Two top executives of a Holbrook company were charged in a federal indictment Wednesday as part of a 20-year scheme to slowly defraud the federal government and private companies out of $116 million intended as refunds for unused medicine, according to officials and court papers.
Dean Volkes, 51, of Port Jefferson, the owner, president and CEO of Guaranteed Returns, and Donna Fallon, 50, of Miller Place, the company's executive vice president and CFO, were charged in connection with the scheme, as was Ronald Carlino, 66, of Deer Park, who worked on the company's computer system.
The 44-count indictment accused the three of operating a scheme that relied on the passage of time, phony companies and the inability of giant drugmakers to keep track of relatively tiny sums of money and merchandise. The result, according to the indictment, was a fraudulent financial windfall for the Holbrook company and its executives as they siphoned off the money.
Volkes and the company were charged with conspiracy, money laundering, obstruction of justice, lying to federal agents, theft of government property and mail and wire fraud. Fallon and Carlino face charges of conspiracy, obstruction of justice and lying to federal agents.
The scheme spanned two decades, said Eastern District federal prosecutor Lara Treinis Gatz at a hearing Wednesday in federal court in Central Islip. Among the victims: the Defense Supply Center in Philadelphia, which buys and distributes drugs to U.S. armed forces, Veterans administration, the District of Columbia Department of Health and the Federal Bureau of Prisons, the papers said.
Acting as a middleman, or "reverse distributor" between pharmaceutical companies and customers, Guaranteed Returns arranged the return of unused pharmaceuticals in exchange for a fee, according to the indictment.
Unknown to customers or drugmakers, bogus business accounts were created on the Holbrook company's computers, according to court papers. Because of a Byzantine web of contracts, drugs, refund policies and massive sums of money, pharmaceutical firms use reverse distributors as an efficient way to obtain refunds for customers, according to court papers.
It was also how the Holbrook executives slowly got rich over time, according to the indictment. When returning the drugs, small amounts were logged in as belonging to the fictitious companies. Over several years, the company's phony companies would seek refunds. Because the refunds were small and the pharmaceutical companies' sales and refunds so diverse and large, they went undetected, according to the indictment.
The company lied about the schemes when questioned by federal agents, or destroyed or attempted to destroy company records, the indictment said.
Magistrate A. Kathleen Tomlinson released Volkes on $10 million bond, and Fallon and Carlino on $250,000 bond each.
Prosecutor Treinis Gatz and defense attorneys declined to comment. If convicted, the three each face more than 100 years in prison and fines of up to $242 million.