Aboard a cruise ship to Cozumel, a vodka-and-soda in hand, Marty Bradley glared at the Gulf of Mexico from inside a locked suite. He had brought 60 employees on the gleaming white ship for his company’s annual blowout, a reward for meeting their sales targets. But all Bradley could think of now was which of the employees on board had sold him out and gotten away with the score of their lives.
Just 24 hours earlier, on January 16, 2002, a white van had backed into an alleyway behind his Miami warehouse. Some men climbed from the van and managed to twist the dead bolt, tear off the rear metal door, and enter the warehouse. Once inside, they knew exactly what to look for.
Bradley’s company, BioMed Plus, is one of the nation’s largest private wholesale distributors of blood products. The thieves had headed directly for a freezer that contained plasma derivatives destined for patients with compromised immune systems, hemophilia, and other disorders. All told, they had taken 344 vials of the clear liquids that for many patients mean the difference between life and death. Some of the vials cost almost $4,000 apiece. The heist was worth about $335,000. The break-in occurred just hours after the delivery of a shipment that included a rare drug called NovoSeven, which helps form blood clots in hemophiliacs. The thieves had taken all of it.
Bradley reported the theft to Florida’s Bureau of Statewide Pharmaceutical Services, a regulatory requirement he expected to solve nothing. The inspector he knew there, Cesar Arias, a tousled Cuban-American whose heart was certainly in his job, had no juice whatsoever. One glance at the man’s car, a dilapidated blue Buick, told the story of his agency’s budget woes.
The local cops took a report, but they were too busy chasing dealers of street drugs to care much about a theft of clotting factor. But Bradley knew the stolen vials posed a serious danger. The medicine inside had to remain motionless at a constant temperature and could be transported only with careful planning. At best, it had become useless to a patient; at worst, it could do harm.
Bradley was in the ship’s cocktail lounge waiting to disembark when his cell phone rang. His purchasing manager, Marlene Caceres, was calling to report that a small pharmaceutical wholesale company, the Stone Group, was offering to sell some plasma derivatives, which it had never offered before. Bradley had done business with the fledgling company in the past.
The pharmaceutical wholesale market operates as an all-hours auction, with deals and discounts materializing suddenly and medicine passing through many hands. And while few patients know that these middlemen exist, much of the nation’s medicine passes through companies like BioMed Plus and the Stone Group.
As Caceres read off the details of the offer, Bradley said, “I don’t believe it.” Everything she mentioned—including 51 vials of NovoSeven and specific amounts of Gamimune, Gammagard, and Iveegam, all for the steeply discounted price of $229,241— was identical to his list of stolen goods. Bradley knew the medicine was his.
He sought advice from the one person whose number he had with him: Cesar Arias. “Stand by,” Arias said excitedly. The drug inspector called one of his few contacts in law enforcement, a state cop named Gary Venema, and then called Bradley back to relay Venema’s advice at top volume: “Buy it back! Buy it back!”
Gary Venema was impossible not to notice. A big, sandy-haired man of 50 who had a wiseass grin and wore Hawaiian shirts and a gold sailboat charm around his neck, he had a magnetic, even manic presence that drew every eye in a room. A former cop with 24 years’ experience, 15 as a homicide-and-narcotics detective in Hialeah, a gritty suburb of Miami, Venema had seen it all, but his days of adrenaline-pumping shoot-outs were long gone. In 1991, after a political clash, the Hialeah police chief demoted him to road sergeant.
In 1997, he had jumped at the chance to join the Florida Department of Law Enforcement (F.D.L.E.), a statewide police agency with power and panache but notoriously low pay. Despite all his experience, his starting salary was $42,000. Many of his new colleagues were just a few years older than his three sons. But he enjoyed the training, and almost immediately he embarked on a case that involved the organized theft of over-the-counter goods from drugstore chains. Even though the merchandise crossed state lines, the feds, who would be needed to pursue it, didn’t seem interested. Venema became discouraged. And then, almost by accident, the case for which he’d been waiting his entire life came along.
It had started inauspiciously enough. On November 13, 2001, he was summoned to a meeting with Assistant Statewide Prosecutor Stephanie Feldman, a petite 28-year-old with five years’ trial experience who stood about five feet one inch in heels. Feldman sent Venema and Arias on a one-day sting operation involving a few vials of stolen cancer medicine. Before he met Arias, Venema had never thought about the safety of his medicine. He assumed that it traveled directly from the drugmaker to the pharmacy. But Arias worried about the medicine’s transport, its temperature, where it originated, the path it took, and the documentation of all this. Venema began to think of himself as a student and apprenticed himself to Arias.
On January 21, 2002, a young Stone Group salesman, Sean Dana, arrived at Bradley’s warehouse in a souped-up Trans Am. He was wearing shorts and a T-shirt and carried a cooler full of the medicine stolen from Bradley five days earlier.
After Dana dropped off the medicine in the receiving bay, Bradley took him to the conference room, where five people were waiting: Arias, Bradley’s lawyer, and three Miami–Dade County detectives.
When asked if he knew that the medicine had been stolen, Dana stammered, “I don’t know anything about that.” Struggling through a few more questions, Dana then offered that he would like to help but wanted to consult a lawyer first. At that word, “lawyer,” the questions had to end.
The next day, the president of the Stone Group contacted the authorities and told them that the drugs had been purchased from a company in Kissimmee called BTC Wholesale. His contact there was a man named Michael Carlow, whom he believed to be the owner.
As much as anyone, Carlow personified what was wrong with Florida’s medicine business. In the distant past, he had served time in prison for armed robbery and gotten probation for grand theft. In 1998 the state gave his wife, Candace, a prescription-drug wholesale license for a company that Carlow ran as president. In June 2000 he was arrested for buying $83,000 of stolen Neupogen, a cancer and aids drug, in the parking lot of a Miami restaurant. He pleaded no contest, paid a nominal fine, and was sentenced to 18 months probation, and he and his wife surrendered their state license—what passed for harsh justice under Florida’s weak health law.
Carlow’s alleged involvement with BTC—which on paper belonged to his brother-in-law, a former mattress salesman named Thomas Atkins Jr.—suggested that he might be making a comeback. Stephanie Feldman directed Venema and Arias to be at BTC first thing the next morning.
Pharmaceutical middlemen buy, sell, sort, repackage, and distribute 98 percent of the nation’s medicine. The companies, about 6,500 in all, range from publicly traded giants with pristine warehouses to small, obscure firms that operate from back rooms.
The largest middlemen, McKesson, AmerisourceBergen, and Cardinal Health— multi-billion-dollar publicly traded entities known as the Big Three—control 90 percent of this market. Below them sit some 15 regional wholesalers that do billions in business. And below them sit the smaller, secondary wholesalers, a group that included numerous companies set up by Michael Carlow. All of these companies buy from, and sell to, one another. They thrive by speculating on price increases. The Big Three have trading divisions that scout the secondary wholesale market for discounted medicine.
Whereas governments in Europe and Canada largely regulate pharmaceutical prices, drugmakers in the United States fought off price controls, choosing instead to offer targeted discounts that allow them to increase their market shares. The drugmakers charge pharmacies “direct” prices and give wholesalers a small reduction. Hospitals and so-called closed-door pharmacies, which solely supply facilities such as nursing homes, sometimes pay less than half the direct price.
The secondary wholesalers contend that aggressive trading helps them reduce prices for mom-and-pop pharmacies and local hospitals that lack the buying power of the big chains. But the bargains also drive a parallel and illegal practice called “diversion,” in which some middlemen resort to fraud to obtain discounted medicine. Corrupt wholesalers often solicit those who qualify for discounts to buy more medicine than they need and sell the rest for kickbacks. In 2000, a task force for the National Association of Boards of Pharmacy estimated that up to four-fifths of the closed-door pharmacies that received discounted medicine exploited loopholes to resell at least a portion to outside buyers.
By 2002 the F.D.A.’s criminal investigators faced a problem that they could not clearly measure or solve: a huge volume of the nation’s medicine no longer flowed directly from drugmakers to one of the Big Three to a pharmacy or hospital. Instead, the medicine passed through numerous middlemen, with each company taking a wedge of
the profit. These sales often went unrecorded or were accompanied by phony pedigree papers that obscured the origin of the medicine and left no way to ensure its safety.
This illicit diversion has become a multi-billion-dollar industry, Terrell L. Vermillion, director of the F.D.A.’s Office of Criminal Investigations, estimates. Yet the practice closely resembles the legal trading of pharmaceuticals, and the laws governing it are murky at best. Michael Carlow and many others allegedly used this confusion to their advantage. They had state licenses, lawyers, accountants, and all the trappings of legitimacy. Their businesses embodied the spirit of “pure capitalism,” as one of Carlow’s lawyers described it. “Buy low, sell high, make money.”
At 10 a.m. on January 23, 2002, Venema’s red truck rattled up to the fading little office building in Kissimmee where BTC had its headquarters. Thomas Atkins Jr., who had been instructed to be there, declined to answer most of Arias’s and Venema’s questions, including queries about Carlow, whom he acknowledged was his brother-in-law. Atkins did say that he knew nothing about the drugs he was selling, except that some of them needed to be refrigerated.
“Are you basically a front for someone else in this business?,” Venema asked. Atkins refused to answer this question too. Arias and Venema emerged from the meeting convinced that BTC was a shell company, its true nature unclear.
In Florida it was laughably easy to become a pharmaceutical wholesaler. All you needed was a refrigerator, a burglar alarm, an air conditioner, $200 for a security bond, and $700 for a license. You needed no experience and no particular knowledge. You had to certify that you had no criminal record, but the pharmaceutical bureau did not actually check.
Florida’s pharmaceutical wholesale companies proliferated like rabbits. By 2002, Florida had licensed 1,399 of them—one for every three pharmacies in the state. The wholesalers ranged from trained pharmacists, doctors, and lawyers to criminal kingpins and uneducated street thugs. Some were former drug dealers seeking a safer line of work. Aided by lax regulations and Florida’s large Medicaid-and-medicine-dependent elderly population, those trafficking in diverted medicine were making a fortune.
Two days after the interview with Atkins, Venema, Arias, and Arias’s partner, drug inspector Gene Odin, set out for Boca Raton to interview the employees of the Stone Group. At 72, Odin had a Ph.D. in medicinal chemistry and two hearing aids that often conked out. He lulled those he regulated into believing he was senile as a way of extracting information from them.
“We’re going to put people in jail,” Venema said by way of introduction. Dana and the other Stone Group employees, none of whom were charged with a crime, appeared terrified. Each recognized a mug shot of Carlow—suntanned and smiling with a diamond stud in one ear—from his arrest in 2000. So far, they had purchased more than $2 million in medicine from Carlow at BTC.
They explained that on January 20, 2002—four days after Marty Bradley’s drugs had been stolen from his warehouse—a Stone Group salesman had picked them up from Carlow’s home in Weston, Florida, near Fort Lauderdale, where he kept medicine in his laundry room and garage.
The inspectors seized several boxes of medicine and loaded them into the truck of Miami-Dade police sergeant John Petri. Short and muscular, with a well-groomed mustache, Petri is a master of surveillance, following suspects invisibly from his truck. Now he gathered with the others in the parking lot and listened as Arias explained that the case against Carlow couldn’t be much simpler: “You can’t have a pharmacy in your house.”
Windmill Ranch Estates—a grid of manicured palm trees and Italianate palazzi on sparkling lakes—was among the costliest gated communities in Weston. Carlow lived here on expansive landscaped grounds. His neighbors knew him as a gregarious family man.
He had come a long way since filing for bankruptcy four years earlier. Then, he had lost his $108,000 Bentley and $675,000 Sea Ray yacht, the Cheshire Cat, named after the vanishing feline in Alice in Wonderland. After his bankruptcy, Carlow also vanished in his particular way. He began to put most of his new possessions in the name of his fourth wife, Candace. He also formed companies that appeared to belong to others.
Michael Carlow was born in Connecticut and raised in Hollywood, Florida. After graduating from high school in 1970, he drifted through a series of jobs. He also embarked on a series of crimes. According to police reports, in 1973, at age 20, he was convicted of armed robbery and served three years in prison. In 1984 he was arrested for dealing in stolen property, but the case against him was dismissed. In 1986 he pleaded guilty to grand theft, was given three years’ probation, and was ordered to complete a substance-abuse treatment program. While enrolled in the program, he was arrested in Alabama for selling cocaine and fled. Later that year he turned himself in and resumed his drug rehab.
By the mid-1990s, Carlow had shed any semblance of the drug-addled hood in his old mug shots. In 1991 he formed what he called a consulting company, which evolved into Quest Healthcare Inc. As he explained to those from whom he wanted money or business, Quest oversaw more than a dozen mental-health, male-impotence, and H.I.V. clinics in six states.
After his 1998 bankruptcy, Quest and his various spin-off companies, most of them not in his name, began branching out into pharmaceuticals. His arrest in June 2000 was a temporary setback, but he never really left the game.
By February 2002, according to authorities, two men were making regular trips to Carlow’s Weston mansion, toting duffel bags and old boxes that contained a jumble of pill bottles, medicine vials, and bags of blood derivatives—some still bearing the labels of patients to whom they had been dispensed. The men, Fabian Diaz and Henry Garcia, were known in certain circles as Carlow’s “cooks.” And their job was to acquire as much medicine as possible.
Investigators believed that the medicine they collected was Carlow’s lifeblood. To make the kind of profit Carlow wanted, it needed to be cheap. Free was best of all. Ordering medicine and not paying for it was one way to do this. Another was through the efforts of Diaz and Garcia. The men were so productive that Carlow’s garage became a virtual pharmacy repackaging operation, a pharmacist who says he dropped off medicine there told investigators.
At the street level, according to law-enforcement sources, Diaz and Garcia bought cancer and aids drugs from Medicaid patients at health clinics in Miami’s slums. Some were “professional patients” who sold, rather than took, their medicine. A notorious example of such a patient, Michael McKinnon, made $5,000 a month by selling his aids medicine.
Sometimes Diaz and Garcia would simply create patients, authorities say, by retrieving names and Medicaid numbers from pharmacies and treatment centers. If necessary, they also could steal drugs by breaking into warehouses. Through his shifting roster of companies, Carlow then resold the drugs to other wholesalers.
But Carlow had not stopped at selling to obscure companies. He had developed what every small wholesaler dreamed of: a lucrative relationship with one of the industry giants, Cardinal Health. From 1999 through the middle of 2000, Quest Healthcare sold nearly $1.5 million in products to National Specialty Services, then a Cardinal division that was the nation’s largest supplier of blood products, cancer drugs, and other specialty pharmaceuticals to hospitals. Cardinal’s purchases from at least four companies that Carlow controlled thrust his medicine into the heart of the nation’s drug supply, where it inevitably reached patients.
After midnight on February 6, 2002, Gary Venema was awake, staring at the ceiling. He couldn’t sleep, because it was Wednesday, and on Wednesdays the city of Weston collected trash at Windmill Ranch Estates.
Dressed in dark jeans, a T-shirt, and sneakers, Venema glided toward the door. He enjoyed thinking of himself as a thief in the night (albeit one on the right side of the law). In his truck he drove to Carlow’s gated community, where he flashed his badge and a sleepy guard let him in. Driving down Windmill Ranch Road, he approached a big stucco mansion in the Mediterranean style with pillars and archways shaded by palm trees. A pool glimmered out back.
He drove past slowly, looking to see if anyone registered his presence, but the house remained dark. He doubled back and, with the engine still running, hopped out, grabbed the trash bag, and threw it into the flatbed.
Venema returned twice the next week. Each time, Carlow’s trash disgorged evidence that he was into pharmaceuticals and attempting to expand his various businesses. The records indicated that BTC received mail at Carlow’s home and sold drugs to companies in Missouri and Nevada. Exuberant after these uncensored looks into Carlow’s life, Venema wrote and sent a memo: To: Stephanie Feldman/ Statewide From: Gary Venema/ Starfleet Command
Steph—couldn’t sleep last nite—and you know what I do when I can’t sleep—i do trash pulls! Carlow had a w-9 or whatever showing misc. income for 2001 at $700,000.00 from some investment firm. Also a letter from Hatteras yachts—FDLE agents don’ motor around the waterways in Hatteras Yachts—[our] whole office couldn’t buy gasoline for one! He continued: My strategy would be to:
1) Call Mr. Carlow real nicely for a little friendly chat … 2) Have the warrant ready for when his [then] attorney, David Mandel tells me to pound salt 3) Hit his house like the weapon of mass destruction that I intend to be on this guy. Through the trash alone, Venema soon formed an intimate dislike of Carlow, and he began declaring to almost anyone who would listen that he was “coming downtown, Charlie Brown, to get Michael Carlow.”
Venema returned to Carlow’s mansion on February 15, 2002. This time he was accompanied by Arias, Odin, and five other investigators, including Randy Jones, a bear of a detective from the Miami-Dade Police Department who was carrying cameras and video equipment. Venema held a search warrant that cited suspicion of racketeering, conspiracy to racketeer, grand theft, dealing in stolen property, and prescription fraud.
Venema rang the doorbell and a startled maid opened the door. Carlow wasn’t home. The investigators, whose wives clipped coupons, were stunned by what they saw. A zippy yellow Dodge Viper with black racing stripes sat just outside the garage. Carlow’s red Ferrari was parked inside. In the house were gleaming antiques, flat-screen televisions and computer monitors, a designer refrigerator, and other accoutrements of major money.
Carlow’s file cabinets turned up neatly indexed folders for shell companies, financial records, and yacht purchases. A box of business cards listed Carlow as the “principal” for BTC Wholesale. The investigators emerged with the names of dozens of people and companies, bank-account records, and other leads to mine.
Five days later, Stephanie Feldman summoned Venema, Arias, Odin, Petri, and Jones to her office to create a special task force. At her direction, the five men would investigate how stolen, diverted, and counterfeit medicine was moving throughout Florida and into the nation’s supply. She would call their work Operation Stone Cold. Their goal, she said, would be to build a racketeering case against Michael Carlow and his accomplices. Venema would be their lead investigator. She expected indictments within six months.
The five men were not an obvious dream team. Except for Arias, they were all 50 or over. Several of them took medicine for high blood pressure and had to hold documents and restaurant menus at arm’s length to read them. None had worked a complex investigation before. But they shared other characteristics not lost on Feldman. They were old-school investigators who came early and stayed late. And none liked spending time behind a desk.
Arias and Odin would supply the essential knowledge of medicine. Venema, as lead investigator, would supply the adrenaline. Petri and Jones, who had worked together for 15 years and had known each other longer, would do the surveillance.
Arias began calling their group “the Horsemen of the Apocalypse,” because he envisioned them exacting a biblical revenge on those who sold bad medicine. They codified their identity with five black polo shirts bearing the image of a Grim Reaper holding a scythe amid a cluster of horses. They wore them while executing warrants.
While Feldman was a relative novice, she had a personal interest in the case. Since age 14 she had battled juvenile diabetes, the disease’s most severe form. Fourteen months earlier, she had been admitted to the hospital in a diabetes-related coma. She
knew that patients’ lives were threatened if they did not get exactly the right medicine, maintained in the right way.
Feldman had dubbed the task force Operation Stone Cold because she viewed those trafficking in adulterated medicine as stone-cold killers. “What was happening was nothing short of murder by inches,” she concluded early on.
Waiting in the broiling sun on April 4, 2002, Venema peered down an empty side street in North Miami. “The delivery should be here, I just called them,” the short, bearded man next to him announced. Posing as a wholesaler, Venema was waiting for a delivery of high-dose Epogen with a dubious pedigree and a suspiciously low price.
Epogen, a miracle of genetic engineering, had transformed the lives of patients who suffered from anemia after organ transplants, cancer treatments, or kidney disease. Derived from human DNA, the drug turned its manufacturer, Amgen Inc., into the world’s largest independent biotechnology company. And Epo, as it is known in the trade, became the best-selling medicine of biotechnology, bringing in $2.6 billion worldwide in 2004 alone. Epogen has to be maintained at a constant temperature of two to eight degrees Celsius and requires protection from moisture, frost, excessive heat, and even light. Amgen—like other makers of delicate medicines—tries to maintain an unbroken set of optimal conditions throughout the manufacturing process. However, as soon as these drugs leave the manufacturer’s loading docks, they are liable to drop into a gray market run by pharmaceutical middlemen of just the sort Venema now confronted.
The bearded man, Sheldon Schwartz, had brokered the deal for 100 boxes of Epogen, plus 17 boxes of an aids medicine that had already been delivered. Venema had agreed to cut him a check for $509,000, still far below the drugmaker’s lowest price. “I don’t want to move anything until we go down and you have your check and you’re a happy camper,” Venema said casually. “I’ll just look over to see if the dates are cool and everything.”
Although the sting had no direct connection to the pursuit of Carlow, the newly christened Horsemen were elated at the opportunity it presented. They were fishing in a tainted lake and were sure to draw out at least more information, if not diverted drugs.
Arias, Odin, Petri, and Jones watched and waited silently in cars and trucks positioned around the parking lot. Finally, a silver Mercedes crept down the alley. Arias knew the driver. It was Brian Hill of Jemco Medical International. Arias and Odin had investigated the man for years, but could never find an explanation in his records for his huge success.
Hill climbed out of the car and popped open the trunk. There, baking in a cardboard box without benefit of a cooler or other protection, was the Epogen, almost certainly degraded by the extreme heat and the turbulence of the ride.
The men went inside a nearby warehouse and Venema scrutinized the boxes. Not one had the sticky residue of medicine that had already been dispensed, and they all shared the same lot number: P002970. The drugs appeared pure.
As arranged, his walkie-talkie buzzed and he uttered the words that signaled the backup units to move in. The Horsemen, accompanied by Miami police with guns drawn, stormed the warehouse. Staying in character, Venema feigned outrage and surprise. Hill looked shaky and stunned. Schwartz and the others in the warehouse denied wrongdoing and were not arrested.
Arias and Odin studied the medicine. It looked perfect. Later that day, Arias contacted Jon Martino, a security official at Amgen, asking whether the company had sold 100 boxes of high-dose Epogen with the lot number P002970 to a single buyer in the last year. Martino wrote back that 100 boxes of high- dose Epogen was too big an order for anyone in the country.
This led Arias to wonder: If no one had bought 100 boxes of the high-dose medicine at one time, how did they end up grouped together? And who could afford to buy that much? The medicine had a market value of almost $500,000.
In late April, Martino contacted Arias with a succinct verdict on the Epogen: “It’s bad.” The drug actually was Epogen and came from Amgen, Martino said. But it was not high-dose Epogen—the Rolls-Royce of anemia treatments—as labeled. It was the low- dose medicine, one-twentieth the strength, which cost $258 per box. Someone had glued on counterfeit labels, making each box worth $4,700.
In the parlance of the drugmakers, the medicine had been “up-labeled.” The counterfeit labels were indistinguishable from the real ones except for two tiny degree symbols missing in the words “Store at 2 to 8 C.” Amgen was sending out a warning letter to physicians, pharmacists, and wholesalers nationwide, identifying the lot and urging those who suspected counterfeit medicine to call the F.D.A. Arias was floored.
As the Horsemen dug deeper, it became increasingly clear that a current of diverted, degraded, and expired medicine lay right below the surface of the so-called legitimate supply. It was not simply that the two streams merged on occasion, by accident, but that the legitimate supply was routinely polluted by inventory from dangerous sources. Since the Big Three bought from Florida’s smallest wholesalers, Florida’s problem was everybody’s.
Medicine counterfeiting has long been endemic in China, India, and certain African countries. But increasingly the American market offers a unique incentive to criminals in search of a niche: medicine here costs far more than anywhere else in the world.
From 2000 to 2004, the F.D.A.’s criminal cases that involved counterfeiting increased almost tenfold, from 6 a year to 58. As of October 2004, 91 counterfeiting cases were active at the agency’s Office of Criminal Investigations. One counterfeiting case in 2003 prompted the recall of 18 million doses of Lipitor, an anti-cholesterol drug that is America’s best-selling medicine. Pfizer’s global security vice president estimates that counterfeit Lipitor may have reached more than 600,000 patients. Those who received it swallowed pills with a bitter aftertaste and no health benefit.
No one actually knows how much counterfeit, adulterated, or subpotent medicine is in our supply, since no one has tested our drugs system-wide. F.D.A. officials have estimated that less than 1 percent of America’s drug supply is counterfeit, but even that number is potentially huge. In 2004, Americans filled 3.5 billion prescriptions from domestic suppliers, according to pharmaceutical-industry consultant IMS Health. One percent of that is 35 million prescriptions.
The up-labeled Epogen the Horsemen discovered had already reached patients across the country, including Tim Fagan, a 16-year-old Long Island boy who had undergone a liver transplant and needed weekly injections of Epogen to help boost his red-blood-cell count. The Fagan family bought the medicine from a CVS pharmacy. Desperate to advance his recovery, Tim’s mother had administered the injections for eight straight weeks, as directed. After each shot, Tim suffered wrenching muscle cramps, and he did not get better.
Though no one knew it at the time, some of the medicine had most likely moved through a cooler in the back room of a seedy Miami strip club called Playpen South, where counterfeit medicine was allegedly being bought and sold. Carlow had a tangential relationship with the club’s owners. He didn’t know them, but some of his suppliers did. Consequently, investigators suspect, some of the drugs that flowed from Playpen South moved through Carlow’s shell companies.
Operation Stone Cold appeared to be going smoothly. Nine months after the break-in at Marty Bradley’s warehouse, 55 of Florida’s more than 450 in-state drug wholesalers were either subjects or targets of the investigation, their particulars taped on the wall of a small, windowless conference room at F.D.L.E.
But in truth, by the fall of 2002, things were not going well at all. Despite the extensive corruption Arias and Odin had helped uncover, their own agency, the Bureau of Statewide Pharmaceutical Services, continued issuing wholesale licenses to those associated with felons, effectively pouring more sludge into the funnel that the Horsemen were trying to clean up at the other end.
In addition, the case’s sheer size and its promise of media attention brought out micro-managers and obstructionists everywhere. Worst of all was the sentiment in the highest ranks of the statewide prosecutor’s office that Michael Carlow’s offenses might not be worth prosecuting. He allegedly had passed on phony documents, obscured the origin of medicine, and bought and sold without a license, but these were offenses that, under the state’s weak health laws, were punishable only with fines and probation. Using them to build a racketeering case was a legal adventure—the last thing any career-minded prosecutor wants to undertake.
Over lunch at the Quarterdeck restaurant, in Plantation, Florida, on May 23, 2003, Carlow extolled the virtues of Costa Rica. He spoke of nice real estate, interesting “retail” opportunities, and the “hookers” he had enjoyed there recently. “I got one for the weekend,” he said. “Smoking hot,” commented his lunch companion, Steven “Doc” Ivester.
From a distance, the two men might have been mistaken for good friends. Carlow divulged that he found his young wife, Candace, “very immature,” while Ivester confided that he went to therapy. “You have this really tangled personal life,” observed Carlow. “It’s like a bowl of spaghetti that’s been drying out.”
But Ivester hated Carlow, and the wire tucked beneath his shirt was recording the suspected medicine trafficker’s every word. Over the two-hour lunch, Ivester kept leading the conversation back to Carlow’s past schemes and his future plans. At one moment, Carlow spelled out his business ethics, stating, “I do not put friends, neighbors, acquaintances into any deals that I am not in myself.” At another, he noted approvingly of a woman in the restaurant, “That’s a tight pussy there.”
In 1998, Ivester, a technology inventor and entrepreneur, launched a company called Navigator, P.C., to develop navigational devices for the navy. Carlow became an investor, pledging $500,000.
One day, Ivester says, he overheard Carlow offer a secretary $25 if she would show him her panties. Another day, a janitor told Ivester about some men taking photographs of a car in the parking lot. It was the Horsemen, photographing Carlow’s car. When Ivester asked his new partner whether he was under investigation, Carlow blew up, screaming, “You don’t fucking know me. I’m going to ruin you.”
Shortly afterward, Ivester says, he found Carlow hugging his girlfriend. Carlow had begun a campaign of seduction that ultimately divided the couple. Ivester believed it was Carlow’s revenge for his asking about the investigation.
But Ivester knew something about revenge, too. “I’m not a badass, but I’m not dumb,” he said. At the right moment, he had a friend reach out to state officials to offer his services. When Venema learned of Ivester’s offer, it was as though Christmas had come early.
Now Venema was outside listening while Carlow—as cocky as ever—provided Ivester with a veritable map of his criminal activities. He described expanding his pharmaceutical business with a new shell company in Kansas, World Pharma, run by his former banker and confidante, Jean McIntyre. He also explained that McIntyre would become his new bookkeeper, replacing his mother-in-law, Marilyn Atkins, whom Carlow said he’d recently terminated for “piss-poor recordkeeping” and being “in-fucking- competent.”
He went on to talk about Costa Rica. But his lurid description of his weekend with a 20-year-old named Danielle mattered little to Ivester or to the Horsemen. What grabbed their attention was Carlow’s almost incidental remark that he might go back to Costa Rica “this coming week.”
If Carlow needed another incentive to leave the country, he got it three days later, when the Fort Lauderdale Sun-Sentinel ran a front-page story, former convicts try a safer venture: pharmaceuticals. The article described Carlow as a “major wholesaler selling millions of dollars worth of questionable medications out of his $1.3 million home.” After the article came out, Ivester unearthed a document that Carlow had left in his Navigator offices. It was entitled “Michael Carlow Offshore Wealth Preservation Planning Business Structure Diagram” and listed various offshore accounts, essentially providing a template for a life on the lam.
If Michael Carlow had been caught selling crack cocaine at a Miami intersection, he would have been arrested instantly and faced serious prison time. Instead, he was suspected of selling more than $54 million in adulterated medicine to wholesalers nationwide, tainting the country’s drug supply, and potentially killing patients. And almost no one in Florida government could seem to figure out how to stop him.
Weeks had rolled into months of interagency bickering as some members of the Attorney General’s Office of Statewide Prosecution argued with the F.D.L.E. over jurisdiction. It seemed that the most senior state prosecutors were hesitant to proceed. One insider believes they liked “three-by-five cases,” those in which the evidence fit on a file card that small. Conversely, they hated “box cases,” in which the evidence arrived in a box. Carlow’s was a quintessential “box case.”
In June, however, the Horsemen’s bosses finally got religion. Red lights turned green. Convinced that Carlow was ready to flee, Venema’s supervisors now wanted to arrest him.
Late at night on July 20, 2003, Gary Venema flipped open his badge at the Windmill Ranch security gate. “F.D.L.E.,” he announced. The guard waved him uneasily into the gated community. In the moonlight, Venema saw right away that the Carlows were home. Two vans were parked in their semicircular driveway, and the Viper’s yellow nose peeked out from the side garage.
The investigator took a lazy swing past the house, satisfied that the couple would still be home at first light. In his truck he had arrest warrants for Carlow and 17 associates, among them his wife; his brother-in-law, Thomas Atkins Jr.; his mother-in- law, Marilyn Atkins; and his suspected “cooks,” Fabian Diaz and Henry Garcia. He also had a copy of a 95-page indictment that listed 32 charges, including racketeering and grand theft.
I’ve been waiting my whole life to do something like this, Venema reflected, just so I could say I did.
That night, Venema actually slept a few hours, but by 4:30 a.m. he was out the door. His department had decided to wait until dawn to make sure that there were no mistakes and that Carlow and the others could clearly read the investigators’ field jackets. The dangers they faced were twofold: someone threatened with arrest might strike up a gun battle, or, more likely, Carlow would hire lawyers to bury them in procedural complaints.
At five a.m., Venema parked his truck on a side street with a clear view of the house. And then he waited.
At first light, a line of unmarked cars with darkened windows rolled slowly and silently toward Carlow’s home. Other units moved into place behind the house. And then two marked police cars, lights turning silently, joined the caravan.
The sound of car doors opening and slamming shut echoed in the sleepy neighborhood. Agents with guns drawn crawled up an embankment behind the mansion, covering it from both sides. It took Venema only a few seconds to reach the door and start pounding. Carlow appeared in a pair of shorts, surveyed the line of idling cars, and said casually, “Come on in.”
Then he sat down at his kitchen table and shook out a cigarette from his pack.
In a separate room, Venema showed Candace a diagram with her husband’s picture in the center and the photographs and names of 17 others ringed around him. All of them—including her mother and brother—were being arrested simultaneously. Her eyes widened, but she told Venema, “I don’t want to talk to you about anything.”
In the kitchen, Carlow asked Venema what his wife was being charged with. “Racketeering,” he said. “Her bond is $1.15 million.” He did not yet tell Carlow the amount of his own bond: $7 million.
“Can I make some coffee?” Carlow asked. “You’re not going to be here that long,” one of the officers responded.
By noon, 12 of the 18 indicted were in custody. Exhausted, grubby, exhilarated, the Horsemen went home, showered, and put on suits for the press conference.
Carlow appeared as buoyant as ever at his bail hearing, on July 28. He entered the courtroom in a jail-issue jumpsuit, waving, blowing kisses, and giving thumbs-ups to his friends packing the courtroom.
Candace, however, looked haggard and distraught. Her mood visibly deteriorated as the hearing progressed. As all three prosecution witnesses not only spoke of Carlow’s alleged pharmaceutical misdeeds but also detailed his extramarital affairs, Carlow turned to his wife and mouthed, “Are you O.K.?” His secretary and his banker both testified that they had slept with him. Steven Ivester testified that Carlow had seduced his girlfriend. “I can honestly say we beat out The Jerry Springer Show,” John Petri later observed.
The judge ultimately reduced Carlow’s bond from $7 million to just under $3 million. Carlow posted bail and enjoyed his freedom for a day—until the bail bondsmen learned that the Carlows had already defaulted on the mortgage that Candace had offered as collateral for her bail. They apprehended Michael Carlow and took him back to jail.
By the end of 2004, the Horsemen had arrested 55 suspects—more than 30 of them on racketeering charges—and seized $33 million in bad medicine and almost $3 million in cash. Sixteen suspects had agreed to cooperate, most pleading guilty to an array of charges.
The efforts of the Horsemen led to the passage of Florida’s 2003 Prescription Drug Protection Act, which imposed heavy new restrictions on drug wholesalers, required criminal-background checks for those seeking licenses, and created serious criminal penalties for trafficking in adulterated drugs.
In the wake of the state’s reforms, the number of licensed drug wholesalers in Florida dropped by almost half. And Operation Stone Cold expanded its reach, working to break up a ring making at least $50 million a year selling painkillers over the Internet, and another that had submitted more than $700 million in fraudulent claims for prosthetic limbs.
Across the country, the F.B.I., the F.D.A., and state investigators continue to probe illicit diversion and counterfeiting networks. Even Marty Bradley, whose call to Cesar Arias sparked Operation Stone Cold, did not escape the increased scrutiny. On March 23, he and seven associates were indicted in Georgia on charges including racketeering and money-laundering. Bradley vowed to fight the charges.
Yet without an overhaul of national laws, bad medicine still pours into the nation’s distribution system, and no one is any closer to knowing where it has been. The F.D.A. made clear, in a February 2004 task-force report on domestic counterfeiting, that it would not impose a solution on the powerful wholesalers. Instead, the agency is encouraging the use of promising technology that is still being developed: bar coding and radio-frequency identification that can help track a drug’s origin electronically. The agency has also emphasized the need to reduce the “regulatory burdens” for “stakeholders”—which include the middlemen. The nation’s drug supply still runs in part on an honor system. Meanwhile, the cases against the Horsemen’s biggest targets are plodding through the legal system. Michael Carlow pleaded not guilty to all 20 charges, but he has been abandoned by confidants and former associates, who are lining up to testify for the state. Carlow remains in jail in Fort Lauderdale, awaiting trial later this year. His wife, Candace, filed for bankruptcy in August 2004 and is also awaiting trial. The Windmill Ranch mansion fell into disrepair and was sold in foreclosure in February 2005.
The Horsemen have remained as cohesive as ever, through good and bad. In late 2004 the five men and their wives headed to Amelia Island, off Florida’s northeast coast, for a long weekend. They stayed by the ocean, rode horses along the beach, and at night had a cookout, spreading a tarp across the sand. Though they knew they had exposed only a sliver of a systemic problem, they viewed the case and the resulting friendships as the true bonus of a lifetime.
Excerpted from Dangerous Doses: How Counterfeiters Are Contaminating America’ s Drug Supply
Originally published in Vanity Fair