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Investigators' Reports

A 'Washed-Up' Snake-Oil Scheme

by Paula Kurtzweil

A California doctor and his partner viewed their homemade cancer treatment as alternative medicine. But a judge declared it "snake oil."

FDA laboratory analysis indicated the treatment, called "Immunostim," contained substances found in common cleaning fluids, such as dish detergent and toilet bowl cleaner. Patients paid as much as $7,500 per treatment to have the product injected into their veins.

Lawrence Taylor, 72, has since had his medical license revoked by the Medical Board of California, and his partner, William Stacey, 48, is serving five years in the San Diego county jail for continuing to sell Immunostim in violation of his probation.

The two men ran the Taylor-Stacey Center for Advanced Medicine in San Diego between 1993 and 1994. Both were sentenced in 1995: Stacey for selling an unapproved cancer treatment, and Taylor for a related but lesser offense, maintaining a public nuisance. Stacey was resentenced earlier this year.

Their illegal activity was uncovered in an investigation by FDA, the San Diego City Attorney's Office, the California Health Department, and the Medical Board of California.

An anonymous caller first alerted FDA to Taylor and Stacey's use of Immunostim in early 1994. At about the same time, two TV reporters who had gone to the Taylor-Stacey clinic posing as relatives of AIDS patients sent a videotape of their investigation to the San Diego City Attorney's Office. The reporters, from the USA Network's "Case Closed" show, were following up on a viewer complaint about Stacey's previous activities in North Carolina. While there, he had treated AIDS patients with Immunostim.

A month later, on March 22, 1994, the San Diego City Attorney's Office filed criminal charges against Taylor and Stacey in San Diego Municipal Court. Two days later, city police arrested the two men, and, as allowed under state law, the Medical Board of California shut down the clinic.

That same day, with search warrants in hand, the group of local, state and federal investigators searched the clinic, as well as the two men's San Diego residences. The searches resulted in the seizure of five vials of Immunostim and various documents related to the product, including financial reports, patient records, and patient handbooks.

The Immunostim was sent to FDA's Forensic Chemistry Center in Cincinnati for analysis. The laboratory identified trisodium phosphate, sodium metasilicate, methyldodecylbenzyl trimethyl ammonium chloride, and trimethyl ammonium chloride as the ingredients. No active drug ingredient was present. The solution had an alkaline pH of 12.7.

Referring to the second edition of Comprehensive Review in Toxicology, laboratory scientists found that the substances they identified matched those found in disinfectants, toilet bowl cleaners, and automatic dishwasher detergents.

Investigators, including Will Brannon, a special agent with FDA's Office of Criminal Investigations, began interviewing Taylor's former patients and their family members. The patients had come from throughout the United States for treatment at Taylor's San Diego clinic.

From these interviews, investigators learned that many of Taylor's patients had gone through conventional medical therapies with little or no success and had subsequently been diagnosed with terminal diseases. Taylor and Stacey often told patients their treatment would cure them. Each treatment, administered for three to six hours four times a week over a three-week period, consisted of a small amount of Immunostim mixed with an approved intravenous (IV) solution infused into a vein.

Many of the patients' family members described the treatments as painful. One woman, whose 34-year-old husband was treated with Immunostim for lung cancer, recalled that during a second infusion, the IV solution "leaked into the tissue" of her husband's hand.

"Immediately he began experiencing excruciating, burning pain," she later wrote to the judge. "His pain intensified over the next several hours, necessitating massive quantities of pain medication with little relief." Several months later, she said, she rushed her husband to the hospital after administering Immunostim to him at home. An emergency room doctor prescribed injectable Demerol (meperidine), a narcotic analgesic. The patient continued to take Demerol at home and didn't regain use of his hand until almost a week later, the woman said.

Another woman, whose son underwent Immunostim therapy for brain cancer, recalled nights when her son was "full of pain." She attributed the pain to an "inflamed" infusion site. She recalled another cancer patient who laid on the floor during treatment because "he was in too much pain to sit."

Donald Stevenson, M.D., with the Scripps Clinic and Research Foundation in La Jolla, Calif., reviewed patient records and said in his report to the court that most patients treated with Immunostim experienced inflammation of veins used for infusion. This led to "painful swellings" and then complete closure of the veins, resulting in a hard knot where a vein had previously existed, the doctor wrote. Patients' family members who were interviewed by investigators recalled instances where clinic employees had difficulty finding usable veins. The mother of one patient recalled seeing another patient receiving the IV infusion through his toe because clinic personnel couldn't find another vein to use.

Many patients reported that they spent considerable money, sometimes their life savings, to receive the Immunostim therapy. Parents of one cancer patient said they paid $5,000 for 12 treatments. The woman whose husband suffered from lung cancer said they spent nearly $26,000 for three courses of treatment. According to the San Diego City Attorney's Office, Taylor and Stacey took in more than $670,000 from patients receiving Immunostim during the 18 months the clinic was open in San Diego.

Upon checking the men's backgrounds, investigators learned that Stacey, who referred to himself as a Ph.D. chemist, probably had "a high school education at most," said Tricia Johnson, the deputy city attorney who prosecuted the case. The universities he said he attended had no records of his having graduated, she said. Taylor was licensed as a general practitioner.

In a plea agreement, on May 12, 1995, Taylor and Stacey pleaded no contest to the criminal charges.

On Aug. 18, 1995, Municipal Court Judge H. Ronald Domnitz sentenced Taylor to a 150-day work-furlough facility with three years' probation, fined him $2,000, and ordered him to pay the cost of the government's investigation of the clinic. In addition, he ordered him, along with Stacey, to pay restitution of $46,779 to nine of 108 former patients or their families. By that time, more than half the patients had died, presumably from their diseases. The nine who received restitution were named in the complaint.

The judge also ordered Taylor to place a sign in his medical office in letters at least 3 inches high with these words: "This office does not treat cancer or AIDS patients unless referred by another physician."

The judge sentenced Stacey Oct. 17, 1995, to 18 months in jail with five years' probation, fined him $3,000, and ordered him not to work in the health-care industry or sell any health-care product. Stacey failed to appear Oct. 31 to begin his jail sentence. An agent for Stacey's bondsman, whom Stacey failed to repay, tracked Stacey to South Carolina, where he apparently was still selling Immunostim. The agent notified local police, who arrested him. The San Diego City Attorney's Office extradited Stacey to California Dec. 21, 1995.

For violating his probation, the judge ordered Stacey last Feb. 29 to serve five years in custody, the maximum allowed under the plea agreement.

Meanwhile, on Feb. 19, the Medical Board of California revoked Taylor's medical license.

Paula Kurtzweil is a member of FDA's public affairs staff.

Importer Convicted of Attempted Bribery

The attempted bribery of an FDA official resulted in the arrest and conviction of a New York seafood importer.

Bernard Kwang Myung of Coimex Seafood, a Brooklyn, N.Y., seafood importing company, was fined $5,000 and sentenced to 18 months' probation April 12 for offering a gratuity to a compliance officer in FDA's New York district office. Offering a gratuity to a government official is illegal. The attempted bribery revolved around imported contaminated imitation scallops.

FDA's Northeast Regional Laboratory analyzed a shipment of the importer's frozen imitation scallops (surimi) in July 1993, and found the product contaminated with Listeria monocytogenes. This bacteria can cause serious illness, particularly in pregnant women and their fetuses. Cooking food kills Listeria. However, these imitation scallops were a cooked processed product. Cooked processed products are often served without any further cooking--in salad bars, for instance.

FDA initially detained the product on July 15, 1993, and determined that all the firm's subsequent shipments would be automatically detained at the port of entry. After Myung agreed to relabel the product with a statement that included a warning about the need to cook the food and cooking instructions, FDA allowed the scallops to enter the U.S. market.

However, with the arrival of shipments in January and May 1994, it became clear to FDA that the company was routinely labeling the product with the warning statement rather than trying to eliminate the bacteria. FDA concluded that it would be more appropriate for the foreign processor to manufacture a safe and wholesome product, without the need for a warning about cooking the imitation scallops. So FDA denied the importer's petition to relabel the product.

On Aug. 9, 1994, Myung visited FDA's New York district office and met with compliance officer James Nelson to discuss how to deal with detained shipments. During this meeting, Myung placed a white envelope on Nelson's lap. Nelson realized right away that there was money in this envelope and that Myung was attempting to bribe him. Nelson refused the money, returning the envelope to Myung. Myung then told Nelson that at least he should be allowed to take Nelson and his wife to dinner. Nelson continued to protest and shook Myung's hand, indicating the end of the meeting.

Nelson immediately reported the incident to his supervisor at the time, Regina Feuchtbaum, former director of the district's import operations branch, who, following FDA procedure, contacted the Department of Health and Human Services' Office of Inspector General (OIG). OIG advised Nelson to call Myung back for a meeting the next afternoon to discuss the matter further. This meeting took place with Nelson wired so that the conversation could be monitored and recorded. Myung once again offered money to Nelson; this time, three $100 bills. OIG special agents, listening in from another room, arrested Myung on the spot.

Myung pleaded guilty in the U.S. District Court for the Eastern District of New York to presenting an illegal gratuity. U.S. District Judge Raymond J. Dearie, who sentenced Myung, commended Nelson for his actions. Nelson received the Inspector General's Integrity Award in December 1994.

--Herman Janiger

Violations Uncovered at Army Blood Center

The U.S. Army voluntarily discontinued much of its blood collection at Walter Reed Army Medical Center, Washington, D.C., in March while it worked on correcting numerous blood collection violations.

Investigators with FDA's Baltimore district office uncovered the violations while inspecting the Walter Reed blood center Sept. 28 through Oct. 17, 1995. Problems found included:

The Army responded to FDA's findings in a letter last Dec. 18, but, because of discrepancies between the Army's response and FDA's findings, investigators returned to Walter Reed on Jan. 30, 1996. They found many of the same problems, as well as new ones, including: Last April 16, Army representatives met with FDA and told the agency that as of March 18 it had discontinued all blood collections except for autologous donations and plateletpheresis. In autologous donations, individuals donate blood for their own use. Plateletpheresis is a process in which platelets are removed from the donor's blood, and then the rest of the blood is returned to the donor. The Army said it was continuing these two types of collections because demand for them couldn't be met from other sources.

The Army informed FDA that it was addressing the problems by:

The Army also said it would inspect North American Biological Inc., Miami, a company under contract to Walter Reed to test blood for infectious diseases, to ensure that it was following regulations.

"We believe that if the Army's aggressive plans are vigorously pursued, there will be no concern for the safety of Walter Reed's blood products," said Ken Shelin, FDA's Baltimore district director.

FDA will reinspect later this fall.

--Dori Stehlin

Unproven Medical Claims Land Men in Prison

"It has been known to shatter cancer cells and AIDS cells in people."
--Salesperson for Life Energy Resources Ltd. (LER), Falconer, N.Y., referring to the firm's REM SuperPro Generator.

"Your kid gets chicken pox, use the REM [SuperPro Generator] immediately, and it will knock it out."
--Pascal (Pat) Ballistrea, LER distributor.

Two New York men are serving time in prison for making claims such as these touting the electrical-shock-producing REM device as a cure-all for many medical conditions. A third man is on probation for three years.

In a felony prosecution for device health fraud, the three men--LER's top distributors--were convicted and sentenced in 1993, 1994 and 1995, for selling unapproved medical devices and drugs.

Their illegal activities came to light in a three-year undercover probe by FDA, the U.S. Postal Inspection Service, and the U.S. Department of Justice.

In prison are Ballistrea, of Williamsville, N.Y., and Michael Ricotta, of Orchard Park, N.Y. Brian Strandberg, of Portland, Ore., who also served as LER's national marketing director, received probation.

FDA first learned about LER on April 7, 1989, when an employee of a Buffalo finance company contacted FDA's Buffalo district office to report suspicions about the company. The employee said a salesperson for LER had called to solicit financial backing for the company's REM SuperPro Generator. Claiming the SuperPro could treat AIDS and cancer, the LER salesperson had confided, "I'm saying this to you, but it goes no further. I really can't say this to you."

Later that month, FDA investigator Russ Davis inspected LER and learned from Christopher Bradish, LER director of operations, that the firm bought the REM SuperPro Generator and other electrical devices and numerous drugs from Zoetic Inc., of St. Francisville, Ill., and marketed them in a pyramid scheme to independent distributors, who sold them to retail customers, who could themselves become distributors.

Davis learned from another man present, Frank Costanzo, that LER had 263 retail customers acting as distributors in 38 states. Costanzo was president of the company that leased computers, software, and building space to LER. He later also became LER chief executive officer.

According to records Davis examined, LER sold the REM SuperPro for $1,380. Directions for the device called for patients to place their feet on metal pads, which were wired to allow an electrical current to run through the body. The company also sold similar but less expensive devices that produced less current than the REM SuperPro.

The drug products, including one called LifeMax Miracle Natural Balance Body Creme, sold for about $7 to $55, according to the records.

Davis told Bradish and Costanzo about the complaint FDA had received, adding that unproven medical claims misbrand a device, and selling misbranded devices is illegal. According to Davis, Bradish said LER instructs its distributors to use only official literature for marketing, but added that because distributors run their own businesses, he couldn't account for their actions. However, he said LER would terminate agreements with distributors making claims not in the official literature, and he would write to them all, reminding them of this and cautioning them not to make the kind of AIDS and cancer claims reported in the original complaint.

Davis collected some of the official marketing literature, which said the electrical devices could treat neuralgia, headache, jet lag, and other conditions. These uses also are unproven medical claims, so before departing, Davis informed the men that distribution of misbranded products may result in legal sanction, such as seizure, injunction or prosecution.

In 1989 and 1990, FDA continued to receive complaints about unproven claims for the REM SuperPro. So, FDA decided to take action.

"We realized that the only way we were going to get them was to do an undercover investigation," said Louis Kaufman, a compliance officer with FDA's Center for Devices and Radiological Health.

Posing as distributors, investigators Steven Libel, Joan Trankle, and Sherry Phillips, of FDA's Buffalo district office, and investigators Edward Edmiston and Victor Meo, of FDA's Seattle district office, infiltrated the LER organization. Libel, Trankle and Phillips centered their efforts on Ricotta and Ballistrea in New York. Edmiston and Meo investigated Strandberg in Portland, which is in FDA's Seattle district. Ricotta, Ballistrea and Strandberg were singled out because they were responsible for promoting LER's products.

The investigators bought LER's products and collected unofficial literature, known as the "underground packet." The packet included literature, audiotapes and videotapes of individuals claiming the products could cure cancer, AIDS, and other diseases.

In secretly recorded meetings and phone conversations, Ricotta, Ballistrea and Strandberg admitted sending underground materials to down-line distributors for use in promoting the REM SuperPro for such diseases as cancer and AIDS and the LifeMax Miracle Cream for such medical conditions as osteoporosis and premenstrual syndrome.

To support LER's claims that the REM SuperPro cured cancer and other diseases, the underground materials routinely referenced a book about the SuperPro Generator, precursor to the REM SuperPro. The book described work by the precursor's inventor, Royal Raymond Rife, who died in 1971. "REM" reportedly stood for "Rife's Electromagnetic."

Meanwhile, on April 19, 1990, FDA investigators Mark Prusak and William Lubas, who were not part of the undercover investigation, inspected LER's facility in Falconer, N.Y.

Costanzo, now the chief executive officer, refused to let Prusak see shipping and receiving records and distribution information and, when questioned by the investigators, Costanzo denied reports that LER made medical claims for its products. LER's Bradish said the devices were sold for relaxation and stress reduction.

By February 1991, FDA had gathered enough evidence to forward its findings to the Department of Justice.

On May 29, executing a search warrant at Ballistrea's house, FDA and the Postal Service found a large amount of product literature and videotapes. Although Ballistrea had sent undercover government investigators numerous materials on LER products in 1990 and 1991, he told the agents it had been more than a year since he had distributed such materials.

A grand jury investigation began in the summer of 1991. U.S. Attorney Dennis Vacco wrote, "Two of the more disturbing aspects of the investigation are the fact that some cancer patients have been using these devices without the knowledge of their physicians and as an alternative to chemotherapy."

On Feb. 25, 1993, Strandberg pleaded guilty in the U.S. District Court for the Western District of New York, in Buffalo, to two misdemeanor counts of distributing an unapproved device. In a plea agreement, he admitted knowing the REM SuperPro was not approved by FDA. He admitted sending materials containing medical claims for the device to customers and distributors.

Judge Leslie Foschio sentenced Strandberg on Dec. 21, 1993, to three years' probation with 200 hours community service and fined him $500 and a $50 special assessment.

On April 8, 1993, in the same court, the grand jury returned a 10-count indictment against Ballistrea and Ricotta.

The trial began Oct. 9. After four days, however, a mistrial was declared for Ballistrea, who was excused because of a back ailment. He was tried later.

During Ricotta's trial, according to the Nov. 18, 1993, Buffalo News, Ricotta denied selling the REM SuperPro for medical purposes, but he said he believed the product was effective treatment for bone and colon cancers, skin diseases, premenstrual syndrome, arthritis, bladder diseases, angina, insomnia, herniated disks, tumors, Lou Gehrig's disease, kidney ailments, emphysema, hearing problems, ear infections, and other illnesses.

On Nov. 19, Ricotta was convicted of two felony and four misdemeanor charges for conspiracy to defraud FDA, distributing an adulterated and misbranded medical device (the REM SuperPro), and distributing an unapproved new drug (LifeMax Miracle Cream).

On Feb. 2, 1994, Judge Richard Arcara sentenced Ricotta to three years, five months in prison and three years' supervised release and fined him $3,000 and a $200 special assessment.

"You are a menace and a threat to society," Judge Arcara told Ricotta, as reported next day in the Buffalo News. "Your sales strategy targeted the most vulnerable people, including those suffering from terminal disease. ... It is especially cruel because, in many instances, it proved false hope to people who had no hope."

After several hearings to determine whether Ballistrea was able to stand trial, his trial finally began Nov. 10, 1994. On Dec. 14, he was convicted of the same charges as Ricotta and of making false statements to FDA and the Postal Service.

On Sept. 22, 1995, Judge Arcara sentenced Ballistrea also to three years, five months in prison and three years' supervised release and fined him $275 special assessment.

--Dixie Farley helped compile this article.

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FDA Consumer magazine (September 1996)