Ex-chief of KV Pharmaceutical gets month or less in jail
Staring down at the former chief executive of KV Pharmaceutical Co. — what used to be among St. Louis' most successful companies — the federal judge portrayed Marc Hermelin as an example of capitalism gone awry.
"What I see when I see Mr. Hermelin is greed, abuse of power, recklessness," U.S. District Judge E. Richard Webber said Thursday. "He had this great company of 1,700 (employees), and once diverted, he was sending pills across the country that were twice the strength of their labels."
Hermelin's attorney, Jim Martin, described his client as a deeply religious man who was known for his individual acts of kindness and who for many years had given large sums of money — a third of his income — to local charities.
The judge brushed the argument aside.
"He has $29 million in his pocket. Giving, to him, is so easy," Webber said dryly.
Minutes earlier, Hermelin, 69 — who moved to Jerusalem two years ago after a federal investigation derailed his company — had stood before the judge in a gray business suit and pleaded guilty to two criminal misdemeanor charges of mislabeling drugs.
"Your honor, I'm sorry we're here," said Hermelin, taking less than 30 seconds to plead for mercy as his wife, Sarah, grown son, David, a squad of attorneys and a gallery of spectators looked on. "I fully accept responsibility for the charges, and I ask for your forgiveness in sentencing me. And I'm remorseful for what happened."
The judge shot back: "You just saved yourself 30 days in jail because I had intended to sentence you to 60 days in jail."
Webber sentenced the defendant to 30 days in county jail, followed by one year of unsupervised release that can be served in Israel. Under a plea agreement, Hermelin also agreed to pay a $1 million criminal penalty and to forfeit an additional $900,000 in ill-gotten gains.
Webber, who ordered Hermelin to surrender his passport, said he did not want him to leave the United States until the jail time is served. But told by Hermelin's attorney that his client needed for family reasons to be in Israel for Passover, which begins April 18, the judge relented — saying that if Hermelin can begin serving his time in the next few days, "it doesn't have to necessarily be 30 days."
Assistant U.S. Attorney Andrew Lay had recommended up to six months in jail, arguing that the errant morphine tablets shipped in 2008 to San Francisco and Canada put doctors and patients in jeopardy, including "vulnerable populations at nursing homes and in hospitals." He also said that since 2004 KV had received a series of consumer complaints about its quality-control problems.
Martin had asked the judge to sentence his client to probation in Israel — without jail time, stressing that Herman had weathered the stress of a long-running federal investigation and was now bearing the "humiliation and embarrassment" of pleading guilty before his family.
"He will carry this badge forever, and not a badge of honor," Martin said.
Hermelin, who stepped down from the Bridgeton-based drugmaker's board of directors in November, had waived his right to stand trial after a year of negotiations between the U.S. attorney's office and defense lawyers.
In an interview after the sentencing, U.S. Attorney Richard Callahan said that because Israel did not have a similar drug law, prosecutors believed that if indicted on felony charges, Hermelin might never face charges here.
"The sufficiency of evidence was never an issue in this case," Callahan said. "There was a real question as to whether we could ever extradite the defendant and bring him back."
Source : stltoday.com
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KV's wholly owned subsidiary, Ethex Corp., pleaded guilty in March 2010 to two felony counts of criminal fraud for failing to report to the Food and Drug Administration that it was making oversize painkillers — and drew $27.6 million in fines and restitution. KV initiated recalls of oversize painkillers in June 2008, but did not report to the FDA its discovery of oversize tablets of other drugs.
By 2008, KV was considered one of the most successful publicly traded companies based in the St. Louis area. But the criminal case against Ethex resulted in a two-year shutdown of KV's production facilities and layoffs of three-quarters of its work force. Now, the drug company is hoping to revive itself with a new prenatal drug, Makena.
Hermelin, a former board chairman of KV Pharmaceutical and a major KV stockholder, was ousted as chief executive in December 2008 as the result of a board investigation into mismanagement.
In November 2010, the federal Department of Health and Human Services banned him as the "owner/operator" of a drug company from participating in federal health programs for the next 20 years. Hermelin resigned as trustee of all family trusts that own KV stock and agreed to divest his stock in the company over a timetable that neither KV or the agency has made public.
Late Thursday, Hermelin issued a statement through his lawyer. "This was clearly unintentional. No one intended for this to ever happen, and I am deeply sorry."