The following is an excerpt from "Hunting LeRoux: The Inside Story of the DEA Takedown of a Criminal Genius and His Empire" by Elaine Shannon, just published by William Morrow.
Paul LeRoux launched his online prescription drug company in 2004. There were other black market pill peddlers, but LeRoux was the first to combine two American addictions—popping pills and online shopping.
He moved to Manila and set up his base of operations there because it offered cheap labor for his call centers, which took orders and pushed sales. As important, the Philippines’ legal system was rife with corruption. He could buy silence. He registered a long list of Internet domains and set up a hand-crafted Black cloud of his own websites and multiple servers. A few sessions at his keyboard and he was a founder! In the New Economy, founders were rock stars. No factory, no staff, no board, no business plan—no problem.
In the tech age, all anyone needed to start a company was a good idea, and LeRoux had one.
Little pastel bits of feel-good and chill were going to make him rich enough to curl up on a sofa made of currency. They were going to get him boats, cars, villas, airplanes, long-legged girls—freedom. Exactly how this stroke of genius came to him isn’t clear, but genius it was. His timing was spot-on. He was perfectly positioned to ride the crest of a wave—a tsunami, really—that the established drug cartels didn’t see coming. In the United States, the world’s largest market for drugs, both legal and illegal, “dirty” street drugs peddled by the likes of Pablo Escobar and El Chapo were on their way out.
Pills that looked like Willy Wonka made them were in. In 2004, according to an annual U.S. government survey, 7.2 million Americans regularly abused pharmaceuticals, double the numbe of Americans who habitually abused cocaine, heroin, methamphetamine, and hallucinogens combined.
The numbers translated to a very appealing business opportunity. There were at least 7 million very loyal potential pill buyers in the United States and probably almost as many in the rest of the world. The black market was a tiny fraction of the global pharmaceutical market, whose revenues exceeded $1 trillion in 2014, but it was big enough to generate some serious money. It was a niche, but exactly the kind of niche LeRoux was seeking—not yet saturated and plenty of room for growth.
Even better, LeRoux didn’t have to spend a dime on marketing. The pharmaceutical industry had been shaping the image of pills over many decades, lavishing many billions of dollars on ads and other promotions. (One estimate put Big Pharma ad spending at $33 billion in 2004.) Pharma ads invariably showed the product being manufactured in pristine labs and dispensed by physicians in white coats.
Healers! Nobody argued with healers.
LeRoux’s websites piggybacked on those themes. His your-pills.com website of May 14, 2005, featured a photo of a man and a woman, both in the white coats of physicians, both fair-skinned, apparently American archetypes. It promised, “Our U.S. Licensed Physicians will review your order and issue your prescription. Next, our U.S. Licensed Pharmacies will dispense, and FedEx your order discreetly using next day delivery.” LeRoux’s matrixmeds.com website for September 1, 2005, featured a photo of a movie-star-handsome man in surgical scrubs, rattling off a lot of very good reasons to buy online: “Why put up with the waiting rooms, the time off of work, the traffic, the embarrassment, and the long lines when you don’t have to!
Unlike other e-commerce pill peddlers, LeRoux did not buy pills wholesale from poorly regulated third-world sources and dispatch them to American buyers. The front-end costs for purchasing, maintaining inventory, packaging, shipping, and getting past U.S. border controls were substantial. That method needed a lot of hands and incurred a lot of risk.
Instead, he recruited a network of physicians and pharmacies inside the United States. He remained offshore as the unseen digital middleman somewhere in a cybercloud. LeRoux found he had more worries from business competitors than from law enforcement. The black market in pills was cutthroat, with rivals hacking one another’s servers, stealing customer lists, and sabotaging software. LeRoux applied his cybersecurity skills to creating elaborate defensive measures. He set up more than fifty servers in various nations, including the Philippines, Israel, and Costa Rica, and rotated them daily. When one server detected an attempted intrusion, it automatically shut down, and the traffic rotated to another server.
In 2008, just as RX Limited hit cruising speed, the business environment for Internet pharmaceutical sales started to change. In the United States, policy makers and lawmakers were beginning to recognize that abuse of prescription drugs had become a serious public health problem. In October of that year, Congress enacted the Ryan Haight Online Pharmacy Consumer Protection Act, named for a teenager who died after taking Vicodin, the trade name for a pharmaceutical containing hydrocodone, a prescription opioid painkiller. The legislation made it a felony to distribute a controlled substance across the Internet without a valid prescription. Although RX Limited was not selling controlled substances, the new spotlight on Internet pharmacies threatened to raise questions about RX Limited’s commercial relationships with banks that processed its credit card payments and with shipping companies.
LeRoux tried to head off deeper inquiries by carpet-bombing the banking system with subterfuges. He sent the banks fake paperwork and set up fake websites that appeared to meet the letter of the new law. When American Express and Discover demanded that online pharmaceutical sellers have valid pharmacy licenses, LeRoux signed up licensed pharmacists to front for him.
Amazingly, he managed to outsmart the Google algorithm. Google executives were trying to do their part to curb prescription drug abuse by barring questionable online pharmacies from buying keywords for the Google AdWords program, which caused advertisers’ names to pop to the top of search results. LeRoux solved this problem by identifying the IP addresses Google was using to collect information about RX Limited. He then redirected the Google probes to fake websites that omitted information that would have disqualified RX Limited from buying keywords.
DEA agents would eventually document that RX Limited shipped over 3 million prescriptions worth $300 million.
Late in 2008, LeRoux set out to create a stronghold—his own small kingdom—in a part of Somalia that he judged was far off the radar of the Great Powers. “My objective in Somalia was to obtain a small territory and set myself up as a warlord, using whatever violence was necessary,” he later testified.
He had several lucrative sources of income in mind. First of all, he wanted to sell hard drugs—heroin, cocaine, meth, opioids, and whatever else the market wanted. Through a contact in the Chinese Triad organized crime group, he arranged to acquire industrial quantities of pure North Korean crystal meth. He planned to sell the meth through intermediaries to buyers the United States, Japan and Australia and also barter it to a Colombian organization in exchange for cocaine, which fetched a high price in Asia and Australia.
Second, LeRoux was going to green-light RX Limited sales of pharmaceutical opioids and ship them directly to customers. Call center workers said that customers in the United States were begging for the synthetic opioid, oxycodone, brand name OxyContin. It was the best-selling opioid prescription drug on the United States market. Hydrocodone, brand name Vicodin, an opioid painkiller, was almost as popular. Both were highly addictive. He would make a lot more money selling opioids. No customers were as loyal or free-spending as addicts. Pain relief trumped pleasure. Tranquilizers and sleep aids were enjoyable, but people could live without them. Addicts would give their last dollar, literally, for the drugs their bodies had to have, or suffer excruciating pangs of withdrawal.
LeRoux set out to build an Amazon-for-small-arms on the coast of Somalia. He envisioned it as a base for the biggest international arms business ever conceived. He figured war was a growth industry, generating billions of dollars, doubling and redoubling as militant bands, guerrillas, warlords, death squads, and private militias cropped up like weeds and new conflicts flared up. Wealthy people in places that weren’t in active conflict were plagued by robbers, kidnappers, and assassins. They all had to have bodyguards, and the body guards had to be equipped. He would be their supplier, no questions asked. Guns were as desirable as crack, crank, and smack. Demand would fluctuate from year to year, but it would never go away, because the postmodern, globalized world had entered an era of never-ending war. Colonial powers and authoritarian rulers had been replaced by chaos as globalization elsewhere left behind certain peoples and regions. Tribes, clans, and communities that weren’t engaged in an active conflict but might be drawn into one at any moment, wanted a stockpile of weapons for the defense of their people and territory.
LeRoux observed that guns, like drugs, were addictive. Nobody who fell in love with them could stop at just one. Powerful people wanted rooms full of them, houses full. They would build private armies just to show them off. If a warlord, political power broker or business tycoon already had an army—call it a militia, guerrilla group, gang, or security force—he or she needed to equip it.
He considered stirring up more small wars. “It’s good if countries get trouble and civil wars,” he told an aide. “It’s good for business.”
LeRoux engaged a Manila architect to draw up blueprints for a self-contained arms receiving and shipping facility on the Somali coast, with modules so that it was expandable as volume demanded. It was labeled “Forward Base Site Development Plan.” There were spaces for offices, bunkrooms, shower rooms, kitchens, and arsenals. Connected to the Somali base would be a private port, outfitted with landing craft to load and unload arms and other goods and supplies from merchant ships and bring them ashore, unseen by airport and waterfront snitches on whom intelligence services traditionally relied. Near the port, LeRoux planned to build an airstrip at least 6,500 feet long, to accommodate big cargo planes coming in from Europe, the Middle East, North Africa, and Asia. LeRoux intended to buy a whole fleet of old Russian and Ukrainian Antonov cargo planes to transport arms from Eastern Europe and building equipment from the United Arab Emirates.
All that was missing was a secure supply of small arms for his inventory. On September 26, 2012, LeRoux thought he had nailed it down. That day, he met with a man he called Jack in Monrovia, Liberia. They were there to set up a meth-for-cocaine deal with a Colombian cartel representative. LeRoux was exultant because he had just heard that the Iranian Defense Industries Organization had agreed to sell to him.
“Everything we want, even bigger shit, is available in Iran,” LeRoux rejoiced. “And there’s no questions asked! They will deliver to us in any Muslim country anywhere in the world—Indonesia, for example...I mean, the stuff they have for sale is unbelievable, even s@#$ the Russians won’t sell us, we can get there, even seven-meter-long rockets the size of this room! They sent me a catalogue! It’s unbelievable, you can fricking buy whatever you want!!”
LeRoux never got a chance to place his order with Tehran. Jack was an undercover operative for the U.S. Drug Enforcement Administration. So was the Colombian. Everything he said to both of them was on videotape. He was arrested, expelled to the custody of DEA and flown to New York to face charges. He made a plea agreement in which he admitted to dealing with Iran and North Korea, plus ordering seven murders. Hoping for leniency, he dismantled his business empire and turned state’s evidence against his hitmen and meth trafficking team. He is awaiting sentencing.
Excerpted from "Hunting LeRoux: The Inside Story of the DEA Takedown of a Criminal Genius and His Empire" by Elaine Shannon, just published by William Morrow.