Tentative plea deal reached for Winnipeg-based pharmacy accused of selling counterfeit cancer drugs

The agreement, which still has to be approved by a U.S. district court in Montana, would see Canada Drugs and two subsidiaries plead guilty, pay a $5 million US fine and forfeit $29 million US.

Canada Drugs would pay $5M fine, forfeit $29M; president Kris Thorkelson would pay $250K, get house arrest

A plea deal, which still has to be approved by a U.S. district court in Montana, would see Canada Drugs president Kris Thorkelson pay a $250,000 fine and serve six months of house arrest, followed by four and a half years of probation. (CBC)

A Winnipeg-based online pharmacy and related businesses, credited with kickstarting the online drug sales industry, have reached a plea deal, which requires a guilty plea and millions of dollars in fines for allegedly selling counterfeit cancer drugs in the United States. 

U.S. court documents filed on Dec. 12 show the agreement, which still has to be approved by a U.S. district court in Montana, would see Canada Drugs and two subsidiaries plead guilty, pay a $5 million US fine and forfeit $29 million US.

A separate plea agreement for the company's president, Kris Thorkelson, would see Thorkelson pay a $250,000 fine and serve six months of house arrest followed by four and a half years of probation.

The deals would also require the company to surrender its domain names, hand over all information and permanently stop selling and distributing unapproved or misbranded drugs in the U.S. The defendants also can't share or sell any information on American customers to any other pharmacy or third party outside of the US. 

Canada Drugs is accused of selling counterfeit cancer drugs online over a three-year period ending in 2012. 

Four Winnipeg men were also charged along with Thorkelson: 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.

An extradition hearing for the five Winnipeg men was scheduled for May of next year.

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.

The men were arrested under the Extradition Act in Manitoba and British Columbia in June. They were released on bail, on conditions including surrendering their passports and not moving without notifying authorities.

At this point, extradition hearings are still scheduled for May 2018, a spokesperson for the Canadian Department of Justice said in an email to CBC News.

"The Government of Canada is not involved in discussions on any potential plea arrangement," Ian McLeod wrote.

A spokesperson for the U.S. Food and Drug Administration said she would not comment on the case while it is still before the courts.

When reached, lawyers for Thorkelson, Chalus and Nakamura also wouldn't comment.

The plea agreement still must be accepted by the presiding judge in Montana. If the court rejects the plea agreement, the defendants will be able to withdraw their guilty pleas. 

However, "based on concessions made by the United States in this case, the Defendants knowingly waive any right to appeal the judgment and sentence and any right to bring any other post-conviction attack on the sentence," the plea agreement says.

"If the Defendants breach the terms of this agreement, or commit any new criminal offenses between signing this agreement and sentencing, the U.S. Attorney's office is relieved of its obligations under this agreement, but the Defendants may not withdraw the guilty pleas," the court document goes on to say.

No court date has been set yet, although lawyers say it will likely be sometime in spring 2018. 

Meanwhile, the judge in this case has asked lawyers for all parties to meet on Dec. 19 "to address logistical matters unique to this case which include ongoing extradition proceedings in the United Kingdom and Canada."

Internet pharmacy pioneers from Manitoba

(Fred Greenslade/Winnipeg Free Press/Canadian Press)

Thorkelson and former Winnipegger Andrew Strempler are credited as being pioneers of the internet pharmacy industry, which began in 2001 when Strempler sold a pack of Nicorette gum on eBay from the pharmacy he owned in Minnedosa, Man.

Strempler was arrested in Panama in June 2012. He was being deported to Canada but his flight included a layover in Miami, where he was arrested.

He was charged in connection with a 2005 seizure of drugs shipped by Mediplan Pharmacy, which Strempler founded. It is also known as RxNorth.com and was later sold to Thorkelson.

Strempler was convicted and sent to prison in 2013 for marketing unapproved and allegedly counterfeit drugs to Americans.

He served most of his time in the U.S. but was transferred to a minimum-security prison Manitoba in 2015.

He was released after serving two-thirds of his sentence on conditions including not owning or operating a business until Jan. 2, 2016, and providing financial documents to his parole officer.

With files from CBC's Karen Pauls and the Canadian Press