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Executive Summary

Bindley Western representatives will be testifying before a grand jury in Atlanta, Georgia as part of a Justice Dept. investigation of the drug distribution system, the whslr. disclosed in a recent press release. The whslr. said that "certain officers and employees of the company and various records have been subpoenaed in connection with an ongoing investigation into certain activites within the pharmaceutical industry." Bindley Western noted that it had discharged a vice president in charge of purchasing "for violating a company policy." In addition, the firm said the jobs of two other employees, including the general manager of the Atlanta division, have been terminated. The company expects to provide the subpoenaed documents by mid-July. The firm further noted that "special counsel" has been engaged "to determine whether any former or current employees were involved in any improper conduct and to determine whether such conduct if engaged in was for personal gain." Bindley declared that "although certain activities of the company are being investigated the company believes that it has not committed any wrongdoing." House Subcmte. Reports That Criminal Investigations Could Become Public By Fall Bindley's announcement of the grand jury activity was supplemented by information at Chairman Dingell's (D-Mich.) House Oversight Subcmte. hearing on drug diversion on July 10. In his opening statement for that hearing, Dingell reported that the subcmte. was deferring an open investigation of recent diversion cases because of "active criminal investigation." Dingell added, however, that "we have been assured that several criminal cases will have been completed or at least entered the public stage by the fall." Dingell described the July 10 hearing as the "first in what is anticipated to be a series of hearings." The Justice investigations have reportedly focused on possible drug diversion/counterfeiting activities. Similar probes are understood to be in progress in Miami and Los Angeles. Florida is suspected as a center of diversion traffic based on recent investigations. A report prepared by the House subcmte. staff mentions nine states that are bases for diversion operations, but almost half of the diversion businesses mentioned in the report are located in Florida. The House report notes that "a number of whslrs. that specialize in diverted goods are located in the [Fort Lauderdale] vicinity." Bindley Western was mentioned as an alleged participant in two instances of drug diversion at the July 10 House hearing. One case involved oral contraceptives sold by Johnson & Johnson at a discount to dummy Haitian companies. The Haitian companies had represented to J&J that the pills would be supplied to Haitian clinics. House subcmte. staffer Stephen Sims, who prepared an investigative report for the hearing, testified that "the merchandise was shipped to Haiti but remained in that country for less than 12 hours before it was returned to the U.S. The pills were eventually sold to an Indiana-based distributor, Bindley Western." Two Americans and one Haitian were indicted in Newark Federal Court for fraud and conspiracy in 1983 with regard to the case. Sims explained that "a Haitian official was paid over $100,000 in bribes to certify that the clinic plan was sponsored by the Haitian government. In fact, title to the pills was routed through the Antilles Trading Company, a Haitian firm, to I&E Internatl., a Tennessee import/export firm." Another subcmte. hearing witness, Philip Robinson, cited court testimony from a separate New York case in which the vice president for purchasing for Bindley Western "testified that the company purchases $600 mil. a year in pharmaceuticals, often from diverters." Robinson is a former New York State law enforcement official who currently works as a private investigator. He noted that four conspirators were convicted in May 1984 for purchasing more than $3.4 mil. in pharmaceuticals for bogus cancer clinics and fictitious New York City health care centers.

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