UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

United States of America

v. Criminal No. 15-cr-57-LM Opinion No.

Mustafa Hassan Arif

O R D E R

The government has charged defendant, Mustafa Arif, with

wire fraud in violation of

(Count I) and four

counts of introducing misbranded drugs into interstate commerce

in violation of

(a), 333(a)(2), and 352(a)

(Counts II – V) (“misbranding of drugs”). The charges arise

from alleged misrepresentations Arif made on his websites

offering various drugs for sale.

Arif has filed two motions pursuant to Federal Rule of

Criminal Procedure 12(b)(1), requesting that the court determine

that two defenses he intends to offer at trial are viable. See

doc. nos. 113 & 114. The government objects to both motions.

Background

The parties have agreed to 19 separate, detailed factual

stipulations. See doc. no. 94. As the court summarized these

facts in its September 16, 2016 order, see doc. no. 108, the

court will refer to them in this order only where relevant. To prove that Arif committed wire fraud, the government

must prove that he participated in a scheme to defraud with the

intent to defraud. To prove that Arif introduced misbranded

drugs into interstate commerce, the government must prove that

he acted with the intent to defraud or mislead.1

In his trial briefs, Arif stated that he intended to offer

at trial a defense that he had a good faith belief in the

efficacy of the drugs sold on his websites and, therefore, could

not have had an intent to defraud for purposes of any of the

charges (“good faith defense”).2 Arif proposed a hybrid approach

to his defense: counsel would represent Arif on the entirety of

his case with the exception of his good faith defense, and, on

that defense, Arif would represent himself.

After a hearing on Arif’s request for hybrid counsel, Arif

requested that the court decide the issue of the viability of

1 Although the government may charge a defendant with introducing misbranded drugs into interstate commerce (“misbranding of drugs”) as a misdemeanor, see

(a) and 333(a)(1), the government has charged Arif with felony misbranding of drugs under

(a) and 333(a)(2). Such a charge requires the government to prove that Arif committed the offense with the intent to defraud or mislead.

2 The court has summarized the unique procedural history of this case in two prior orders. See doc. nos. 108 & 112. The court repeats in this order only that portion of the procedural history necessary for an understanding of the two pending motions.

2 his good faith defense as a matter of law prior to trial. In an

order dated September 16, 2016, the court held that Arif’s

proposed good faith defense is not a viable defense to the

“intent to defraud” element of the pending wire fraud and

misbranding of drugs charges. See doc. no. 108.

At a hearing on that same date, the parties disclosed that

the ruling had generated discussions about a conditional plea

agreement. Arif informed the court that he intended to plead

guilty to the wire fraud charge if he could retain his right to

appeal two legal issues.3 The two legal issues, briefly

summarized, are: (1) whether Arif’s proposed good faith defense

is a viable defense to the “intent to defraud” element of the

pending wire fraud and misbranding of drugs charges (the issue

addressed in the court’s September 16 order); and (2) whether

the government would be precluded from prosecuting the wire

fraud charge in the event the government failed at trial to

prove certain alleged facts with respect to the misbranding of

drugs charges (i.e., that the representations about the drugs

constitute labeling as opposed to advertising) (the

“jurisdictional defense”).

3 Federal Rule of Criminal Procedure 11(a)(2) allows a defendant to enter a conditional plea of guilty, “reserving in writing the right to have an appellate court review an adverse determination of a specified pretrial motion.”

3 There were two impediments to Arif’s ability to enter into

a plea and reserve his right to challenge the court’s rulings on

the two issues. First, the court had not issued an order or

expressed any view, adverse to Arif or otherwise, on his

jurisdictional defense. Second, although the court decided the

first legal issue adversely to Arif, see doc. no. 108, that

issue did not come before the court by way of “a specified

pretrial motion” as required in Rule 11(a)(2). See doc. no. 108

(explaining the case’s unique procedural history).

To resolve these procedural snags, the parties proposed

that they place both issues before the court in a manner that

would allow the court to rule, as required by Rule 11(a)(2), on

“a specified pretrial motion.” The court agreed to continue the

trial for a short time (until October 11, 2016), to enable the

parties to file their motions and objections, and allow the

court to rule on the motions prior to the start of trial.

Arif has now filed two specified pretrial motions, pursuant

to Federal Rule of Criminal Procedure 12(b)(1). The first is a

“motion for pre-trial ruling regarding jurisdiction” (doc. no.

113). The second is “defendant’s pro se motion for pretrial

ruling – intent” (doc. no. 114). The government objects to both

motions.

4 Discussion

Rule 12(b)(1) provides: “A party may raise by pretrial

motion any defense, objection, or request that the court can

determine without a trial on the merits.” The parties agree

that the court can determine the viability of Arif’s

jurisdictional defense and his good faith defense without a

trial on the merits.

I. Jurisdictional Defense

Counts II through V of the superseding indictment charge

Arif with misbranding of drugs with the intent to defraud or

mislead in violation of

(a) and 333(a)(2).4 The

superseding indictment alleges that the drugs were misbranded

under

(a) because their labeling, in this case,

Arif’s statements about the drugs on his websites, was false or

misleading. Thus, if the government fails to prove at trial

that Arif’s statements about the drugs on his websites

The government has argued in an earlier filing, see doc. no. 4

105 at n.4, that an “intent to mislead” is broader than an “intent to defraud.” For purposes of this order, the court presumes, without deciding, that the term “intent to mislead” under the misbranding of drugs statute is, for all intents and purposes, identical to an intent to defraud. See United States v. Watkins,

(9th Cir. 2002). Therefore, the court will refer to the intent element of the charged offenses as “intent to defraud.”

5 constitute labeling (as opposed to advertising), then Arif would

be entitled to a verdict of not guilty on Counts II through V.

Arif’s motion (doc. no. 113) asks the court to assume, for

purposes of the motion, that the government would fail at trial

to prove that Arif’s statements about the drugs on his websites

constitute labeling, and instead that they constitute merely

advertising. Arif contends that, in such circumstances, the

government would be precluded from prosecuting the wire fraud

charge (Count I) on the basis of false advertising because the

Federal Trade Commission (“FTC”) has exclusive jurisdiction over

false advertising of drugs. Arif asserts two arguments to

support his theory of preclusion: 1) the Department of Justice

cannot criminally charge a defendant with wire fraud based on

false advertising because such a charge is preempted by the

Federal Trade Commission Act (“FTCA”); and 2) even if the

Department of Justice could criminally charge a defendant based

on false advertising, it cannot do so unless the FTC certifies

the facts necessary for such a charge, which the FTC has not

done in this case. See doc. no. 113 at 7. The court addresses

each of these arguments in turn.5

5 In its objection, the government discerns from Arif’s motion a third argument: that the FTCA “depriv[es] United States District Courts of jurisdiction over” any matter involving a charge based on false advertising. Doc. no. 115 at 2. The court does not read Arif’s motion to challenge the court’s jurisdiction, but rather to challenge the government’s authority

6 A. Preemption

Arif first asserts that a charge of wire fraud based on

false advertising of drugs is preempted or implicitly repealed

by the FTCA. See doc. no. 113 at 7 (“To allow the Government to

charge wire fraud . . . where the allegations of fraud fall

squarely within the regulatory jurisdiction of the FTCA, guts

the intent of

and renders it meaningless.”).

In so arguing, Arif “march[es] into the teeth of a strong

judicial policy disfavoring the implied repeal of statutes.”

United States v. Brien,

(1st Cir. 1980);

Posadas v. Nat’l City Bank of N.Y.,

(1936)

(“The cardinal rule is that repeals by implication are not

favored.”). “For a court to find implied repeal, there must be

a positive repugnancy between the two statutes.” Brien,

(citing United States v. Borden Co.,

(1939)). “When two statutes are capable of coexistence, it

is the duty of the courts, absent a clearly expressed

congressional intention to the contrary, to regard each as

to bring criminal charges based on false advertising. To the extent Arif intended to assert an argument as to the court’s jurisdiction over a wire fraud charge, that argument is without merit. See

(“The district courts of the United States shall have original jurisdiction, exclusive of the courts of the states, of all offenses against the laws of the United States.”).

7 effective.” FCC v. NextWave Personal Commc’ns, Inc.,

(2003).

Conduct related to false advertising of non-prescription

drugs falls within the reach of the FTCA and, therefore, the FTC

has jurisdiction to pursue charges based on false advertising.

Under Arif’s view, because the FTC has the authority to enforce

the FTCA, the government cannot bring a charge of wire fraud

against Arif based on his allegedly false advertising of non-

prescription drugs. Arif must thus show that there is an

“inherent conflict” between the wire fraud statute and the FTCA.

Nextwave,

.

Arif offers no support for his contention that the FTCA

preempts or implicitly repeals the wire fraud statute. The

First Circuit, although not directly addressing the FTCA, has

rejected similar arguments based on implied repeal. In Brien,

defendants convicted of mail and wire fraud challenged their

convictions, arguing that the mail and wire fraud statutes were

impliedly repealed or preempted by the enactment of more

specific provisions of the Commodity Futures Trading Act

(“CFTA”). Brien,

. The First Circuit agreed

that Congress gave exclusive jurisdiction over commodities

futures regulation to the Commodities Futures Trading

Commission, but disagreed that the CFTA preempted or impliedly

repealed the mail and wire fraud statutes.

The court noted

8 that “[i]t was the fraudulent scheme furthered by use of the

mails and interstate telephone calls that brought appellants

within the purview of the mail and wire fraud statutes and not

the sale of commodity options.”

The court held that since

the mail and wire fraud statutes “are federal general antifraud

statutes, they cannot be preempted by the CFTA.”

Other

courts have reached the same conclusion as to the CFTA. See

United States v. Shareef,

(2d Cir. 1980)

(mail fraud statute not implicitly repealed by the CFTA with

respect to mail fraud involving commodity futures); United

States v. Abrahams,

(S.D.N.Y. 1980)

(CFTA does not preempt or implicitly repeal the mail fraud

statute).

While the court has been unable to locate precedent

precisely on point, there are numerous cases where the

government has successfully prosecuted mail and wire fraud

charges based on false or misleading advertising without any

suggestion that the charges were precluded by virtue of the FTC

having exclusive jurisdiction over the subject matter of false

advertising. See United States v. Sloan,

(7th Cir.

2007); United States v. Themy,

(10th Cir. 1980);

United States v. Pearlstein,

(3d Cir. 1978); United

States v. Andreadis,

(2d Cir. 1966); Blanton v.

United States,

(8th Cir. 1914). Further, courts have

9 held that the FTCA does not preclude the government from

prosecuting a defendant for false advertising under other

federal statutes. See United States v. Philip Morris, 263 F.

Supp. 2d. 72, 77-78 (D.D.C. 2003) (holding that a federal RICO

charge based on false advertising was not preempted by the FTCA,

noting “[e]ven though the FTC has exclusive jurisdiction under

the FTCA, the statute has never been interpreted to give the

agency exclusive jurisdiction over advertising or marketing

conduct”); Friedlander v. U.S. Postal Serv.,

(D.D.C. 1987) (“[T]he existence of [Food and Drug

Administration (“FDA”)] or FTC jurisdiction over this same

matter does not prevent the Postal Service from initiating

section 3005 proceedings against companies using the mails in

furtherance of a fraudulent scheme.”).6

Arif has not met the high burden of showing that the FTCA

preempts or implicitly repeals the wire fraud statute for

charges based on false advertising of non-prescription drugs.

6 Further, there is nothing in the legislative history of the FTCA to suggest that Congress intended the statute to repeal other fraud statutes or serve as the exclusive method by which false advertising could be prosecuted. See S. Rep. No. 74-1705 (1936); S. Rep. No. 75-221 (1937); H.R. Rep. No. 75-1613 (1937); & H.R. Rep. No. 75-1774 (1938).

10 B. Necessity of FTC Certification

Arif next argues that even if the government can bring wire

fraud charges against him based on false advertising, FTC

“[c]ertification under

(b) is a jurisdictional

prerequisite to any prosecution premised on false advertising.”

Doc. no. 113 at 7.

Section 56(b) provides: “Whenever the Commission has reason

to believe that any person . . . is liable for a criminal

penalty under this subchapter, the Commission shall certify the

facts to the Attorney General, whose duty it shall be to cause

appropriate criminal proceedings to be brought.” Arif contends

that § 56(b) is the exclusive mechanism by which a federal

criminal prosecution may be brought for an alleged FTCA

violation.

Arif’s argument fails for several reasons. First, § 56(b)

provides that the FTC may certify facts to the Attorney General

when it has reason to believe that a person is criminally liable

“under this subchapter.” § 56(b) (emphasis added). Such

criminal liability under the subchapter refers to

, which provides criminal penalties for false advertising, an

offense the government has not charged. Thus even if Arif’s

reading of the FTCA were correct – that FTC certification is

necessary before the government can bring criminal charges

against a defendant – the plain language of § 56(b) would

11 require FTC certification only before bringing charges under the

FTCA. Section 56(b) cannot be read to require FTC certification

for the enforcement of criminal penalties for another offense,

such as wire fraud, and Arif makes no developed argument that it

does.

Regardless, Arif’s interpretation of § 56(b) is incorrect.

Arif does not cite, and the court is not aware of, any authority

for the proposition that certification by the FTC under § 56(b)

is a jurisdictional prerequisite for criminal prosecution.

Indeed, in United States v. St. Regis Paper Co.,

(2d Cir. 1966), the Second Circuit addressed the issue of FTC

certification to the Attorney General. The court held that FTC

certification was a “jurisdictional prerequisite” for actions

seeking civil penalties for violations of cease-and-desist

orders. See

. The court noted, however, that the

legislative history of the statute made clear “that the Attorney

General could prosecute violations of that section on his own

motion, without awaiting FTC certification.”

(emphasis added). The court quoted Congressman Lea, the co-

sponsor of the Wheeler-Lea Act, which amended the FTCA to give

the FTC authority over false advertising, as stating:

As to the man who advertises an article injurious to health or advertises with intent to defraud or mislead, the provisions of the bill * * * authorize an immediate prosecution of such a man regardless of what

12 the Federal Trade Commission does. He can be arrested and prosecuted immediately.

at 692 n.7 (quoting 83 Cong. Rec. 406 (1938)).

Therefore, Arif’s argument as to the necessity of FTC

certification before the government can prosecute a defendant

for false advertising is based on a misunderstanding of the

FTCA. Section 56(b) is not a jurisdictional prerequisite to

criminal prosecution. Even if it were, such a prerequisite

could only apply to criminal prosecutions brought under the

FTCA, and would not apply to other statutes.

For the above reasons, the court holds that, assuming the

government would be unable to prove at trial that Arif’s

websites constituted “labeling” for purposes of the misbranding

of drugs charges, it would not be precluded from pursuing

charges against Arif under the wire fraud statute. Accordingly,

Arif’s motion regarding his jurisdictional defense (doc. no.

113) is denied.

II. Good Faith Defense

As discussed above, the court issued an order on September

16, 2016, holding that Arif’s proposed good faith defense was

not a viable defense to the “intent to defraud” element of the

pending wire fraud and misbranding of drugs charges. See doc.

no. 108. To meet the requirements of Rule 11(a)(2), Arif filed

a “pro se motion for pretrial ruling – intent.” See doc. no.

13 114.7 In his most recent motion, Arif asserts two new legal

arguments in support of his lack of intent to defraud: (A)

Arif’s business was aimed at inducing purchase from only knowing

and willing buyers of non-FDA-approved herbal and homeopathic

remedies; and (B) Arif had no intent to harm his customers.

Doc. no. 114 at 1. The court addresses each argument below.

A. Purchasers of Non-FDA-Approved Products

Arif argues:

since his websites were aimed at selling only to a limited circle of knowing and willing buyers and importers of non-FDA approved herbal and homeopathic medicine and any statements on the websites did and could only induce purchases from such buyers, therefore he could not have had the requisite specific intent to defraud. Knowing and willing buyers and importers of non-FDA approved medicine are not defrauded even if such a medicine fails to meet their expectations in some manner.

Doc. no. 114 at 3. Arif appears to be arguing that it is

impossible for a seller of non-FDA-approved products to have an

intent to defraud customers who purchase such products with the

knowledge that they are not FDA-approved, regardless of any

7 In this motion, Arif reasserts the same argument he made in earlier briefs, i.e., his good faith belief in the efficacy of the drugs negates his intent to defraud. The court has previously determined that, assuming Arif had a personal, good faith belief in the efficacy of the drugs sold on his websites, that good faith belief is not a viable defense to the charges in the superseding indictment. See doc. no. 108. The court incorporates its analysis in document no. 108 into this order.

14 misrepresentations.8 Arif cites United States v. Vitek Supply

Corp.,

(7th Cir. 1998) and United States v.

Andersen,

(7th Cir. 1995) in support of his

argument. Neither case helps Arif’s cause.

In Vitek, the defendants sold premixes, which contained

non-FDA-approved drugs, to be added to feed for veal calves.

The defendants smuggled the drugs into the United States by

either misdescribing the drugs in documents submitted to United

States Customs or failing to declare the drugs altogether. The

defendants were charged with and convicted of, among other

things, misbranding of drugs.

Arif quotes the following language from Vitek: “[D]irect

customers were aware that the premixes contained unapproved

drugs. Therefore, as the government concedes, these customers

were not defrauded.” Doc. no. 114 at 2 (quoting Vitek,

). Arif construes that language as standing for the

sweeping proposition that a seller of non-FDA-approved drugs

cannot legally defraud any customers who knowingly purchase non-

FDA-approved drugs.

Arif’s reliance on Vitek is misplaced. First, the language

quoted by Arif is taken out of context; the language concerns

8 For purposes of this order, the court assumes that Arif intended to induce the purchase of his drugs by only knowing and willing buyers of non-FDA-approved drugs.

15 the court’s calculation of loss under the United States

Sentencing Guidelines. The court’s analysis did not concern the

defendants’ guilt or innocence, and did not bear on the

defendants’ intent to defraud.

Second, the defendants in Vitek were charged with

misbranding of drugs based on their misrepresentations

concerning the content of the drugs. Therefore, the fact that

the government conceded that the defendants’ customers knew the

true content of the drugs was relevant to whether the customers

sustained any loss from the misrepresentations. Here, however,

the government has charged Arif with misbranding of drugs based

on Arif’s allegedly false statements on his websites concerning

cure rates and efficacy, customer testimonials, and research

papers. None of Arif’s alleged misrepresentations pertains to

FDA approval. The fact that Arif’s customers may have known the

drugs were non-FDA-approved does not bear on the question of

whether Arif intended to defraud his customers by making

misrepresentations about the efficacy of the drugs, customer

testimonials, or research conducted on the drugs.

Arif’s reliance on Andersen is also misplaced. In

Andersen, the defendants manufactured and sold animal drugs

which had not been approved by the FDA. They pled guilty to

failing to register a drug manufacturing facility with the FDA

with intent to defraud or mislead in violation of 21 U.S.C.

16 331(p) and 333(a)(2). Andersen,

. Arif asserts

that Andersen holds “that there was no quantifiable loss where

consumers were very pleased with defendant’s product, even

though defendant sold said product without FDA approval and made

false statements to consumers about the product.” Doc. no. 114

at 3.

Andersen’s holding is not relevant to Arif’s argument.

First, as in Vitek, the Andersen court analyzed the issue in the

context of calculating loss under the Sentencing Guidelines.

The analysis had no bearing on the defendants’ guilt or

innocence as to the charged offense or whether they had an

intent to defraud. Second, in Andersen, the government charged

that the defendants intended to defraud the FDA, rather than

their customers.

. Here, Arif’s alleged

fraudulent statements on his websites were directed at his

customers, not the FDA or any government agency.

Nothing in Vitek or Andersen suggests that a defendant who

misleads customers by making misrepresentations to induce the

customers to purchase his products, as the government alleges in

the superseding indictment, nevertheless acts without intent to

defraud or mislead as long as he is truthful about a lack of

FDA-approval. Under Arif’s theory, a seller of a non-FDA-

approved drug could make any misrepresentation, so long as he

17 did not state that the drug was FDA-approved. No such immunity

exists.

In sum, assuming that Arif intended to induce the purchase

of his drugs by only knowing and willing buyers of non-FDA-

approved drugs, for the above reasons, the court finds that that

fact is not a defense to the charges in the superseding

indictment.

B. Good Faith

With regard to Arif’s good faith argument, the court

addresses one additional argument not directly discussed in its

earlier order but pressed by Arif in his current motion. That

is, Arif now argues that for the government to prove Arif acted

with the intent to defraud, “there is a pressing need to

independently establish an ‘intent to harm’ from an ‘intent to

deceive.’” Doc. no. 114 at 4.

Arif is incorrect. Arif’s intent to defraud does not turn

on whether he intended to harm his customers. See United States

v. DeNunzio, Cr. No. 14-10284-NMG,

, at *4 (D.

Mass. Sept. 19, 2015) (differentiating between an intent to harm

and an intent to defraud for purposes of wire fraud, and holding

that the former is not an element of the offense) (citing United

States v. Kendrick,

(1st Cir. 2000) (en banc)

and collecting cases)); see also United States v. Appolon, 715

(1st Cir. 2013); United States v. Mueffelman,

(1st Cir. 2006) (noting that defendant had an intent

to defraud for purposes of mail fraud even though “he

optimistically believed that his programs would succeed”).

Arif’s intent to defraud turns on whether he intended to deceive

another in order to obtain money or property. See United States

v. Pimentel,

(1st Cir. 2004).

In short, for the reasons stated above and in the court’s

September 16, 2016 order, the good faith defense, as argued by

Arif in his briefs before the court, is not a viable defense to

the charges in the superseding indictment.

Conclusion

For the foregoing reasons, Arif’s “motion for pretrial

order – jurisdiction” (doc. no. 113) and “pro se motion for

pretrial order – intent” (doc. no. 114) are denied.9

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

October 6, 2016

9 The court made clear at the September 16, 2016 hearing that, in the event this case proceeds to trial, nothing in any of Arif’s pro se briefs shall be used against him at trial, even for impeachment purposes.

19 cc: Kirsten B. Wilson, Esq. Robin D. Melone, Esq. Arnold H. Huftalen, Esq. Sarah E. Hawkins, Esq. U.S. Probation U.S. Marshal

20