On May 23, 2018, the United States District Court in the District of South Carolina entered judgment for the United States in the amounts of $111,109,655.30 against defendants LaTonya Mallory, Floyd Calhoun Dent III and Robert Bradford Johnson, and for an additional $3,039,006.56 against Johnson and Dent, the Department of Justice announced today. The judgment follows the January 31, 2018, jury verdict finding the three individuals liable for violating the False Claims Act (FCA) by paying remuneration to physicians in exchange for patient referrals, in violation of the Anti-Kickback Statute, and causing two laboratories to bill federal health care programs for medically unnecessary testing.

“Improper financial relationships between physicians and laboratories can distort a physicians’ best judgment for their patients, in addition to undermining patient health and trust,” said Acting Assistant Attorney General for the Justice Department’s Civil Division Chad Readler. “Executives and other individuals who break the law will be held personally accountable for their actions."

During a two-week jury trial held in Charleston, South Carolina, the government introduced evidence that the defendants paid physicians remuneration disguised as processing and handling fees of between $10 and $17 for each patient they referred to two blood testing laboratories: Health Diagnostics Laboratory Inc. (HDL), of Richmond, Virginia; and Singulex Inc., of Alameda, California. The government also introduced evidence that the kickback scheme resulted in physicians referring patients to HDL and Singulex for medically unnecessary tests, which were then billed to federal health care programs.

The jury found Mallory, HDL’s former CEO, and Johnson and Dent, who marketed and sold HDL’s and Singulex’s tests, jointly and severally liable for causing the submission of 35,074 false claims, worth $16,601,591, submitted to Medicare and TRICARE by HDL. The jury also found defendants Dent and Johnson jointly and severally liable for an additional 3,813 false claims, worth $467,935, submitted by Singulex. As provided by the FCA, the Court trebled those damage amounts, offset settlement payments received from HDL and Singulex for the same claims, and awarded $63.8 million in penalties requested by the United States, for a total judgment of $114,148,661.86.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs. The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

“The Court’s damages award in this case recognizes the seriousness of what these defendants did,” said Sherri A. Lydon, U.S. Attorney for the District of South Carolina. “Paying kickbacks to cause unnecessary tests injures patients, the Medicare Program, and American taxpayers and the District of South Carolina will continue to pursue those who participate in such conduct.”

“This judgment affirms that individuals who cheat Medicare and TRICARE will not be allowed to enjoy their ill-gotten gains,” said U.S. Attorney for the District of Columbia Jessie K. Liu. “This office joins with its Department of Justice colleagues in our mutual commitment to investigate misconduct and recover funds unlawfully obtained from federal healthcare programs.”

“Laboratories that pay kickbacks to physicians in exchange for referrals of business exploit patients and taxpayer-funded health care programs,” said Special Agent in Charge Derrick L. Jackson, U.S. Department of Health and Human Services, Office of Inspector General. “Our agency is dedicated to investigating such corrosive kickback schemes, as they undermine the public’s trust in medical professionals, and the integrity of government health care programs.”

“The FBI will continue to aggressively investigate allegations of criminal misconduct between companies and individuals who engage in kickback schemes at the expense of the U.S. government,” said Acting Assistant Director of the Criminal Investigative Division Chris Hacker. “We recognize the importance of those who came forward and brought allegations to light and realize that we cannot do our work without the public’s help.”

The claims resolved by the court’s order were originally brought in three lawsuits filed by Dr. Michael Mayes, Scarlett Lutz, Kayla Webster, and Chris Reidel under the qui tam, or whistleblower, provisions of the False Claims Act. Under the Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. The Act permits the United States to intervene in and take over the whistleblower suit, as the United States did, in part, in the three consolidated actions against Mallory, Dent, Johnson and others in August 2015. The whistleblowers’ share of any recovery has yet to be determined.

The cases were litigated by the Civil Division’s Commercial Litigation Branch, and the U.S. Attorneys’ Offices for the District of South Carolina and the District of Columbia. The U.S. Attorney’s Office for the Middle District of North Carolina, HHS-OIG, the FBI’s Columbia Field Office and FBIHQ’s Major Provider Response Team, the U.S. Office of Personnel Management’s Office of Inspector General, and the Department of Defense’s Office of Inspector General Defense Criminal Investigative Service assisted with the investigation.

The cases are captioned United States ex rel. Mayes v. Berkeley HeartLab Inc., et al., Case No. 9:11-CV-01593-RMG (D.S.C.); United States ex rel. Riedel v. Health Diagnostic Laboratory, Inc., et al., Case No. 1:11-CV-02308 (D.D.C.); and United States, et al. ex rel. Lutz, et al. v. Health Diagnostic Laboratory, Inc., et al., Case No. 9:14-CV-0230-RMG (D.S.C.).