VAOIG Seal U.S. Department Of Veterans Affairs
Office of Inspector General
Central Field Office
P.O. Box 1454
Hines, IL 60141
(708) 202-2676
Thursday, April 20, 2006
Former AbTox, Inc. Executives Convicted of Selling Unapproved Hospital Sterilizers
Special Agent-in-Charge John W. Brooks, U.S. Department of Veterans Affairs, Office of Inspector General, Central Field Office of Investigations, announced that two former executives of AbTox, Inc., a now defunct corporation which was based in Mundelein, IL, a suburb north of Chicago, were convicted on April 13, 2006, on federal conspiracy and fraud charges involving the manufacture, promotion, and sale of the AbTox Plazlyte Sterilization System, a device marketed to hospitals to sterilize medical instruments. A multi-count indictment in February 2003 charged four individuals with conspiring to defraud the United States by impeding and impairing the lawful regulatory functions of the U.S. Food and Drug Administration and further committing fraud by selling approximately 160 sterilizers to hospitals around the country, including VA hospitals, despite the fact that these sterilizers had not been approved by the FDA as required by federal law.

At the conclusion of the 8 week jury trial in U.S. District Court for the Northern District of Illinois, defendants Ross A. Caputo, 56, of Long Grove, Illinois, president and chief executive officer for AbTox, and Robert M. Riley, 59, of Buffalo Grove, Illinois, vice president of regulatory affairs of AbTox, were convicted of all counts as charged in the indictment. Pursuant to plea agreements reached with the United States, two other defendants who worked in management positions at AbTox, Mark E. Schmitt, 47, of Chesterfield, Missouri, director of marketing, and Marilyn M. Lynch, 61, of Milwaukee, Wisconsin, director of clinical services, had each pled guilty in December 2003 to one misdemeanor charge of introducing an adulterated medical device into interstate commerce.

All four defendants were originally charged with felony conspiracy and several misdemeanor counts of introducing an adulterated and misbranded sterilizer into the market. Caputo and Riley were also charged with multiple felony counts of mail and wire fraud in connection with sales of the unapproved sterilizers to unwitting hospitals. Riley, Lynch, and Schmitt also had each been charged with one felony count of making false statements to an inspector from the FDA.

Brooks said evidence at trial showed that in December 1994 the FDA approved AbTox's request to market a small, low-temperature hospital sterilizer for use in cleaning stainless steel surgical instruments with no tubes or hinges. From then until the company filed for bankruptcy in July 1998, AbTox manufactured, marketed, and sold a much larger sterilizer with different design and engineering characteristics than the device that was approved by the FDA. The sterilizer AbTox actually marketed was never approved by the FDA, while AbTox never marketed or attempted to market the small sterilizer that had FDA approval. Moreover, AbTox promoted the sterilizer for use on many types of instruments for which neither sterilizer was ever approved. AbTox sold approximately 160 of the unapproved sterilizers to hospitals nationwide for prices ranging from $75,000 to $115,000 each. Twelve of the unapproved sterilizers were sold for approximately $1.2 million to VA hospitals, a few more to government agencies such as the Department of Defense and the Indian Health Service, and the remainder to private hospitals. Hospitals that purchased the sterilizers were deceived into believing that the AbTox sterilizer being marketed had been approved by the FDA.

One witness testified at the trial that early in the scheme Caputo told him to sell as many of the sterilizers as fast as he could before the FDA “caught on.” Other evidence at trial showed the FDA repeatedly directed AbTox not to sell the larger, unapproved sterilizer. Additionally, evidence at trial showed that the AbTox Plazlyte Sterilization System may have contributed to catastrophic eye injuries in up to 18 patients who underwent eye surgeries at four different hospitals � surgeries in which eye cannulas (tubed instruments often containing brass) were used. Evidence presented at trial showed that AbTox officials knew their sterilization system adversely reacted with brass and they failed to perform proper eye irritation studies, but nevertheless did not discourage hospitals from processing brass instruments.

The investigation, which began in May of 1998, was conducted by the VA Office of Inspector General and the FDA’s Office of Criminal Investigations. Assistance was also provided by the Naval Criminal Investigative Service and the Air Force Office of Special Investigations.

Convictions on the felony counts of the indictment expose the defendants to a maximum sentence of 5 years’ imprisonment and a $250,000 fine for each count; the misdemeanor counts carry penalties of one year’s imprisonment and a $100,000 fine.

U.S. District Court Judge Ruben Castillo set sentencing of Caputo and Riley for July 12, 2006. Sentencing dates for Schmitt and Lynch have not yet been scheduled.