Owner of Pain Clinics Implicated in South Florida and East Tennessee’s Largest Pill Mill Operations, to Face RICO Charges

“Pill Mill” Boss Extradited 

Luigi Palma, 54, a dual U.S.-Italian national was extradited from Italy to the United States on Nov. 20. by the U.S. Marshals Service.  

He is a co-defendant of Sylvia Hofstetter, who, with three other medical providers, was convicted of numerous charges related to “pill mill” operations in Florida and Tennessee following a 4-month trial earlier this year in Knoxville. Palma had fought against his extradition from Italy for almost two years. He now faces charges of Racketeer Influenced and Corrupt Organization (RICO) conspiracy, and conspiracy to distribute oxycodone, oxymorphone, and morphine outside the scope of professional practice—not for a legitimate medical purpose.  

Palma stood before U.S. Magistrate Judge Debra C. Poplin in the Eastern District of Tennessee Monday and pleaded not guilty to all charges. He waived his right to an immediate detention hearing and will remain under the custody of U.S. Marshals. The trial has been set for March 30, 2021, before Judge Varlan. 

Background

A pill mill is an illegal facility that resembles a regular pain clinic but has doctors or staff who prescribe opioids for non-existent or exaggerated pain. Medical histories, physical examinations, diagnosis, and medical monitoring are not required. Prescriptions are usually cash-only. The purpose is to make high profits, not relieve or cure pain. This makes pill mills a criminal enterprise.   

Opiates have a euphoric effect, so when used regularly, the opiate replicates the function of the body’s endorphins, leading to addiction, abuse, and high numbers of overdose deaths. Opioid misuse was recognized as a U.S. epidemic in the late 1990s. 

The prosecution’s case 

So far, this case has seen approximately 140 convictions, following investigations by the U.S. Attorney’s Office for the Eastern District of Tennessee, the Criminal Division’s Organized Crime and Gang Section, and the FBI High-Intensity Drug Trafficking Area, made up of investigators assigned by the Loudon County Sheriff’s Office, Knoxville Police Department, Blount County Sheriff’s Office, Roane County Sheriff’s Office, Harriman Police Department, and Clinton Police Department, all based in Tennessee. 

The case began from a tip by the Loudon County Sheriff’s Office in 2012 about a suspicious pain clinic in Lenoir City operated by co-defendant Hofstetter. The FBI’s Knoxville division followed up and in three years amassed enough evidence to raid that clinic and two more in Knoxville.  

They found that Hofstetter, on behalf of three bosses, known as “The Italians” helped set up a network of so-called “feeder” urgent care and walk-in clinics that, in turn, funneled patients to pain clinics in Lenoir City and Knoxville. Court records and testimony showed Florida-based, Luca Sartini, Luigi Palma, and Benjamin Rodriguez (“the Italians”) were considered pill-mill kings in South Florida but repeatedly escaped prosecution and, amid a law enforcement crackdown in Florida moved their operation to East Tennessee. 

The agency worked up the distribution chain, gathering enough evidence to prosecute medical providers at Urgent Care & Surgery Center Enterprise—the network of emergency clinics and walk-in clinics that sent patients to the pain clinics.   

Next, they charged drug-testing companies and national drug-testing laboratories that the criminal enterprise used to launder the millions the clinics were generating, as well as ripping off Medicare and TennCare. Hofstetter, with a Knoxville medical office manager called Clyde Christopher Tipton, would direct the drug testing business from all the clinics to Confirmatrix and Sterling Laboratories for unnecessary and expensive testing. The labs, in turn, billed taxpayer-subsidized healthcare insurance programs such as Medicare and TennCare and gave Tipton and partner, Maynard Alvarez, kickbacks. They billed those insurance programs $2.9 million in unnecessary and overpriced testing. 

Court documents say the clinics “would see as many as 100 customers a day,” and the FBI alleges operations netted $21 million in profits in four years, putting more than 12 million prescription painkillers into the hands of addicts, leading to the deaths of hundreds of opiate addicts. 

Hofstetter imprisoned 

Co-defendant Hofstetter was sentenced to serve 400 months on Oct. 21, after a jury earlier this year convicted her of a Racketeer Influenced and Corrupt Organization, (RICO), conspiracy. Sartini and Palma fled to Italy after her arrest, but both have now been extradited to the United States.  

Rodriguez struck a deal to plead guilty and testify against Hofstetter in exchange for a 20-year prison term. Assistant U.S. Attorney Tracy Stone charged that Hofstetter was unrepentant about the destruction caused by the opioids and pill mills, stating, “There are untold people whose lives will never be the same.”

In defense, Hofstetter’s attorneys, Charles Burks and Loretta Cravens argued Hofstetter should not be held responsible for the entirety of the conspiracy and noted the plea deal made by Rodriguez who is technically one of her bosses in the RICO conspiracy. They said, “This case was about these three 'Italians' that started the operation.” 

When sentencing, the Judge said, “The defendant operated pain clinics in East Tennessee and elsewhere. She took in significant amounts of money. She pressured providers to see more and more patients to bring in even more money. This conduct was not isolated and occurred over a multi-year period. The court is mindful of the impact on the defendant and the impact on her family, but the court is also mindful of the impact on our community.” 

Palma’s extradition completes the detainment of all the ringleaders involved. Prosecutors said Palma’s extradition was possible due to provisions of a treaty between the United States and Italy. They thanked the Italian authorities for their cooperation.