Kingpin 2.0?

In 2004, the federal government passed an antispamming law, and Smith swears he stopped immediately (AOL Time Warner disagrees, settling for $1.7 million, according to the Star Tribune, in a 2006 suit that Smith, concentrating on his criminal defense at the time, didn’t contest). Regardless, after repeatedly listening to his father, who had lost everything more than once, make the point that the only person looking out for you is you, Chris had adopted his own peculiar but effective business ethos. “I learned at a very young age that you have to be on the line between good and bad,” he says. “There’s innovation there. I mean, maybe not between good and bad, but you want to be closer to the line between legal and illegal, but you always stay on the side of legality.” In fact, whether it was radar detectors, cable boxes, penis enlargers, or Vicodin, Smith embraced his inner gray area. After he stopped spamming, he wrote software for an online casino based in Costa Rica, traveling to San Jose during the week and spending weekends with Anita and the kids. But another one of his father’s lessons was never far from his mind: “Never work for the man.”

In the fall of 2004, Smith was freelancing for the online casino and running a carpet-cleaning business in the Twin Cities, but he wasn’t getting the returns he had as a teenage spammer. Some virtual buddies from his spamming days—IM pals scattered around the country—had moved into the online pharmacy business, and they were telling him how successful they were. Here, it seemed, was the ultimate lucrative gray area—the pharmacy 2.0. Hot-selling brand-name pharmaceuticals such as Vicodin were easy to get if you could find a doctor willing to buy the “Jeez, doc, my wrist really hurts when it rains” routine. So why not make it even easier, Smith thought, using the Internet to connect the consumer to the right doctor and charging a premium for the convenience of FedEx delivery?

Following his friends’ advice, Smith created a model for his new business, which he called Xpress Pharmacy Direct. He rented office space in Burnsville from the landlord of his carpet-cleaning-company warehouse. He used a New Jersey “broker,” John “Johnny G” Guerriero, to find a doctor who would write the prescriptions, and he selected a New Brunswick physician named Phillip Mach, who would eventually write hundreds of prescriptions a day at $7 a pop without ever seeing a patient. He hired a New York accountant, Bruce Liebermann, to facilitate the credit card payments and Scott Poe, a friend from his spamming days, and Darrell Griepp, a local business executive with sales experience, to line up pharmacies and identify customers. Residents of a local halfway house, 180 Degrees, were enlisted to work a call center to support his seventeen websites selling drugs. His legal team, headed by Dan Adkins and John Nelson, assured him that everything was run according to Hoyle. That most of the hires were almost twice his age didn’t seem to faze him in the least.

Supply was the initial problem. Smith was buying the pills in India, but the quality was consistently terrible—generic ibuprofen sold as Vicodin, et cetera—and often the shipments were destroyed by customs officials. Then, in June 2004, Smith began buying the drugs from five small-town pharmacies scattered around the country—in Fallbrook, California; East St. Louis, Illinois; Rutherford College, North Carolina; Astoria, Oregon; and Seymour, Wisconsin—struggling mom-and-pop drug stores squeezed by Wal-Mart and CVS. The orders came in by phone or the Internet and were relayed to the pharmacies, which FedExed the medications directly to Xpress Pharmacy customers. To expedite matters, Smith and his team swooped in on his private jet and set up computers and a mobile call center on a pharmacy’s premises.

Xpress Pharmacy’s growth was explosive. With clients willing to pay exorbitant prices—eighty Vicodin could cost as much as $599, including jacked-up shipping costs—and with no insurance company bureaucracy to clog the process or split revenue, the cash flow was ridiculous. According to the FBI’s Kyrilis, within the first year monthly sales were in the millions and Brinks trucks were beating a path between Wells Fargo and Smith’s office. Xpress Pharmacy soon had a staff of eighty-five, and Smith was renting more and more space at the Burnsville office park. Other renters watched with growing curiosity as the pudgy twentysomething kid wearing an untucked button-down and dirty khakis arrived at the office in a late-model Maybach, then shuffled into the building.

Kyrilis was first tipped off by one of Smith’s office park neighbors. The agent had spent twenty-nine years investigating white-collar crime—he put away a former mayor of Edina, Glenn Smith, on embezzlement charges back in 1999—and was a highly skilled tracker of assets and excavator of financial gray areas. But in 2003, he was forty-eight, working for the local office’s cybercrime task force, and planning to retire. “I ran one Google search on Chris Smith and found out he was a prolific spammer,” he says. “And shortly after I opened my investigation, the IRS contacted me and said they were also investigating Chris.” In a matter of weeks, Kyrilis believed he had a “major drug case.”

“You could have charged him on every prescription that he made, because every prescription was illegal,” Kyrilis says. “And the wires were used and the mail was used—each prescription was sent through FedEx.” He sighs. “This guy was nothing more than an online drug dealer. He was selling his prescriptions—primarily painkillers—targeting addicts. Knowing that addicts wouldn’t complain, knowing that addicts would be repeat customers. Eighty-five percent of his sales were for hydrocodone-based products. I mean, has your pharmacist ever called you to solicit a refill? It was clearly a slam-dunk drug case.”

Except, as anybody who’s ever found a Viagra ad in his inbox should understand, there isn’t a single drug law that specifically addresses online pharmaceutical sales, making enforcement a selective effort at best. The U.S. Attorney’s Office was in new legal territory with online drug sales and prosecutors wanted to set a precedent: They charged Smith with a “continuing criminal enterprise.” Otherwise known as the “kingpin law,” the CCE concept grew out of the 1972 federal Controlled Substances Act. Smith’s prosecutors had made a dramatic decision—to invoke a law used to prosecute Colombian drug lords to put away a twenty-six-year-old computer geek who once sold penis-popping pills.