DOJ Charges Execs over Alleged Lab Kickbacks to Obtain Restitution

Feds to pursue individual accountability in civil fraud lawsuits

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CEO SUMMARY: Multiple executives and sales representatives at True Health Diagnostics and Boston Heart Diagnostics have been named as defendants in a civil suit filed by the U.S. Department of Justice. The complaint centers on alleged kickbacks in return for clinical laboratory test referrals. The companies and employees involved have been associated with allegations, a settlement, and for one of the people, a guilty plea. 

EXECUTIVES AND OTHER EMPLOYEES WHO ONCE WORKED AT DIAGNOSTIC COMPANIES dogged by fraud allegations have been named by the U.S. Department of Justice (DOJ) in a civil complaint. 

The lawsuit seeks damages for alleged fraudulent clinical laboratory test claims. One of those people—Jeffrey “Boomer” Cornwell—pleaded guilty in January to a prior related criminal indictment on Anti-Kickback Statute charges. 

Cornwell was the former Vice President of Sales for the Southwestern Region at True Health Diagnostics in Frisco, Texas. He and Christopher Grottenthaler, former CEO at True Health; Susan Hertzberg, former CEO at Boston Heart Diagnostics in Framingham, Mass.; and Matthew Theiler, former Vice President of Sales at Boston Heart, are the highest-ranking employees among 18 defendants listed in the DOJ’s civil complaint. 

The lawsuit was unsealed on April 4 in U.S. District Court in the Eastern District of Texas. (See TDR, “In Civil Suit, DOJ Seeks Triple Damages for Lab Test Fraud,” April 25, 2022.) The suit was originally filed by whistleblowers Chris Riedel and Felice Gersh, MD. The DOJ eventually joined the filing. Aside from the Anti-Kickback Statute, the complaint also notes alleged violations of the False Claims Act and the Stark Law. 

One fact makes this federal court case of high interest to clinical laboratory managers and pathologists. It is an example of federal prosecutors pursuing charges against individuals associated with a laboratory company that had earlier entered into a settlement with the DOJ. 

Prior Settlement 

Essentially, federal prosecutors want to hold individuals in these lab organizations personally accountable by seeking penalties and restitution from the executives, sales reps, and other staff associated with lab organizations that previously settled allegations of fraud with the DOJ. 

In the case of Boston Heart, federal prosecutors entered into a settlement agreement with the company back in 2019. Boston Medical agreed to pay back nearly $27 million to settle False Claims Act allegations. Now the DOJ has filed a civil case against employees of Boston Heart. 

In the past, once the DOJ obtained a settlement agreement with a lab company accused of violating one or more federal laws, the federal agency seldom took the additional step of initiating a civil court case against former executives and employees of that company as a way to obtain additional repayment. 

Individual Accountability 

Because the latest actions by the DOJ are occurring in civil court, the government will have a lower burden of proof to find the defendants liable compared to a criminal case. 

The Dark Report previously reported on the DOJ’s rekindled interest in individuals’ responsibility in fraud cases. (See TDR, “Federal Healthcare Fraud Enforcement Turns to Emerging Areas,” April 4, 2022.) 

In a virtual keynote address in October to the American Bar Association’s National Institute on White Collar Crime, U.S. Deputy Attorney General Lisa Monaco announced a renewed focus on individual accountability in cases of corporate fraud and abuse, including clinical laboratory testing. 

“Accountability starts with the individuals responsible for criminal conduct,” Monaco said in the keynote. “Attorney General [Merrick] Garland has made clear it is unambiguously this department’s first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance.” 

Attorney Randy Jones with Boston-based law firm Mintz previously said that medical laboratories and others that run into potential trouble with the False Claims Act should pinpoint who was responsible for the problems. 

“This renewed focus on individual accountability is going to cause companies under investigation by the DOJ to be prepared to conduct more fulsome internal investigations, to identify all wrongdoers, and to provide the government with all non-privileged information about individual wrongdoing,” Jones explained during a February webinar. “There is no partial credit for incomplete disclosures.”

CEO Under Fire from DOJ

Grottenthaler worked at True Health from 2014 to 2019. In 2015, True Health acquired the assets of Health Diagnostic Laboratory (HDL), the latter of which was under scrutiny following a $47 million settlement with the DOJ for alleged violations of the Anti-Kickback Statute and False Claims Act. (See TDR, “True Health to Buy HDL Pending Court Approval,” Sept. 14, 2015.) 

At the time of the acquisition, Grottenthaler said in a statement that True Health would adopt “an exacting corporate compliance program.”

According to the DOJ, the opposite ended up happening. “Aware of the financial success and astronomical growth of a prior laboratory known as HDL, Grottenthaler sought to adopt the illegal practices used by HDL,” the lawsuit stated.

Specifically, Grottenthaler allegedly entered into a conspiracy with Little River Healthcare, which ran several small hospitals in Southeast Texas, to commit lab test fraud. A True Health affiliate company later operated an onsite lab for Little River.

Little River “agreed to pay [True Health] per laboratory test that was performed, and [True Health] allowed [Little River] to bill the tests to any public or private insurer,” the lawsuit stated. The DOJ stated that Grottenthaler allowed True Health to submit two fraudulent reimbursement claims for laboratory testing. In a statement given to The Dark Report, Grottenthaler’s lawyer, Andrew Wirmani at the law firm Reese Marketos in Dallas, said his client is not liable for the allegations.

“Mr. Grottenthaler adamantly denies the allegations unsealed [on April 4]. The truth is True Health, at his direction, invested millions to develop a rigorous compliance program, hired top-of-the-line compliance professionals, and even went so far as to volunteer to have the government monitor its operations,” Wirmani stated. “Whatever misconduct the government believes occurred did not involve my client. We are confident that the facts will demonstrate that he should never have been a part of this lawsuit.”

Wirmani filed a motion to dismiss Grottenthaler from the lawsuit on May 13.

According to the DOJ, part of Grottenthaler’s motivation for the alleged scheme was to prevent losing business to Boston Heart Diagnostics, which was a competitor. That notion of competition has been disputed by some, as each company focused on different diagnostic tests, according to a source familiar with the case.

From 2006 to 2011, Grottenthaler was Vice President of Finance at Ameritox, a drug testing company that closed in 2018 after being sued by Humana for allegedly filing false claims with the insurer. In 2010, Ameritox settled a federal whistleblower lawsuit and agreed to pay $16.3 million. (See TDR, “Facing Lawsuit Filed by Humana, Ameritox Closes Lab, Sells Assets,” March 26, 2018.)

Grottenthaler left True Health after the company entered bankruptcy. His LinkedIn account does not indicate where he currently works.

VP Had HDL Connections

Cornwell was hired by True Health after a stint on the marketing team at BlueWave Health Consultants. BlueWave at one point served as a contracted sales company for HDL. 

HDL ended its relationship with BlueWave after HDL’s leaders believed a BlueWave executive recruited BlueWave salespeople to work for True Health, The Dark Report noted in 2015.

Cornwell’s alleged troubles started during his time at BlueWave. While there in 2013, Cornwell offered purported “processing and handling fees” to Oakmont Wellness Center in Fort Worth, Texas, to induce their laboratory referrals to HDL, according to the DOJ. Later, while at True Health, Cornwell arranged for lab test referrals from Oakmont to True Health. The owner of Oakmont later started Onsite Draw Station, a Fort Worth phlebotomy lab.

On Jan. 5, 2022, Cornwell pleaded guilty in a criminal case to conspiring with one or more persons to violate the Anti-Kickback Statute in connection with True Health’s payments of processing and handling fees to Onsite Draw Station. The payments were to induce Oakmont laboratory referrals to True Health, according to the DOJ.

Cornwell also allegedly pushed True Health to get involved with kickbacks from management service organizations (MSOs), the civil lawsuit states. MSOs are legal healthcare setups that help providers and practices with administrative operations. But some MSOs have been associated with fraudulent activity.

Cornwell worked at True Health for about a year. His LinkedIn profile indicates he is currently owner at a hormone replacement therapy and wellness clinic in Texas.

Hertzberg is accused by the DOJ of working with Little River to set up kickbacks for tests performed by the diagnostics firm.

‘Buy and Bill Contract’ 

“Described as a ‘buy and bill contract,’ Hertzberg allowed [Little River] to bill [Boston Heart] tests to insurers, including federal healthcare programs, in return for a fee paid to [Boston Heart],” the DOJ lawsuit states.

Boston Heart’s sales force, allegedly with Hertzberg’s approval, worked with Little River and MSO recruiters to induce referrals to the hospital system for Boston Heart testing, the lawsuit contended. 

Unnamed vice presidents at Boston Heart seemed to be aware of potential fraud occurring, and they allegedly warned Hertzberg about this problem to no avail, the DOJ stated.

Hertzberg is currently CEO at BrainScope in Bethesda, Md., according to BrainScope’s website.

Theiler was the former Vice President of Sales at Boston Heart. He worked there from 2012 to 2017. As a vice president, Theiler was a right-hand executive to Hertzberg, the lawsuit stated.

Theiler and Hertzberg knew that, as a critical access hospital, Little River could submit claims at higher Medicare rates. Such hospitals receive higher rates to ensure access to care in rural communities, and thus, they cannot submit claims for services provided to people who are not inpatients or outpatients at the facility. 

Theiler allegedly knew that individuals receiving Boston Heart testing through Little River were not patients at the hospital and had been referred via MSOs. From 2015 to 2018, Little River allegedly paid Boston Heart more than $30 million as part of the MSO-based fraud.

According to Theiler’s LinkedIn profile, he works as Vice President of U.S. Sales at ZOLL Medical’s LifeVest division in Pittsburgh. However, LifeVest’s website lists another person in that position.

Attempts to reach Hertzberg, Cornwell, and Theiler were unsuccessful. 

Sales Reps’ Roles in Alleged Lab Fraud Resulted in Inducements and Cash Payments 

AMONG THE OTHER DEFENDANTS IN THE FEDERAL GOVERNMENT’S CIVIL LAWSUIT alleging clinical laboratory fraud are three sales representatives who worked in various roles: Stephen Kash, True Health’s former Director of Strategic Accounts; Courtney Love, Account Executive at True Health from January 2015 to September 2019; and Laura Howard, a Sales Manager for Boston Heart.

The suit alleged that Kash recruited providers to refer patients to Little River for testing in return for payments from an MSO called Quick Diagnostics.

In an alleged conversation, Kash offered MSO kickbacks to a Texas doctor. The physician indicated he knew the kickback income would not be for medical services provided to the MSO.

“In an attempt to hide his role in the kickback scheme, Kash had his payments funneled through a shell company named Tigerlily LLC, of which he was the beneficial owner,” the lawsuit stated.

In 2016 and 2017, two companies that recruited for MSOs as part of the Little River scheme allegedly paid Kash via Tigerlily more than $862,000. 

Processing and Handling

Meanwhile, the federal lawsuit painted Love as being deeply involved with setting up kickbacks, including at Oakmont Wellness Center. Oakmont was enrolled as a healthcare provider under Medicare and Medicaid. 

Oakmont was owned by a physician whose parents worked in administrative roles there. One parent formed Onsite Draw Station in April 2015. That same month, Love went to Onsite Draw Station to pick up taxpayer forms as a prelude to a compensation arrangement, the suit contended. Love allegedly knew the parents worked for Oakmont and had a financial interest in Onsite Draw Station.

The next month, an alleged agreement was reached in which True Health would pay Onsite Draw Station “processing and handling fees” of $25 per specimen sent to True Health for testing. From 2015 to 2017, True Health allegedly paid Onsite Draw Station kickbacks worth $260,000 to induce laboratory referrals to True Health, stated court documents.

‘Cash in a Bag’ Deliveries

Aside from her sales duties for Boston Heart, Howard was also a recruiter for MSOs that allegedly paid kickbacks.

For example, in October 2015, she allegedly induced a physician in Plano, Texas, to order Boston Heart tests through Little River. “Before being offered the kickbacks, [the physician] had never referred to [Little River], a hospital nearly 200 miles away,” the suit stated.

To conceal Howard’s actions, a fellow recruiter’s company allegedly received payments for her fraud-related work. “Approximately monthly, from May to December 2016, [the fellow recruiter] delivered to Howard the cash in a bag,” the suit said, adding that, “Each month, after Howard received the bag of cash … she placed it in the safe in her home.” In total, Howard allegedly received $250,000 in cash from various MSO schemes.

DOJ Lawsuit Notes Three Federal Laws

IN ITS CIVIL LAWSUIT AGAINST SEVERAL LAB EXECUTIVES AND LAB SALES REPS, the Department of Justice cited violations to the following federal laws: 

    • The Anti-Kickback Statute prohibits providers from soliciting, providing, or receiving any payment to induce either the referral of an individual or furnish a service for which payment may be made under a federal healthcare program.
    • The False Claims Act imposes penalties for any person who submits or causes the submission of fraudulent claims for payment to the federal government. 
    • The federal Stark Law prohibits the referral of Medicare and Medicaid beneficiaries by a physician to an entity for health services if that physician (or the physician’s immediate family member) has a financial relationship with the entity.

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