Feds: Grandmother hid pill mill ring behind suburban facade

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KNOXVILLE, Tenn. (AP) — To neighbors, Sylvia Hofstetter was a wealthy businesswoman and grandmother who threw extravagant pool parties and went all out to decorate her upscale suburban home on Christmas and Halloween.

That image was shattered when FBI agents raided the health care administrator's Knoxville home in March. Federal prosecutors say the 51-year-old Florida native was running the largest illicit drug operation in the history of east Tennessee: a string of pill mills that raked in $17.5 million in four years.

Hofstetter didn't hide her affluence. She often had contractors renovating her 3,400-square-foot home in the winding Falcon Pointe development of cul-de-sacs, where neighbors smile and wave on their afternoon strolls. Around the holidays, her displays rivaled the massive tangle of lights assembled by Clark Griswold in the film "National Lampoon's Christmas Vacation," said Teresa Coleman, who lives a few doors down from Hofstetter's home.

"She had huge decorations," Coleman said. "I mean over the top."

Her parties went well beyond the backyard burger-flipping affair, with caterers supplying food and booze to neighbors, clinic workers and even those who worked on the home, Coleman said. However, Hofstetter typically disappeared after a brief appearance.

Hofstetter has been charged with drug trafficking, several counts of money laundering and money laundering conspiracy. She is currently awaiting federal trial.

Her lawyer said she had never been arrested before. When the facts come out, he said, they will show that Hofstetter was closer to the person Coleman and others described.

"She's a very good person," said Richard Escobar, a Tampa-based attorney who is defending her. "She's a very good mother. "She's hired counsel in order to investigate and set the story straight."

A former worker who first met Hofstetter while bidding on renovation work on one of the clinics described her as the hardest-working businesswoman he'd ever met.

"Probably the first time I ever met a lady that knew exactly what she wanted to do when it come to construction," Lynn Johnson testified, according to transcripts from a detention hearing in March on whether Hofstetter should be held in jail until her trial.

Outside of work, Johnson said, Hofstetter was inseparable from her 7-year-old grandson.

"That's her obsession," Carie Pfrogner, a family friend testified of the grandson. "She's in love with that little boy." The friend said Hofstetter had the child over at her house any chance she could get, and neighbors said the boy was often seen playing outside.

The government maintains Hofstetter was running several pain clinics, some strictly for cash, serving as many as 100 addicts a day. Others were described as legitimate operations that took insurance but referred people to facilities where prescriptions for oxycodone and other narcotics were written with no questions asked. One of them, the now-closed East Knoxville Healthcare Clinic, sits between a Waffle House and an adult bookstore.

The clinics were originally funded by three men from Florida whom Hofstetter referred to as "The Italians," FBI Agent Andrew Chapman testified during Hofstetter's detention hearing. Government officials believe an odd brand of market economics brought them to East Tennessee.

"We know, from interaction with law enforcement down there, that Tennessee license plate tags were frequently the most observed state tags in the parking lot on drug surveillances," Chapman said of the Florida pill mills. Given that the customer base was in Tennessee, Hofstetter opened clinics there, in Knoxville and nearby Lenoir City. Some of them would see 1,000 patients a month.

Florida was once a haven for pill mill operators, attracting addicts and drug dealers from around the country. But a statewide crackdown on pain clinics sent the operators scrambling to set up shop in Georgia, Tennessee and other states.

The United States is in the grip of a prescription drug epidemic that kills 44 people each day from overdose, according to the federal Centers for Disease Control and Prevention.

"In a few short years she went from a very modest income for South Florida terms to richer beyond probably her wildest dreams, with a lifestyle to match," Assistant U.S. Attorney Tracy Stone said at her hearing.

In the past few years, the investigation found that she had $6 million worth of financial transactions at casinos, though her tax returns didn't show her making anywhere near that amount of money, Chapman said. Agents have seized two Lexus vehicles, big screen TVs and more than 100 pieces of jewelry, including a Rolex watch and diamond rings and other valuables. They have also seized her home and several of the pain clinics.

The FBI estimates that about 12 million prescriptions for opioids, including oxycodone, oxymorphone and morphine, were prescribed by the clinics in four years. A typical visit, Chapman said, cost a patient $325 to $350.

So far, about 100 people have been charged in the case, including patients, former employees and even a former police chief. A judge said there was a risk Hofstetter would flee and refused to release her from jail before trial.

"The evidence suggests that these clinics appear to be one thing on paper, but in reality are something else," U.S. Magistrate Judge C. Clifford Shirley said. "I'm concerned that the picture painted of Ms. Hofstetter is the same."

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