Court records: Pill-mill scheme made millions, spanned ET

Jamie Satterfield , Don Jacobs knoxnews.com

KNOXVILLE — Federal court records unsealed Tuesday afternoon lay out the makings of a multimillion-dollar pill-mill operation that apparently spanned East Tennessee.

Records identify the main suspect in the case as Sylvia Hofstetter, who is being arraigned in U.S. District Court on charges she operated a $17.5 million pill-mill operation in Knox County and at least one other county.

Hofstetter is represented by attorney David Eldridge. A federal indictment returned in secret last week alleges Hofstetter set up at least two pain clinics that hauled in millions in a cash-for-pills scheme. The clinics have not yet been identified in court records.

A separate indictment alleges employees of one of Hofstetter’s clinics branched out on their own and opened another Knoxville clinic.

A series of indictments remains under seal. Those indictments are believed to involve people accused of sponsoring trips from out of state and from outside Knox County to Hofstetter’s clinic in return for a cut from the pills received.

Assistant U.S. Attorney Tracy Stone told U.S. Magistrate Bruce Guyton there are 32 related indictments expected to be filed by the end of the week.

The roundup apparently began Tuesday morning as federal agents and local law enforcement officers raided two West Knoxville pain clinics and the West Knox County home of a clinic operator, seizing records and saying little.

The raids began about 8 a.m. with officers from the Knoxville Police Department and the Knox County Sheriff’s Office joining agents with the FBI and the U.S. Department of Homeland Security as they swarmed into East Knoxville Healthcare Services LLC, 509 Lovell Road.

That pain clinic is in the former Prince Deli and Sports Bar just off the Lovell Road interchange for Interstate 40/75. On one side of the targeted pain clinic is an adult video store. On the other side, a Waffle House.  

A man who said he was a regular customer of East Knoxville Healthcare Services said he had been obtaining pain pills from the clinic housed in the building. He arrived about 9 a.m. at the business for his appointment and was questioned by federal agents. He was allowed to leave, but without his anticipated dose of pain pills.

No one Tuesday morning answered the telephone listed for East Knoxville Healthcare Services. Hofstetter could not be reached at several phone numbers listed for her on business records.

According to Tennessee Secretary of State records, East Knoxville Healthcare Services is operated by Hofstetter. The company was formed in January 2013, according to records, and was first located at 301 S. Gallaher View Road.

The business’ mailing address was updated in November 2013 from South Gallaher View Road to the Lovell Road location raided Tuesday.

Knox County property records show the last listed owners as a family in Lenoir City, but state law does not require new owners to document a sale with county officials. Property records show the location is valued at $400,000. Property taxes are current, records show.

Federal agents were joined by officers with the Roane County Sheriff’s Office to raid Hofstetter’s home at 1842 Falcon Pointe Drive in the Falcon Pointe subdivision in deep W. Knox County off S. Northshore Drive. Officials were seen removing boxes of documents from the home as the raid continued at the Lovell Road clinic.

Records show Hofstetter bought the home in April 2013. The house built in 2012 and the property are appraised at $365,000, according to records.

As that raid progressed, a mix of federal, city and county law enforcement officers were sweeping through the offices of Knoxville Pain Care PLLC, 9303 Park West Boulevard. Officers removed documents from suite 300 in the building as other law enforcement officers greeted and detained people arriving at the clinic expecting to obtain pain medications. Officers took some of the detained customers away in police cars, but it was unclear if they were arrested on new or old charges or later released.

Records show Knoxville Pain Care PLLC first started at 9123 Cross Park Drive before relocating to the Park West Boulevard office. The company was launched in August 2014, records show, and relocated in November 2014. The listed contact in state records for the business is Kevin J. Faulkner in Hixson, Tenn.