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Sacks Medical Corp. pleads guilty to money laundering

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By Richard Gazarik
Wednesday, Feb. 24, 2010

A Butler County drug company pleaded guilty in federal court in Pittsburgh to international money laundering and violating federal drug laws in an investigation that involved the now-defunct Monsour Medical Center Research Institute.

Sacks Medical Corp. of Evans City was fined $500,000 and ordered to forfeit an additional $500,00 by U.S. District Court Judge Gustave Diamond on Monday. The firm was placed on one year's probation.

The research institute was not charged in the investigation.

According to federal prosecutors, Sacks in 2004 obtained pharmaceutical drugs at discount prices, which were then resold to other drug wholesalers in violation of the Prescription Drug Marketing Act.

Sacks persuaded officials at the Monsour Medical Center in Jeannette to create the research institute, which was nothing more than a shell company, according to the charges.

The institute joined two group purchasing organizations and began buying large amounts of medical supplies that should have been designated only for the hospital's use and not resold, according to the charges.

Purchases were made from major drug companies, AmerisourceBergen of Valley Forge and McKesson Corp. San Francisco. Monsour then sold the medications to Millenia Hope Healthcare Inc., which was located at Monsour.

Millenia then sold the drugs directly to Sacks or to San Med Development Group, which is owned by Sacks, according to prosecutors.

Sacks supplied Monsour with the money to buy the discounted drugs. The company then tried to disguise the transaction by wiring the money to a Canadian bank, which in turn wired the money back to Monsour, according to the plea agreement.

IRS and Food and Drug Administration agents began looking at the transaction after Monsour opened the research center, which did no research or any other business, according to the U.S. Attorney's Office. Agents learned the institute began buying large amounts of pharmaceuticals without the knowledge of the hospital's board of directors.

The institute was created without any specific purpose. It was incorporated by Dr. Alexander Kavic, who has since died. He was Monsour's director of emergency medicine at the time the institute was created.

Hospital officials said at the time the purchases were made, they did not know where the money came from to buy the drugs because Monsour was in precarious financial shape. Financial and licensing problems eventually forced the hospital to close in 2006.

Sacks Medical Corp. is owned by Jake Sacks, who did not respond to a request for comment on Tuesday.

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