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United States v. Jackson

United States District Court, N.D. Ohio, Eastern Division

August 8, 2019

United States of America, Plaintiff,
v.
Kenneth A. Jackson, Defendant.

          MEMORANDUM OF OPINION AND ORDER

          PATRICIA A. GAUGHAN JUDGE

         Introduction

         This matter is before the Court upon defendant's Motion to Vacate Under 28 U.S.C. § 2255 (Doc. 307). This case arises from defendant's conviction, along with three other defendants, relating to an investment fraud scheme revolving around the development of a hypodermic syringe destruction device called the “Sharps Terminator.” For the following reasons, the motion is DENIED.

         Facts

         On direct appeal to the United States Court of Appeals for the Sixth Circuit by the four defendants charged in this offense, the following background facts were stated:

In August 1992, defendant Kenneth Jackson was convicted in Ohio state court of multiple counts of unlicensed sales of securities and sales of unregistered securities, passing bad checks, perjury, theft and aggravated theft. The convictions stemmed from Jackson's operation of what the government has characterized as a $13 million Ponzi scheme involving sales of securities in “Vision Television Network.” As a consequence, Jackson was incarcerated from 1992 to 1999. He was also prohibited, by injunction of the Securities and Exchange Commission (“SEC”), from holding any corporate officer or director position in a publicly traded company. Jackson was also subject to a disgorgement order requiring him to pay $1.8 million to the SEC.
Despite these setbacks, in 2002, Jackson had become director of research and development for Event Future (a/k/a E-Med), a company he and co-defendant Daryl Dane Donohue established to design and manufacture a hypodermic needle destruction device called “Needlezap.” The Needlezap disposes of used needles by crushing them. It is a Class III medical device requiring Food & Drug Administration (“FDA”) approval before marketing. Donohue was employed by E-Med to address the FDA's regulatory compliance requirements. The Needlezap was granted FDA approval in 2003 and was patented in 2006.
In 2007, Jackson left E-Med and he and co-defendant William Schureck created Medical Safety Solutions (“MSS”) to develop and market an improved version of the Needlezap called the “Sharps Terminator.” The Sharps Terminator was designed to dispose of used needles by incinerating them. Again, FDA premarket approval was required. Donohue was hired by MSS as a regulatory compliance consultant, but Jackson, director of research and development, was responsible for obtaining FDA approval of the Sharps Terminator. Schureck was Chief Executive Officer of MSS.
To raise funds for development of the Sharps Terminator by selling securities, MSS prepared two prospectuses, “Prospectus A” (2007) and “Prospectus B” (2009). Prospectus A disclosed an Assets Purchase Agreement under which MSS agreed to pay Jackson and Schur Partnership (a venture established by Schureck) $3 million for transfer of ownership of the Sharps Terminator, along with its patent and intellectual property rights. What the prospectuses did not include, relevantly, was any mention of MSS co-founder Jackson's prior convictions for theft and securities fraud offenses. Nor did the prospectuses disclose that the conduct for which Jackson was convicted also precipitated action by the SEC that resulted in a $1.8 million judgment against him, as well as an injunction prohibiting him from holding any officer or director position in a publicly traded company.
In the summer of 2007, MSS began displaying its plans for the Sharps Terminator and soliciting investments at medical trade shows. MSS raised $5 million from investors in response to Prospectus A. Among the first such investors, co-defendant Dennis DeCiancio invested $275, 000 and became a promoter of the Sharps Terminator at trade shows. Of the $5 million received, $3 million was to be used to pay for the intellectual property rights in the Sharps Terminator and to repay prior investors in the Needlezap, and $2 million was to be used for further research and development of the Sharps Terminator.
In July 2007, MSS also purportedly commenced efforts to obtain FDA premarket approval and told inquiring investors for years that progress was slow, but approval was imminent. In fact, Jackson testified, it was not until October 2012 that he first filed the application for premarket approval. The FDA responded to the application a month later with the first of several deficiency letters, which MSS was attempting to address when, in March 2013, its efforts were undercut by execution of a search warrant and seizure of MSS files and records. In the meantime, the FBI had begun investigating MSS's operations.
The investigation ripened into an 80-page, 31-count indictment in the Northern District of Ohio in July 2015, charging all four of the above-named defendants-Jackson, Donohue, Schureck and DeCiancio-with numerous offenses allegedly committed between November 2007 and May 2013, including conspiracy, mail fraud, wire fraud, securities fraud, and money laundering. The charges were premised on allegations that defendants, in soliciting investments for development and marketing of the Sharps Terminator device: falsely represented the status of FDA premarket approval proceedings, the market-readiness of the Sharps Terminator, and the use to which invested funds would be applied; and failed to disclose material information to prospective investors about Jackson's prior convictions.
A joint jury trial was conducted in April and May 2016 and culminated in verdicts on May 6, 2016, finding all four defendants guilty of almost all charged offenses. All four defendants were sentenced on October 25, 2016, to various prison terms: Jackson to 188 months, Schureck to 108 months, DeCiancio to 70 months, and Donohue to 46 months. The judgments of sentence were entered on November 1, 2016, and each defendant timely filed notice of appeal. The judgments were followed by a restitution order on January 5, 2017, ordering all four defendants, jointly and severally, to pay restitution in the amount of $9, 825, 917.41. Amended judgments, incorporating all terms and conditions of the sentences, were entered on February 6, 2017. None of the defendants filed notice of appeal from his amended judgment.

United States v. Donohue, et al., 726 Fed.Appx.333 (6th Cir. 2018). The Sixth Circuit affirmed all ...


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