Two-Time Convicted CEO Faces 20 Years in Prison After His Supplement Firm Dupes Clients in a $4.7M Fraud

Jared Wheat and his company, Hi-Tech Pharmaceuticals, have been convicted by a federal jury of wire fraud for forging documents that misled clients into believing the dietary supplement firm was compliant with good manufacturing practices (GMPs). The Georgia-based company was found guilty after a six-week trial of laundering millions of dollars derived from the fraudulent scheme.

According to US Attorney Theodore Hertzberg, Wheat, who had two prior federal felony convictions, once again chose profits over product quality and consumer safety. He did so by fabricating documents to falsely indicate that an independent third-party audit firm had certified Hi-Tech Pharma as compliant with industry manufacturing standards. This deception helped the company secure millions of dollars from clients who relied on these forged documents.

Hertzberg noted that the fraudulent scheme was uncovered following years of investigation. Wheat now faces a maximum of 20 years in prison, followed by three years of supervised release. His company also faces significant penalties, including a fine of up to twice the value of the criminal proceeds involved — amounting to nearly $10 million (£7.3 million) — and probation of up to five years. The date for sentencing has yet to be scheduled.

Concealing Quality and Safety Issues

Hi-Tech engaged a third-party audit firm in late 2010 to inspect its facilities for compliance with dietary supplement GMPs. The audit report allegedly identified 75 non-compliance issues, including gaps in facility doors that could permit rodents to enter, exposure of products to contaminants prior to packaging, and lapses in product specifications and testing.

Rather than addressing these issues, Wheat decided to fabricate a certificate of compliance from PharmaTech Consulting in March 2011, falsely claiming that the company met GMP criteria. The defendants listed a former attorney of Wheat as the general manager of PharmaTech and forged the attorney's signature on the certificate. However, they did not disclose that PharmaTech was owned by Wheat, had conducted no audit of Hi-Tech, and was not an independent auditor.

Hi-Tech allegedly manipulated the inspection report issued by the third-party auditor, making it appear as though PharmaTech had issued a favourable audit report. Each of the 75 GMP non-compliance categories was altered from the legitimate report to 'Acceptable', with PharmaTech listed as the auditor.

The company also forged FDA Free Sale export certificates, which indicate that products are marketed in the US and eligible for export, by changing dates and product names. Between 2011 and 2013, Hi-Tech sent modified audit reports as well as GMP and FDA certificates to clients.

Receiving Millions from the Use of Fraudulent Documents

The US Attorney's Office for the Northern District of Georgia stated that clients forwarded these forged documents to foreign regulators, enabling Hi-Tech's products to be sold abroad. From March 2011 through April 2013, customers who received these fraudulent documents paid at least $4.7 million (£3.4 million) to Hi-Tech.

'Making fraudulent claims about FDA-regulated products shows a reckless disregard for public health and safety,' stated Kelly McCoy, Acting Special Agent in Charge, FDA Office of Criminal Investigation. 'We remain committed to pursuing and bringing to justice those who misrepresent key aspects of their products to unsuspecting customers.'