December 14, 2010

http://news.cincinnati.com/apps/pbcs.dll/article?AID=/AB/20101214/NEWS010702/12150324/

Steve Warshak will get a chance to reduce the 25-year prison sentence he received for committing fraud and other crimes related to the sale of “male enhancement” pills.

A federal appeals court in Cincinnati ruled Tuesday that the judge who sentenced Warshak did not adequately explain why the founder of Berkeley Premium Nutraceuticals was held accountable for more than $400 million in losses by his customers and his banks.

The U.S. 6th Circuit Court of Appeals ordered a new sentencing hearing for Warshak and said the lower court must more thoroughly examine the amount of money lost because of his crimes.

The dollar figure is important because federal sentencing guidelines recommend longer prison sentences for those convicted of crimes that cost victims large amounts of money. If the loss in Warshak’s case drops significantly, his time in prison could be cut.

Warshak still faces an uphill battle, however, because the appeals court upheld all of his convictions on fraud, conspiracy and money laundering charges.

All of the charges are connected to Berkeley’s mail-order sales of herbal supplements, primarily the sale of Enzyte, which the company marketed as an aid to male sexual performance. Enzyte was the company’s most popular product and was pitched in TV ads by a grinning character known as Smilin’ Bob.

The court also upheld his 77-year-old mother’s convictions for bank fraud, but it overturned her convictions for money laundering because there was not enough evidence to support them.

His mother, Harriet Warshak, also will get a new sentencing hearing. She was sentenced to two years in prison but has remained free pending her appeal.

“It’s a fresh start,” said Martin Pinales, Harriet Warshak’s attorney.

He said he’s optimistic the court’s decision to review the loss amounts and to overturn some of Harriet Warshak’s convictions will result in less prison time.

Federal prosecutors said they still were studying the 6th Circuit’s 98-page decision, but they were pleased the court upheld most of the convictions.

“We’re grateful on behalf of the victims that Mr. Warshak’s convictions were upheld,” said Fred Alverson, spokesman for U.S. Attorney Carter Stewart.

The convictions in 2008 were the culmination of a federal investigation into Warshak and his Forest Park company that lasted at least four years and resulted in criminal charges against about a dozen employees and associates. Most received sentences of one to two years in prison.

Warshak’s lawyers argued during his trial and his appeal that he did nothing wrong and was the victim of sloppy bookkeeping and other problems caused by the rapid growth of his company.

His attorneys told the 6th Circuit judges that the evidence did not support the convictions, and that federal agents and prosecutors violated Warshak’s constitutional rights while conducting their investigation. They said investigators illegally peeked at Warshak’s e-mails and claimed prosecutors failed to share evidence and made inappropriate comments during the trial.

But the panel of three 6th Circuit judges rejected most of those arguments.

The court said federal agents may have violated Warshak’s rights when they obtained e-mails without a warrant through his Internet service provider. But the judges said the e-mails still could be used against Warshak because the agents “relied in good faith” on federal laws covering stored communications when they obtained them.

The judges also found that prosecutors made improper comments during the trial, but those comments did not amount to serious prosecutorial misconduct.

“Though the prosecution did make a number of improper remarks during its rebuttal argument, the remarks were not flagrant,” wrote Judge Danny Boggs, who was joined in the ruling by judges David McKeague and Damon Keith.

Warshak and his mother were sentenced in 2008 by U.S. District Judge S. Arthur Spiegel, who now must hold new sentencing hearings for each. No hearing dates have been set.