Tuesday, July 11, 2023

Attorney General James Announces Indictment and Arraignment of Owner and Manager of New York City Pharmacy for Allegedly Stealing Millions from Medicaid

 

Owner and Manager of Santiago Pharmacy Allegedly Paid Kickbacks to Patients and Falsely Billed Medicaid for HIV Medications That Were Diverted or Never Dispensed

 New York Attorney General Letitia James today announced the indictment, arrest, and arraignment of the owner and manager of a Queens County pharmacy for their roles in a multimillion-dollar drug diversion and kickback scheme involving HIV drugs. Juan Poveda, 32, of Nassau County, owner of CSE Drug Corp. doing business as Santiago Pharmacy (Santiago Pharmacy), and Javier Burbano, 32, of Queens, manager of Santiago Pharmacy in Flushing, Queens, allegedly paid kickbacks to Medicaid recipients in exchange for filling their HIV prescriptions at Santiago Pharmacy and submitted false claims for HIV drugs like Biktarvy that they either obtained illegally or never actually purchased. 

Poveda, Burbano, and Santiago Pharmacy were indicted by a Queens County Grand Jury for Grand Larceny in the First Degree, Health Care Fraud in the Second Degree, and for violating the New York Social Services Law for unlawfully paying kickbacks to Medicaid beneficiaries. Poveda, Santiago Pharmacy, and B&H Health Distributors, Inc. (a corporation allegedly registered to Juan Poveda) were also charged with Money Laundering in the First Degree, and Poveda, Santiago Pharmacy, Pobal Cargo LLC (a corporation allegedly registered to a relative of Poveda), were indicted for Money Laundering in the Second Degree for allegedly conducting financial transactions designed to conceal the illegally obtained funds. Grand Larceny in the First Degree and Money Laundering in the First Degree are both class B felonies and carry a maximum sentence of 25 years in prison. Health Care Fraud in the Second Degree is a class C felony and carries a maximum sentence of 15 years in prison.  

This investigation remains ongoing. In connection with the investigation, the Office of the Attorney General’s (OAG) Medicaid Fraud Control Unit (MFCU) executed search warrants at Corona Chemist Pharmacy in Corona and Mi Botica Pharmacy in Flushing, Queens.    

“We trust pharmacies to attend to the needs and welfare of their patients, not to take advantage of our most vulnerable neighbors to line their own pockets,” said Attorney General James. “People living with HIV are able to live full and healthy lives by taking wholesome medications as prescribed by their doctors. Scams like the one alleged in this indictment cheat New Yorkers out of their health. Stealing from Medicaid is a reprehensible crime, and New Yorkers can count on my office to hold these bad actors accountable.” 

In the defendants’ arraignment on the indictment before New York State Supreme Court Judge Michelle Johnson, and at a prior proceeding, OAG’s MFCU outlined a scheme in which Poveda and Burbano allegedly paid or directed others to pay cash kickbacks to Medicaid recipients to encourage them to fill their HIV prescriptions at Santiago Pharmacy. Santiago Pharmacy then billed Medicaid and received millions of dollars for those prescriptions. State law prohibits all medical providers, including pharmacies, from paying or offering to pay anyone for the referral of medical services paid for by Medicaid.  

Court papers allege that Poveda and Burbano stole more than $2.9 million dollars from Amida Care, a Medicaid-funded managed care organization, by billing for drugs, including the expensive HIV retroviral medication Biktarvy, that were either not legally obtained or that never existed. Poveda then allegedly attempted to hide the fraudulently obtained funds by funneling criminal proceeds from Santiago Pharmacy accounts to pass-through bank accounts without any apparent business operations, including B&H Health Distributors Inc. and Pobal Cargo, LLC.   

The charges filed in this case are accusations. The defendants are presumed innocent until proven guilty in a court of law. 

Attorney General James thanks the New York State Department of Health and the Office of the Medicaid Inspector General as well as the United States Department of Health and Human Services Office of the Inspector General for their assistance in this investigation. The Attorney General also thanks Medicaid MCOs Amida Care and VNS Choice, pharmacy benefit managers Express Scripts and Med Impact, pharmacy services administrative organization AlignRx, and pharmaceutical wholesaler AmerisourceBergen for their cooperation with the investigation. 

MFCU’s total funding for federal fiscal year (FY) 2023 is $65,717,936. Of that total, 75 percent, or $49,288,452, is awarded under a grant from the U.S. Department of Health and Human Services. The remaining 25 percent, totaling $16,429,484 for FY 2023, is funded by New York state. Through MFCU’s recoveries in law enforcement actions, it regularly returns more to the state than it receives in state funding. 

Governor Hochul Updates New Yorkers on Ongoing State of Emergency Due to Significant Rainfall and Potential for Additional Flooding

Gov. Hochul at podium 

Due to Significant Flooding and Transportation-Related Impacts From Heavy Rainfall; More than Eight Inches of Rain Fell in Parts of Mid-Hudson and More than Five Inches in the Finger Lakes Between Sunday and Monday

Road Closures Remain in Albany, Oswego, Orange, Putnam and Rockland Counties; Metro-North Services Remain Suspended for Upper Harlem Line, Hudson Line Trains to Operate Between Grand Central and Peekskill Beginning Tuesday Morning

Governor Hochul Spoke with White House, FEMA Leadership and U.S. Senators from New York on Potential for Federal Disaster Assistance

Additional 2-3 Inches of Rain Possible Tonight into Tomorrow Morning in the Capital Region and North Country; Flood Watches Remain in Effect for Entire Eastern Part of the State

 Governor Hochul today provided an update to New Yorkers as heavy rainfall continues throughout the State and continues to impact widespread areas in the Mid-Hudson, Finger Lakes, Central New York and North County regions. On Sunday, Governor Hochul declared a State of Emergency in Orange and Ontario Counties as numerous road closures and reports of flooding were addressed by state and local responders.

Between Sunday and Monday, more than eight inches of rain was reported in parts of the Mid-Hudson Region (Orange County), and more than five inches of rain were reported in the Finger Lakes Region (Ontario County). As the State Division of Homeland Security and Emergency Services field staff began damage assessments in Orange and Rockland Counties today, Governor spoke with federal officials from the White House, FEMA and U.S. Senate Majority Leader Chuck Schumer and U.S. Senator Kirsten Gillibrand today regarding the ongoing emergency and the potential for federal assistance to help rebuild.

"While much of the storm has passed through New York, it's critical to remain vigilant," Governor Hochul said. "I'm so grateful to every first responder, state worker and local leader who has stepped up to care for their neighbors in the wake of unprecedented flooding. Moving forward, I'm committed to helping these communities recover and rebuild."

New York State Division of Homeland Security and Emergency Services Commissioner Jackie Bray said, "Our team continues to work around the clock to assist our local partners and assess damages in impacted counties. New Yorkers in the North Country will experience more rain tonight with potential for flooding. Stay alert and use extra caution if traveling tonight into tomorrow." 

The State Department of Transportation is monitoring and responding to weather conditions and has more than 3,470 supervisors and operators available statewide, including more than 545 in the Hudson Valley region. Staff are actively assessing damage and working to get state roads back open as quickly as possible. 

To assist with operations, 36 staff from the Capital Region and the Mohawk Valley are being deployed to the Hudson Valley region as follows: 

  • Capital Region - sending 19 operators and 4 supervisors to the Hudson Valley 
  • Mohawk Valley - sending 11 operators and 2 supervisors to the Hudson Valley 

The Department has deployed bridge inspection teams from Long Island, the Southern Tier and Hudson Valley to the Hudson Valley region and their work is ongoing. The State Route 9W bridge over the Popolopen Creek in the Town Highlands, Orange County, is currently closed for repairs while state engineers develop a plan to repair the bridge and resume traffic as quickly as possible.  The Department of Transportation also deployed damage assessment teams from the region and across the state to assess damages on both state and local roads, with information and data currently being assessed by the teams.

Statewide equipment numbers are as follows:

  • 1,427 large dump trucks
  • 323 large loaders
  • 79 tracked and wheeled excavators
  • 84 chippers
  • 19 graders
  • 18 vacuum trucks with sewer jets
  • 15 tree crew bucket trucks

Portions of the following State Routes are closed: 

Hudson Valley: 

  • State Route 218 is closed in both directions between Storm King Highway and Town of Cornwall/Town of Highlands line, Town of Cornwall, Orange County
  • Palisades Parkway is closed in both directions Between exits 14 and 18, Town of Highlands, Rockland County 
  • State Route 32 is closed in both directions at Troutbrook Road, Woodbury, Orange County
  • U.S. 6 is closed in both directions between NY 293 and Palisades Parkway Ramp, Woodbury, Orange County
  • U.S. 6 is closed in both directions between NY 9D and Annsville Circle, Cortlandt, Westchester County
  • U.S. 9W is closed in southbound directions north of NY 218 Exit, Highlands, Orange County
  • U.S. 9W is closed in both directions area of NY 293, Highlands, Orange County 
  • U.S. 9W is closed in both directions at Old State Road, Highlands, Orange County 
  • State Route 32 is closed in both directions at Woodbury Road, Woodbury, Orange County 
  • U.S. 9W is closed in northbound directions at Bear Mountain Circle, Highlands, Orange County 
  • U.S. 9W  is closed in both directions between Seven Lakes Drive and S Entrance Road, Stony Point, Rockland County 
  • U.S. 9W is closed in both directions at Mine Dock Road, Highlands, Orange County
  • Palisades Parkway is closed in southbound directions between U.S. 9W; U.S. 6; end route and Exit 15; Old Gate Hill Road; County Route 10, Highlands, Orange County 
  • U.S. 9W is closed in northbound directions south of Stoney Lonesome Road, Highlands, Orange County 
  • State Route 980U is closed in northbound and southbound directions between U.S. 9W and State Route 218, Highlands, Orange County 
  • State Route 292 is closed in both directions between State Route 292; State Route 311; State Route 55, Patterson, Putnam County 
  • State Route 17 is closed in eastbound directions on ramp to exit 130A, Woodbury, Orange County 
  • State Route 132 is closed in both directions South of U.S. Route 6, Town of Yorktown, Westchester County
  • State Route 448 is closed in both directions east of North Broadway, Mount Pleasant, Westchester 

Capital Region:

  • State Route 32 is closed in both directions between Tibbits Avenue and Bridge Avenue, Cohoes, Albany County 

Central New York:

  • State Route 104 is closed in both directions Between Standpipe Rd. and Emery Rd., Mexico, Oswego County
  • U.S. 11 is closed in both directions between State Route 69 and Czebeniak at the Bridge over the Little Salmon River, Mexico, Oswego County
  • U.S. 69A is closed in northbound directions Between State Route 69 and U.S. 11, Parish, Oswego County

Metro-North Transit Service

MTA Metro-North Railroad today announced a partial restoration of train service on the Hudson Line beginning the morning of Tuesday, July 11. Hudson Line trains will operate between Grand Central Terminal and Peekskill at least once per hour.  

 Metro-North will continue to provide limited bus service for essential travelers between Croton-Harmon and Poughkeepsie, with buses departing Croton-Harmon on a load-and-go basis. Buses will make stops at Croton-Harmon, Beacon and Poughkeepsie. There is no substitute service provided at Manitou, Garrison, Cold Spring and New Hamburg. Bus service on the Upper Harlem Line between Southeast and Wassaic will continue on Tuesday at least through mid-day, making all station stops. 

The American Red Cross has established two shelters - one in Ontario County at the Canandaigua Town Hall (5440 Route 5 & 20 West, Canandaigua) and in Orange County at the Sacred Heart School (7 Cozzens Avenue, Highland Falls). 

The majority of counties in the easternmost part of the state are under a Flood Watch through this evening as up to two more inches of rain are expected for areas in the Capital Region and the North Country. For a complete listing of weather alerts and forecasts, visit the National Weather Service website at https://alerts.weather.gov.

New Yorkers are encouraged to sign up for emergency alerts by subscribing to NY Alert at alert.ny.gov, a free service providing critical emergency information to your cell phone or computer.

Severe Weather Safety Tips

Disaster Supplies

  • Have disaster supplies on hand, including:
  • Flashlight and extra batteries
  • Battery-operated radio and extra batteries
  • First aid kit and manual
  • Emergency food and water
  • Non-electric can opener
  • Essential medicines
  • Checkbook, cash, credit cards, ATM cards

Flash Flooding

  • Never attempt to drive on a flooded road. Turn around and go another way.
  • If water begins to rise rapidly around you in your car, abandon the vehicle immediately.
  • Do not underestimate the power of fast-moving water. Two feet of fast-moving flood water will float your car, and water moving at two miles per hour can sweep cars off a road or bridge.

Lightning

  • Follow the 30-30 rule: If the time between when you see a flash of lightning and hear thunder is 30 seconds or less, the lightning is close enough to hit you. Seek shelter immediately. After the last flash of lightning, wait 30 minutes before leaving your shelter.
  • Lightning hits the tallest object. If you are above a tree line, quickly get below it and crouch down if you are in an exposed area.
  • If you can't get to a shelter, stay away from trees. If there is no shelter, crouch in the open, keeping twice as far away from a tree as it is tall.

Tornado

  • If outdoors and a Tornado Warning is issued, seek shelter immediately. If there is no shelter nearby, lie flat in a ditch or low spot with your hands shielding your head.
  • If at home or in a small building, go to the basement or an interior room on the lowest floor of the building. Stay away from windows. Closets, bathrooms, and other interior rooms offer the best protection. Get under something sturdy or cover yourself with a mattress.
  • If in a school, hospital, or shopping center, go to a pre-designated shelter area. Stay away from large open areas and windows. Do not go outside to your car.
  • If in a high-rise building, go to an interior small room or hallway on the lowest floor possible. Do not use elevators - use stairs instead.

For more information on personal preparedness and how to stay safe during severe weather, visit: https://www.dhses.ny.gov/safety-and-prevention.


MAYOR ADAMS ANNOUNCES PLACEMENT OF TWO NEW HUMANITARIAN EMERGENCY RESPONSE AND RELIEF CENTERS

 

 New York City Mayor Eric Adams today announced the placement of two new Humanitarian Emergency Response and Relief Centers as the number of asylum seekers currently in the city’s care surpasses 52,000. The Crowne Plaza JFK Airport New York in Queens will today transition from an emergency respite center to a humanitarian relief center to serve more than 330 families with children seeking asylum. In the coming weeks, another emergency respite site already open, located at 47 Hall Street in Brooklyn, will add an area that will serve as a humanitarian relief center to support approximately 1,400 adults in addition to the hundreds served at the respite site that will remain open, depending on operational needs. Both humanitarian relief centers will provide a range of services, in addition to ensuring asylum seekers can reach their desired destination, if not New York City.

 

“New York City continues to receive thousands of asylum seekers each week, and we continue to do everything in our power to respond accordingly, but we are still in dire need of assistance from our state and federal partners,” said Mayor Adams. “The transition of these two emergency respite sites to humanitarian relief centers will provide, when combined, thousands of individuals with a range of services and help them reach their final destinations. New York City is doing more than any other city or state to respond to this crisis, but we need others to step up and do their part as well.”

 

“These two new sites will enable us to serve hundreds of families with children as well as adults as they settle in New York City or move to their final destination,” said Deputy Mayor for Health and Human Services Anne Williams-Isom. “As we continue to respond to this humanitarian crisis, we again call on the federal government to advance work authorizations for people seeking asylum and for the federal government to lead this humanitarian crisis with a national coordination strategy.”

 

“Navigating this crisis has required a tremendous amount of resources and creativity,” said Deputy Mayor for Public Safety Philip Banks III. “Despite the challenges facing the city, we have continued to do what’s right and open new humanitarian relief centers as needed to ensure asylum seekers’ health and safety.”

 

“NYC Health + Hospitals continues to answer the call to assist asylum seekers in need,” said Ted Long, MD, MHS, senior vice president for ambulatory care and population health, NYC Health + Hospitals. “These centers will offer comprehensive resources to both families and adults as they arrive in New York City. I am proud to be a part of the Adams administration that is changing the lives of so many.”

 

“These two new humanitarian relief centers will provide critical resources for asylum seekers transitioning into their new lives,” said New York City Emergency Management Commissioner Zach Iscol. “As we continue to respond to this humanitarian crisis, we will work diligently to identify locations to provide shelter and access to various services for asylum seekers who arrive to New York City each day.”

 

Since this humanitarian crisis began, the city has taken fast and urgent action — opening approximately 180 emergency shelters, including 12 other large-scale humanitarian relief centers already; standing up navigation centers to connect asylum seekers with critical resources; enrolling thousands of children in public schools through Project Open Arms; launching the Asylum Application Help Center to help migrants with their asylum applications; and more. Earlier this spring, the city released “The Road Forward: A Blueprint to Address New York City’s Response to the Asylum Seeker Crisis,” detailing how the city will continue to manage the influx of asylum seekers and advocate for support from federal and state partners.

 

U.S. Attorney Announces Charges Against Co-Director Of Think Tank For Acting As An Unregistered Foreign Agent, Trafficking In Arms, Violating U.S. Sanctions Against Iran, And Making False Statements To Federal Agents

 

Gal Luft, a Dual U.S.-Israeli Citizen, Allegedly Evaded FARA Registration While Working to Advance the Interests of China in the United States and Sought to Broker the Illicit Sales of Chinese-Manufactured Weapons and Iranian Oil to China

 Damian Williams, the United States Attorney for the Southern District of New York, Matthew G. Olsen, the Assistant Attorney General for National Security, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an eight-count Indictment charging GAL LUFT with offenses related to willfully failing to register under the Foreign Agents Registration Act (“FARA”), arms trafficking, Iranian sanctions violations, and making false statements to federal agents.  LUFT, a dual U.S.-Israeli citizen, was arrested on February 17, 2023, in the Republic of Cyprus based on the charges in the Indictment.  LUFT subsequently fled after being released on bail while extradition proceedings were pending and remains a fugitive.

FBI Acting Assistant Director in Charge Christie M. Curtis said: “As alleged, the defendant engaged in multiple schemes to evade sanctions and laws intended to protect our national security.   The FBI is determined to defend our nation by enforcing laws designed to promote transparency of foreign influence within the United States.”

According to the allegations contained in the Indictment, other filings, public information, and statements made during court proceedings:[1]

For years, LUFT, a dual U.S.-Israeli citizen who serves as the co-director of a Maryland-based think tank, engaged, along with others, in multiple international criminal schemes. 

First, LUFT conspired with others in an effort to act within the United States to advance the interests of the People’s Republic of China (“China”) as agents of China-based principals, without registering as foreign agents as required under U.S. law.  As part of this scheme, while serving as the co-director of a Maryland-based non-profit think tank, LUFT agreed to covertly recruit and pay, on behalf of principals based in China, a former high-ranking U.S. Government official (“Individual-1”), including in 2016 while the former official was an adviser to the then-President-elect, to publicly support certain policies with respect to China without LUFT or Individual-1 filing a registration statement as an agent of a foreign principal with the Attorney General of the United States, in violation of FARA.  Among other things, in the weeks before the 2016 U.S. presidential election, LUFT and a co-conspirator (“CC-1”), who is a Chinese national and worked for a Chinese nongovernmental organization affiliated with a Chinese energy company, created a written “dialogue” between CC-1 and Individual-1, in which LUFT wrote Individual-1’s responses and included information that was favorable to China.  The dialogue was then published in a Chinese newspaper online and sent to, among others, individuals in the United States, including a journalist and professors at multiple U.S. universities.  When LUFT was writing the dialogue, CC-1 told LUFT that “[i]n these articles, we do not want to spill all the beans yet, just enough to let ‘people’ know he [i.e., Individual-1] is in the corridor of power to be.  Just broad stroke policy consideration that leaves plenty of room for interpretation and imagination to be filled in later.”  After the purported “conversations” were published, LUFT told CC-1 that certain information, favorable to China, had been “tucked between the lines.”  Shortly after the 2016 election, LUFT and CC-1 also discussed possible roles Individual-1 might have in the incoming U.S. administration and discussed Individual-1 taking a “silent trip” to China.  LUFT responded that “[w]e are debating about his role in the new admin.  There are all kinds of considerations . . .We should talk ftf [i.e., face-to-face] as there can be a supremely unique opportunity for china.”

Second, LUFT conspired with others and attempted to broker illicit arms transactions with, among others, certain Chinese individuals and entities.  In his role as a broker or middleman, LUFT worked to find both buyers and sellers of certain weapons and other materials, without a license to do so as required under U.S. law, in violation of the Arms Export Control Act.  Among other things, LUFT worked to broker a deal for Chinese companies to sell certain weapons to Libya, including anti-tank launchers, grenade launchers, and mortar rounds (which LUFT and his associates referred to in coded language as “toys”).  LUFT also worked to broker deals for certain weapons to be sold to the United Arab Emirates, including aerial bombs and rockets.  LUFT further worked to broker deals for certain weapons to be sold by a Chinese company to Kenya, including unmanned aerial vehicles (“UAVs”) – and specifically “strike” UAVs, which LUFT acknowledged “[t]he US doesn’t want to sell[, . . .] hence the opportunity.”  LUFT also discussed brokering a deal for weapons to Qatar and told CC-1 that Israel was “not a good fit” as the middleman for the deal because it had the “[s]ame problem the [] Q [i.e., Qataris] have w uncle [i.e., the United States].  Need a third party.  . . .  I will activate.”  In his role as a broker for illicit arms deals, LUFT worked on a commission basis and traveled to meetings and received and passed on documentation needed to secure the deals.  During a voluntary interview with U.S. law enforcement in which he was asked questions about his involvement in arms trafficking, LUFT made multiple false statements, including that he had not sought to engage in or profit from arms deals.

Third, LUFT conspired with others and attempted to broker deals for Iranian oil – which he directed an associate to refer to as “Brazilian” oil in an effort to conceal the activity and evade sanctions – in violation of U.S. sanctions against Iran and the International Emergency Economic Powers Act.  In his role as a broker or middleman, LUFT solicited buyers and passed on pricing and other information.  One offer letter for Iranian oil that LUFT received noted that the “origin” of the oil was “Iranian / It can be presented as UAE origin without Iranian papers.”  He also assisted in setting up meetings between Iranian representatives and a Chinese energy company for the purpose of discussing oil deals.  During a voluntary interview with U.S. law enforcement in which he was asked about his role brokering deals in Iranian oil, LUFT made multiple false statements, including that he had tried to prevent oil deals with Iran and had not been present during meetings with the Chinese energy company and Iranians. 

LUFT, 57, a dual U.S.-Israeli citizen who formerly resided in both Maryland and Israel and is now a fugitive, has been charged with the following offenses, which carry the maximum prison terms listed below.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.

Count

Charge

Maximum Prison Term

One

Conspiracy to violate the Foreign Agents Registration Act

Five years

Two

Conspiracy to violate the Arms Export Control Act

Five years

Three

Violation of the Arms Export Control Act (relating to Libya)

20 years

Four

Violation of the Arms Export Control Act (relating to the United Arab Emirates)

20 years

Five

Violation of the Arms Export Control Act (relating to Kenya)

20 years

Six

Making false statements

Five years

Seven

Conspiracy to violate the International Emergency Economic Powers Act

20 years

Eight

Making false statements

Five years


Mr. Williams praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division.  Mr. Williams also thanked the Internal Revenue Service – Criminal Investigation, the Department of Justice’s National Security Division, and the Department of Justice’s Office of International Affairs for their assistance.

If you have any information about LUFT’s whereabouts, please contact your local FBI office or the nearest American Embassy or Consulate.  Tips can be reported anonymously and can also be reported online at tips.fbi.gov.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Monday, July 10, 2023

MAYOR ADAMS, CORPORATION COUNSEL HINDS-RADIX ANNOUNCE LAWSUIT AGAINST FOUR COMPANIES ILLEGALLY SELLING DISPOSABLE FLAVORED E-CIGARETTES

 

New York City Mayor Eric Adams and New York City Corporation Counsel Sylvia O. Hinds-Radix today announced that the City of New York is filing a federal lawsuit against four major distributors of flavored disposable e-cigarettes, the most popular vaping devices among middle-school children and high school youth. The four defendants — Magellan Technology Inc. and Demand Vape, both based in Buffalo, NY; Mahant Krupa 56 LLC d/b/a Empire Vape Distributors, based in Queens; and Star Vape, based in Brooklyn — are alleged to have distributed, and continue to distribute, exotically flavored disposable e-cigarettes to retail vape and smoke shops, convenience stores, and directly to consumers in New York City through online sales, in violation of nearly every applicable federal, New York state, and New York City law governing the sale of such products. Today’s lawsuit seeks to block the four defendants from further sales of these illegal items and seeks both monetary damages and fines.

“There is nothing more important than the health of young New Yorkers, but while these four distributors have chosen profits over people, we won’t sit idly by as they continue to poison our children,” said Mayor Adams. “Even though the packaging and flavoring of some of these products might seem harmless, they are 100 percent harmful. These products are packed with nicotine, a toxic and highly addictive chemical that is particularly damaging to adolescent minds and bodies. We will do whatever it takes to keep our children safe, and today’s lawsuit seeks to put an end to the greedy, harmful, and openly illegal behavior of these four nicotine pushers.”

“The city’s lawsuit represents a significant enforcement step against distributors that are fueling an epidemic of e-cigarette use among youth in our city,” said Corporation Counsel Hinds-Radix. “These defendants continue to supply retail outlets throughout the city with nicotine-laced disposable e-cigarettes in exotic fruit, candy, and dessert-like flavors that are clearly designed to appeal to young people in violation of multiple federal, state, and local laws. The aim of this lawsuit is to put a stop to this illegal conduct and protect our youth against these highly addictive and dangerous products.”

“With this action, the city is moving to protect children and young people and hold responsible parties accountable,” said Deputy Mayor for Health and Human Services Anne Williams-Isom. “The city has supported and will continue to support the health and well-being of every person that calls New York City home.”

“The city proactively created laws that protect the health of young people and reduce tobacco companies’ power to market their harmful products to kids,” said New York City Department of Health and Mental Hygiene Deputy Commissioner and Chief Medical Officer Dr. Michelle Morse. “It is infuriating that these companies think they can bypass our laws to hook children on addictive e-cigarettes. The younger a person begins to smoke or vape, the harder it is to quit. This lawsuit shows that New York City will fight to protect the health of its young people.”

“The Sheriff’s Interagency Task Force will continue to work with our partners to utilize all available solution-driven options in combating these serious health and safety threats caused by illegal, unregulated products,” said New York City Sheriff Anthony Miranda. “Holding manufacturers accountable for enabling, promoting, and selling these products that threaten our children and communities is a necessary step to combating the problem. Selling these products are illegal, and we will continue to remove them from our communities.”

“As a mother of two growing children, I know how important it is to protect the health of our youngest New Yorkers,” said New York City Department of Consumer and Worker Protection (DCWP) Commissioner Vilda Vera Mayuga. “Despite being illegal, flavored e-cigarettes continue to make their way into our local retailers, which is one of the reasons why DCWP recently stepped-up enforcement against stores that sell tobacco and e-cigarette products to minors or sell these products without a license. Thank you to the Law Department and Mayor Adams for taking action against these distributors and working to protect New Yorkers.”

Most e-liquids provide nicotine levels far exceeding that of conventional cigarettes — some have as much nicotine as 175 to 350 cigarettes. Additionally, federal health authorities, such as the U.S. surgeon general and the U.S. Food and Drug Administration (FDA), say youth-friendly flavors in e-cigarettes, such as “strawberry milkshake,” “cola,” and “pina colada” are among the flavors that tempt kids to “vape” high levels of nicotine. Child-friendly, cartoon character packaging on e-cigarettes targeted at young people has also contributed to the epidemic of nicotine addiction among middle and high school youth.  

Between 2017 and 2019, e-cigarette use among young people nearly doubled. In October 2022, the FDA and the Centers for Disease Control and Prevention released federal data from the 2022 National Youth Tobacco Survey finding that one in 10 U.S. middle and high school students had used e-cigarettes in a 30-day sample period. Specifically, 14.1 percent (2.14 million) of high school students and 3.3 percent (380,000) of middle school students reported current e-cigarette use. Flavored e-liquids were used by 81 percent of first-time users, aged 12 to 17, who had ever used electronic nicotine delivery devices, and 85.3 percent of current youth users had used a flavored e-liquid in the past month.

Consistent with the national trend, e-cigarette consumption in New York City schools has climbed in recent years. The 2019 Youth Risk Behavior Survey revealed that 15.2 percent of public high school students and 6.7 percent of public middle school students surveyed reported current use of electronic vapor products.

All this led the FDA, in January 2020, to ban flavored vape products. Flavor bans have also been enacted in New York state and New York City, as well as in many other cities and states nationwide. Additionally, the federal Prevent All Cigarette Trafficking Act prohibits anything other than face-to-face sales of disposable e-cigarettes unless the sales comply with all state and local laws of the jurisdiction in which the sale occurs. This is an impossibility in New York City and in New York state where the New York Public Health Code and the New York City Administrative Code prohibit the sale of flavored disposable e-cigarettes altogether.

Despite these laws, city agencies documented thousands of illegal sales of flavored vapes by city stores in 2022, levying thousands of dollars in fines. In January of this year, deputies from the New York City Sheriff’s Office seized hundreds of thousands of dollars’ worth of illegal flavored vapes from stores located on the Upper West Side. More recently, in May of this year, investigators were able to purchase flavored disposable e-cigarettes from vape and smoke shops, as well as convenience stores throughout the city. Overall, since the formation of the Joint Interagency Task Force convened by Mayor Adams last December, the Sheriff’s Office has seized 319,636 packages of flavored vape, with an estimated value of $6.4 million dollars.

The defendants named in today’s lawsuit include:

  • Magellan Technology Inc.: Magellan Technology owns the trademarks for disposable e-cigarettes sold under the trade name “Hyde,” one of the largest-selling brands of flavored disposable e-cigarettes. Magellan’s website encourages customers to “Choose from our fabulous selection of Hyde flavors you'll love!” including “disposable” and “discreet” flavored e-cigarettes, such as “cherry peach lemonade,” “summer luv,” “caribbean colada,” and “strawberry ice cream.” Magellan sells flavored vapes directly to the public over the Internet and delivers the products to city residences.
  • Demand Vape: Magellan-affiliate Demand Vape is one of the largest e-cigarette distributors in the United States — offering approximately 30,000 products and selling to approximately 5,000 retailers in 49 states, as well as internationally through online sales. Demand Vapes' website displays an extensive selection of flavored disposable e-cigarettes expressly banned by the FDA.
  • Mahant Krupa 56 LLC d/b/a Empire Vape Distributors: Empire Vape is a wholesaler of disposable e-cigarettes to dozens of retail outlets it owns or is affiliated with in New York City and in at least 13 states. Empire Vape boldly markets on its website flavors such as “banana ice,” “lush ice,” “blueberry,” and “cola” through statements such as “FLAVOR BAN? NO WORRIES. WE GOT YOU.” Investigators purchased flavored e-cigarettes at numerous vape shops owned by Empire Vape throughout the city.
  • Star Vape: Star Vape advertises many brands of disposable e-cigarettes with flavors such as “strawberry milkshake” and “aloe grape,” including the popular Hyde brand disposable e-cigarettes, which are all available in wholesale quantities and through Star’s retail outlet in Brooklyn.

The lawsuit — filed today in the U.S District Court for the Southern District of New York —seeks to enjoin all four defendants from further illegal sales that not only constitute a public nuisance and mail and wire fraud, but are also specifically in violation of New York City’s Administrative Code, New York State Public Health Law, the federal Tobacco Control Act, the federal Racketeering Influenced Corrupt Organizations (RICO) Act,  and the federal government’s Prevent All Cigarette Trafficking Act. The city also seeks to recover monetary damages and civil penalties from the defendants, potentially totaling millions.

“Flavored tobacco products remain a major cause of another generation of kids getting hooked on these deadly products,” said Michael Seilback, national assistant vice president, state policy, American Lung Association. “The American Lung Association applauds Mayor Adams and the City of New York for holding these distributors of flavored tobacco products accountable for illegally pushing their products into neighborhoods citywide. The City of New York, the state of New York and the federal government must continue to use all tools at their disposal to stop the importation, distribution and sale of all flavored tobacco products including menthol cigarettes, flavored e-cigarettes and flavored cigars.”

“Founded in 2018 by three New York City moms around a kitchen table, Parents Against Vaping E-cigarettes — the first national parent voice fighting youth tobacco use and the predatory behavior of the tobacco industry — is enormously grateful to Mayor Eric Adams and the Corporation Counsel for today’s landmark legal actions that we believe should be a model for other cities across the country,” said Meredith Berkman and Dorian Fuhrman, co-founders, Parents Against Vaping E-cigarettes. “We hear from New York City parents every single day that yet another unlicensed tobacco retailer has opened in their neighborhood and is selling illegal flavored vapes to local kids. Cracking down on these bad actors is important and urgently needed, but going after the distributors themselves — the source of these dangerous and highly-addictive youth-marketed flavored products — is the most effective way to protect our kids from becoming a generation of nicotine addicts and the tobacco industry’s next generation of lifetime customers."

“Similar to traditional cigarettes, E-cigarettes are easily accessible to youth at local convenience stores and are highly visible in the media,” said Lisa David, president and CEO, Public Health Solutions. “The tobacco industry is using strategies that were banned for cigarettes in the 1990’s for youth-targeted marketing today.  Many people are unaware that e-cigarettes are considered tobacco products because they contain nicotine, which comes from tobacco. Nicotine is a dangerous and addictive substance that can harm adolescent brain development. We don’t need more access points for our youth to become hooked on tobacco products. We at Public Health Solutions (PHS) thank Mayor Adams for taking this bold action, and we will continue the fight to ensure all NYC residents are aware of the dangers of tobacco use and the deceptive tactics of the tobacco industry.”

Justice Department Statement on the European Union’s Adoption of Trans-Atlantic Data Privacy Framework to Restore Trust and Stability to Transatlantic Data Flows, Reflecting the Strength of EU-U.S. Relationship

 

Today, the European Commission adopted its adequacy decision for the EU-U.S. Data Privacy Framework. The decision concludes that the United States ensures an adequate level of protection – comparable to that of the European Union – for personal data transferred from the EU to US companies under the new framework. On the basis of the new adequacy decision, personal data can flow safely from the EU to US companies participating in the Framework, without having to put in place additional data protection safeguards.

The EU-U.S. Data Privacy Framework introduces new binding safeguards to address all the concerns raised by the European Court of Justice, including limiting access to EU data by US intelligence services to what is necessary and proportionate, and establishing a Data Protection Review Court (DPRC), to which EU individuals will have access. The new framework introduces significant improvements compared to the mechanism that existed under the Privacy Shield. For example, if the DPRC finds that data was collected in violation of the new safeguards, it will be able to order the deletion of the data. The new safeguards in the area of government access to data will complement the obligations that US companies importing data from EU will have to subscribe to.

President Ursula von der Leyen said: “The new EU-U.S. Data Privacy Framework will ensure safe data flows for Europeans and bring legal certainty to companies on both sides of the Atlantic. Following the agreement in principle I reached with President Biden last year, the US has implemented unprecedented commitments to establish the new framework. Today we take an important step to provide trust to citizens that their data is safe, to deepen our economic ties between the EU and the US, and at the same time to reaffirm our shared values. It shows that by working together, we can address the most complex issues.”

US companies will be able to join the EU-U.S. Data Privacy Framework by committing to comply with a detailed set of privacy obligations, for instance the requirement to delete personal data when it is no longer necessary for the purpose for which it was collected, and to ensure continuity of protection when personal data is shared with third parties.

EU individuals will benefit from several redress avenues in case their data is wrongly handled by US companies. This includes free of charge independent dispute resolution mechanisms and an arbitration panel.

In addition, the US legal framework provides for a number of safeguards regarding the access to data transferred under the framework by US public authorities, in particular for criminal law enforcement and national security purposes. Access to data  is limited to what is necessary and proportionate to protect national security.

EU individuals will have access to an independent and impartial redress mechanism regarding the collection and use of their data by US intelligence agencies, which includes a newly created Data Protection Review Court (DPRC). The Court will independently investigate and resolve complaints, including by adopting binding remedial measures.

The safeguards put in place by the US will also facilitate transatlantic data flows more generally, since they also apply when data is transferred by using other tools, such as standard contractual clauses and binding corporate rules.

Next steps

The functioning of the EU-U.S. Data Privacy Framework will be subject to periodic reviews, to be carried out by the European Commission, together with representatives of European data protection authorities and competent US authorities.

The first review will take place within a year of the entry into force of the adequacy decision, in order to verify that all relevant elements have been fully implemented in the US legal framework and are functioning effectively in practice.

Background

Article 45(3) of the General Data Protection Regulation (GDPR) grants the Commission the power to decide, by means of an implementing act, that a non-EU country ensures ‘an adequate level of protection' - a level of protection for personal data that is essentially equivalent to the level of protection within the EU. The effect of adequacy decisions is that personal data can flow freely from the EU (and Norway, Liechtenstein and Iceland) to a third country without further obstacles.

After the invalidation of the previous adequacy decision on the EU-U.S. Privacy Shield by the Court of Justice of the EU, the European Commission and the US government entered into discussions on a new framework that addressed the issues raised by the Court.

In March 2022, President von der Leyen and President Biden announced that they had reached an agreement in principle on a new transatlantic data flows framework, following negotiations between Commissioner Reynders and US Secretary Raimondo. In October 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States Signals Intelligence Activities', which was complemented by regulations issued by US Attorney General Garland. Together, these two instruments implemented the US commitments reached under the agreement in principle into US law, and complemented the obligations for US companies under the EU-U.S. Data Privacy Framework.

An essential element of the US legal framework enshrining these safeguards is the US Executive Order on ‘Enhancing Safeguards for United States Signals Intelligence Activities', which addresses the concerns raised by the Court of Justice of the European Union in its Schrems II decision of July 2020.

The Framework is administered and monitored by the US Department of Commerce. The US Federal Trade Commission will enforce US companies' compliance.

Following the European Commission’s adoption of its adequacy decision for the EU-U.S. Data Privacy Framewor, the Justice Department made the following statement:

The Justice Department welcomes the European Commission’s adoption on July 10 of an adequacy decision for the United States as part of the EU-U.S. Data Privacy Framework, to which President Biden and European Commission President von der Leyen agreed in March 2022. The adequacy decision provides a basis in the law of the European Union for transfers of personal data from EU countries to the United States for commercial purposes. This flow of data underpins the $7 trillion-dollar U.S.-EU economic relationship and provides vital benefits to citizens and businesses on both sides of the Atlantic, enabling businesses of all sizes to compete in each other’s markets. 

The Commission’s adoption of the adequacy decision also brings into effect the Attorney General’s designation of the EU and the three additional countries making up the European Economic Area (EEA) as “qualifying states” for purposes of implementing the redress mechanism established in Executive Order 14086. A country or a regional economic integration organization may be designated a “qualifying state” by the Attorney General if he determines, in consultation with the Secretary of State, the Secretary of Commerce, and the Director of National Intelligence, that it meets the requirements set forth in the executive order. That determination was made on June 30 for the EU/EEA, contingent upon the Commission’s adoption of an adequacy decision. 

The Attorney General’s designation and the supporting memorandum for the designation are available at www.justice.gov/opcl/executive-order-14086. As a result of the designation and the adoption of the adequacy decision, EU/EEA individuals may now submit complaints to obtain redress for alleged violations of law in connection with U.S. signals intelligence activities affecting their personal data transferred to the United States.

The Justice Department looks forward to working with our partners at the European Commission, together with representatives of European data protection authorities, on continuing implementation of these data privacy safeguards.