Thursday, July 19, 2018

Six-year prison sentence for false advertising online

United States v. Arif, No. 17-1597, 2018 WL 3454467 (1st Cir. Jul. 18, 2018)

A reminder that false advertising can be subject to criminal penalties: Mustafa Hassan Arif sold non-prescription drug products that purported to treat or cure hundreds of different diseases and medical conditions from over 1,500 websites containing altered clinical studies, fabricated testimonials, and false indicia of origin (designed to make customers think they were buying from within their own Western countries, rather than from Pakistan) and made more than $11 million in revenues. He conditionally pled guilty to wire fraud in 2016 and was sentenced to seventy-two months of imprisonment.  The court of appeals affirmed the sentence.

Arif argued that he could only be prosecuted under the FTCA, not the wire fraud statute. But the wire fraud statute, even assuming that it was enacted before the FTCA (it was not, but it was based on the pre-FTCA mail fraud statute), wasn’t impliedly repealed by the FTCA to the extent of any overlap. The statutes addressed different activities—wire fraud, requiring the use of “wires,” versus only false advertising, but in any medium. Overlap isn’t enough to require the use of one statute instead of another where both are clear, as here. United States v. Batchelder, 442 U.S. 114 (1979), held that “when an act violates more than one criminal statute, the Government may prosecute under either so long as it does not discriminate against any class of defendants”:

This case provides a good example for why Congress has vested discretion in the prosecutorial agencies as to which statute to employ. The offense here was not a run-of-the-mill false advertising of a single product. Arif, in order to make millions, mounted an elaborate worldwide scheme to defraud: he deliberately posted numerous false and misleading statements on over a thousand websites that he created and maintained in order to gull those with medical ailments into purchasing his products. The FTCA penalties for first or second offenders would hardly have been an adequate deterrent for such egregious conduct. Crime must be made not to pay.

Arif also argued that the court should have allowed his defense that he did not commit wire fraud because he was pure of heart and mind as to the efficacy of his products. But Arif was not being charged “with selling drugs that did not work as intended ... or for harming his customers.” Rather, he was charged with “making misrepresentations on his websites,” which were designed to give false comfort to buyers, in order to induce their purchases. Arif knowingly misrepresented, among other things, that: (1) there was clinical research showing outstanding results for the drugs he sold, including specific cure rates; (2) actual customers attested to the efficacy of the drugs; and (3) his businesses were operating from various western countries.  That was more than enough for intent.  False statements in service of a subjective greater “truth” aren’t allowed.  [Ah, for such a rule in politics.]  The falsities here were material—indeed, they “went to the heart of his customer’s purchases.” 

Nor did the disclaimer on the third-party credit-card processor’s website suffice: “[T]he product(s) purchased are not intended to diagnose, mitigate, treat, cure or prevent any disease or health condition, and I will not use any information or statements contained on the website through which this product is purchased, or contained on or in such product(s), for such purposes.  Arif argued that any potential customer of “reasonable prudence” should have known not to rely on the other statements on his website after reading this statement.  But reliance is not an element of wire fraud, so that didn’t matter.

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