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Federal judge dismisses fraud case, blasts prosecutors' actions

A federal judge has dismissed fraud charges against the owner of a local pharmacy chain, accusing prosecutors of failing to disclose evidence, presenting "significant" false testimony at trial and destroying evidence.

U.S. District Judge George L. Russell III called the actions of federal prosecutors improper and said they "shock the conscience of this court," according to transcripts of the hearing held last week, during which charges were dismissed against Reddy Annappareddy, the head of Pharmacare and Caremerica, a chain of pharmacies that operated in Maryland, Pennsylvania and the District of Columbia.

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Annappareddy, 48, was charged in July 2013 with health care fraud and aggravated identity theft. Prosecutors alleged that he defrauded Medicare, Medicaid and private insurers by submitting false claims for prescription refills that were neither requested by the customers nor received by them. The indictment also alleged that the insurers were not paid back when the customers did not receive the medications.

Annappareddy was convicted by a federal jury in December 2014. He then hired new lawyers, Mark Schamel and Joshua Greenberg of Washington, who successfully pressed for a new trial. He was scheduled to be retried later this month.

His attorneys argued last week that the charges against their client should be dismissed because federal prosecutors misinformed jurors, destroyed evidence and presented false evidence at his trial, which they said showed a "pattern of outrageous prosecutorial misconduct," according to one motions filing.

In dismissing the charges, Russell said Annappareddy's "constitutional due process rights were violated, and they were violated by mistakes the government made," according to the transcript.

Annappareddy could not be reached for comment Tuesday. His attorneys did not respond to a request for comment Tuesday.

Marcia Murphy, a spokeswoman for the U.S. attorney's office in Maryland, said in an email that "supervisors are reviewing the judge's ruling and will take appropriate steps."

Annappareddy's attorneys argued in court filings that prosecutors intentionally destroyed exculpatory evidence.

In response, prosecutors argued that Annappareddy's attorneys had "numerous occasions" to review four boxes of files that were "among the hundreds" kept in a warehouse before they were destroyed, and "had the opportunity to copy on those same multiple occasions and did not assert a right to after trial."

"I did not do this in bad faith. I believed in my heart that I had consent. And I knew that the defense had been through these documents many, many times, as we did, and none of them were used," said Assistant U.S. Attorney Sandra Wilkinson, who tried the case.

Russell questioned why prosecutors would not preserve evidence while a motion for a new trial was pending.

Annappareddy's attorneys also said prosecutors "presented false evidence and arguments to the jury" and the court about a lack of response by Annappareddy to an email from a pharmacy technician, which was used as the "centerpiece of the government's case at the first trial."

His attorneys said phone records showed Annappareddy did respond with a phone call, instead of an email, but that information was not presented at trial.

Wilkinson told the judge that her office did not have the phone records at the time. "We never got them, because we subpoenaed the wrong service provider," she told the judge, according to the transcript.

The judge also found that prosecutors failed to turn over information about discrepancies in the amount of loss suffered by the government programs calculated by expert witnesses. The judge found that the witness' opinions of the losses, which were less than those of the government's auditor, should have been turned over to defense attorneys.

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Four of Annappareddy's co-defendants previously pleaded guilty in the case.

Vipinkumar Patel and Jigar Patel pleaded guilty to making false statements relating to health care matters. Jigar was sentenced to 13 months and Vipinkumar has yet to be sentenced.

Ram Guruvareddy pleaded guilty to obstruction of a health care fraud investigation and received five months of probation, according to court records.

Venkata Srinivas Mannava pleaded guilty to conspiracy to commit health care fraud and unlawful acts with a controlled substance and received three years of probation.

James Wyda, the head federal public defender in Maryland, said he was surprised by the judge's comments in dismissing the case. Russell used words such as "shocking" to describe the government's conduct in the trial.

Kobie Flowers, a Washington-based defense attorney who previously served as a federal public defender and as a prosecutor in the Justice Department's Civil Rights Division, said the issues raised by the Annappareddy case "are certainly troubling. ... It really undercuts the faith that we ask our society to put in our justice system."

Baltimore Sun writers Justin Fenton and Allan Vought contributed to this article.

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