself. To the contrary,

a reasonable jury could easily conclude the evidence was sufficient

on both points.

1. Gladys's Knowledge that the Golden Island Prescriptions Were Invalid

The relevant statute, 21 U.S.C. § 841(a)(1), makes it

"unlawful for any person knowingly or intentionally . . . to

manufacture, distribute, or dispense, or possess with intent to

manufacture, distribute, or dispense, a controlled substance."

There was evidence sufficient to conclude that Gladys knew, at


least by August 2008, that Golden Island's prescriptions filled by

Meetinghouse were not issued in the usual course of professional


Gladys played an important role in managing

Meetinghouse's operations. She was Meetinghouse's majority owner,

presented herself as an officer of the corporation, and Baldwin

referred to her as his "partner in this business." When Baldwin

was away, Gladys was in charge of Meetinghouse.

Gladys was aware that Meetinghouse was dispensing

prescriptions for Internet pharmacies, and participated in this

activity. A Meetinghouse employee specifically testified at trial

that Gladys "ma[d]e sure that we did the Internet prescriptions"

when Baldwin was away, issued "instructions about whether to ship

the Internet pharmacy packages as well as when not to ship them,"

and counted pills "[f]or the Internet" business. Gladys received

the warning letter from the Missouri Board of Pharmacy stating that

Meetinghouse was "engaged in a continuing course of conduct whereby

prescription drug orders . . . are dispensed based solely on an on-

line questionnaire," and in her handwritten notes regarding this

warning she specifically referred to the "medicine for online" and

"on line meds."

At least by the time Gladys received this warning in

August 2008, if not earlier, she knew that these Internet

prescriptions were invalid. The warning stated that "prescriptions


obtained in this manner are not created pursuant to a valid

prescriber/patient relationship," so that "such prescriptions are

invalid." Gladys argues that this warning put her on notice only

that Meetinghouse could not dispense Internet prescriptions to

Missouri for the particular website identified in the warning,

www.pillsless.net. But in her notes, Gladys wrote that she needed

to "[h]ave all displayed medicines for online & put them away," and

to "[p]ut away all the on line meds out of site [sic]." A

reasonable jury could have concluded from these notes that Gladys

knew in August 2008 that all Internet prescriptions Meetinghouse

was filling were invalid and hence she had an interest in hiding

the evidence.

There was also ample evidence that Gladys was integrally

involved in and knew of the arrangements with Golden Island. In an

email, Baldwin stated that he "put up a good argument and

eventually convinced my wife" to work with Golden Island, and later

told Reyes that in his absence Gladys would "run the financial

aspects of my business as well as helping out with making sure that

your orders are filled and shipped." Beyond that, Gladys sent

emails to Reyes demanding that Golden Island wire payments to

Meetinghouse for shipments and threatening to delay shipments until

payment was received. Gladys knew that Meetinghouse was filling

Internet prescriptions for other online pharmacies, Meetinghouse

shipped hundreds of packages of prescription drugs on behalf of


Golden Island, and Gladys came to Meetinghouse "[a]lmost everyday"

after its Internet business began.

2. Gladys's Commission of the Substantive Offense of Distributing Controlled Substances

Gladys also argues that even if she knew that Golden

Island prescriptions were invalid, the government failed to prove

that she actually participated in transferring a controlled

substance to another person pursuant to these prescriptions.

"'[D]istribute' is defined broadly under § 841(a)(1)," United

States v. Cortés-Cabán, 691 F.3d 1 , 17 (1st Cir. 2012), to include

"not only the transfer of physical possession, but also other acts

perpetrated in furtherance of a transfer or sale, such as arranging

or supervising the delivery, or negotiating for or receiving the

purchase price," id. at 19 (quoting United States v. Luster, 896

F.2d 1122 , 1127 (8th Cir. 1990)) (internal quotation mark omitted).

After Gladys was put on explicit notice from the Missouri

letter that Internet prescriptions were invalid and that Golden

Island was issuing such prescriptions, her primary concern was

getting paid. She sent four emails to Reyes demanding that Golden

Island wire payments to Meetinghouse. Moreover, Meetinghouse sent

prescription medications to five Golden Island customers in

September 2008, and Golden Island wired $10,000 directly into

Gladys's personal account on September 19, 2008. This evidence,

together with the other evidence that Gladys managed shipment of


Golden Island orders, supported the conclusion that Gladys

distributed controlled substances under § 841(a)(1).

B. The Sufficiency of the Evidence Supporting the Conviction for Conspiracy to Distribute Controlled Substances

The jury convicted Gladys as well of conspiracy with

Reyes and Baldwin to fill invalid prescriptions for Golden Island

between October 2007 and October 2008. Gladys contends that the

government failed to prove either the existence of the Golden

Island conspiracy, or that she ever joined this conspiracy. "[T]o

sustain a conviction for conspiracy under 21 U.S.C. § 846, the

evidence must show that (1) a conspiracy existed, (2) the defendant

had knowledge of the conspiracy, and (3) the defendant knowingly

and voluntarily participated in the conspiracy." United States v.

Dellosantos, 649 F.3d 109 , 116 (1st Cir. 2011). The government

presented evidence that Baldwin, Gladys, and Reyes agreed that

Meetinghouse would fill prescriptions for Golden Island, and that

Gladys participated in this conspiracy despite knowing that Golden

Island was issuing Internet prescriptions and that such

prescriptions were invalid.

C. The Sufficiency of the Evidence Supporting the Convictions for the Money Laundering Offenses

The jury also convicted Gladys of conspiring with Baldwin

and Reyes to commit international money laundering between March

and October 2008, and of committing international money laundering

on September 19, 2008, by receiving a wire transfer of $10,000 from


the Dominican Republic. Gladys argues that (1) because she did not

know the Golden Island prescriptions were invalid, she lacked the

mens rea needed to support these convictions, and (2) there was no

evidence that she was personally involved in the transfer that

formed the basis for the substantive conviction.

We have rejected the first argument. The government

presented evidence that (1) in late August 2008, Gladys demanded

that Reyes "send substantial money or I will stop [Baldwin] from

shippinh [sic]," and (2) on September 19, 2009, $10,000 was wired

from the Dominican Republic to Gladys's personal account. We

reject the latter argument, as well.


We affirm the sentence of Baldwin Ihenacho and the

convictions of Gladys Ihenacho.


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