A man who recruited destitute HIV patients to be straw purchasers in a prescription drug scheme was convicted by a federal jury Tuesday in Los Angeles.
Nathaniel Newhouse, 53, showed no expression as the verdict was read in the courtroom of U.S. District Judge Dean D. Pregerson.
Newhouse was arrested two years ago following a surveillance operation in which he was caught with 29 bottles of highly addictive painkillers that had been prescribed to other people. The drugs, which included OxyContin and Dilaudid, are popular on the black market and had a street value of $40,000 to $80,000, according to authorities.
Federal prosecutors told jurors during the three-day trial that Newhouse arranged for the HIV patients to meet with conspiring doctors who prescribed the drugs even though the patients did not need them.
The patients, who had Medicare or Medi-Cal insurance, were charged only a couple of dollars for a bottle of OxyContin, but the insurers were billed nearly $1,000.
"They were warm bodies with medical coverage," Assistant U.S. Atty. Jennifer L. Williams said of the "patients." "They provided a good cover for the defendant."
Newhouse would pay the patients $300 per trip to the pharmacy, but planned to sell the drugs they obtained for many times that amount, prosecutors alleged. In court papers, they accused him of operating a "mobile pharmacy" out of the trunks of multiple cars he either owned or rented.
Two of the recruited patients were granted immunity by prosecutors and testified against him at trial.
Newhouse did not testify. His attorney, Deputy Federal Public Defender Raul Ayala, said Newhouse is self-employed as a professional gambler. In his spare time, the lawyer said, he occasionally acted as in informal caretaker for people who were ill.
"He was trying to help some people who were down and out," Ayala said.
The lawyer declined further comment, citing a possible appeal.
The day Newhouse was arrested, Feb. 5, 2008, DEA agents and Los Angeles County sheriff's deputies watched as three people filled prescriptions at B&B Pharmacy in Bellflower. The trio were followed as they were driven by a woman in a beige Honda to a nearby parking lot. As police watched, she got out of the Honda carrying what appeared to be a B&B bag and got into a Grand Marquis driven by Newhouse.
When investigators swarmed the vehicle they found the drugs prescribed to all three people in the bag. They also found thousands more pills in the trunk, glove compartment and in Newhouse's pocket. Subsequent searches of the defendant's home and a rented storage locker revealed scores of prescriptions, identification cards and Medicare cards belonging to people other than Newhouse, according to court documents.
Newhouse faces a maximum term of 60 years in prison and is scheduled to be sentenced in August.