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Health Diagnostic Lab Ex-CEO, BlueWave Healthcare Owners Found Liable of Medicare Fraud

NEW YORK (360Dx) – A federal jury in South Carolina has found the former CEO of a medical testing lab and owners of its marketing partner liable for Medicare fraud under the federal False Claims Act, the law firm Phillips & Cohen said today.

The defendants are Tonya Mallory, the former CEO of Richmond, Virginia-based Health Diagnostic Laboratory (HDL), and Floyd Calhoun Dent III and Robert Bradford Johnson, who are the owners of Alabama-based BlueWave Healthcare Consultants.

The verdict, announced Wednesday, was the outcome of three separate whistleblower cases that were litigated together. Phillips & Cohen filed one of these cases on behalf of Michael Mayes of Hilton Head, South Carolina, in 2011.

The whistleblowers and government had alleged that the three executives conspired to pay kickbacks to doctors of $20 for each blood draw and testing referral, intending to induce those doctors to order cardiovascular blood tests for federally insured patients.

The Department of Justice "requested damages in the amount of $174 million and the jury returned a verdict of slightly over $16 million," Beattie Ashmore, who is Tonya Mallory's attorney, said in an e-mail to 360Dx. "The parties have 28 days to file post-trial motions. After those motions are filed, heard, and ruled upon, it will be determined if an appeal should be filed."

Under the False Claims Acts, damages are automatically trebled, and other penalties could be implemented in an amount yet to be determined by the court, Phillips & Cohen said.

Peter Chatfield, a partner at Phillips & Cohen, said in a statement that "the trial proved that the defendants continued to pay kickbacks even after they received a growing flood of warnings and corrected legal advice that showed [that the] defendants' continuation of such payments was a knowing or reckless disregard of the law."

BlueWave was a defendant in the trial. The jury found the marketing company not liable but its two owners, Dent and Johnson, liable.

Other defendants in the whistleblower cases previously settled with the government. In 2015, HDL agreed to pay a total of $48.5 million and Singulex agreed to pay more than $1.5 million. Last year, Quest Diagnostics and Berkeley Heartlab, which Quest Diagnostics had acquired, agreed to pay a total of $6 million to settle similar charges.

HDL had filed for Chapter 11 protection in June 2015, shortly after reaching that agreement with the US Department of Justice to settle the investigation, and the firm subsequently sold its assets to True Health Diagnostics for $37.1 million.