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Co-Owner of Defunct Lab Convicted of Kickback Scheme

NEW YORK – The co-owner of a defunct Bellevue, Washington-based clinical laboratory was convicted this week in US District Court in Seattle of five federal felonies linked to illegal kickbacks, the US Department of Justice said on Tuesday.

Richard Reid, who was co-owner and vice president of sales of Northwest Physicians Laboratory (NWPL), was found guilty of steering urine drug testing business to two other labs in exchange for more than $3.7 million in kickbacks.

He was convicted of one count of conspiracy to solicit and receive kickbacks involving health care programs and four counts of receipt of kickbacks and faces up to five years in prison on each count. He is scheduled to be sentenced on July 12.

According to the DOJ, Reid directed to the two labs more than $6.5 million in drug testing for patients covered by Medicare and TRICARE in exchange for kickbacks paid to NWPL, violating the federal Anti-Kickback Statute. NWPL was not able to do the testing itself because it is physician-owned. Physician-owned labs are not allowed to test urine samples for patients covered by government insurance.

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

“Mr. Reid devised this scheme, knowing that it was illegal to profit on tests conducted by his toxicology lab that were paid for by government insurance,” said US Attorney Nick Brown in a statement. “The web of referrals and kickbacks increased profits for Reid and his co-conspirators, while inflating medical costs for the rest of us. This is essentially theft from taxpayers."

NWPL pleaded guilty in February 2021 and was sentenced with several other defendants to pay $8.1 million in restitution. The lab has since dissolved.

Three other defendants involved in the scheme have pleaded guilty and await sentencing. Former NWPL CEO Jae Lee is scheduled for sentencing on May 24. Kevin Puls, the former executive director of NWPL, is scheduled for sentencing June 7. Steve Verschoor, former head of one of the labs that paid the kickbacks, will be sentenced on May 10.

In addition to the criminal charges, businesses and individuals involved in the kickback arrangement have to date paid more than $14 million in civil penalties, the DOJ said.