Former J&J Sales Rep Convicted in Stolen Devices Scheme

U.S. federal prosecutors have netted convictions and $5 million in restitution in more than 20 cases through "Operation Miami Device."

Nancy Crotti

A former sales representative at Johnson & Johnson's Ethicon Endosurgery subsidiary was convicted last week on charges of conspiring to transport stolen medical devices in interstate commerce, money laundering, and other charges.

A federal judge in Miami convicted Kerri L. Kaley, 50, of Cold Spring Harbor, NY, on seven felony counts in a criminal case arising out of a Miami-based FDA investigation. "Operation Miami Device" has led to convictions in more than 20 cases of medical device theft and has resulted in forfeitures, fines, and restitution totaling more than $5 million, according to a statement by the U.S. Attorney's office for the Southern District of Florida and the FDA Office of Criminal Investigations.

Kerri Kaley was employed at Ethicon Endosurgery between about 1989 and 2005, according to a report in the South Florida Business Journal. She and her husband Brian K. Kaley, and Ethicon, Inc. sales representative Jennifer Gruenstrass were indicted in February 2007, the report said. Gruenstrass worked for Ethicon from about July 1990 through May, 2005, according to the indictment. Charges remain pending against Brian Kaley, but no trial date has been set.

From approximately 1995 through February 2005, Kerri Kaley participated in a conspiracy with a Long Island, NY-based group of other medtech salespeople from J&J subsidiaries, according to court records and testimony presented at trial. Kaley and others working with her obtained, through theft or fraud, "significant quantities of prescription medical devices" from nonprofit New York hospital customers, "which were then forwarded to a conspirator" who maintained F&S Medical Inc., in Delray Beach, FL, according to the indictment in the case. These devices were often state-of-the-art equipment used for minimally invasive surgery and the suture materials used throughout hospitals.

Kerri Kaley laundered over $2.2 million in payments through two sham construction corporations owned by Brian Kaley and used the funds to pay the co-conspirators, a home mortgage, home-renovation expenses, and child care, the statement and indictment say. A Miami-based conspirator solicited sales representatives and other employees of medical device manufacturers, seeking to purchase medical devices for re-sale. Three of Kaley's co-conspirators testified at her trial.

Kaley is scheduled for sentencing on December 2.  She faces up to five years in prison on the conspiracy charge, a maximum sentence of up to 10 years on each of the five substantive counts of transporting stolen property, and up to 20 years on the money-laundering conviction.  Kaley is also subject to fines on each of the seven counts of up to $250,000 per count.  Kaley agreed to forfeit $500,000 to the federal government, payable before her sentencing date, the statement said. Kaley also faces sentencing based on a November 2014 conviction arising in the same matter for obstruction of justice, which carries a potential sentence of 10 years' imprisonment and a fine of $250,000, the statement noted.

Nancy Crotti is a contributor to Qmed.

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[Image courtesy of Salvatore Vuono on FreeDigitalPhotos.net]