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Former Drug Company Employee Indicted On Federal Charges After Allegedly Stealing Thousands Of Bottles Of Joint Medication

An indictment was unsealed today in federal court in Central Islip charging Gregory Settino with theft of medical products and making a false statement to a federal agent. Settino was arrested today and arraigned this afternoon via teleconference before United States Magistrate Judge Arlene R. Lindsay. Settino was released on a $250,000 bond.

Seth D. DuCharme, Acting United States Attorney for the Eastern District of New York, and Jeffrey Ebersole, Special Agent-in-Charge, Food and Drug Administration, Office of Criminal Investigations, New York Field Office (FDA-OCI), announced the arrest and charges.

“As alleged, Settino abused his supervisory position at a pharmaceuticals company to steal large quantities of equine drugs in order to enrich himself and without regard for how his sale of the medical products could potentially endanger the health of horses,” stated Acting United States Attorney DuCharme. “The defendant then allegedly compounded his criminal conduct by lying to an FDA Special Agent to minimize the scope of his thefts. Thanks to the combined efforts of the U.S. Attorney's Office and the FDA, this illicit pipeline of stolen drugs to vets and horse trainers has been shut down.”

“The safety and effectiveness of veterinary drugs play a key role in maintaining the health of animals. When these drugs leave the legitimate supply chain, they can lose their effectiveness or become unsafe,” stated FDA-OCI Special Agent-in-Charge Ebersole. “We will continue to investigate and bring to justice those who endanger the health of animals.”

As set forth in court filings, Settino was the production supervisor of manufacturing at Luitpold Pharmaceuticals, Inc. in Shirley, New York. In January 2019, Luitpold was renamed American Regent. One of the products manufactured at Luitpold and American Regent was Adequan, an injectable equine drug administered to horses with degenerative joint disease and sold throughout the United States. Between 2012 and January 2020, Settino allegedly stole thousands of bottles of Adequan from Luitpold and American Regent valued at over $1 million, and sold those drugs to horse trainers and veterinarians at New York racetracks, including Belmont Park, for more than $600,000. Settino's conduct endangered the health of horses because the drugs were not maintained, stored or transported in accordance with proper procedures for ensuring the safety, effectiveness and efficacy of the drugs. At times, Settino transported the drugs in shoeboxes stored in his car. At all times, the drugs were handled in violation of the FDA regulated supply chain.

On January 23, 2020, Settino was interviewed by an FDA Special Agent and allegedly falsely stated that he had stolen fewer than 100 bottles of Adequan from Luitpold and American Regent.

The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Settino faces up to 25 years in prison.

The government's case is being handled by the Office's Long Island Criminal Division. Assistant United States Attorney Charles P. Kelly is in charge of the prosecution.

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The Friday Show Presented By Woodbine: COVID-19 And Positive Drug Tests

It's been a busy news week in horse racing. COVID-19 continues to disrupt the racing business, most recently with the cancellation of this weekend's racing at Del Mar. How might a second wave of coronavirus cases impact the racing business as a whole?

Also this week, Arkansas officials announced the disqualification of Bob Baffert trainees Charlatan from the G1 Arkansas Derby and Gamine from an allowance race at Oaklawn Park due to lidocaine overages. Baffert has also been handed a 15-day suspension. Baffert asserts those tests were the result of the horses' exposure to a Salonpas patch used by an employee. That raises the question — should the means of exposure to a substance factor in to a commission or steward's decision when disqualifying a horse?

Ray Paulick and Natalie Voss sit down to discuss these questions in this week's edition of The Friday Show. Watch below and share your thoughts.

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Attorney For Baffert Claims Human Back Pain Patch Caused Drug Positives For Gamine, Charlatan

Hall of Fame trainer Bob Baffert claims that two horses in his barn were “unknowingly and innocently exposed” to a banned substance that wound up in their post-race test samples from May 2 at Oaklawn Park in Hot Springs, Ark.

Information leaked from initial testing by the Arkansas Racing Commission's contracted laboratory in late May indicated that Gamine and Charlatan both tested positive for the Class 2 drug lidocaine. Gamine won a May 2 allowance race by a neck. She subsequently won the Grade 1 Acorn Stakes at Belmont Park on June 20 by 18 ¾ lengths. Charlatan won a division of the Grade 1 Arkansas Derby and shortly thereafter suffered a minor ankle injury that will have him sidelined until after the Sept. 5 Kentucky Derby. Both horses are unbeaten in three starts.

Split samples, sent at Baffert's request to the Equine Analytical Testing Laboratory at the University of California-Davis, confirmed the findings, according to published reports.

Lidocaine is used by veterinarians during lameness examinations to “block” or numb a horse's limbs. It is also commonly found in ointments and analgesic treatments and patches to alleviate pain in humans.

A statement from Baffert's attorney, Craig Robertson, said both Gamine and Charlatan were exposed to the lidocaine from a patch worn by a member of the trainer's staff suffering back pain while tending to the horses at Oaklawn.

“Even though lidocaine is a lawful, widely available therapeutic medication, it was never intentionally administered to either Gamine or Charlatan,” the statement reads. “When test results indicated that trace amounts of lidocaine were found in both horses after their respective races on May 2, Bob Baffert and his team were shocked. Leading up to May 2, both horses were healthy and worked hard to earn their victories that day.

“After investigation,” the statement continues, “it is our belief that both Gamine and Charlatanwere unknowingly and innocently exposed to lidocaine by one of Bob's employees. The employee previously broke his pelvis and had been suffering from back pain over the two days leading up to May 2. As a result, he wore a Salonpas patch on his back that he personally applied. That brand of patch contains small amounts of lidocaine. It is believed that lidocaine from that patch was innocently transferred from the employee's hands to the horses through the application of tongue ties by the employee that was handling both horses leading up to May 2.

“What I want to make clear are the following three points: 1) This is a case of innocent exposure and not intentional administration; 2) the levels of Lidocaine found in both Gamine and Charlatan that day were extremely small – 185 picograms for Gamine (in race 7), and 46 picograms for Charlatan (in race 11). A picogram is a trillionth of a gram. 3) It is our understanding that the trace amounts of Lidocaine found in both Gamine and Charlatan would not have had any effect on either horse – much less a performance enhancing one. The extreme sensitivity of modern-day testing can now pick up trace levels of innocent contaminants that have no effect on a horse. This is an issue that regulators of horse racing need to account for and address.

“Based on these facts, we intend on defending the cases involving Gamine and Chalatan before the Arkansas Racing Commission.”

Jimmy Barnes, assistant trainer for Baffert, saddled the horses at Oaklawn in the trainer's absence. He suffered a fractured pelvis in September 2017.

Recommended penalty for a Class 2/Category B penalty drug like lidocaine is a minimum 15-day suspension and $500 fine for a first offense under Association of Racing Commissioners International Model Rules. A second offense has a 30-day penalty and $1,000 fine. Some racing commissions consider simultaneous violations of the same drug as a mitigating factor and do not increase penalties for a second offense.

The Model Rule also calls for disqualification, meaning the owners would lose the purse money from the races (Gamine earned $36,600 and Charlatan $300,000). In the case of Charlatan, the 100 qualifying points earned for the Kentucky Derby would be transferred to Basin, the second-place finisher (if the case is resolved before Sept. 5). Currently sidelined Gouverneur Morris finished third, Winning Impression fourth and Anneau d'Or fifth. Points for the Arkansas Derby division are awarded on the basis of 100-40-20-10 to the top four finishers.

Gamine is owned by Michael Lund Petersen. Charlatan is owned by the partnership of SF Racing LLC, Starlight Racing, Madaket Stables LLC, Stonestreet Stables LLC, Frederick Hertrich III, John D. Fielding and Golconda Stables.

An even bigger financial stake for the owners of Charlatan may be in the sale of breeding rights to Hill 'n' Dale Farm announced several days after the Arkansas Derby. Depending on the language and when the contract between the parties was signed, the sale price may have hinged on Charlatan being a Grade 1 winner. If the Speightstown colt is disqualified from the Arkansas Derby – his stakes debut – the sale price could be reduced by millions of dollars unless and until he officially becomes a Grade 1 winner in the future.

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Superseding Indictments Could Be Coming In Federal Case Against Navarro, Servis, Etc.

Since the indictment of more than two dozen trainers, assistants, veterinarians, and pharmacists in connection with a horse doping ring this March, rumors have swirled that more names could be forthcoming in connection with the federal investigation. Speaking at a status conference for the case on Tuesday morning, Assistant U.S. Attorney Andrew Adams told U.S. District Judge Judge Mary Kay Vyskocil that a superseding indictment could be around the corner, but did not provide details as to the timing.

“We are looking seriously at superseding indictments,” said Adams. “For the moment, and I made this point at least to some defense counsel previously, the nature of what we're looking at is largely in the same kind of criminal conduct as what is in the current indictment. We're looking at expanding timeframes for certain of the conspiracies. We're looking at potentially adding different statutory charges with respect to certain of the defendants. What I do not anticipate for the moment is that those superseding indictments, if and when they come, would require the production of some substantial large set of materials not already produced to date or already in the queue of things we expect to produce.”

A superseding indictment is one which replaces an existing indictment, and could add charges against already-named defendants and/or could name new defendants.

Vyskocil reminded Adams that the court would not hold things up while the government finishes its investigation. Adams said he understood and that he would not ask to hold up the proceedings for that reason.

The charges on the current indictments, which names former top trainers Jorge Navarro and Jason Servis, among others, focus on drug adulteration, misbranding, and conspiracy. The indictments claim a network of horsemen, veterinarians and pharmacy reps sold, distributed and used drugs in racehorses for the purpose of performance enhancement.

Other than a potential superseding indictment, there are not likely to be many updates in the case until late fall. Currently, attorneys are going through the discovery process, meaning each side is requesting and providing requested evidence in the case. Adams said he believes his office will be able to provide the last of the discovery material requested by defendants by the end of September.

Already, the office has provided some 90 gigabytes' worth of data to all defendants in three different volumes, and has fielded 20 additional individual requests. That data includes the results of 30 different search warrants, intercepted phone calls and text messages, geolocation information for various devices, email accounts, file transfer accounts, inventory lists, shipping records, veterinary records, drug promotional and marketing material, and much more. The Federal Bureau of Investigation is still extracting data from devices like cell phones and tablets seized from defendants at the time of their arrests.

After the government produces requested evidence, it is sent to a coordinating discovery attorney for organization and distribution. One defense attorney pointed out that it generally takes the coordinating discovery attorney roughly a month to process large document releases before they are given over to defense counsel, so a late September target for discovery completion means they will get a look at the last of the evidence in early November.

Vyskocil scheduled a status conference for Nov. 19. Most participants on the call agreed it would be impractical to set a trial date or motion schedule until the defense has seen all the government's evidence against their clients.

Read more about the federal indictments in this March 9 piece from the Paulick Report.

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