Legal Update

Will Federal Prosecutors Pursue HDL Lab Execs and Physicians?

Observers believe HDL and Singulex settlements are just the first and more legal actions are to come

WHERE WAS MUCH TO BE LEARNED when, on April 9, federal prosecutors announced settlements of multiple whistleblower lawsuits against Health Diagnostics Laboratory, Inc. of Richmond, Virginia, and Singulex Inc. of Alameda, California.

First, the Department of Justice structured a settlement agreement with the two lab companies which involves money to be paid up front and additional money to be paid later, based on certain contingencies.

Second, federal prosecutors, for the first time, acknowledged that the DOJ had joined whistleblower lawsuits against several related parties. In the press release, the DOJ said, “The government also intervened in the lawsuits as to similar allegations against another laboratory, Berkeley HeartLab Inc.; a marketing company, BlueWave Healthcare Consultants Inc., and its owners, Floyd Calhoun Dent and J. Bradley Johnson; and former CEO Latonya Mallory of HDL.”

Guilty Pleas from Doctors

Third, the possibility exists that the federal attorneys prosecuting this case might follow the same pattern as the U.S. attorney in the federal case against BioDiagnostic Laboratories, LLC, of Parsippany, New Jersey. In that case, the early settlements were announced against the lab company and its owners and employees. Only then did the federal attorney pursue and win criminal guilty pleas, fines, and restitution from a substantial number of physicians who admitted to accepting inducements and kickbacks from Bio-Diagnostic Labs.

The settlements with HDL and Singulex are civil settlements and both companies deny the allegations in the lawsuit. HDL will pay $47 million plus interest, and as much as $100 million if the company is sold or HDL sells assets. Singulex will pay $1.5 million plus interest, plus additional payments over five years based on its total annual revenue.

Multiple Whistleblowers

In the DOJ press release, additional information was provided that will be of particular interest to pathologists and lab administrators. It disclosed that “the lawsuits were filed by Dr. Michael Mayes, Scarlett Lutz, Kayla Webster, and Chris Reidel under the qui tam, or whistleblower, provisions of the False Claims Act.”

That means multiple whistleblowers with knowledge of these schemes filed separate lawsuits. The DOJ then joined the lawsuits under seal and combined them. The message here is that any lab company that is pushing its interpretation of federal and state lab compliance laws should fear employees, other insiders, and physicians. These are the individuals who have access to the documents needed to demonstrate violations of antikickback laws.

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