`
`
`
`In the
`United States Court of Appeals
`For the Seventh Circuit
`____________________
`
`No. 19-2890
`UNITED STATES OF AMERICA,
`
`Plaintiff-Appellee,
`
`v.
`
`PAUL ELMER,
`
`Defendant-Appellant.
`____________________
`
`Appeal from the United States District Court for the
`Southern District of Indiana, Indianapolis Division.
`No. 1:17-cr-113 — James R. Sweeney, II, Judge.
`____________________
`
`ARGUED SEPTEMBER 16, 2020 — DECIDED NOVEMBER 19, 2020
`____________________
`
`Before EASTERBROOK, MANION, and SCUDDER, Circuit
`Judges.
`SCUDDER, Circuit Judge. Paul Elmer owned and operated
`multiple healthcare-related companies including Pharmakon
`Pharmaceuticals. His pharmacy produced and distributed
`drugs that Elmer knew were dangerous. Rather than halting
`manufacturing or recalling past shipments, sales continued
`and led to the near death of an infant. Federal charges fol-
`lowed for Elmer’s actions in preparing and selling drugs that
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`No. 19-2890
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`contained more or less of their active ingredient than adver-
`tised. A jury returned a guilty verdict on all but one count.
`Elmer now appeals several of the district court’s rulings re-
`lated to the evidence admitted at trial and his sentence. The
`evidence before the jury overwhelmingly proved Elmer’s
`guilt. And the district court’s imposition of a sentence of 33
`months’ imprisonment was more than reasonable given the
`gravity of Elmer’s crimes. We therefore affirm.
`I
`Through a process known as compounding, Pharmakon
`mixes and distributes drugs—including potent opioids like
`morphine and fentanyl—to hospitals across the United States.
`Federal regulations require such compounding pharmacies to
`comply with “Good Manufacturing Practices” regarding the
`potency of drugs and the sterility of the mixing and manufac-
`turing process. Potency refers to the amount of the active in-
`gredient in the drug. By way of an everyday example, con-
`sider Tylenol. The potency of Tylenol advertised as having
`500mg of its active ingredient—acetaminophen—refers to
`whether each pill contains that precise amount of acetamino-
`phen. Industry standards generally require compounded
`drugs like the ones Pharmakon produced to be within a po-
`tency range of 90–110%. Taking our Tylenol example, a 500mg
`pill would need to have between 450mg and 550mg of aceta-
`minophen to comply with federal regulations. Test results
`showing compounded drugs outside of the required potency
`range are considered “out of specification.”
`Pharmakon conducted its own internal potency testing
`and contracted with a third party to perform additional test-
`ing to evaluate whether its compounded drugs had too little
`of the active ingredient (called “under-potent” drugs) or too
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`No. 19-2890
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`much (called “over-potent” drugs). Between 2014 and 2016,
`testing showed 134 instances of under- or over-potent drugs
`being distributed to customers.
`The sale of these out-of-specification drugs risked disas-
`trous consequences. In March 2014 Pharmakon shipped a sed-
`ative called Midazolam to a Community Health Network hos-
`pital in Indianapolis. The drug was twice as potent as indi-
`cated on the label, and before anyone caught the error, Com-
`munity Health staff gave the drug to 13 infants in the hospi-
`tal’s neonatal intensive care unit. The administration of the
`overly potent Midazolam risked causing severe respiratory
`distress, as the infants who received the drug were already on
`ventilators. Fortunately, none of the babies died or went into
`respiratory arrest.
`Two years later, in February 2016, Pharmakon again sent
`Community Health an over-potent batch of drugs—this time
`morphine sulphate. The doses contained 25 times the amount
`of morphine indicated on the label. Once again unaware of
`Pharmakon’s egregious compounding error, a Community
`Health nurse gave this ultra-concentrated morphine to a 12-
`month-old child. The infant immediately went into respira-
`tory arrest and survived only because doctors were able to ad-
`minister three different doses of Narcan, a medication for re-
`versing the effects of opioid overdose.
`These events did not go unnoticed. Community Health re-
`ported the incidents to the Food and Drug Administration.
`Upon receiving the first of these reports in April 2014, the
`FDA sent investigators to Pharmakon, despite having just
`completed a routine inspection the prior month. During the
`inspection Caprice Bearden, Pharmakon’s Director of Com-
`pliance, lied to FDA officials when telling them that the
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`No. 19-2890
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`company had not received any out-of-specification test re-
`sults. Bearden, in turn, told Elmer of this deception, and he
`too lied to the inspectors during the April investigation.
`Bearden and Elmer repeated the falsehoods multiple times,
`all as part of seeking to conceal the existence of out-of-speci-
`fication results.
`After Pharmakon’s over-potent morphine nearly killed
`the infant in February 2016, the FDA once again sent inspec-
`tors to the company’s Indiana campus. This time Elmer took
`a more active role in misleading the agency. He told Michelle
`Beland, a pharmacist at a related Pharmakon entity, to lie to
`the inspectors and pretend that she was the pharmacist at the
`facility under inspection. He also convinced Beland to try to
`prevent the actual pharmacist for that facility, Marcus Fields,
`from speaking to the inspectors, for Elmer worried that Fields
`would report Pharmakon’s recurring issues with producing
`and shipping over- and under-potent drugs.
`Elmer’s efforts to hide the truth ultimately failed. After
`Fields came clean to the FDA inspectors, Bearden and Beland
`followed suit and eventually provided documentation reveal-
`ing Pharmakon’s misconduct, foremost the out-of-specifica-
`tion test results. Confronted with this evidence, Elmer still re-
`fused to recall Pharmakon’s compounded drugs. The FDA re-
`sponded by issuing a public safety alert and referred the case
`to the Department of Justice for criminal investigation.
`In June 2016 a federal grand jury issued a ten-count indict-
`ment charging Elmer with conspiracy to defraud the FDA
`(18 U.S.C. § 371); introducing adulterated drugs into inter-
`state commerce (21 U.S.C. §§ 331(a), 333(a)(1) & 351); and
`adulterating drugs being held for sale in interstate commerce
`(21 U.S.C. §§ 331(k), 331(a)(1) & 351). A superseding
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`No. 19-2890
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`indictment added a charge for obstructing justice (28 U.S.C.
`§ 1505). Elmer chose to go to trial on all charges.
`Several Pharmakon employees
`(including Bearden,
`Beland, and Fields) testified against him. So too did various
`FDA inspectors and Community Health Network medical
`staff testify at trial. The government also introduced emails
`from a Pharmakon employee who conducted internal testing.
`These emails showed Elmer being urged to address multiple
`instances of out-of-specification test results. He never did so.
`In short, the evidence that Elmer was aware of and directed
`the efforts to conceal out-of-specification test results from the
`FDA was overwhelming.
`The trial ended with the jury returning guilty verdicts on
`the conspiracy count and all nine counts related to the adul-
`terated drugs. The jury acquitted Elmer on the obstruction
`count. The district court later sentenced him to 33 months’ im-
`prisonment. Elmer now appeals.
`II
`Elmer challenges two of the district court’s evidentiary
`rulings. First, he contends the government, as part of proving
`the adulteration charges alleged in counts three through
`eleven, should not have been allowed to introduce evidence
`of 73 separate instances of out-of-specification test results.
`Second, he argues that the district court should never have al-
`lowed the jury to learn about the personal relationship he had
`with Pharmakon pharmacist Michelle Beland. We disagree on
`both fronts and see no abuse of discretion in the district
`court’s evidentiary rulings. See United States v. Buncich,
`926 F.3d 361, 367 (7th Cir. 2019) (explaining that abuse of dis-
`cretion review is highly deferential and requires us to defer to
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`No. 19-2890
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`the district court absent any reasonable basis supporting its
`view).
`
`A
`We start with Elmer’s challenge to the 73 out-of-specifica-
`tion test results. He insists these tests were evidence of prior
`bad acts inadmissible under Federal Rule of Evidence 404(b)
`and unrelated to the nine counts of making or distributing
`adulterated drugs. Had Elmer been charged with only those
`nine counts, he might have a point. What he overlooks, how-
`ever, is the indictment’s conspiracy charge. The indictment al-
`leged that Elmer’s efforts to hide these out-of-specification re-
`sults were an object of the conspiracy. In clear and precise
`terms, count one alleged that the conspiracy aimed to conceal
`from the public that “Pharmakon was compounding and dis-
`tributing numerous drugs that were under- and over-potent.”
`And therein lies the nexus with the evidence presented at
`trial: Elmer’s concealment of the 73 out-of-specification test
`results from the FDA were overt acts taken in furtherance of
`the charged conspiracy.
`The government stood on firm ground approaching proof
`of the charged conspiracy this way. Time and again we have
`said that “Rule 404(b) does not apply to direct evidence of the
`crime charged.” United States v. Ferrell, 816 F.3d 433, 443 (7th
`Cir. 2015). Even more, we have noted “[s]pecifically, evidence
`directly pertaining to the defendant’s role in a charged con-
`spiracy is not excluded by Rule 404(b).” United States v. Adams,
`628 F.3d 407, 414 (7th Cir. 2010). In no way were these out-of-
`specification test results prior bad act evidence: they consti-
`tuted direct evidence of the conspiracy. The district court
`properly admitted this evidence.
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`No. 19-2890
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`B
`Elmer fares no better in his challenge to Michelle Beland’s
`testimony. Recall that Beland worked as a Pharmakon phar-
`macist and testified that Elmer instructed her to lie to FDA
`inspectors. Beland testified that Elmer told her to pretend to
`be sick so she would not have to speak to the inspectors dur-
`ing the March 2014 inspection. He also directed her to hide
`the fact that she did not work in the exact facility under in-
`spection. Finally, Elmer implored Beland to ask Marcus Fields
`to also lie to the FDA—urging him to tell the inspectors that
`Beland was the lead pharmacist at the facility being inspected
`and to make no mention of the related facility where Beland
`actually worked.
`Elmer does not challenge the admissibility of this testi-
`mony. Nor does he argue that the district court should have
`barred Beland from testifying altogether. He instead contends
`that the district court abused its discretion by allowing the
`government to elicit testimony of Beland’s personal relation-
`ship with him. In the days leading to the February 2016 in-
`spection, and for a few months afterwards, Beland and Elmer
`communicated frequently through text messages and phone
`calls. Some of these communications contained “sexual talk”
`and “dirty jokes.”
`Elmer moved before and during trial to exclude any refer-
`ence to the nature of these communications, asking the district
`court to limit the government’s description of his relationship
`with Beland to that of a mentor or father figure. The govern-
`ment defended the admission of this testimony on the
`grounds that it was necessary to show why Beland was will-
`ing to follow Elmer’s instructions to lie to the authorities. The
`district court allowed Beland to offer limited testimony about
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`No. 19-2890
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`these personal messages with Elmer. But the court prevented
`her from reading the content of any particular message. The
`government complied with the district court’s instructions
`and only generally referenced the personal and sexual content
`of some of the messages. The court likewise barred prosecu-
`tors from discussing any “salacious” details provided by
`Beland in a pre-trial interview.
`We cannot say the district court abused its discretion in
`allowing but limiting Beland’s testimony this way. To be sure,
`the safer course would have been to prohibit the government
`from making any reference to the sexual banter. But Beland’s
`testimony on this topic was very general, lacking in prejudi-
`cial details and occupying less than ten pages in a 1,700-page
`trial transcript. See United States v. Miller, 688 F.3d 322, 329–30
`(7th Cir. 2012) (concluding that a “brief reference” to prejudi-
`cial evidence did not amount to an abuse of discretion). Even
`if this was an abuse of discretion, any error was harmless in
`light of the overwhelming evidence of Elmer’s guilt. See
`United States v. Taylor, 522 F.3d 731, 735 (7th Cir. 2008).
`III
`We come in closing to Elmer’s challenge to his sentence.
`He asserts the district court, in computing the advisory sen-
`tencing range under the Sentencing Guidelines, improperly
`applied certain enhancements while also refusing to award
`him credit for accepting responsibility for his offense conduct.
`Elmer also argues that the sentence was substantively unrea-
`sonable given his health issues and family obligations.
`The district court committed no error in applying a two-
`level vulnerable victim enhancement under U.S.S.G.
`§ 3A1.1(b)(1). Elmer posits that the only victim of the charged
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`No. 19-2890
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`conspiracy was the FDA. Not so. Elmer ignores the way the
`Guidelines and our case law have defined “victim.” The
`Guidelines commentary advises district courts that the en-
`hancement applies to victims of “any conduct for which the
`defendant is accountable under § 1B1.3” if that victim is “un-
`usually vulnerable due to age, physical or mental condition,
`or who is otherwise particularly susceptible to the criminal
`conduct.” U.S.S.G. § 3A1.1 cmt. 2. Our case law has clarified
`that a person who has “experienced some actual or intended
`harm” from the relevant conduct qualifies as a vulnerable vic-
`tim. United States v. Johns, 686 F.3d 438, 460 (7th Cir. 2012).
`Multiple infants suffered actual harm and others faced as-
`tronomical risk as a result of Elmer’s deception. It affronts re-
`ality to suggest an absence of vulnerable victims. Elmer was
`on notice, moreover, that infant patients could (and did) re-
`ceive his company’s drugs by no later than April 2014, when
`Community Health filed its first report of over-potency at-
`tributable to Pharmakon medications. Because these infant
`victims were “unusually vulnerable due to age,” the district
`court had more than enough to impose the two-level vulner-
`able-victim enhancement.
`Nor do we see any error with the district court’s applica-
`tion of a two-level enhancement for Elmer’s abusing a posi-
`tion of trust or using a special skill. See U.S.S.G. § 3B1.3. Elmer
`bases his objection on the view that his role in the conspiracy
`did not require any of the special skills he possessed as a li-
`censed pharmacist. While that point is debatable—for exam-
`ple, Elmer often relied on his pharmaceutical knowledge in
`rebuffing inquiries from regulators and his staff—his larger
`problem is that the district court did not apply the two-level
`enhancement based on any use of a “special skill,” but rather
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`No. 19-2890
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`because Elmer abused a “position of trust.” Elmer entirely
`misses this point, even after the government pointed out this
`lapse in its briefing. Any challenge to the position-of-trust en-
`hancement is therefore waived. See United States v. Cook,
`406 F.3d 485, 487 (7th Cir. 2005) (“[A] waiver is a deliberate
`decision not to present a ground for relief that might be avail-
`able in the law.”).
`The district court stood on equally sound ground in deny-
`ing Elmer’s request for acceptance of responsibility credit.
`Elmer never admitted wrongdoing or accepted responsibility
`for his grievous offense conduct. To the contrary, he chose to
`contest his guilt at trial, all along continuing to blame every-
`one around him, including at sentencing and indeed through-
`out this appeal. Refusing to find that Elmer accepted respon-
`sibility under these circumstances is not clear error and comes
`nowhere close, as Elmer claims, to imposing a “trial tax” in
`violation of the Sixth Amendment right to a speedy and pub-
`lic trial. See United States v. Saunders, 973 F.2d 1354, 1363 (7th
`Cir. 1992) (“As long as the leniency decision is an individual-
`ized one, not based merely on the defendant’s decision to go
`to trial, a defendant’s constitutional rights are not impaired.”).
`Finally, the district court’s imposition of a 33-month sen-
`tence was in no way substantively unreasonable. The sentence
`matched the low end of the advisory range and reflected the
`district court’s application of the mitigating factors required
`by 18 U.S.C. § 3553(a), including Elmer’s health conditions
`and his role as the sole caretaker for his wife who also suffers
`from serious medical conditions. The law required no more of
`the district court. If anything, Elmer’s sentence strikes us as
`meaningfully lower than the district court could have
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`No. 19-2890
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`imposed given the extreme risks, including to infant patients,
`posed by his offense conduct.
`For these reasons, we AFFIRM.
`
`