Four Docs Plead Guilty In N.J. Lab Bribery Case

More arrests of physicians are expected, according to U.S. Attorney prosecuting case

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CEO SUMMARY: As of July 24, four New Jersey doctors had pleaded guilty to federal criminal charges. Each of the doctors accepted bribes in exchange for referring patient lab testing to Biodiagnostic Laboratory Services (BLS) of Parsippany, New Jersey. This landmark criminal prosecution includes criminal charges associated with sham lease and service agreements between labs and referring physicians. Doctors and labs are now on notice that criminal charges may result from these activities.

TWICE IN LATE JULY, U.S. Attorney Paul J. Fishman announced that physicians in New Jersey had entered guilty pleas and admitted accepting bribes in exchange for referring laboratory tests to Biodiagnostic Laboratory Services (BLS), of Parsippany, New Jersey. The cases involve criminal charges against certain physicians and employees of BLS.

This is a development of importance for both clinical laboratories and office-based physicians. THE DARK REPORT believes this may be the largest federal case to prosecute both a clinical lab and the physicians who accepted kickbacks, inducements, and bribes after agreeing to refer specimens to the laboratory.

Doctors Face Jail Terms

The doctors face heavy jail terms, large fines, and severe financial penalties. More importantly, this case can make it easier for U.S. attorneys in other districts to successfully prosecute labs and physicians for many common practices that violate Medicare inducement and anti-kickback laws.

On July 24, Frank Santangelo, M.D., of Boonton, New Jersey, pleaded guilty in U.S. District Court in Newark to charges that he violated the Travel Act, laundered money, and failed to file tax returns, Fishman said. An internist with offices in Montville and Wayne, Santangelo received more than $1.8 million in bribe payments from BLS for referrals, according to Fishman, who also reported that Medicare and other insurers paid BLS more than $6 million for this lab testing.

Santangelo is scheduled for sentencing on October 24. He faces five years in prison and a $250,000 fine for bribery; 20 years in prison and a $500,000 fine for money laundering charge; and, one year in prison and a $100,000 fine on the tax charge.

It was on July 17, a week earlier, when Fishman announced guilty pleas from three other doctors: Dennis Aponte, 46, of Cedar Grove, Claudio Dicovsky, 51, of Fort Lee, and Franklin Dana Fortunato, 63, of Montville, each pleaded guilty in Federal District Court in Newark to violating the Federal Travel Act because they illegally used the mail for criminal activity.

Each physician faces up to five years in prison and a $250,000 fine. Sentencing for all three doctors is scheduled for October 22. Further, the U.S. Attorney’s office said that Aponte has agreed to forfeit $235,000, Dicovsky has agreed to forfeit more than $220,000, and Fortunato has agreed to forfeit more than $635,000.

Fortunato also pleaded guilty to filing a false tax return. The numbers reveal the scale of the bribes flowing from Biodiagnostic Laboratory Services to Fortunato. In the U.S. Attorney’s press release, it said that Fortunato admitted in court that, for the years 2004 through 2008, he failed to report more than $640,000 in bribe money and patient co-pays for laboratory tests.

Additionally, Fortunato failed to pay more than $160,000 in taxes he owed as a result of that unreported income, according to a press release from Fishman’s office. Fortunato faces up to five years in prison and a $250,000 fine for the tax crime.

More Docs to Be Charged?

What’s fascinating about this case is that many more physicians could be charged in the coming weeks. How many more is the subject of speculation.

“The investigation is ongoing and we expect more arrests,” was all Matthew Reilly, a spokesman in Fishman’s office, would say when contacted by THE DARK REPORT. Fishman is the U.S. Attorney for the District of New Jersey.

According to court documents, BLS employees and their associates conspired to pay millions of dollars in bribes to physicians over several years in exchange for blood sample referrals worth more than $100 million to the laboratory, according to an announcement from Fishman’s office. Many of the blood samples were not medically necessary, Fishman said.

Sham leases for phlebotomy space and similar services between labs and referring physicians figured prominently in this case. It is a scheme that is quite common in many regions across the country.

Court records show that Santangelo was paid more than $800,000 from BLS through sham lease agreements and sham service agreements between 2006 and 2010. “After that, he began receiving bribes from BLS through a third party—often tens of thousands of dollars a month—totaling more than $1 million between 2010 and his arrest in April 2013,” Fishman’s office said.

Bribes Paid, Tests Referred

In a similar fashion, Aponte admitted to taking $3,000 in cash bribes each month in exchange for referring blood specimens to BLS from his patients from October 2012 to March 2013, Fishman said. The lab made more than $175,000 through testing on these specimens.

Dicovsky also admitted to accepting bribes in exchange for referring blood specimens, Fishman reported. To disguise those bribes, Dicovsky and BLS entered into sham agreements in which the monthly bribe payments of more than $5,000 were characterized as “lease” and “service” payments, noted Fishman.

According to the press release, while the lease agreement purported to be for 1,000 square feet of space, little or no space was allocated to BLS in Dicovsky’s medical office in Paterson, New Jersey. Between November 2006 and August 2009, Dicovsky received more than $224,000 in bribe payments from BLS, and BLS made more than $800,000 through testing on blood specimens referred by Dicovsky.

Laboratory compliance officers and their legal advisors should study this case to understand how U.S. Attorney Paul J. Fishman successfully prosecuted both the lab employees and the referring physicians. Because tens, if not hundreds, of New Jersey physicians were involved in these kickback arrangements, more prose- cutions of physicians might be announced in the coming months.

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