Friday, February 3, 2012

Chateau Drug sues pharmacist

Lawsuit alleges breach of contract and fraud

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By TERRY SMITH
Express Staff Writer

Longtime Wood River Valley pharmacist Jackie Mizer has been hired as chief pharmacist at Chateau Drug in Ketchum. Business owner Ken Sangha has terminated a contract that he had with former chief pharmacist Andrew D. Welch to manage the pharmacy. Photo by David N. Seelig

The owner of Chateau Drug in Ketchum has filed a lawsuit against former chief pharmacist Andrew D. Welch, alleging breach of contract and fraud and claiming damages in excess of $100,000.

The lawsuit, filed Jan. 27 in Blaine County 5th District Court, follows execution of search warrants on the evening of Jan. 5 at the Chateau Drug pharmacy and at Welch's residence on Leadville Avenue in Ketchum as part of a police investigation into possible insurance fraud and illegal possession of controlled prescription drugs.

No criminal charges have been filed, but the investigation remains under way. It has involved the Blaine County Narcotics Enforcement Team, the Blaine County Sheriff's Office, the Idaho Attorney General's Office, the Idaho Department of Insurance, the Idaho Board of Pharmacy and Blue Cross of Idaho.

The Board of Pharmacy suspended Welch's licenses on Jan. 11. In an emergency suspension order, the board alleged that 30 different prescription medicines, for which Welch did not have valid prescriptions, were seized on the Jan. 5 raid on his residence.

Officially, the lawsuit was filed by Chateau Drug owner Darsons Group Inc. against Welch and NEBT Corp., a business entity that Welch founded in October 2007 in conjunction with an agreement he signed with Darsons Group Vice President Ken Sangha to manage the pharmacy operation at Chateau Drug.

The complaint, filed on Chateau Drug's behalf by the Ketchum law firm of Lawson Laski Clark & Pogue, states that exact damages allegedly caused by Welch are unknown because a complete accounting has not been done and because Welch allegedly did not keep proper records as required by contract.

Chateau Drug claims in the suit that it has already suffered a loss of $150,000 in prescription drug sales because of Welch's actions and "associated negative publicity associated with the police raid."

Contacted by the Idaho Mountain Express on Wednesday, Welch said he was not then aware of the lawsuit and had no comment on it.

Following execution of the search warrants and Welch's license suspensions, Sangha terminated the Darsons Group contract with Welch and NEBT Corp. and has now hired pharmacists and pharmacy technicians as Chateau Drug employees.

Pharmacy contract

The contract between Darsons Group and NEBT Corp. is attached as an exhibit to the lawsuit complaint. The contract was signed by Sangha and Welch on Oct. 19, 2007, and states that NEBT Corp. would manage and operate the pharmacy at Chateau Drug.

The contract requires that NEBT Corp. staff the pharmacy with licensed pharmacists and pharmacy technicians and that NEBT Corp. be responsible for ordering medicines and supplies, billing insurance companies and maintaining adequate records of pharmacy sales.

The contract also has an indemnification clause, providing that Darsons Group will not be held liable for any actions undertaken by NEBT Corp.

The contract further states that the agreement between Darsons Group and NEBT Corp. is not to be "deemed to create an employer-employee relationship, nor be construed as creating the relationship as joint-venturers or partners."

NEBT Corp. was contracted to manage and operate the Chateau Drug pharmacy at $316,000 per year, with annual adjustments to reflect the consumer price index and with incentive provisions if pharmacy sales reached specified dollar levels.

Darsons Group alleges in the lawsuit that Welch and NEBT Corp. breached the contract by failing to ensure that the pharmacy was adequately staffed, failing to maintain adequate records and failing to maintain proper control over pharmaceuticals as required by law.

It further alleges that Welch and NEBT Corp. failed to pay bills as required, falsified information in order to receive incentive payments and kept prescription payments made in cash without reporting the funds to Chateau Drug.

The complaint demands a trial by jury, requests that a judgment be entered against NEBT Corp. and Welch to reimburse all damages allegedly inflicted and asks that the court order a complete accounting "to determine the sums due from defendants" to Chateau Drug.

Terry Smith: tsmith@mtexpress.com

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