For six years, Kerri Kaley worked at Johnson & Johnson’s Ethicon Endosurgery unit, selling surgical products to hospitals. But she and about two dozen other sales reps got into trouble with federal authorities by selling inventory that hospitals no longer wanted on the gray market, an indictment charged, The Daily Business Review reports.

Valid prescription medical devices, such as sutures, allegedly were bought by F&S Medical of Delray Beach, Florida, which turned around and dealt the products to other medical facilities. Now, the New York resident and her husband are the poster children in an appeal pending before the 11th US Circuit Court of Appeals on the legal standard for pre-trial seizure of a defendant’s assets, the paper writes.

For years, the criminal defense bar has been arguing wholesale seizures of assets are unconstitutional because they strip defendants of their Sixth Amendment right to choose the counsel of their choice, the paper writes. “The Kaleys simply want to use their own money to retain counsel of choice to defend them at trial,” their lawyer, Howard Srebnick, tells the paper.

The lawyers are being paid by a relative of the Kaleys, who are accused of defrauding the FDA by selling stolen medical goods. They were charged with conspiracy, interstate transportation of stolen property, money laundering and obstruction of justice.

The Kaleys’ case was buoyed when a co-defendant, Jennifer Gruenstrass, was acquitted last November, the paper writes. The Ethicon saleswoman said there never was any theft, and she was simply helping hospitals by disposing of excess products no longer wanted or needed.

Her lawyer, Robert Casale, tells the paper J&J created the secondary market by constantly marketing new products and making it hard for hospitals to return the older versions, and that Gruenstrass gave loads of returned medical inventory to a doctor who performed surgery in Third World countries.

“I always assume Johnson & Johnson didn’t like the competition,” Casale tells the paper. “They probably said, ‘We’ve created a monster, and now it’s biting us on the heels and competing against us.’”

The U.S. Attorney’s Office said 23 defendants have pleaded guilty in related cases. “Ethicon takes the laws governing our business practices very seriously,” an Ethicon spokeswoman tells the paper. “We don’t tolerate any unlawful behavior. We immediately terminated the employees found to be involved.”

F&S owner John Keith Danks, a former Ethicon employee, pleaded guilty to transportation of stolen property and was sentenced in 2006 to 30 months in federal prison by US District Judge Alan Gold in Miami, the paper notes.

Hat tip to the WSJ Law blog