The owner and former president of a Holbrook company has been sentenced to 5 years in prison and ordered to pay more than $200 million in forfeiture and restitution for his role in a complex scheme to pocket refunds on returned medicine, according to officials.
The sentence of Dean Volkes of Port Jefferson, who was also the CEO of Guaranteed Returns, was announced Tuesday by the U.S. attorney’s office in Philadelphia. Volkes and his company owe $114.8 million in forfeiture and $95 million in restitution, officials said.
Though Volkes and other defendants were originally indicted on Long Island, the case was transferred to a federal court in Pennsylvania because one of the main victims of the scheme was a U.S. Defense Department purchasing and supply agency based in Pennsylvania.
Guaranteed Returns is what is known as a reverse pharmaceutical distributor. The company manages the return of expired drugs for not only the military, but also hospitals, nursing homes and other medical-related businesses, according to officials.
But between 1999 and 2014, Volkes headed a scheme in which 13,000 customers were defrauded because many of their reimbursements were pocketed by the company and not passed on to them, officials said.
Guaranteed Returns itself was sentenced to 5 years' probation and is responsible, along with Volkes, for paying the forfeiture and restitution.
In addition, Guaranteed Returns’ former chief financial officer, Donna Fallon of Miller Place, who is also Volkes’ sister, was sentenced to a year-and-a-day in prison for her role in the scheme and must pay $515,000 in restitution, officials said.
Volkes, Fallon and the company were convicted after a trial in Philadelphia in 2017 of mail fraud, wire fraud, theft of government property, money laundering conspiracy, obstruction of justice and false statements, officials said.
Volkes’ attorney, Elkan Abramowitz of Manhattan, said Wednesday that his client “is looking forward to an appeal” to overturn the verdict because prosecutors misunderstood the contractual relationship between the company and its customers.
An attorney for Guaranteed, Douglas Grover of Manhattan, said that while Volkes is still the owner of the company, he and Fallon have no role in its operation. A new management team has been running Guaranteed; the voting stock has been put in a blind trust; the company has instituted a series of reforms to guard against fraud; and a court-appointed monitor is also reviewing the business’s operations, Grover said.
Grover said the company is expected to survive despite the more than $200 million in penalties because when Volkes was indicted the government seized $126 million from him that could potentially be put toward penalties.
The judge overseeing the case also said that any payment schedule would be structured so as not to drive Guaranteed out of business.
A spokeswoman for Guaranteed, Katherine Heaviside, said in a statement: "Since 2014, the nearly 150 employees at Guaranteed Returns have worked tirelessly with new leadership to regain the trust of our customers and have fully embraced a new corporate culture of integrity, transparency, and ethical compliance." Heaviside added that the company’s attorneys are reviewing whether to appeal a part of the sentence.
An attorney for Fallon could not be reached immediately.