Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 1 of 8 - Page ID#: 23 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION LEXINGTON CRIMINAL ACTION NO. ~~ ttf (' 1 --It"/- t'llf/ 1 J_ UNITED STATES OF AMERICA Eastern District of Kentucky FILED SEP 1 1 2014 AT LEXINGTON ROBERT R. CARR CLERK U.S. DISTRICT COURT PLAINTIFF v. PLEA AGREEMENT ZAVOS DIAGNOSTIC LABORATORIES, INC. DEFENDANT * * * * * 1. Pursuant to Federal Rule of Criminal Procedure 11 (c), Zavos Diagnostic Laboratories, Inc., (ZDL), the Defendant herein, will enter a guilty plea to the Information, charging a violation of21 U.S.C. 331(a), Introducing Misbranded Devices into Interstate Commerce. 2. The essential elements of21 U.S.C. 33l(a)(2) and 333(a)(2) are: (a) The Defendant knowingly introduced into interstate commerce; (b) A device; (c) The device was misbranded; and (d) The Defendant acted with the intent to defraud. 3. As to the allegation in the Information, the United States could prove the following facts that establish the essential elements of the offense beyond a reasonable doubt, and the Defendant admits these facts:
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 2 of 8 - Page ID#: 24 (a) From on or about 2008 to the present, the Defendant owned and operated a business known as Zavos Diagnostic Laboratories, Inc. (hereinafter ZDL) located in the city of Lexington, Fayette County, in the Eastern District of Kentucky. Mr. Zavos directed the daily operations of ZDL. ZDL sold various medical products to retail customers through its website. The advertised purpose of these products was to enhance the possibility that the user may become pregnant. (b) ZDL promoted its conception products as approved by the Federal Drug Administration (FDA), when none of ZDL's products were so approved. The following ZDL products were not FDA approved: ( 1) Zavos Home Conception Pak. (2) Zavos Seminal Collection Device. This product consisted of a sterile non-latex condom, tie, and a plastic bag. Because the collection of the sperm was for a therapeutic purpose, i.e., intrauterine insemination, this required FDA approval for sale. This product was a misbranded device. (3) SpermPrep Viscolytic System (VLS). The purpose was for use in assisted reproductive procedures, including intrauterine insemination, requiring FDA approval for sale. This product was a misbranded Class II device. ( 4) Home Gender Selection products. These products provided the user with tools necessary to collect a sample, submit it for processing, and returning the sample for use in at-home insemination or to take to a physician for use. These devices required FDA approval for sale. These products were misbranded Class III devices (prescription only). ( 5) Doctor lui package. This product and its components are advertised for use in insemination procedures. The product and its components (ZSC swim-up column, SpermPrep Media, and Zavos lui Catheter) require FDA approval for sale. The package was a misbranded Class II device. (6) Zavos Artificial Insemination Kits. This product consists of a Tom Cat AI catheter, a 50 ml tube for semen collection, and a 5 ml syringe, and it is advertised for use in intrauterine insemination procedures by a physician or by the patient. The product was a misbranded Class II device. (b) From on or about a date unknown through April 2010, ZDL sold individuals various preconception kits, including "Zavos Home Conception Pak," representing the product was effective in promoting conception. Most of the Zavos Home Conception Paks were purchased via credit card for $79.95. The
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 3 of 8 - Page ID#: 25 Zavos Home Conception Paks were shipped to the customers though the U.S. Postal Service or a commercial delivery service (such as United Parcel Service). The return address on each of the Zavos Horne Conception Paks was ZDL, Inc., 181 Southland Drive, Lexington, Kentucky 40503. The label on the Zavos Home Conception Pak stated that the Pak was "Manufactured and Distributed by The Andrology Institute of America & Zavos Diagnostic Laboratories, Inc." The Andrology Institute of America, Zavos Diagnostic Laboratories, Inc. or Panayiotis Zavos are not registered as medical device manufacturers (nor were they registered in the past as medical device manufacturers) with the FDA. (c) The Zavos Horne Conception Kit is a non-fda cleared medical device. An FDA expert review of five Horne Conception Kits revealed the devices were deemed misbranded under 21 U.S.C. 352 because (1) their labeling failed to bear adequate directions for its use; (2) they were manufactured, prepared, propagated, compounded, or processed in an establishment in a not duly registered with FDA; and (3) they were distributed in interstate commerce without providing FDA with the proper notice under section 360(k) [21 U.S.C. 510(k)] of the Food, Drugs, and Cosmetics Act. (d) From 2008 through 2010, ZDL's pecuniary gain from the domestic sale of non-cleared FDA medical devices was approximately $288,000.00 l~w4' ftkm 4. The maximum statutory punishment for Count~ ;fthe lnf~ation alleging a violation of21 U.S.C. 331(a) is a fine of not more than $500,000 pursuant to 18 U.S.C. 3571(c)(3). A mandatory special assessment of$400 for each count of conviction applies pursuant to 18 U.S.C. 3013(a)(2)(B), and the Defendant will pay this assessment to the U.S. District Court Clerk at the time of the entry of the plea. 5. The Defendant agrees to have the ZDL member who signs this plea agreement on behalf of ZDL present in Court to enter the guilty plea or as otherwise ordered by the Court. 6. The Defendant agrees to provide to the United States a resolution signed by all ZDL members agreeing to the plea agreement prior to the date of arraignment in this
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 4 of 8 - Page ID#: 26 matter. The Defendant understands the resolution will be attached to this Plea Agreement for review by the Court. 7. Pursuant to Rule 11 (c)( 1 )(B), the United States and the Defendant recommend the following sentencing guidelines calculations, and they may object to or argue in favor of other calculations. This recommendation does not bind the Court. (a) United States Sentencing Guidelines (U.S.S.G.), November 1, 2013, manual, will determine the Defendant's guidelines range. (b) Pursuant to U.S.S.G. 1B1.3, the Defendant's relevant conduct includes the facts set forth above in paragraph 3. (c) U.S.S.G. 8C2.1 applies because ZDL did not operate for a criminal purpose or by primarily criminal means. (d) Pursuant to U.S.S.G. 8C2.4(a)(2), the base fine equals ZDL's pecuniary gain of $288,000.00. (e) Pursuant to U.S.S.G. 8C2.5(a), the Defendant's initial culpability score starts at 5. The parties do not have an agreement as to the final culpability score. The parties may make arguments for or against any provisions of the Guidelines or factors that are not set forth herein impacting the final culpability score. 8. The Defendant will not file a motion for a decrease in the offense level based on a mitigating role pursuant to U.S.S.G. 3Bl.2 or a departure motion pursuant to U.S.S.G. Chapter 5, Parts H or K. The Defendant may move for a variance and argue for a fine of not less than $250,000.00. The United States will not oppose arguments for a fine of $250,000.00 or more.
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 5 of 8 - Page ID#: 27 9. The Defendant waives the right to appeal the guilty plea, conviction, and sentence. Except for claims of ineffective assistance of counsel, the Defendant waives the right to attack collaterally the guilty plea, conviction, and sentence. 10. ZDL agrees to cease any current operations related to its sale of contraception kits and components thereof, and to cease sales of any other medical devices and products. Further, ZDL agrees that it will not engage in the marketing, transport or sale of contraception kits, components of contraception kits, and other medical devices in or into the United States. This paragraph binds ZDL and any of its successors. 11. The Defendant agrees to cooperate fully with the United States Attorney's Office and will make a full and complete financial disclosure. The Defendant agrees to complete and sign a financial disclosure statement or affidavit disclosing all assets in which the Defendant has any interest or over which the Defendant exercises control, directly or indirectly, including those held by a nominee, or other third party, and disclosing any transfer of assets that has taken place within three years preceding the entry of this plea agreement. The Defendant will not encumber, transfer, or dispose of any monies, property, or assets under the Defendant's custody or control without written approval from the United States Attorney's Office. 12. The Defendant understands and agrees that, pursuant to 18 U.S.C. 3613, whatever monetary penalties are imposed by the Court will be due and payable immediately and subject to immediate enforcement by the United States. If the Court
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 6 of 8 - Page ID#: 28 imposes a schedule of payments, the Defendant agrees that it is merely a minimum schedule of payments and not the only method, nor a limitation on the methods, available to the United States to enforce the judgment. The Defendant waives any requirement for demand of payment on any fine, restitution, or assessment imposed by the Court and agrees that any unpaid obligations will be submitted to the United States Treasury for offset. The Defendant authorizes the United States to obtain the Defendant's credit reports at any time. 13. If the Defendant violates any part of this Agreement, the United States may void this Agreement and seek an indictment for any violations of federal laws, and the Defendant waives any right to challenge the initiation of additional federal charges. 14. The Defendant agrees to close ZDL or to sell ZDL and its assets to an unrelated third party purchaser no later than 90 days from the date of sentencing. The Defendant also agrees that it will not engage in the sale of medical devices of any kind, directly or indirectly, within the United States, from the United States, or into the United States. 15. This document and the sealed supplement contain the complete and only Plea Agreement between the United States Attorney for the Eastern District of Kentucky and the Defendant. The United States has not made any other promises to the Defendant. 16. This Agreement does not bind the United States Attorney's Offices in other districts, or any other federal, state, or local prosecuting authorities.
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 7 of 8 - Page ID#: 29 17. The Defendant and the Defendant's attorney acknowledge that the Defendant understands this Agreement, that the Defendant's attorney has fully explained this Agreement to the Defendant, and that the Defendant's entry into this Agreement is voluntary. KERRY B. HARVEY UNITED STATES ATTORNEY Date: /t.4j: J Dl 'T By: ~;//( ))J:7;}J Robert K. McBride Assistant United States Attorney oq\ \,\ \':\ Date: Albert B. Chandler, III Attorney for Defendant R. Michael Murphy Attorney for Defendant Date: '/lt/1'1 ( ' APPROVED, this // day of ~f.m.}.ua_ ' 80ft/ 0
Case: 5:14-cr-00101-KKC Doc #: 9 Filed: 09/11/14 Page: 8 of 8 - Page ID#: 30