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Drug Screen Lab Owner Gets Four Months House Arrest in Fraud Case

NEW YORK – The US Department of Justice said on Thursday that Rakesh Reddy Kothuru, the former majority owner of Laboratory Services of America (LSA), has been sentenced to four months of house arrest and ordered to pay $510,000 in forfeiture, restitution, and fines for his part in a Medicare kickback scheme.

Kothuru pled guilty in January to one count of knowingly and willfully making false representations of material facts for payments under federal health care programs. He is also subject to mandatory exclusion from future participation in federal health care benefit programs, including Medicare and Medicaid.

Las Vegas-based LSA provided urine drug testing. Among its clients was American Toxicology Labs, a lab firm owned by Michael Dube who also owned additional treatment clinics in Tennessee and Virginia. According to the government, ATL conducted urine drug testing for those clinics and routinely sent tested samples to other labs for what it said was confirmatory testing.

In January 2015, Kothuru entered an agreement with Dube (who last year was sentenced to 36 months in federal prison for healthcare fraud and ordered to pay more than $9 million in fines, forfeitures, and restitution) in which Dube referred all of ATL's tested samples to LSA for confirmatory testing in exchange for cash kickbacks paid to Dube's personal checking account.

Between March 23, 2015, and Sept. 20, 2016, LSA received more than $750,000 from Medicare, Virginia Medicaid, Kentucky Medicaid, and TennCare for testing referred from ATL under this arrangement, according to the US Attorney's Office, Western District of Virginia.