SPRINGFIELD -- A federal grand jury indicted three businesses in Springfield on Thursday on charges of fraudulent marketing. The grand jury believes the companies, their two owners and business associates fraudulently marketed several dietary supplements over the Internet with illegal claims that the products could prevent, treat, or cure a number of diseases. Investigators say the businesses sold the products to a business in Michigan that used several Web sites to sell more than $16 million worth of the products in 2005 and 2006.

The indictments, which include 40 separate crimes, are against Charles Thao, Mai Lor, Nutrapha Research, Bio Nutrasource, Tony Pham, Tong Vang, Techmedia Health (also known as Frist Nutrients and K.Y.C.), Shua Vang. The defendants, who were all arrested by Thursday, could face decades in prison or hundreds of thousands of dollars worth of fines.

To read the 67-page indictment, click here.

Edited news release:

  SPRINGFIELD -- John Wood, United States Attorney for the Western District of Missouri, announced today that two Springfield business owners, along with their local companies and their business associates located in Michigan, have been indicted by a federal grand jury for fraudulently marketing several dietary supplements over the Internet with illegal claims that these supplements could prevent, treat or cure a number of diseases. The Springfield businesses sold the products to a Michigan business, which used several Web sites to sell more than $16 million worth of the products in 2005 and 2006.

        Charles Thao, 40, and his wife, Mai Lor, 23, both of Springfield, along with two businesses that they own and operate in Springfield, Nutrapha Research, and Bio Nutrasource, and Shua Vang, 40, also of Springfield, and Tony Pham, 40, and his business, Techmedica Health, and Tong B. Vang, 42, all of Grand Rapids, Mich., were charged in a 40-count indictment returned by a federal grand jury in Springfield on Wednesday.  All of the defendants are in federal custody pending their arraignment and detention hearing at 2 p.m. Tuesday, March 4..

        The federal indictment alleges that since April 6, 2004, the defendants have participated in a conspiracy to buy and sell unapproved new drugs and misbranded drugs and to defraud the United States by impeding the lawful functions of the Food and Drug Administration to prevent the introduction of unapproved new drugs and misbranded drugs in interstate commerce, to regulate the interstate sale and distribution of drugs in the United States, and to safeguard the health and safety of consumers who purchase drugs.

        According to the indictment, Thao and Lor, through their Springfield business, Medycinex, Inc., supplied millions of dollars worth of dietary supplements to Pham and his business, Techmedica. Pham sold more than $16.6 million worth of those products in 2005 and 2006, using several different Web sites.  Pham distributed some of the supplements to Shua Vang and his business, Naturocare.  Naturocare also sold products over the Internet, with sales totaling $12,287.

        Under federal law, a dietary supplement may not claim to treat, cure or prevent a specific disease or class of diseases.  The indictment alleges the defendants claimed that six products listed in the indictment, which were sold over the Internet, had been proven reliable through clinical testing for the treatment and prevention of diabetes, irritable bowel syndrome, gout, high cholesterol, high blood pressure, heartburn and diarrhea. The indictment alleges that, in reality, no clinical testing had been performed. The dietary supplements that were allegedly marketed as unapproved new drugs and misbranded drugs included Diabeticine (later renamed Diamaxol, and also known as Glucolex), Digestrol (also known as Digesticine), Uricinex (also known as Uricaid), Cholestasys Rx (later renamed Cholestasys), Hyperexol and Prolipamy.

        Several Web sites used by Techmedica allegedly contained materially false testimonials, product information, and identification of medical professionals.

        The indictment says that Techmedica fabricated fraudulent customer identities using photographs purchased from Istockphoto.com. Testimonials attributed to these fraudulent identities touted the effectiveness of the unapproved new drugs and misbranded drugs. The indictment alleges that Techmedica and Shua Vang (through Naturocare) also posted one of the Istockphoto.com photographs on their Web sites to fabricate a non-existent physician, Dr. Judy Hamilton, for the purpose of lending authenticity to and endorsing product claims about Diabeticine for customers with Type I and Type II diabetes and to endorse Thao.  The person identified as Dr. Hamilton was in fact a model from California.  This same model's photograph was also used by Pham on another Web site to fabricate a non-existent nurse, the indictment says, Bethany Hunt, RN, to tout the effectiveness of the unapproved new drugs and misbranded drugs.

        According to the indictment, Thao’s photograph and credentials were posted on the Techmedica and Naturocare Web sites with claims that Thao was a board-certified naturopathic physician and chief cellular researcher for Techmedica. In fact, the indictment says, none of the institutions from which Thao claimed to have received medical training are accredited institutions of higher education.

The Defendants

        The indictment alleges that Thao claimed to be a board-certified naturopathic physician, and claimed to have researched and developed the products identified in the indictment.  Thao claimed to have obtained a PhD in healthcare management from Vernell University in June 1999. Thao also claimed to have received medical training from the Southern College of Naturopathic Medicine in Waldron, Ark.  Neither entity is an accredited institution of higher education, the indictment says.

        Between June 13, 2005, and Oct. 15, 2006, Thao owned a 51-percent interest in and directed the day-to-day operations of Medycinex, Inc., a Missouri corporation located in Springfield. Thao used Medycinex to purchase the products listed in the indictment and to distribute those products in interstate commerce. On Oct. 15, 2006, Thao created Nutrapha Research, a Missouri limited liability company located in Springfield, to carry on the business previously conducted by Medycinex.  Thao owned a 100 percent interest in Nutrapha and directed its  day-to-day operations.

        Lor owned a 49-percent interest and participated in the day-to-day operations of Medycinex. Lor maintained the financial records of Medycinex. On Feb. 6, 2007, Lor formed Bio Nutrasource, a Missouri limited liability company located in Springfield, to carry on the business previously conducted by Medycinex. Lor owned a 100 percent interest in and participated in the day-to-day operations of Bio Nutrasource.

        The Springfield businesses owned and operated by Thao and Lor allegedly contracted with two dietary supplement manufacturers one in Jonesboro, Ga., and the other in Fayetteville, Ark.  These two companies manufactured the dietary supplements that the defendants sold as unapproved new drugs and misbranded drugs.

        Pham owned and operated Techmedica Health, Inc., a Michigan corporation located in Grand Rapids, Mich. Pham allegedly used Techmedica to repackage, sell, market and distribute the unapproved new drugs and misbranded drugs described in the indictment. Tong Vang participated in the day-to-day operation of Techmedica.

        Shua Vang  worked at Medycinex from July 2005 to June 2006 as the warehouse manager responsible for the delivery of the unapproved new drugs and misbranded drugs to Techmedica. Shua Vang also did business as Naturocare while he was employed at Medycinex. Shua Vang owned and operated Naturocare from October 2005 to July 2006. Shua Vang allegedly purchased the unapproved new drugs and misbranded drugs from Techmedica then re-labeled and renamed them, marketing the drugs under Naturocare labels.

FDA Warnings

       The indictment alleges that Techmedica, through Pham and Tong Vang, in an effort to defraud the United States by impeding, obstructing, and defeating the  lawful functions of the FDA, operated several Web sites using mirror image technology.  The use of this technology assured that when each of these Web sites was accessed from an FDA network computer, they displayed a “sanitized” version of the Web site containing medical claims that attempted to comply with the federal Food, Drug, and Cosmetic Act (FDCA).  However, the indictment says, when each of these Web sites was accessed from a computer whose IP address could not be traced to the FDA, they displayed claims that the dietary supplements could cure, mitigate, treat, and prevent diseases, so that these supplements were sold as unapproved new drugs and misbranded drugs. 

        Techmedica and Pham had twice been warned that such claims violated the FDCA, the indictment says.  On Aug. 16, 2005, the FDA issued a warning letter to Techmedica, advising it had violated the FDCA. Between April 27 and May 1, 2006, the FDA Office of Regulatory Affairs conducted an  on-site inspection of Techmedica at its Grand Rapids location.  The FDA Office of Enforcement discovered Techmedica’s mirrored Web sites on May 9, 2006.

Additional Charges

        In addition to the fraud conspiracy charge, Thao, Lor, Pham, Tong Vang, Techmedica and Shua Vang are each charged with causing the introduction of unapproved new drugs into interstate commerce, causing the introduction of misbranded drugs into interstate commerce, and receiving and distributing misbranded drugs in interstate commerce.  Bio N utrasource is also charged with receiving and distributing misbranded drugs in interstate commerce.

        Thao, Lor, Nutrapha, Bio Nutrasource , Pham, Tong Vang, Techmedica and Shua Vang are also charged with participating in a conspiracy to commit wire fraud. The indictment alleges that they made false representations and promises to consumers that their products had been formulated and tested by qualified medical professionals to cure, mitigate, prevent, and treat diseases. That scheme involved wire communication and payments in the form of bank wire transfers, including credit card transactions with customers. Thao, Lor, Bio Nutrasource, Pham, Tong Vang, Techmedica and Shua Vang are also charged with 11 counts of wire fraud related to payments in the form of wire transfers to bank accounts.

        Thao, Lor, Bio Nutrasource, Pham, Tong Vang, Techmedica and Shua Vang are also charged with participating in a conspiracy to commit mail fraud related to false representations and promises to consumers involving the unapproved new drugs and misbranded drugs that were delivered by mail. Thao, Lor, Bio Nutrasource, Pham , Tong Vang, Techmedica and Shua Vang are also charged in six counts of mail fraud related to the mailing of misbranded and unapproved new drugs.

        Thao, Lor, Nutrapha, Bio Nutrasource , Pham, Tong Vang, Techmedica and Shua Vang are also charged with participating in a conspiracy to commit money laundering.  The indictment alleges that they participated in financial transactions that involved the proceeds of wire fraud, with the intent to promote the carrying on of that unlawful activity.

Forfeiture Allegations

        The federal indictment also contains two forfeiture allegations, which would require the defendants to forfeit to the government any property derived from the proceeds of the alleged wire and mail frauds and involved in the money laundering conspiracy, including $17,421,059 (which represents the amount of proceeds obtained as a result of the wire and mail frauds and involved in the money laundering conspiracy), as well as five parcels of real estate (three in Springfield, and one each in Rogersville, Mo., and Pleasant Hope, Mo.), a 2007 Toyota RAV 4, a 2006 Hummer H2, a 1999 Mercedes Benz, and various bank accounts.

        Wood cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

        This case is being prosecuted by Supervisory Assistant U.S. Attorney Michael S. Oliver. It was investigated by the Food and Drug Administration – Office of Criminal Investigation.