UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
United States of America
v. Criminal No. 15-cr-057-01LM
Opinion No. 2016 DNH 166
Mustafa Hassan Arif
O R D E R
The government has charged defendant, Mustafa Arif, with
wire fraud (Count I) and four counts of introducing misbranded
drugs into interstate commerce (Counts II – V). The charges
arise from alleged misrepresentations Arif made on his websites
offering various drugs for sale.
To prove that Arif committed wire fraud, the government
must prove that he participated in a scheme to defraud with the
intent to defraud. To prove that Arif introduced misbranded
drugs into interstate commerce, the government must prove that
he acted with the intent to defraud or mislead.1
1 Although the government may charge a defendant with
introducing misbranded drugs into interstate commerce
(“misbranding of drugs”) as a misdemeanor, see 21 U.S.C. §§
331(a) and 333(a)(1), the government has charged Arif with
felony misbranding of drugs under
21 U.S.C. §§ 331(a) and
333(a)(2). Such a charge requires the government to prove that
Arif committed the offense with the intent to defraud or
mislead.
This criminal trial is highly unusual in two respects.
First, it is a bench trial. See doc. no. 42. Second, the
parties have agreed to 19 separate, detailed factual
stipulations. See doc. no. 94. Pretrial briefing revealed a
third potential twist: the possibility of Arif pursuing hybrid
representation. A brief summary of the procedural history
follows.
In his first trial brief, Arif summarized the four defenses
he intends to pursue at trial, including a defense that he
lacked the intent to defraud on all five counts.2 See doc. no.
87. With respect to the lack of intent to defraud defense,
counsel indicated in a footnote that counsel did “not endorse[]”
that defense and that “Arif seeks leave to argue this position
pro se.” Id. at n.1
The court scheduled a hearing to address Arif’s request for
hybrid representation. Prior to the hearing, the government
filed a “memorandum regarding pro se representation” (doc. no.
2 The government argues in their briefs that an “intent to
mislead” is broader than an “intent to defraud.” For purposes
of this order, the court presumes, without deciding, that the
the term “intent to mislead” under the misbranding of drugs
statute is, for all intents and purposes, identical to an intent
to defraud. See United States v. Watkins, 278 F.3d 961, 966-69
(9th Cir. 2002). Therefore, the court will refer to the intent
element of the charged offenses as “intent to defraud.”
2
98), in which it opposed allowing the type of hybrid
representation proposed by Arif (i.e., allowing Arif to have
counsel represent him on all but the “intent to defraud” theory
of his defense, and permitting Arif to represent himself on that
theory of his defense). The government proposed that the court
allow Arif to represent himself pro se, after a knowing waiver,
but appoint standby counsel.
The hearing took place on September 2, 2016. Early on in
the hearing, defense counsel moved to seal the hearing so that
counsel and Arif could address the court on an ex parte basis,
and the court could hear privileged details about the genesis of
the hybrid representation request. The court granted that
request and heard from Arif and counsel.
After the court reopened the hearing to the public, the
court proposed that the legal issue at the heart of the dispute
between Arif and his counsel appeared ripe for ruling by the
court as a matter of law. That is, the court could decide
whether Arif’s defense to the “intent to defraud” element in all
five counts was a legal and viable defense to the charges in the
superseding indictment. In so doing, the court would presume
the truth of Arif’s subjective, good faith defense, and consider
any relevant factual stipulations.
Arif agreed that the question was a matter of law for the
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court, and that the court’s ruling on the question would likely
obviate his need for hybrid counsel. That is, in the event that
the court rules that Arif’s intent to defraud defense is legally
viable, Arif’s counsel would agree to pursue that defense at
trial on his behalf. On the other hand, in the event the court
ruled that Arif’s defense was not viable, Arif acknowledged that
he would not pursue that defense on a pro se basis at his trial,
but would reserve his appellate rights on the issue. Arif
requested that the court decide this issue as a matter of law
prior to trial.
The government agreed that the issue could be decided as a
matter of law. Additionally, the government offered that it had
proposed in discussions with defense counsel, although in an
entirely different context, a similar pretrial resolution of
this issue. The court permitted further briefing on the issue
by the parties, (Arif, on a pro se basis), and set a deadline of
September 9, 2016.
The court must clarify the limited universe of facts it is
considering here. There are only two appropriate sources for
the court: (1) the parties’ 19 factual stipulations; and (2)
facts asserted by Arif in his pro se briefs that the court
construes favorably to him for purposes of this legal analysis,
such as his statement that he had a good faith belief in the
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efficacy of the drugs offered for sale on his websites. The
court will not consider any statement by Arif that he has
included in his briefs that could be construed adversely to him,
such as his admission that the purpose of the false testimonials
on his websites was to induce customers to purchase his drugs.
Having reviewed the parties’ briefs on this issue, the
court begins by summarizing the relevant factual stipulations.
See doc. no. 94.
Stipulated Facts
Mustafa Arif owned and operated MAK International. Arif
and/or MAK International created and maintained more than 1,500
websites, more than 1,000 of which offered drugs3 for sale. The
remaining websites acted as referral sites, directing potential
customers to one or more of the websites offering drugs for
sale.
The websites contained several representations regarding
the efficacy and/or cure rates of the various drugs. They also
contained links to research papers, which discussed clinical
3 The Food, Drug, and Cosmetic Act defines the term “drug,” in
relevant part, as “articles intended for use in the diagnosis,
cure, mitigation, treatment, or prevention of disease in man or
other animals; and . . . articles (other than food) intended to
affect the structure or any function of the body of man or other
animals . . . .” 21 U.S.C. § 321(g)(1).
5
tests conducted on the particular drug being promoted, as well
as testimonials from customers. “All claims on all web sites
regarding efficacy and/or cure rates were unsupported by
clinical studies conducted” by Arif or any entity Arif
controlled. Doc. no. 94 at ¶ 7. The research papers listed on
the websites “were plagiarized and were not written about the
drugs they purported to reference.” Id. at ¶ 8. Additionally,
“[t]he testimonials listed on the websites were fictitious.”
Id. at ¶ 9.
Although Arif managed the websites and his business from
Pakistan, the websites were registered to entities with
addresses listed in other countries, including Italy, New
Zealand, Australia, Norway, and Denmark. Any mail sent to those
addresses was forwarded to Arif in Pakistan. Arif used these
addresses to make prospective customers more comfortable
purchasing the products.
The drugs sold on Arif’s websites “purported to be
homeopathic remedies,” doc. no. 94 at ¶ 16, or “purported to
contain herbs and other natural ingredients as listed,” id. at ¶
17, consistent with naturopathic remedies. Both homeopathy and
naturopathy are alternative systems of medicine that are
practiced, in good faith, by many believers.
In the process of purchasing drugs from Arif’s websites,
6
customers were redirected to a different website, for a company
called “CCNow,” that processed all sales for Arif’s websites.
CCNow is a company located in Minneapolis, Minnesota. CCNow
transmitted the proceeds of all the sales, less a fee, to Arif’s
bank accounts located in England and Pakistan.
Before completing their purchases through CCNow, Arif’s
customers were required to read and certify the following:
I understand and acknowledge the following: (a) actual
product packaging and materials may contain more
and/or different information than that shown on the
website through which the product(s) are purchased;
(b) I will read and follow all labels, warnings and
directions in connection with using or consuming the
product(s), and will contact a health care provider
immediately if I suspect I have a medical problem or
reaction; (c) the content on this website is for
reference purposes and is not intended to substitute
for advice given by a physician, pharmacist, or other
licensed health-care professional; (d) the product(s)
purchased are not intended to diagnose, mitigate,
treat, cure or prevent any disease or health
condition, and I will not use any information or
statements contained on the website through which this
product is purchased, or contained on or in such
product(s), for such purposes.
Discussion
Arif was indicted on one count of wire fraud in violation
of 18 U.S.C. § 1343 (Count I) and four counts of misbranding of
drugs in violation of
21 U.S.C. §§ 331(a), 333(a)(2), and 352(a)
(Counts II – V). The parties agree that intent to defraud is an
element of both wire fraud and misbranding of drugs as charged
7
in the superseding indictment.
Arif intends to argue at trial that he is not guilty of any
of the charges because he had a good faith belief in the
efficacy of the drugs sold on the websites. He intends to argue
that his good faith belief proves that he did not have an intent
to defraud and such evidence will, therefore, require a verdict
of not guilty on all counts. The government disagrees and
argues that even assuming the truth of Arif’s subjective, good
faith belief in the efficacy of the drugs, such a personal good
faith belief is not relevant to the intent to defraud element
based on the charges in the superseding indictment. The parties
have agreed that the question is one of law that the court can
decide in advance of trial.
In addressing Arif’s argument, the court assumes for
purposes of this order that the evidence at trial would show
that Arif had a good faith belief in the efficacy of the
products he sold on his websites.
I. Arif’s Good Faith Belief in the Efficacy of the Drugs
At trial, Arif intends to offer the defense that he had an
honest belief the drugs he sold on his websites were
efficacious; that is, that he believed each drug would
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successfully treat the specified diseases.4 Arif contends that,
in light of his good faith belief, “the government misconstrues
as a matter of law the very essence of what constitutes actual
fraud in a case such as this.” Doc. no. 103 at ¶ 3 (emphasis in
original). Arif reasons that “once it is averred that defendant
may have had an honest belief that his remedies work then, in
the very same breath, the allegation is actually conceded that
defendant [never] sold his remedies to intentionally ‘defraud’
his customers.” Id. (emphasis in original).
“The elements of wire fraud under 18 U.S.C. § 1343 are ‘(1)
a scheme or artifice to defraud using false or fraudulent
premises; (2) the defendant’s knowing or willing participation
in the scheme or artifice with the intent to defraud; and (3)
the use of the interstate wires in furtherance of the scheme.’”
United States v. Foley,
783 F.3d 7, 13 (1st Cir. 2015) (quoting
United States v. Appolon,
715 F.3d 362, 367 (1st Cir. 2013)).
Intent to defraud “excludes false statements honestly believed
to be true and promises or predictions made in good faith.”
United States v. Mueffelman,
470 F.3d 33, 36 (1st Cir. 2006)
(discussing intent to defraud as an element of mail fraud); see
4 Arif asserts numerous other arguments with respect to his
lack of an intent to defraud. Arif’s primary argument, however,
is that he had a good faith belief in the efficacy of the drugs.
The court addresses only Arif’s primary defense in this order.
9
also United States v. Martin, 228 F.3d 1, 15 (1st Cir. 2000)
(noting identical analysis of the elements of wire fraud and
mail fraud).5
Arif’s good faith defense is based on his misunderstanding
of the charges against him. Arif is not being charged with
selling drugs that did not work as intended, for selling
homeopathic or naturopathic remedies, or for harming his
customers. Arif is charged with making misrepresentations on
his websites, including plagiarizing research papers about other
drugs, creating false testimonials, inventing clinical studies
which did not exist, and creating fake addresses for the
entities to which the websites were registered. Arif does not
contend in his briefs that he had a good faith belief in the
truth of the false statements on his websites. Rather, Arif
intends to offer evidence that he had a good faith belief in the
efficacy of the drugs, and he argues that this belief is a
complete defense to the intent to defraud element of his charged
offenses.
5 As discussed above, the misbranding of drugs charges in the
superseding indictment also require the government to prove that
Arif acted with the intent to defraud. Neither party argues,
and the court has been unable to locate, any case law holding
that the test for “intent to defraud” in the misbranding statute
is different in any material respect from that in the wire fraud
statute.
10
Arif’s defense is nearly identical to the one the defendant
raised in Mueffelman, 470 F.3d at 36. In Mueffelman, the
defendant and a partner created a business venture, which
offered to assist persons who were poor or had low credit
ratings in acquiring homes. The venture charged clients for
enrolling in the assistance program. Throughout the venture’s
existence, the defendant made several misrepresentations to
attract clients, including guaranteeing financing terms which it
could not secure, inventing the existence of established
relationships with lenders and government-supported loan
programs which did not exist, and falsely claiming that the
venture was an “investor, when in fact it did no more than seek
lenders.”
Id. The defendant was convicted of several counts of
mail fraud.
On appeal, the defendant in Mueffelman admitted he made the
various false statements as alleged in the indictment. He
argued, however, that he did not have the intent to defraud his
clients, which, as with wire fraud, is a necessary element of
mail fraud. In support, the defendant argued that he lacked the
intent to defraud “because he optimistically believed that his
programs would succeed” and that “his business was not a sham
enterprise.” Id. at 36.
11
The First Circuit affirmed the defendant’s conviction. The
court acknowledged that a good faith defense on intent to
defraud is an absolute defense available to defendants. Such a
defense is available where a defendant can show he honestly
believed in the truth of his alleged false statements, or made
promises and predictions in good faith. Id. at 36-37. On the
other hand, the court stated:
This is a far cry from saying that Mueffelman was free
knowingly to make false statements to secure money
from clients because he believed that his enterprise
would succeed. One can be optimistic, even with good
reason, about the prospects of a business, but one
still cannot, for example, sell stock by lying about
the business’ past earnings or the presence of booked
orders that do not exist. A prediction made in good
faith may be sheltered; a statement of fact known to
be false is not.
Id. at 37. Every other circuit to address this question has
found that a subjective good faith belief in the efficacy of a
product cannot negate intent to defraud where a defendant made
false statements about the product to induce purchase of the
product. See United States v. Spirk,
503 F.3d 619, 622 (7th
Cir. 2007) (good faith belief that investors would profit does
not negate an intent to defraud because “people who want to
raise money cannot obtain it by deceit and then try to persuade
a jury that their intentions were good”); United States v.
Benny,
786 F.2d 1410, 1417 (9th Cir. 1986) (an honest belief in
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the truth of misrepresentations may negate an intent to defraud;
a good-faith belief that the victim will suffer no loss is “no
defense at all”); United States v. Stull, 743 F.2d 439, 446 (6th
Cir. 1984) (good-faith belief in enterprise does not excuse
false or reckless representations); United States v. Townley,
665 F.2d 579, 585 (5th Cir. 1982) (“[N]o amount of good-faith
intent to deliver and good-faith belief in the ultimate success
of the business could constitute a good-faith defense
exculpating [the defendant] from criminal liability for his
false and misleading statements in connection with the ads,
letters, and statements by [the defendant] . . . , by which the
investors/purchasers funds were obtained.”); Sparrow v. United
States,
402 F.2d 826, 828 (10th Cir. 1968) (“[N]o matter how
firmly the defendant may believe in the plan, his belief will
not justify baseless, false, or reckless representations or
promises.”); United States v. Painter,
314 F.2d 939, 943 (4th
Cir. 1963) (“[N]o amount of honest belief that his corporate
enterprise would eventually succeed can excuse the willful
misrepresentations by which the investors’ funds were
obtained.”).
Arif distinguishes his case because it involves what he
calls “medicinal marketing.” He believes that bona fide
disputes over a product’s efficacy necessarily negate any
13
fraudulent intent as a matter of law, citing Am. Sch. Of
Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902). The holding
of McAnnulty might weigh in Arif’s favor at trial if the
evidence shows, for example, that he confined the
representations on his websites to statements about his
subjective belief in the drugs’ therapeutic value, or that he
posted on his websites actual consumer testimonials about the
drugs’ efficacy or actual opinions from medical professionals.
But, Arif is not making this argument in his briefs. Instead,
he is arguing on the basis of his honest belief in the efficacy
of the drugs. Based on the charges in the superseding
indictment, that good faith belief is irrelevant, as a matter of
law, on the question of intent to defraud.
To illustrate the problem with Arif’s legal argument, the
court will use a hypothetical example. Suppose that, in
searching for an attorney to represent him in a case, a
defendant interviews a number of attorneys. One of those
attorneys holds a good faith belief in himself as the “greatest
defense attorney in the world.” During his interview, the
lawyer provides the defendant with the following: false
newspaper clippings lauding the lawyer’s performance in trials;
fake testimonials from non-existent defendants explaining how
the lawyer secured their acquittals; and a fabricated American
14
Bar Association story stating that the attorney has won 99% of
his criminal trials. He also provides the defendant with a fake
address for his office, located in an upscale area to make the
defendant more comfortable with hiring him. Under Arif’s view
of the law, the lawyer did not intend to defraud the defendant
because the lawyer truly believed he was an incredibly effective
defense attorney, regardless of any misrepresentations he made
to induce the defendant to hire him. For obvious reasons, that
is simply not the way the law works.
In short, in light of the charges in the superseding
indictment, Arif’s intent to defraud depends on whether he
intended to deceive potential customers about his drugs to
induce them to purchase those products. Therefore, as a matter
of law, Arif’s good faith belief in the efficacy of his drugs is
irrelevant as to his intent to defraud in this case, and is not
a viable defense.
II. Summary
Arif argues, as a matter of law, that his honest belief in
the efficacy of his products absolves him of any intent to
defraud, which is an element of all of the charged offenses.
Although good faith is a defense to an intent to defraud, for
the defense to be viable in this case, Arif would need to show
15
that he had a good faith belief that the allegedly false
representations on his websites were truthful (i.e., that the
research papers were actually written about the drugs on his
website, or that the client testimonials were drafted by actual
clients about the drugs on his websites). In light of the
charges in the superseding indictment, however, Arif’s good
faith belief in the efficacy of his products is not, under these
circumstances, a viable defense to the charge that Arif acted
with an intent to defraud (for purposes of the wire fraud
charge) or an intent to defraud or mislead (for purposes of the
misbranding of drugs charges).
In short, the good faith defense, as argued by Arif in his
briefs before the court, is not a viable defense to the charges
in the superseding indictment.
SO ORDERED.
__________________________
Landya McCafferty
United States District Judge
September 16, 2016
cc: William E. Christie, Esq.
Sarah E. Hawkins, Esq.
Arnold H. Huftalen, Esq.
Robin D. Melone, Esq.
Kirsten B. Wilson, Esq.
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