The Rise and Fall of Christopher Smith

The making of an online pharma king

by Ana Azpurua and Hilke Schellmann

When Christopher William Smith landed at the Minneapolis-St. Paul International Airport in the early morning of June 30, 2005, the FBI was waiting for him.

Smith, known in cyberspace as “Rizler,” was one of the world’s most prolific spammers. The 25-year-old had also sold thousands of tablets of prescription painkillers through a rogue online pharmacy that he operated.

Smith could have eluded the law had he remained in the Dominican Republic where, law enforcers say, he was intending to move part of his business. But he returned to Minnesota. After all, everyone he ever cared about was there.

“He came home because his wife and his family were here,” said Chris Smith’s father, Scott. “He was under the impression that nothing he had done was illegal.”

In May 2005, the government initiated a series of civil and criminal cases against Smith. His assets were frozen and his Minnesota business was shut down after he was charged with wire and mail fraud. In August 2007, a jury found him guilty of running a criminal enterprise and sentenced him to 30 years in jail.

Prosecutors said that from early 2004 until May 2005, Smith had amassed over $24 million by running an illegal online pharmacy.

Smith’s Internet operation was a 21st-century crime. From court documents and interviews with law enforcers, prosecutors, experts and Smith’s father, we were able to reconstruct how a young, ambitious computer whiz from a middle-class family used the Web to run an immensely lucrative business that allowed him to afford a lavish lifestyle that included luxury cars, fancy accommodations and a trophy mistress.

Smith had never met some of his key employees, nor had he ever spoken to them on the phone. He communicated to his staff via email and online chats. One of his accomplices, Bernardette Hollis, known as the “Spam Queen,” was operating from her house in Kansas, while Smith lived in Minneapolis.

Most of Smith’s business was run from the United States. His companies, Xpress Pharmacy Direct and Online Payment Solutions had their headquarters in Burnsville, Minnesota. He worked with Philip Mach, a doctor licensed in New Jersey, who issued prescriptions that were filled and shipped by American pharmacies.

Smith had also begun to expand his business abroad. He was planning to set up an Internet drugstore in Montreal, Canada. After his Minnesota headquarters were raided, he also tried to open a new online pharmacy in the Dominican Republic.

In a questionnaire we sent Christopher Smith via his father Scott, he said he was on vacation in the Caribbean and did not intend to do business there. But in a civil case against Smith prosecutors said he was attempting to set up shop overseas.

Government investigators and experts fear that Smith’s planned overseas expansion is part of an emerging trend in the online pharma business.

“They’ve become more sophisticated,” said Carmen Catizone, executive director of the National Association of Boards of Pharmacies, a trade organization.

“Their drugs come from outside of the U.S., so there’s a less likelihood of them being caught or identified here.”

“They’re trying to get away from using U.S. pharmacies,” Catizone added, “and use more of these foreign distribution centers where they mailed drugs into the U.S.”

"He always pushed the edge, pushing everything as far as he could."

The early years

From his boyhood, Christopher Smith showed extraordinary talent with the computer. His father recalls how the boy often sat on his lap observing while he worked on his computer.

“By the time he was four he was already starting computers and booting them up, and playing with them,” Scott Smith said.

When Smith was five, his father was seriously injured in a car accident. A year later, his parents divorced.

“That had a huge impact on the kids, Christopher and my daughter Corbin,” Scott Smith said.

In the early 1980s, he owned successful restaurants in Minnesota. After the accident, he made millions from a company that sells diaper-changing stations. Scott Smith traveled all over the world with his children because he thought that would show them what they could have if they work hard.

Christopher started making money early. He cleared the snow from his neighbor’s driveways and sold mini-donuts at church fairs, Scott Smith said. At age 16, Christopher opened a car-radio store in one of his father’s offices in Canon Falls, Minnesota.

“From the business point of view he was always good,” Scott Smith said. “But he always pushed the edge. Pushing everything as far as he could to get by with it. And so I think that’s part of the problem that he ran into with his business.”

When he was 17, Smith met his wife-to-be Anita, who was then 21. They moved in together and four years later, they had a son. Smith opened his first Internet marketing company in the late 1990s, during the early years of his relationship with Anita.

Soon, the high school dropout was making thousands of dollars filling inboxes with junk emails selling sexual enhancement drugs and college diplomas, according to Spamhaus, an organization which tracks the world’s top spammers. One of the world’s most prolific spammers had been born.

By 2003, Smith’s spamming activities attracted the attention of AOL. Smith sent millions of spam messages  to AOL affiliates between January and August of 2003, according to court documents filed in 2005. The company sued Smith in Virginia for sending unwanted email.

The online drug business

With his spamming activities under surveillance, Smith ventured into a new business: selling prescription drugs online.

“One of his friends said he was doing an online pharmacy and making all kinds of money,” Scott Smith said his son told him.

In the beginning, Smith imported drugs from India. But after facing problems with overseas shipments, he sought out struggling independent pharmacies throughout the U.S. to fill his orders. But these pharmacies required prescriptions, so Smith hired Dr. Philip Mach to write them. Court records say that Mach took the job because he had money problems after a messy divorce.

Smith’s online pharma operation had multiple Web sites that required customers to fill out a questionnaire and state the medication they needed. But the information customers provided was never verified and Mach never saw any of his online patients face to face. Smith paid Mach $3.50 for every order he approved and turned into a prescription.

“These pharmacies would access Web sites that were part of the network that Christopher Smith had organized, and they were able to download prescription orders from those websites,” said Carmen Catizone. “They would simply then print the labels, they would put the medications in the bottles and in the bags and then ship them to patients.”

To promote his business to U.S. consumers, Smith ran a telemarketing office in Burnsville, Minnesota and also in the Dominican Republic, the Philippines and Canada. Xpress pharmacy also publicized its services through Internet search engines and television ads.

Smith’s operation eventually had about 80 employees. These included a New York accountant, Bruce Lieberman, who was chief financial officer, and Daniel Adkins, who acted as the in-house general counsel.

Another employee, Darrell Griepp, acted as the pharmacy coordinator. Griepp was tasked with finding more brick-and-mortar drugstores to fill the orders. (When we tried to contact Griepp by phone, he said: “Do not call this number anymore,” and hung up.)

Smith's business was going well, but its success soon attracted attention.

The fall of Christopher Smith

As the millions came pouring in, the 25-year-old flaunted his success. He bought an extravagant new house for himself and his wife Anita. He also began an affair with a former stripper and took her on expensive trips overseas, according to former FBI agent George Kyrilis, who investigated the case.

Smith rented an upscale office in Burnsville for his online pharmacy and call center business. Smith owned more than a dozen luxury cars, including two Ferraris, two Jaguars and two Hummers. A chauffeur drove him to work in a Mercedes Maybach, one of the world’s most expensive cars.

Kyrilis said the end began when a lawyer who worked in the same office building noticed the young man being driven to work in a chauffeured Mercedes. The lawyer also noticed that some of Smith’s former employees seemed out of place in such a well-appointed office. After all, some of them were former convicts. The lawyer alerted a friend who was working at the FBI.

The FBI looked into Smith’s business and soon realized that it wasn’t legit, Kyrilis said. The Internal Revenue Service and the Food and Drug Administration joined the probe and soon, a full-scale investigation was underway.

"Quite literally they were getting these printouts that were flying from their printers. They literally couldn’t keep up.”

The operation unravels

In February 2005 the Drug Enforcement Administration issued a directive warning pharmacies that “it is illegal to receive a prescription for a controlled substance without the establishment of a legitimate doctor/patient relationship, and it is unlikely for such relationship to be formed through Internet correspondence alone.”

When the drugstores that had been filling the prescriptions for Xpress Pharmacy expressed their concern about the DEA directive, the company sent them false assurances that its business was legal. It claimed that it had physicians in all states, that its questionnaire was DEA approved and that doctors were conducting face-to-face patient consultations.

This was far from true. Xpress Pharmacy had just one doctor, Philip Mach, who was issuing prescriptions – as many as 1,500 in a single day, prosecutors would later allege. The drugstores filling those prescriptions were swamped.

It was not difficult to prove that Smith sold drugs online without patients never seeing a doctor. An undercover FBI agent simply bought prescription drugs from one of Smith’s websites. As the investigation progressed, Smith tried to move his business operations to Montreal. He also put his luxury cars under false names in storage facilities in Minneapolis.

Cornered by the government

In May 2005 the law enforcement team felt they had enough evidence against Smith’s pharmacy and went to court. A judge issued an injunction for operating an online pharmacy that defrauded consumers. The court froze $18 million in assets and shut down the online business. Days later, Smith traveled to the Dominican Republic.

Law enforcement agents feared he had escaped. But to everybody’s surprise he returned to Minnesota. Law enforcers found out about his impending return because his wife’s new lover tipped off the IRS, agent Kyrilis said. Smith was arrested at the airport for violating his injunction order.

In September 2006, Smith was released to a halfway house but he smuggled a laptop into his room in violation of the agreement with the judge. He was then sent to Sherburne County Jail north of Minneapolis.

“Smith never slowed down. He continued like the energizer bunny,” said Kyrilis, who added that Smith’s operations gave his task force headaches.

While in jail, Smith tried to outwit his captors. He called a lawyer, and because calls between lawyers and clients are privileged, correction officers could not listen in.

"Just let her know... we’re going to give her the option of picking which one of her kids she’s going to sacrifice."

Smith dialled a lawyer's phone number that was no longer in use. He then re-routed the number via VoIP, which allows phone calls over the Internet. Whenever Smith told the guards that he wanted to talk to his lawyer, he would actually call his associate Roanna Cleofe in the Philippines, court documents said.

The authorities eventually found out about the fake number and started to listen in. In one call, Smith talked about threatening a key witness in the trial, his former accomplice, Bernardette Hollis.

Hollis was a doting mother with prodigious computer skills. She  programmed the online pharmacy for Smith. When law enforcement agents raided her house in Kansas, she opted to cooperate with the authorities.

“She is the key that unlocked the case,” Peterson said. With Hollis’s help, agents were able to decrypt the online transactions and unravel how the business operated.

In March 2006, during one of his supposed phone consultations with his lawyer, Smith talked about killing one of Hollis’s daughters: “Just let her know that, you know, if she wants to talk on the stand, that’s perfectly fine, but we’re also going to give her the option of picking which one of her kids she’s going to sacrifice for doing so.”

Smith's father did not dispute that his son said these words, but he explained that at that time Christopher had been in solitary confinement and had not been taking medication to treat his bipolar disorder. Scott Smith claimed that his son was angry because Hollis and other close associates were cooperating with the government, but he never meant harm.

At trial, prosecutors accused the 25-year-old of running a “continued criminal enterprise” (CCE), a serious offense which carries a minimum sentence of 20 years and is usually applied to those involved in drug cartels. The case against him was one of the first times that the CCE charge was applied to someone dealing with prescription drugs.

“Chris Smith was never more than a drug dealer with a criminal enterprise,” Peterson said. “He operated like a typical kingpin."

"Instead of dealing his drugs with dealers on the street, he dealt them on the Internet,” she said.

On August 1, 2007, Christopher Smith was found guilty by a jury. The judge handed down one of the longest sentences anyone involved in an online business has ever faced: 30 years.

“The significance is that it was the first case in which a person was convicted, who is not a pharmacist or a doctor,” Peterson said. “This was the first case that we were able to charge as a conspiracy.”

Smith is appealing his case. His former associates — Hollis, Mach and Griepp — collaborated with the government and got either probation or sentences of less than three years. Smith's company accountant and lawyer were acquitted.

Kyrilis said that catching Christopher Smith was only possible because they knew where he was.

“We were lucky," he said. "Our case started with an office in Minnesota. Now these guys are overseas and use aliases and fake names.”