Court documents are providing new information about the U.S. investigation into a Manitoba online pharmacy, including details about the surveillance of five Winnipeg homes as recently as last month.
American prosecutors are accusing Kris Thorkelson, owner and CEO of Winnipeg-based CanadaDrugs.com, his company, and affiliated companies and associates in the United Kingdom and Barbados of illegally importing and selling $78 million worth of unapproved, misbranded and counterfeit drugs to American doctors between 2009 and 2012.
Some were improperly labelled and some were contaminated with bacteria after not being stored properly in a cold temperature, prosecutors say.
Thorkelson and five other people associated with CanadaDrugs, including four Winnipeggers, are facing charges.
An affidavit by RCMP Const. Michael Menard dated June 6, 2017, details surveillance by officers at the five Winnipeg homes between May 15-17, 2017.
"I believe it is necessary in the public interest that the Court order the arrest of the persons sought, to ensure they remain in the jurisdiction, attend Court appearances as required, and to maintain confidence in the administration of justice," the affidavit says.
"The persons sought, along with another Canadian in another province, stand charged in the United States with serious criminal offences for which the Requesting State is seeking their extraditions. If convicted, they could face a substantial period of time in jail given that the pharmaceutical drug operation in which they were involved endangered people's health and safety.
"The knowledge that their extraditions are sought to face such charges may be an impetus for them to go into hiding or flee the jurisdiction in order to avoid the extradition proceedings," the affidavit says.
6 charged with smuggling, money laundering
Charged along with Thorkelson are CanadaDrugs.com CFO Ronald Sigurdson; Thomas Haughton, president of two CanadaDrugs subsidiaries operating in Barbados and the U.K.; Darren Chalus, director of clinical sales for CanadaDrugs; and Troy Nakamura, clinical manager for CanadaDrugs — all residents of Winnipeg.
A sixth man, James Trueman, is awaiting an extradition hearing in British Columbia. He's accused of serving as a liaison between CanadaDrugs and its drop-shippers in Illinois and Washington state.
In 2014, they were charged with smuggling goods into the United States, conspiracy, and international money laundering.
Const. Menard's affidavit says Thorkelson's lawyer was already in possession of his passport.
"Counsel for Sigurdson indicated that Sigurdson is prepared to turn himself in and discuss terms of release," the affidavit reads.
"Finally, counsel for Haughton has stated that Haughton would like to be able to present himself for arrest rather than having the police attend at his home, and that counsel could hold his passport."
Last week, the men were arrested under Canada's Extradition Act. They were released on bail on conditions while they await extradition hearings, which have not yet been set.
Evidence gathered during raids
The affidavit also provides emails between the men on questions about customs declarations that may contain false information about the value of the merchandise and the cold storage of medication.
Some of the correspondence was found on computers seized during a raid of the CanadaDrugs offices in March 2015, according to an unsealed search warrant dated Mar. 20, 2015.
Emails between Sigurdson, Chalus, Nakamura and Trueman were authenticated by Microsoft, according to the affidavit.
Meanwhile, bank statements from Steinbach Credit Union and TD Canada Trust list millions of dollars of money transfers marked as dividend payments and dividend profits between 2010-2013.
American investigators also taped a conversation in December 2011 between an employee at a cancer clinic and a U.S. affiliate of CanadaDrugs.com.
The employee asked if the drugs being sold were approved by the U.S. Food and Drug Administration.
"No, the drugs we sold were never FDA approved ... That is why you are able to get the prices you are getting," replied the employee of Montana Healthcare Solutions.
Two associates of Thorkelson's, Paul Bottomley and Bryan Phillips, have already pleaded guilty in this case and are expected to testify at trials in the U.S.
Charges against an Illinois man, Ram Kamath, were dropped in exchange for his testimony. He was involved in CanadaDrugs' shipments of the cancer drug Avastin, some of which was later found to be counterfeit and not contain any active ingredients.
More than 30 other people are expected to be called as witnesses in any upcoming U.S. trial, including scientists, employees of cancer clinics and special agents for the FDA.
None of the charges have been proven in court and CanadaDrugs.com has said it is not connected with the Avastin investigation.
Lawyers for four of the Winnipeg men are declining to comment.
Excerpts of email exchange dated Feb. 15-16, 2012
Email from Troy Nakamura, clinical manager for CanadaDrugs, to James Trueman: "As you might have heard, there has been issues with Avastin and Oncology. Therefore, it has been decided that we don't want to have any product sitting at Meiko until further notice. Please have them return the products as soon as possible …"
Trueman: "I am a bit confused do you want all the product in Meiko sent back or just the product in quarantine/damaged + any Avastin we have in stock."
Nakamura: "All of the stock. There have been issues with Oncology, so for now we are going to have all the stock returned."
Trueman: "I need to know what is going on what are the issues re Oncology and what are your plans re Meiko."
Nakamura: "The issue is with some Avastin that has been listed as possible counterfeit. We had some with the lots that were listed as possibly an issue … We want to be extra careful and want to see what happens with the investigation. We hope to return back to normal as soon as we know more. So for now — it was decided to temporarily move the stock back."
Trueman: "Who is doing the investigating, when do you think things will get back to normal and is my depot in danger."
Nakamura: "Currently lead by MHRA — UK authority. We are hoping that all will be back to normal in a couple of weeks."