Steamboat Springs Jim and Melanie Dailey of Steamboat Springs have agreed to plead guilty to federal charges related to the distribution of large quantities of hydrocodone-based narcotics without valid prescriptions.
Special agents with the federal Food & Drug Administration and the Internal Revenue Service are investigating the case involving an alleged illegal Internet pharmacy.
According to court documents provided by the IRS's Criminal Division - including plea agreements signed by both Daileys - Jim and Melanie Dailey were paid to write prescriptions for hydrocodone to customers of Birmingham, Ala.-based William & Mary Pharmacy, from Nov. 1, 2002, to Oct. 31, 2003, even though they did not "examine or otherwise have a legitimate doctor/patient relationship with such patients."
"The people that ran the William & Mary Pharmacy would solicit customers, then would solicit out-of-state physicians to write prescriptions," said Jill Ellis, spokeswoman for United States Attorney Alice H. Martin of the Northern District of Alabama.
Jim Dailey would not answer questions about the charges Tuesday.
"Unfortunately, at this point, we shouldn't say anything," he said.
Neither of the two Birmingham lawyers representing the Daileys returned calls Tuesday. Melanie Dailey was a licensed physician in Oregon and Colorado from 2002-03; James Dailey was a licensed physician in Oregon during that same period.
Although the Daileys admit to almost identical acts of wrongdoing in their plea agreements - including providing improper prescriptions that resulted in the dispensing of more than 40,000 units of drugs containing hydrocodone as the primary ingredient - they face different charges.
Jim Dailey, 43, is charged with unlawfully distributing controlled substances; Melanie Dailey, 44, is charged with misprision of a felony, which means she had actual knowledge that a crime was being committed, did not report the crime, and actively concealed evidence of the crime. According to the plea agreement, Melanie Dailey destroyed "certain records in order to prevent state/federal authorities from discovering the nature of her and her husband's conduct."
The maximum penalty for misprision of a felony is three years in prison, fines of $250,000 or both. The maximum penalty for distribution of controlled substances is 20 years in prison, a fine of $1 million or both. As part of the plea agreements, the Daileys' "acceptance of responsibility" and their cooperation in the ongoing investigation, federal prosecutors will recommend reduced sentences.
Hydrocodone is a narcotic pain reliever and a Schedule II controlled substance under federal law. When used in combination with another product it can be listed as a Schedule III controlled substance. The opioid is marketed as the drug Vicodin, among others. Tussionex Pennkinetic is the only marketed drug mentioned in the plea agreements. The prescription drug contains a combination of hydrocodone and chlorpheniramine and is used for the relief of cough and upper respiratory symptoms.
"Distributing controlled substances without a valid prescription is a serious federal crime, one with criminal consequences," Martin said in a statement announcing the charges. "Doctors, pharmacists and their employees hold positions of trust in their communities, and will be accountable for wrongdoing."
'Trust of the public'
Special agents with the FDA and IRS said this case is an example of the U.S. government's commitment to investigate the illegal sale of pharmaceuticals on the Internet and to dismantle the responsible criminal enterprises.
"Our system of health care is founded on the trust of the public in its health care professionals and the outstanding services that they provide," Rodney Clarke, an IRS special agent, said in the statement announcing the charges. "The system was not designed for the few rogue individuals who chose to place personal profit ahead of that trust."
The Daileys owned and operated Rocky Mountain Integrative Health Management in Steamboat until Feb. 27, 2006, when they received a letter from the office of state Attorney General John Suthers ordering the practice to close. The decision came after a complaint filed with the Colorado Board of Medical Examiners alleging that the naturopathic clinic "practiced medicine" - meaning it undertook the diagnosis and treatment of illness - without a license.
The very next week, on March 8, 2006, William & Mary Pharmacy was closed after federal agents searched the offices and residences of several individuals and corporations related to it and found "criminal wrongdoing relating to the operation of an Internet pharmacy."
Earlier this year, the Daileys unsuccessfully lobbied in favor of House Bill 1192, which would have allowed qualified naturopathic practitioners to not only obtain licenses in Colorado, but also treat and diagnose patients. Naturopathics believe the human body has an inherent capacity to heal itself with natural methods such as homeopathy, blood work, herbs and nutritional supplements.
More than a dozen states, including Utah and Arizona, offer licensing for naturopathic practitioners, but Colorado's House Committee on Health and Human Services indefinitely postponed HB 1192 in April.
In February, Jim Dailey said he had spent much of the past year working construction jobs.
Melanie Dailey is scheduled for arraignment Thursday in U.S. District Court for the Northern District of Alabama. Both Daileys are scheduled on the Feb. 4, 2008, trial docket.
Others charged in the case include James E. Maddox Jr., 57, of Montevello, Ala., and Stephens C. Puckett, 61, of Birmingham. Maddox, a pharmacist, and Puckett were both William & Mary Pharmacy employees.