Las Vegas man, 84, indicted in medical fraud case

By Steve Kanigher

Thursday, July 15, 2010 | 5:56 p.m.

Federal agents today arrested a Las Vegas man who purports to be a retired physician and allegedly caused more than 100 chronically ill patients to undergo experimental stem cell implant procedures while also convincing investors to pay him large amounts of money, Nevada's U.S. Attorney Daniel Bogden said.

Alfred T. Sapse, 84, was indicted on seven counts of mail fraud, 13 counts of wire fraud and criminal forfeiture. He was arrested in Las Vegas by special agents with the U.S. Food and Drug Administration Office of Criminal Investigations and appeared before a federal magistrate judge.

Sapse, who was released on a personal recognizance bond pending trial, faces up to 20 years in prison and a $250,000 fine on each count, and forfeiture of money or property up to $913,748 if convicted.

According to the indictment, beginning January 2005 Sapse allegedly devised a scheme to defraud patients and investors by claiming to have developed a novel medical procedure involving “stem cells” that would cure or improve certain severe, incurable diseases, such as multiple sclerosis and cerebral palsy. Sapse purports to be a retired foreign physician, but he has never been licensed by Nevada or any other state to practice medicine.

Sapse formed Stem Cell Pharma Inc., a Nevada corporation, in May 2005 allegedly to create the false impression that he operated a legitimate pharmaceutical company. Sapse also controlled several websites and issued dozens of “press releases,” claiming he developed a method to extract stem cells from human placentas. By misrepresenting his credentials, the nature of his treatment, the source of his “stem cells,” and the adverse effects suffered by previous patients, Sapse convinced chronically ill patients to undergo experimental implant procedures and convinced investors to pay him large amounts of money without knowing the short- or long-term effects of the implant procedure he was promoting.

The indictment alleges that Sapse caused the implantation of portions of the placental tissue into the abdomen of sick patients for the treatment of their diseases. In the fall of 2005, Sapse hired a local Las Vegas pediatrician known as “Physician C” with no prior stem cell training to perform his implant procedure on patients. At Sapse’s direction, Physician C performed the implant procedure on roughly 34 patients in Las Vegas between February and November 2006. Sapse targeted extremely sick patients by claiming that his “proprietary” procedure was especially effective for patients with multiple sclerosis, cerebral palsy and retinitis pigmentosa.

Sapse allegedly failed to obtain any approvals from the FDA, as he knew he was required to do, prior to coordinating the implantation of patients with placental cells. In July 2006, Sapse made false representations, and instructed others to make false representations, to regulatory investigators with the FDA regarding his role in the scheme.

In February 2007, Sapse relocated his fraudulent scheme to Mexico and entered into an arrangement with a Mexican physician known as “Physician G” with an office in Nuevo Progreso, Mexico, to perform his implant procedure. At Sapse’s direction, Physician G performed the implant procedure on roughly 100 patients between February 2007 and May of this year.

The indictment also alleges that Sapse falsely claimed to patients and investors that he studied at the Filatov Institute of Eye Diseases and Tissue Therapy, a prestigious clinic in Odessa, Ukraine, where he purportedly learned about and performed placental implants; that the placental tissue he caused to be implanted in patients was obtained only from Caesarian section births, so as to reduce the risk of passing infection, or otherwise to prevent “damage” to the placenta; that he had achieved “considerable success” with a procedure that was going to “revolutionize medicine as it is known today”; that wheelchair-bound patients would “definitely walk again”; and that he subjected the placental tissue he obtained to a “proprietary process,” such that the stem cells in that tissue would express a special enzyme that would cause the stem cells to replicate indefinitely.

Sapse conducted no follow-up with his patients after inducing them to undergo his implant procedure and collected no data, despite creating the impression that he was engaged in legitimate medical research. Sapse also concealed from prospective patients and investors the adverse effects suffered by previous patients, including infection and worsening of their symptoms.

Sapse allegedly received roughly $1 million from patients and investors, $700,000 of which he spent on personal expenditures and for gambling at local casinos. Sapse did not use any of the money for laboratory research, animal studies or human clinical studies relating to the short- and long-term effects of the implant procedure he was promoting.

This case is being investigated by the FDA Office of Criminal Investigations and prosecuted by Assistant U.S. Attorneys Crane Pomerantz and Patrick Walsh.