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CEO of Defunct Lab Sentenced to Two Years in Jail, Pay $7.6M Restitution for Kickback Scheme

NEW YORK – The former CEO of Northwest Physicians Laboratory (NWPL) was sentenced in US District Court in Seattle to two years in prison and ordered to pay $7.6 million in restitution for conspiracy to solicit kickbacks, the US Department of Justice said last week.

Between 2013 and 2015, Jae Lee and several conspirators ran a scheme in which they referred government testing business to other labs in exchange for kickbacks, according to the DOJ.

Because NWPL was physician owned, it could not legally test urine samples for patients covered by government healthcare programs. Instead, the lab referred patients covered by these programs to two other labs that could bill government insurance programs for testing. In exchange for these referrals, NWPL received more than $3.7 million in kickbacks, while the two labs receiving the referrals charged the government more than $6.5 million for urine testing.

Lee and his co-conspirators described the payments as being for marketing services, but according to the DOJ, they never performed any marketing services.

NWPL, which has dissolved, pleaded guilty in February 2021 and was sentenced to pay $8.1 million in restitution. In March, Richard Reid, NWPL's co-owner and vice president of sales, was convicted of five felonies linked to illegal kickbacks. Reid is scheduled to be sentenced on Oct. 11. Kevin Puls, former executive director of NWPL, is scheduled to be sentenced on Sept. 6.

To date, the labs and individuals involved in the kickback scheme have agreed to pay more than $14 million to settle related civil allegations.

"Mr. Lee was one of the ringleaders of a conspiracy that stole more money per month than some honest Americans make in a year," Donald Voiret, special agent in charge of the Seattle FBI Field Office, said in a statement. "By stealing from these benefits programs, he wasn’t only stealing from taxpayers, but taking funding from people who legitimately relied on these programs for their health and well-being."