New South Wales District Court CITATION: R v Pan Pharmaceuticals Pty Ltd [2008] NSWDC 221 HEARING DATE(S): 17 July 2008 JUDGMENT DATE: 19 September 2008 JURISDICTION: Criminal JUDGMENT OF: Nield DCJ DECISION: Pan Pharmaceuticals is convicted of each of the fifty-three offences to which it has pleaded guilty and it is fined as follows: (1) For each offence of knowingly using a false document, a fine of $500,000. (2) For each offence of dealing with counterfeit therapeutic goods, a fine of $125,000. CATCHWORDS: CRIMINAL LAW - offences of using a false instrument contrary to the Crimes Act (Clth) and dealing with counterfeit therapeutic goods contrary to the Therapeutic Goods Act (Clth) - guilty pleas - sentences Crimes Act 1914 (Cth) LEGISLATION CITED: Criminal Code Act 2005 (Cth) Therapeutic Goods Act 1989 (Cth) PARTIES: Regina Pan Pharmaceuticals Pty Ltd FILE NUMBER(S): 2008/00005426; 2008/00010054 COUNSEL: R J Bromwich SOLICITORS: Commonwealth DPP Blake Dawson Waldron (for Liquidators) JUDGMENT 1 The manufacture, both within and without Australia, the supply within Australia, the import into Australia and the export from Australia of therapeutic goods are controlled by the Therapeutic Goods Act administered by the Therapeutic Goods Administration. 2 The manufacturers, places of manufacture and manufacturing processes of therapeutic goods are controlled by the Act. All places of manufacture and manufacturing processes must conform to the Australian Code of Good Manufacturing Practice to be approved by the Therapeutic Goods Administration, whether the place of manufacture is within or without Australia. Only therapeutic goods manufactured by approved manufacturers at approved places by approved processes may be supplied within Australia, imported into Australia or exported from Australia. 3 All therapeutic goods, whether prescription or non-prescription goods, must be evaluated for quality and safety and, in relation to some prescription goods, efficacy, by the Therapeutic Goods Administration to ensure conformity with the required standard. Only therapeutic goods which conform with the standard are approved for manufacture within, supply within, import into and export from Australia. 4 Once a therapeutic good is approved by the Therapeutic Goods Administration it is registered in the Australian Register of Therapeutic Goods in the name of the person or company, called the sponsor, manufacturing, importing or exporting the good. 5 A therapeutic good registered in the Australian Register of Therapeutic Goods is either a "listed" good or a "registered" good. A listed good is a non-prescription good other than an analgesic and a registered good is a prescription good or an analgesic. 6 When a therapeutic good is registered in the Australian Register of Therapeutic Goods it is registered in the name of its sponsor and given its identifying number. A listed good's number begins with the prefix "AUST L" and a registered good's number begins with the prefix "AUST R" and each prefix is followed by five numbers. Accordingly, an identifying number identifies both the sponsor and the good. 7 A sponsor, whether a person or a company, wishing to export a therapeutic good from Australia to another country must obtain registration of the good in the Australian Register of Therapeutic Goods. 8 Before a sponsor may export a therapeutic good from Australia to another country the sponsor must obtain a Certificate of a Pharmaceutical Product, a Certificate of a Listed Product or a Certificate of an Exempt Product in relation to the good from the Therapeutic Goods Administration. Such a Certificate is issued by the Therapeutic Goods Administration under the World Health Organisation Certification Scheme related to the international trade of therapeutic products. 9 A Certificate of a Pharmaceutical Product is issued by the Therapeutic Goods Administration for a therapeutic good that is registered in the Australian Registry of Therapeutic Goods and approved for supply within Australia or such a good approved for export only. 10 A Certificate of a Listed Product is issued by the Therapeutic Goods Administration for a therapeutic good that is registered in the Australian Register of Therapeutic Goods and approved for supply within Australia. The Therapeutic Goods Administration does not issue such a Certificate for a good approved for export only. 11 A Certificate of an Exempt Product is issued by the Therapeutic Goods Administration for a therapeutic good that is not required to be registered in the Australian Register of Therapeutic Goods but is, nonetheless, subject to the Therapeutic Goods Act. 12 The various Certificates issued by the Therapeutic Goods Administration contain various information about the therapeutic good required by the World Health Organisation Certification Scheme and include a formulation certificate and analysis certificate. 13 A formulation certificate details the ingredients and the strength of the ingredients contained in the therapeutic good. 14 An analysis certificate, also called an analytical report, details the result of analysis of a sample of the manufactured therapeutic good. 15 A therapeutic good approved by the Therapeutic Goods Administration for "export only" cannot be supplied in Australia but may be exported to a nominated country and such a good is registered in the Australian Register of Therapeutic Goods as a listed good. 16 Most countries to which an export only therapeutic good manufactured in Australia may be exported, evaluate the good according to its regulatory requirements to approve the importation of the good into the country but some countries, including Vietnam, rely upon the regulatory regime of the exporting country, such as Australia, to ensure that the imported good is safe and of the required quality. 17 The Drug Administration of Vietnam, which is part of the Ministry of Health of Vietnam, will allow the importation of a therapeutic good from another country, including Australia, if the good is approved for sale and is on the market for sale within the exporting country and is authenticated by a Certificate of a Pharmaceutical Product or a Certificate of a Listed Product, otherwise the exporter must apply to the Drug Administration to register the drug as a therapeutic good for supply within Vietnam. 18 Gateway Pharmaceuticals Australia Pty Limited was registered on 7 June 1989. Gateway Promotions Pty Limited was registered on 14 February 1985. Anthony John Sukari and David John Bokeyan were the directors of both companies. They later became involved with both Pan Laboratories Pty Limited and Pan Pharmaceuticals Pty Limited. 19 Gateway Pharmaceuticals and/or Gateway Promotions held a licence issued by the Ministry of Health in Vietnam to import therapeutic goods into Vietnam for supply within Vietnam. 20 Gateway Pharmaceuticals and/or Gateway Promotions obtained the therapeutic goods that it exported from Australia into Vietnam from, firstly, Pan Laboratories and, then, Pan Pharmaceuticals. 21 In about May 2000 Pan Laboratories acquired the licence held by Gateway Pharmaceuticals and/or Gateway Promotions to import therapeutic goods into Vietnam for supply within Vietnam following the financial failure of the Gateway companies. 22 As there had been change from the Gateway company to Pan Laboratories as the exporter of the therapeutic goods, there needed to be an application to the Therapeutic Goods Administration for the issue of the necessary Certificate of a Pharmaceutical Product or Certificate of a Listed Product for each good in the name of Pan Laboratories as the sponsor. 23 Pan Laboratories did not apply to the Therapeutic Goods Administration for the issue to it of the necessary Certificate of a Pharmaceutical Product or Certificate of a Listed Product for each therapeutic good being exported by it to Vietnam for supply within Vietnam. 24 Pan Pharmaceuticals is the successor of Pan Laboratories. It was listed as a public company on the Australian Stock Exchange in April 2001. 25 Before 12 February 2003 Pan Pharmaceuticals was the sponsor of 1660 therapeutic goods approved by the Therapeutic Goods Administration for manufacture in Australia and registered in the Australian Registry of Therapeutic Goods as listed goods for export only. 26 On 12 February 2003 the Therapeutic Goods Administration received a request from a pharmaceutical company in Australia on behalf of a company in Vietnam as to whether the Certificate of a Pharmaceutical Product apparently issued by the Therapeutic Goods Administration to Pan Pharmaceuticals in relation to a particular therapeutic good was a valid certificate. 27 A search of the records of the Export Section of the Therapeutic Goods Administration revealed that the particular Certificate of a Pharmaceutical Product was false, as the number appearing on the Certificate related to a different sponsor and a different therapeutic good and the list number following the prefix "AUST L" appearing on the Certificate related to yet another different sponsor and yet another different therapeutic good. 28 On 28 April 2003 Pan Pharmaceuticals was notified by the Therapeutic Goods Administration that its licence to manufacture therapeutic goods in Australia was to be suspended for six months. 29 On 15 May 2003 a search warrant was executed by investigators of the Therapeutic Goods Administration upon Pan Pharmaceuticals at 10-12 Church Road in Moorebank. The investigators seized numerous documents and electronic data. 30 Examination of the documents and electronic data seized by the investigators during the search revealed that Pan Pharmaceuticals exported a number of therapeutic goods to Vietnam to a number of suppliers in Vietnam. 31 Between 9 and 18 June 2003 investigators of the Therapeutic Goods Administration examined documents held by the Drug Administration of Vietnam related to therapeutic goods exported to Vietnam by Pan Pharmaceuticals. 32 Examination of the documents held by the Drug Administration of Vietnam revealed that seven Certificates of a Pharmaceutical Product and two Certificates of a Listed Product lodged by Pan Pharmaceuticals with applications by it for approval to import therapeutic goods into Vietnam for supply within Vietnam were false. 33 Further investigation by the investigators of the Therapeutic Goods Administration revealed the identity of the person who created the false Certificates and how they were created, but I need not recite these investigations. 34 Further investigation of the documents in electronic data seized by the investigators during the search on 15 May 2003 revealed that batches of five different therapeutic goods exported by Pan Pharmaceuticals from Australia to Vietnam were counterfeit. 35 By s 42E of the Therapeutic Goods Act, a therapeutic good is counterfeit if: (a) The label or presentation of the good, or; (b) any document or record relating to the good or its manufacture, or; (c) any advertisement for the good contains a false representation of: (a) The identity or name of the good; (b) the formation, composition or design specification of the good or of any ingredient or component of it; (c) the presence or absence of any ingredient or component of the good; (d) the strength or size of the good other than the size of any pack in which the good is contained; (e) the strength or size of any ingredient or component of the good; (f) the sponsor, source, manufacturer or place of manufacture of the good. 36 Each particular batch of the particular therapeutic good was counterfeit because a document or record relating to it or its manufacture, or because its label or presentation contained a false representation as to the identity of the particular good or the sponsor of a particular good or as to the strength of an ingredient or component of the particular good. 37 Consequently, Pan Pharmaceuticals and a number of individuals were charged with a number of offences related to the use of the seven false Certificates of a Pharmaceutical Product and the two false Certificates of a Listed Product and to the dealing with counterfeit therapeutic goods. 38 On 13 June 2008 Pan Pharmaceuticals pleaded guilty to nine charges that it, knowing that a particular document, namely a Certificate of a Pharmaceutical Product bearing a particular number for a particular therapeutic good or a Certificate of a Listed Product bearing a particular number for a particular therapeutic good was a false document, used that document to induce another person, namely a representative of the Government of Vietnam, to accept the document as genuine, so as to dishonestly obtain a gain or to dishonestly influence the exercise of a public duty or function, the false document being a Commonwealth document, contrary to s 145.1(5) of the Commonwealth Criminal Code Act. These offences were committed on various dates between 1 October 2001 and 5 July 2002. 39 On 3 July 2008 Pan Pharmaceuticals pleaded guilty to thirty-four charges that it intentionally exported a particular good, namely a particular therapeutic good, from Australia knowing that or being reckless as to whether the particular good was counterfeit by reason of the fact that the documents or records relating to the good or its manufacture or its label of presentation contained false representations as to the identity of the particular good (counts 1 to 4, 9 to 12, 21, 22, 39 and 40 of the indictment) or as to the sponsor of the particular good (counts 5 to 8, 13 to 16, 23, 24, 43 and 44 of the indictment) or as to the strength of an ingredient of the particular good (counts 17 to 20, 27, 28, 31, 35 and 36 of the indictment), contrary to s 42E of the Therapeutic Goods Act. 40 Also, on 3 July 2008 Pan Pharmaceuticals pleaded guilty to ten charges that it intentionally manufactured a particular good, namely a particular therapeutic good, in Australia knowing that or being reckless as to whether the particular good was counterfeit by reason of the fact that the documents or records relating to the good or its manufacture or its label or presentation contained false representations as to the identity of the particular good (counts 37 and 38 of the indictment) or as to the sponsor of the particular good (counts 41 and 42 of the indictment) or as to the strength of an ingredient or component of the particular good (counts 25, 26, 29, 30, 33 and 34 of the indictment), contrary to s 4E of the Therapeutics Goods Act. These offences and the thirty-four offences referred to above were committed between 18 November 2002 and 31 December 2002. 41 The penalty for an offence contrary to s 145.1(5) of the Criminal Code Act is, for a natural person, imprisonment for a maximum of ten years or a fine of a maximum of $660,000 or both and, for a company, a fine of a maximum of $3.3 million. 42 The penalty for an offence contrary to s 42E of the Therapeutic Goods Act is, for a natural person, imprisonment for a maximum of five years or a fine of a maximum of $55,000 or both and, for a company, a fine of a maximum of $275,000. 43 There cannot be any doubt that the offences committed by Pan Pharmaceuticals are very serious offences. The statutory regime for the manufacture of therapeutic goods in Australia is strict because, if the requirements were not met, there is a real and significant risk that the goods will not be safe and will cause harm to users of them. The World Health Organisation Certification Scheme for the international trade of therapeutic goods was designed and is intended to ensure that therapeutic goods exported from one country into another country, particularly when the importing country accepts approvals given by the exporting country, are safe and not likely to cause harm to users of them. 44 The offences of knowingly using a false document were deliberate and intentional offences committed by the largest manufacturer of therapeutic goods in Australia and were designed to avoid the regulatory regime for the manufacture of therapeutic goods in Australia and for the importation of those goods into Vietnam for the sale of those goods within Vietnam. 45 The offences of dealing in counterfeit therapeutic goods were deliberate and intentional offences as, in some cases, the strength of a declared active ingredient was not tested and, in some other cases, the testing of a declared active ingredient was manipulated to produce the desired result and were designed to avoid the regulatory regime. 46 One serious consequence of the conduct of Pan Pharmaceuticals is that it undermined Australia's standing in the world insofar as the international trade of therapeutical goods is concerned. The basis of the World Health Organisation Certification Scheme in relation to therapeutic goods was that one country, if it did not undertake its own evaluation of a therapeutic good which a person or company wished to import into it, could rely upon a certificate issued by another country. Pan Pharmaceuticals' knowing use of false certificates to export therapeutic goods, particularly counterfeit therapeutic goods, from Australia into Vietnam for supply within Vietnam undermined Australia's standing in the world as an exporter of safe therapeutic goods. 47 As the offences committed by Pan Pharmaceuticals are offences contrary to the laws of the Commonwealth, I must sentence it for each offence in accordance with Pt 1B of the Commonwealth Crimes Act, particularly s 16A(2) of that Part. 48 I consider that the offences show that Pan Pharmaceuticals engaged in a course of conduct involving a series of criminal acts of the same or similar character. 49 I accept that Pan Pharmaceuticals is entitled to have its guilty pleas to the various offences taken into account in the determination of an appropriate penalty for each offence. I understand that, by letter dated 6 June 2008, it notified the Commonwealth Director of Public Prosecutions of its intention to plead guilty to the charges. The guilty pleas show its willingness to facilitate the course of justice. I intend to discount the penalties that I will impose upon Pan Pharmaceuticals by twenty per cent on account of its guilty pleas. 50 I understand that Pan Pharmaceuticals has been dealt with for other offences committed by it. I do not know whether those offences are similar to or different from the subject offences. However, whatever were those offences, Pan Pharmaceuticals cannot claim that it is a good corporate citizen or that it is entitled to have its good corporate character taken into account in its favour. 51 I must take deterrence into account. As Pan Pharmaceuticals does not now exist, it having been placed in liquidation, I need not concern myself with specific deterrence. However, I must consider general deterrence. It is something that cannot be ignored or undervalued. Companies and those who control them must be warned that deliberate and intentional flouting of Australia's regulatory regimes, whether for the manufacture of therapeutic goods or otherwise, will not be tolerated or condoned and will, following conviction after detection, be sanctioned by imprisonment in the cases of natural persons or significant fines in the cases of companies. 52 What, then, having regard to what I have said about the offences and the offender, is an appropriate penalty to impose upon the offender for each of the offences? 53 I say that, had I been determining an appropriate sentence to impose upon a natural person, the only appropriate sentence for each offence would have been imprisonment to be served on a full time basis. 54 I note that some natural persons have been charged with a number of offences arising from the investigation of the subject offences by investigators of the Therapeutic Goods Administration and that, of those people, two of them, Ms Nhung Mai and Ms Melissah Chew, have pleaded guilty to some offences and have been dealt with. 55 Dealing, firstly, with the offences of knowingly using a false document, I have determined that the appropriate starting point is a fine of $1,000,000 for each offence, which amount I reduce by twenty per cent, that is by $200,000, on account of the guilty plea, to $800,000. 56 Dealing, now, with the offences of dealing with counterfeit therapeutic goods, I have determined that the appropriate starting point is a fine of $175,000 for each offence, which I reduce by twenty per cent, that is by $35,000, to $140,000. 57 As to totality, I consider, bearing in mind that the sum of the various fines is $13,360,000, that, to reflect Pan Pharmaceuticals' criminality to the fifty-three offences to which it has pleaded guilty, the total overall fine should be $10,000,000. 58 Accordingly, Pan Pharmaceuticals is convicted of each of the fifty-three offences to which it has pleaded guilty and it is fined as follows: (1) For each offence of knowingly using a false document, a fine of $500,000. (2) For each offence of dealing with counterfeit therapeutic goods, a fine of $125,000. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.