by John Gessner
Thisweek Newspapers

It used to be a corporate headquarters, but the office-warehouse building at 12400 Portland Ave. in Burnsville hadn't drawn much attention in recent years.

That changed May 10 when federal agents raided the place, which they say housed an illegal Internet prescription-drug business that has generated $18 million in profits since 2002.

A federal judge shut down the business, Online Payment Solutions, which is alleged to be the telemarketing arm of Xpress Pharmacy Direct, an illegal distributor of Viagra and prescription painkillers including Vicodin.

A May 20 ruling by U.S. District Court Judge Michael Davis froze the assets of the businesses and of 25-year-old Christopher William Smith, who allegedly controlled the businesses and several Web sites. The ruling also froze the assets of his alleged co-conspirators: Smith's father, Scott, wife, Anita, and another man, Alton Scott Poe.

It's unusual to shutter businesses and seize assets absent criminal charges, which must come from a grand jury, said Greg Brooker, an assistant U.S. attorney in Minneapolis.

"But there is a statute that allows for it,î Brooker said. "And this is an extraordinary, compelling case. We had probable cause to believe there was fraud on a national scale. You had a consumer public health issue regarding the prescription drugs. You had a high volume of activity, and you had a high profit since 2002.î

A prolific spammer famous in anti-spamming circles, Smith moved to Minnesota and established Xpress Pharmacy Director and Online Payment Solutions with his spamming profits, Brooker said.

Smith paid $1.1 million in cash for a home in Prior Lake and owns a home in Burnsville, Brooker said. Several luxury vehicles from a Burnsville limousine service he owned were also seized, Brooker said.

A federal investigation into Xpress Pharmacy Direct began when some customers complained to authorities about getting fewer pills than they had ordered or having their credit-card charges run through multiple times, according to Brooker.

Authorities believe the business was supplied drugs by a New Jersey doctor, Brooker said. A customer would go to a Web site and answer four health-related questions. Those were reviewed by the doctor, who then shipped the drugs to pharmacies Chris Smith had contracted with to fill his orders, Brooker said. Those included pharmacies in Oregon, California and Illinois. The drugs were shipped to Burnsville and then shipped to customers once payments were made through money orders or online through Online Payment Solutions.

"The red flag should go up when 3,000 of the same prescriptions are coming from New Jersey for patients in Minnesota,î Brooker said. "We believe some pharmacies did call their state board and say, ëIs this legitimate?' î

The businesses lacked federal and state licenses to operate a pharmacy, said investigators from the Food and Drug Administration, FBI and Drug Enforcement Administration.

Investigators believe the businesses committed "large-scale mail and wire fraudî by overcharging for prescription drugs, failing to provide customers with the type and amount of drugs ordered, mislabeling and mispackaging drugs and failing to obtain valid prescriptions.

"Records indicated that at least 22,000 phoney prescriptions were being generated within a short period and that large sums of cash were being deposited in local banks from the defendants' prescription drug orders,î federal court documents said.

The businesses were closed by a temporary restraining order May 10, after the federal raid.

Online Payment Solutions employed 85 people to solicit and process drug orders. Inside the building investigators found 50 to 100 work stations, more than 75 computers, and several copiers and fax machines, "all of which were set up to facilitate the marketing of prescription drugs,î documents said.

Also found were three safes apparently used to store cash and "thousands of business records detailing the national scope of the fraud.î

Many of the customers were uninsured people in their 20s, documents say. Witnesses also told investigators Chris Smith offered drugs to employees -- including those under 18 -- without prescriptions.

Prescription drugs returned by customers were repackaged and resold, a violation of federal law, documents said.

Smith is being sued in Virginia for $1.7 million by AOL, which alleges he hijacked "netblocksî and spammed more than 1 billion AOL subscribers with solicitations for drugs, cable descramblers and other items, according to the Spam Kings Web site run by investigative journalist Brian McWilliams.

John Gessner is at burnsville.thisweek@ecm-inc.com.

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