|True Lines Distributing IS WTF Wholesale Suppliers Corp re-invented|
|They have stolen millions from innocent veterinarians |
|21st of Sep, 2011 by OneAngryvet |
|As reported by Edie Lau, VIN Newservice:|
A rising number of veterinarians who engaged in the controversial practice of diverting dog and cat flea-prevention products maintain that they have been cheated by a Florida-based broker of pet products, W.T.F. Wholesale Suppliers Corp.
Mike Mittelman, a private investigator hired by some of the parties to try to recoup their money from WTF, says he has been contacted separately by more than 100 diverters, almost all veterinarians, who contend that they are owed thousands of dollars in unpaid merchandise. He said the product that most supplied to WTF is Frontline Plus, a popular topical non-prescription treatment used to prevent flea and tick infestations in dogs and cats.
“There’s an ever-growing group that grows by about two victims a week,” Mittelman told the VIN News Service. The amount each claims to be owed varies, but most are in the realm of $25,000 to $35,000, he said.
At least four veterinarians filed lawsuits recently against WTF in the Circuit Court of Volusia County, Fla.; Mittelman said he expects many more to do so in coming days.
After lawsuits surfaced, WTF officials stopped operating under that name, disconnecting telephone numbers posted on the company website. They informed their suppliers that the business is continuing under the name True Lines Distributing Co. Reached at True Lines last Tuesday, company representative Kay Carpenter would not respond to allegations against WTF.
“We’re no longer WTF,” Carpenter said. “There is no more WTF Wholesale.”
Carpenter said she would pass along a message from the VIN News Service seeking information on WTF’s operations and standing, but the call was not returned.
However, the lawyer representing WTF against the veterinarians’ legal claims, Kelly Parsons Kwiatek, responded by email that WTF closed its operation at 1620 S. Clyde Morris Blvd. in Daytona Beach on Aug. 19 due to a combination of circumstances.
“While WTF saw great success as an early adopter of the veterinarian-grade flea treatment, 2011 marked an unprecedented year in the history of the organization,” she wrote. “Same-store sales seeing considerable loss of sales due to extended drought conditions, the overall poor state of the economy as a whole thereby diminishing consumer spending, and the introduction of generic equivalents (of flea products) in mass retailers led to the current situation.”
Asked why, if business conditions are poor, company officials are able to continue the operation under a different name, Parsons Kwiatek said, “I have never heard of True Lines Distributing Corp.”
In response to questions about unpaid debts to suppliers and whether the lack of payment is part of a calculated scheme to defraud, Parsons Kwiatek said:
“WTF adamantly denies that it deliberately lured veterinarians into a relationship of trust with the company, paying upfront initially and then delaying or ceasing payments over time. However, the policies, procedures and practices at the shipping, receiving, purchasing and accounting levels have, upon occasion, created a non-payment issue with a few vendors who sent product to WTF outside of its typical model. At this time, WTF is in the process of marshalling its assets and determining its liabilities so that as many vendor issues can be resolved as smoothly as possible.”
Clandestine operations revealed
The claims against WTF have opened a window into the secretive realm of pet-product diversion, a practice that may be legal, depending on the product involved, but is nonetheless considered unethical in veterinary circles. Where diverted products are not prescription drugs — Frontline brand products are classified by federal regulators as a pesticide — rules controlling the sale and distribution of pharmaceuticals appear not to apply.
But the veterinary community frowns upon diversion because it violates an understanding between most manufacturers and veterinarians that distribution should be limited to veterinarians dispensing directly to pet owners to ensure the products’ safe and effective use. Moreover, parasiticides represent a major, if dwindling, source of revenue for veterinary hospitals, one that practitioners have come to rely on for decades.
With the exception of Bayer Animal Health, major players in veterinary pharmaceuticals — Merial, Novartis, Pfizer and Elanco, for example — have policies of selling their products only to licensed, practicing veterinarians.
Despite that, a variety of pet parasiticides are readily available directly to consumers through online vendors such as PetMed Express and Amazon.com and from retail chains including Costco, Walmart and Target.
Veterinary pharmaceutical companies, suspected by many veterinarians to be complicit in the so-called gray market, usually point the finger back at practitioners, saying it is they who are diverting product to retail outlets.
Based on his research, Mittelman said, he believes a large number of veterinarians are involved in diverting, and that pharmaceutical companies, if not openly facilitating such activity, are knowingly letting it happen.
“I don’t know if there’s a lot of hypocrisy or what, but I’m telling you, there are a lot of vets who do this ... ” Mittelman said. “I’m not talking a couple hundred vets. I’m talking thousands.”
As for the pharmaceutical companies, Mittelman said he was told by one veterinarian that the veterinarian’s account representative and the representative’s boss would call periodically “begging the vet to move large volumes of the non-prescription product that they need to get rid of. Obviously,” Mittelman said, “they have to know the vet is diverting this large volume of product.”
He speculated that taking big orders probably personally benefits account representatives as much as diverters. Comparing the situation to the market for mortgages in the United States before the housing sector imploded, Mittelman noted that loan officers, “weren’t checking references or anything because they were getting commissions.” He suspects the same of pharmaceutical company account representatives but added, “Maybe some account reps have more integrity than others; who knows?”
Dr. Zack Mills, head of U.S. companion animal sales for Merial, maker of Frontline, told the VIN News Service that he became aware of the WTF issue about six months ago when some of Merial’s veterinarian customers reported having trouble with their bills because they had not been paid for product they resold to WTF.
While Merial does not condone or support diversion, Mills said, the company is giving to those who explain their situation extended time to settle their bills.
“Our interest is in settling these matters amicably, not in turning their accounts over to collection agencies,” Mills said. “That said, our sales policy has not changed. We continue to sell only to practicing veterinarians and we will not sell to identified diverters. These accounts have violated our sales policy and have probably lost the ability to purchase Frontline in the future.”
Profession condemns diversion
Publicly admitting involvement with WTF is difficult for the typical veterinarian because diversion is regarded by the profession as a shameful secret. Mittelman said that of the 100 or so diverters who have contacted him, about 75 did so anonymously. They wanted him to know that they, too, had bad experiences with WTF but would not divulge their names and opted not to pursue payment. “They are willing to walk away from their losses ... because they fear being shunned by their peers,” Mittelman said.
Of the remainder — 25 veterinarians and one drug sales representative who obtained product for WTF through veterinarian clients — Mittelman said most are hurting financially and cannot afford to walk away.
One may soon declare bankruptcy; another is on the verge of divorce. A couple of them say they may lose their practices due to the unpaid debt, Mittelman said. Hearing their stories has given the former law-enforcement officer an appreciation for the financially tenuous state of many veterinarians — a professional group that he previously had assumed was well-to-do.
“A lot had gigantic loans to pay back from college and on top of that, rent, electricity, plus the veterinary practice they owe a lot for,” Mittelman said. “And here comes a company like WTF saying, ‘Hey, if you buy flea and tick product and send it to us, we’ll pay you anywhere from 3 percent to 10 percent above what you paid. This vet, who may have hundreds of thousands of dollars in loans, sees an opportunity to make a few bucks diverting flea and tick product. You think, ‘What’s the big deal?’ ”
But as one veterinarian who wrote about her experience with WTF in a message board of the online community Veterinary Information Network (VIN) found, diversion is a big deal among her colleagues.
When the veterinarian posted queries on June 21 and August 8 looking for others who had sold Frontline Plus to WTF and not been paid, she elicited a storm of responses, many poking fun at her predicament or expressing scorn.
One of the gentler jibes was this from Dr. Katie Thompson, a Florida clinic owner: “As my momma says, you lie down with dogs, you get up with fleas.”
Dr. Shelley Lenz, a practice owner in North Dakota, suggested that the diverting veterinarian was as much a crook as the company she accused. “Hopefully you’ve learned there is no honor code among thieves,” she wrote. “You are one of them...”
The criticism cut deeply. Although the veterinarian used her full name when she posted her experience on the members-only VIN discussion board, she asked not to be identified in this article for fear of retaliation by fellow veterinarians and the potential impact her involvement could have on finding work in the future.
In an interview, she said the view that she had stolen from other veterinarians by helping to make Frontline Plus available through retail channels resonated with her. “I never thought about it that way (before),” she said.
The veterinarian, who has practiced for more than 20 years and currently serves as a relief doctor in Illinois, said she always understood that diversion was considered unethical. However, she’s known veterinarians who have successfully engaged in the activity for years. When she walked into a PetSmart store one day to buy dog food and saw a large display of Frontline Plus in the entrance, she figured refraining from diversion was pointless.
About the same time, she was having trouble paying bills because she had undergone surgery for breast cancer and was unable to work for several months. She had received solicitations regularly, once or twice a year, from companies inviting her to sell them flea-prevention products. When the next letter came, she accepted.
She started out small, ordering $5,000 worth of Frontline Plus. Since she doesn’t own a clinic, the product came to her house. WTF supplied her with shipping labels, she said, so she could send the product to the company. She did not ask to be paid before shipping the product, which she now realizes was a stupid mistake. However, the company would wire payment into her bank account within 21 days so she didn’t worry.
Within two years, the veterinarian said, she sent five shipments of product with a total value of nearly $90,000, for which she earned $2,700, or 3 percent. Payment on the fifth shipment took nearly 60 days, which caused the veterinarian to consider ending the deal with WTF. But the veterinarian said her contact, Kay Carpenter, persuaded her to make another $25,000 order by pointing out that Merial had a promotion offering discounted pricing, so the veterinarian could earn more money than usual. That shipment went out in August 2010.
With the last shipment, the veterinarian said, payment never came. Carpenter “was full of excuses,” the veterinarian recounted. “She said they had issues with cash flow. They had ordered a lot of product from vendors and were having trouble getting their receipts sorted out.”
When the veterinarian received an overdue notice from Merial, she explained her situation to an account representative at the company. After some negotiation, Merial agreed not to send her to collections if she would make payments of $100 to $500 per month.
Meanwhile, the veterinarian said, she continued to call and email Carpenter every week. “I would call, I would beg, I would plead,” she said. “She would say, ‘Yes, it’s coming. Yes, it’s coming.’ ” The veterinarian tried to reach other people at WTF, as well, but always was routed back to Carpenter.
In time, she couldn’t reach Carpenter on the telephone either, she said, and her emails to the woman began bouncing.
The veterinarian acknowledges erring in diverting but disagrees with the critics who say she — and others in the same situation — deserve what’s happened. “None of us should have to be responsible for this level of debt because the product was stolen from us,” she said. “It is our responsibility that we ordered it from Merial. Nobody is contesting that. But the fact that it was stolen, we didn’t do that. We just got (caught) in the con.”
The American Veterinary Medical Association (AVMA)’s Principles of Veterinary Medical Ethics identifies as an unethical act the diversion of “ethical products.” Such products are defined as those “for which the manufacturer has voluntarily limited the sale to veterinarians as a marketing decision.” AVMA members who fail to comply with the ethics principles may be disciplined, according to spokeswoman Sharon Curtis Granskog. Discipline may include censure, suspension, probation and/or expulsion.
But from a legal standpoint, the veterinarian in Illinois who diverted has not violated state codes, according to Susan Hofer, a spokeswoman for the Illinois Department of Financial and Professional Regulation, which oversees licensing of veterinarians and distribution of drugs, among other things.
Diversion of a pesticide product such as Frontline “is not expressly against the law in Illinois,” Hofer said. Noting that the state veterinary practice act requires that a licensee “be a person of good moral character,” she added, “I suppose somebody could make the case that reselling product is not showing good moral character.”
Practitioners file suit
In Circuit Court in Volusia County, at least four veterinarians in four states filed claims recently against WTF Wholesale.
Dr. Cynthia Maravich of Ohio filed suit on June 7 asserting that WTF owes her $26,455.20 for an order of Frontline Plus shipped to the company in July 2010. The complaint states that Maravich made her first purchase for WTF in September 2006 and continued to place orders for the company about every three months thereafter. Maravich declined to be interviewed by the VIN News Service.
On Aug. 23, Maravich voluntarily dismissed the suit with prejudice, precluding herself from filing another suit with the same claim. WTF attorney Parsons Kwiatek said the claim was settled. She declined to disclose the settlement terms.
Royer Veterinary Services in Indiana filed a complaint on July 18 claiming that WTF owes the clinic $22,995.60 plus interest for Frontline Plus products delivered in September. Clinic owner Dr. Scott Royer did not respond to a telephone message left with a clinic staff member by the VIN News Service.
Dr. John McQuown, a retired veterinarian in California, filed suit on July 25, seeking to recover from WTF payment of $32,022.90 for product he said he supplied to the company in August 2010. McQuown did not respond to a telephone message left with his wife by the VIN News Service.
Dr. David Kulhavy, a relief and emergency veterinarian in Texas, filed suit Aug. 16 in pursuit of $25,148 he said WTF owes him for product he supplied to the company in August 2010.
Parsons Kwiatek said she has been in contact with lawyers for Roger, McQuown and Kulhavy and that WTF “hopes to resolve all accounting matters in the near future.”
In an interview, Kulhavy said he began diverting Frontline Plus to WTF in 2006, two years into his career. As a recent veterinary school graduate trying to get established in the profession, the extra income was attractive.
“I don’t know if they target new vets or what ... but right then, it was like, ‘Great. This is a huge bonus,’ ” Kulhavy said.
At the outset, Kulhavy recounted, the deal went like this: “They start off with a small order of, like, $10,000 and they pay you 10 percent, kind of a teaser rate. The rate kind of went down a bit — it fell in line with the economy slowing down — so I was like, 'Whatever.' ” Even at 5 or 6 percent, Kulhavy said, “It was very, very, very easy money to make so ... I’m not going to walk away from it.”
Two other conditions changed over time, as well. The company began requesting larger orders, and paying for them more slowly, Kulhavy said. Initially, he was paid before shipping. Later, he said, payment came after delivery, and at continuously longer intervals. Kulhavy said he had six months interest-free in which to settle his account with Merial, so the time lag wasn’t a great concern at first.
When by January he hadn’t been paid for $42,000 in product shipped last August, Kulhavy said he contacted Carpenter, who told him that an accounting error led some veterinarians to be paid twice while others went unpaid. Kulhavy said he didn’t believe it, and as the due date on his Merial bill approached, he contacted a lawyer.
WTF eventually paid a portion of what he was due, Kulhavy said, leaving a balance of slightly more than $25,000. At this point, Kulhavy said, he’s working off his Merial bill with monthly payments.
Kulhavy doesn’t apologize for reselling a non-prescription product. Of colleagues who criticize the activity, Kulhavy said: “My theory is that those are all practice owners, and they’re mad because other vets are making money off the product. ... I don’t see why anyone has a concern or care because it’s a non-prescription product. It’s not illegal. ... It’s no different from a convenience store ordering a bunch of Tylenol and putting it on the shelf. The only reason it’s sold exclusively to vets is because that’s what the drug companies choose to do.”
As in Illinois, veterinarians in Texas are not prohibited by law from reselling pesticide products such as Frontline, according to state officials. Nicole Oria, executive director of the Texas State Board of Veterinary Medical Examiners, said the board has disciplined a practitioner in the past for reselling antibiotics. But Frontline Plus, regulated by the U.S. Environmental Protection Agency as a pesticide, falls into a different category.
In addition to Frontline Plus, the private investigator Mittelman said that a few of the veterinarians he works for sold to WTF the flea product Capstar. Like Frontline, Capstar does not require a prescription, but unlike Frontline, Capstar is regulated by the U.S. Food and Drug Administration as a drug. As such, diversion of Capstar may be illegal, at least in some states.
WTF previously accused of deceit
WTF is not the only company that solicits veterinarians to resell flea and tick products for pets. Mittelman said one of his clients diverts for multiple brokers and reportedly has had difficulty only with WTF.
Records at the Florida Department of State Division of Corporations show that WTF has been in business since at least 2001, originally under the name W.T.F. Wholesale Inc., then, beginning in April 2003, under the name W.T.F. Wholesale Suppliers Corp.
Todd Stefaniak is listed as the registered agent and officer for W.T.F. Wholesale Inc. He also is listed as the officer of W.T.F. Wholesale Suppliers Corp. Stefaniak could not be reached for comment. Palmetto Charter Services Inc. is listed as the registered agent for W.T.F. Wholesale Suppliers Corp. An entry for Palmetto Charter on manta.com, an online directory for small businesses, lists John P. Ferguson, attorney, as Palmetto’s contact. A telephone message left for Ferguson with a staff member at his law office went unanswered.
In paperwork sent to one veterinarian, WTF Wholesale describes itself as “a sales and distribution firm providing retail outlets hard-to-find veterinary products.” It goes on: “Our customer base of thousands consist (sic) primarily of retail pet stores, groomers and farm & feed stores in the Central Florida area. The WTF Wholesale corporate offices and primary distribution center is located near Daytona Beach, Florida.”
WTF has been accused of deceit by not only veterinarians, but others in the business of selling pet products. The Kong Company, LLC, maker of rubber chew toys for dogs, in a suit filed in August 2010, alleged that Stefaniak and WTF obtained product from Kong “under the guise that the product would be distributed as gifts to veterinarians when in fact that product was provided to Costco Wholesale Corporation for distribution throughout the United States.”
The suit cites an e-mail sent by Stefaniak to Kong in May 2010 that begins: “My company partners with approximately 5,000 veterinarians across the country. It’s these veterinary relationships that enable us to be the largest distributor of Frontline branded products in the U.S.”
The message goes on to say that Stefaniak is considering including Kong toys in a quarterly “thank you” package to its veterinarian partners.
Kong responded by selling to WTF 20,736 large Classic Kongs at the discounted price of $2.40 each, along with an equal number of large liver snacks to be inserted into the chew toys at the price of $1.75 each, according to the suit. (The retail price of a large Classic Kong is $12.99.) A few weeks after it shipped the order to Florida, the suit states, Kong discovered the products had been sold to Costco and appeared in stores in California and Texas.
“Kong products are distributed throughout the United States primarily at specialty pet stores such as PetSmart and Petco. Kong does not distribute its products through ‘warehouse’ stores such as Costco,” the suit states.
The case was dismissed without prejudice in January over jurisdiction: The suit was filed in U.S. District Court in the Central District of California, but the defendants had shipped the products to Idaho. Asked whether Kong would re-file the suit in Idaho, a company spokeswoman said Kong regards the case as closed and had no further comment.
Meanwhile, veterinarians who believe they are victims of theft by WTF are posting about WTF, True Lines Distributing, Stefaniak, Carpenter and other company officials on Internet sites such as ripoffreport.com and merchantcircle.com with warnings to avoid doing business with these parties.
Dr. Paul Pion, president and co-founder of VIN, said the difficulties veterinary colleagues report with WTF illustrate some of the risks of diverting. When some members of VIN objected to the use of their professional forum as a means for diverters to contact each other, Pion explained in a post that he hoped open discussion of the issue “might deter other colleagues considering making the same poor choice.”
Post your Comment