United States v. Shengyang Zhou
2013 U.S. App. LEXIS 11619
10th Cir.2013Background
- Shengyang Zhou pled guilty to trafficking and attempted trafficking of counterfeit weight loss drugs, including Alli, under 18 U.S.C. § 2320 and § 2, and was sentenced to 87 months and 3 years’ supervised release with restitution of $507,567.
- Plea agreement and PSR establish facts from FDA alerts between 2008–2010 about Sibutramine in weight loss products and counterfeit Alli containing Sibutramine instead of the legitimate Orlistat.
- An undercover FDA-OCI operation, including meetings in Bangkok and Honolulu and multiple shipments from China, documented Zhou’s manufacture and distribution of counterfeit products to U.S. distributors and consumers.
- Zhou admitted ownership of manufacturing/distribution and that the counterfeit products contained Sibutramine, violating U.S. law; he acknowledged the FDA warnings and the illegal nature of the conduct.
- The PSR calculated an offense level with enhancements for infringement amount, organizer/leader role, conscious/reckless risk of death or serious bodily injury, and a downward adjustment for acceptance of responsibility, yielding a guideline range of 70–87 months; restitution to victims was mandatory.
- District court imposed the top of the range, 87 months, 3 years’ supervised release, and $507,568.39 restitution (to GSK and several individuals) based on the offenses and relevant conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Infringement amount inclusion of unfinished 10,000 units | Zhou argues § 2X1.1 governs attempts; include only completed items or require certainty of completion. | Court properly used Application Note 2(A)(vii) to § 2B5.3 and not § 2X1.1. | Included unfinished 10,000 units; Application Note 2(A)(vii) controls. |
| Leader/organizer enhancement under § 3B1.1(a) | Evidence shows Zhou led the enterprise and thus merits the four-level enhancement. | Insufficient articulate basis; defense contested but withdrew; court should provide clearer rationale. | Sufficient factual basis and not clearly erroneous. |
| Conscious or reckless risk of death or serious bodily injury under § 2B5.3(b)(5) | Zhou knowingly faced FDA warnings and risk; the conduct created a conscious/reckless risk. | Evidence shows minimal acknowledgement; misapplies recklessness standard; argues negligence level. | Two-level enhancement affirmed; Zhou consciously aware of risks; standard applied as Maestas. |
| Restitution under MVRA for GSK expenses (public relations, etc.) | MVRA permits recovery for losses caused by counterfeit activity, including related mitigation costs. | Some costs are incidental or not directly caused by offense; lack of invoices; not all incurred during investigation. | Affirms restitution; expenses deemed direct/proximate, or proper proxy for damage; preserved plain-error review and waived challenges on some factual grounds. |
Key Cases Cited
- United States v. Mojica, 214 F.3d 1169 (10th Cir. 2000) (guide for choosing specific guideline over general attempt when applicable)
- United States v. Brown, 314 F.3d 1216 (10th Cir. 2003) (de novo review of guideline application; defer to district court on factual findings)
- Maestas v. United States, 642 F.3d 1315 (10th Cir. 2011) (defines conscious vs. reckless mental state for 2B5.3(b)(5) based on awareness of risk)
- United States v. Serawop, 505 F.3d 1112 (10th Cir. 2007) (MVRA restitution discretion and related standards)
- United States v. Quarrell, 310 F.3d 664 (10th Cir. 2002) (restitution as actual loss; limits and considerations under MVRA)
- Overholt v. United States, 307 F.3d 1231 (10th Cir. 2002) (plain-error standard in MVRA restitution challenges)
- United States v. Wacker, 72 F.3d 1453 (10th Cir. 1995) (sufficiency of § 3B1.1 findings and appellate review)
- United States v. Patty, 992 F.2d 1045 (10th Cir. 1993) (losses must be directly related to defendant’s criminal conduct; MVRA limits)
- United States v. Sung, 87 F.3d 194 (7th Cir. 1996) (discusses application of § 2B5.3 in earlier version)
- United States v. Guerra, 293 F.3d 1279 (11th Cir. 2002) (reasonable certainty of completion in infringement contexts (pre-Note 2(A)(vii)))