Round Two – The United States Files a Complaint in Intervention Against BlueWave, Its Founders Dent and Johnson, and HDL’s Former CEO, Tonya Mallory, for Their Roles in HDL and Singulex Kickbacks

On August 6, 2015, the United States filed its Complaint in Intervention against Latonya (Tonya) Mallory, BlueWave Healthcare Consultants, Inc., Floyd Calhoun (Cal) Dent and Robert Bradford (Brad) Johnson for their part in a Medicare and Tricare fraud scheme involving three laboratories, including Health Diagnostics Laboratories, Inc., of Richmond, VA and Singulex, Inc. of Alameda, CA. The United States’ Complaint in Intervention alleges that “draw” and “process and handling” fees were offered to financially incentivize doctors to subject their patients to expensive HDL and Singulex testing.

BlueWave, Dent, Johnson, and Mallory allegedly facilitated payments of $68 million nationwide in kickbacks to doctors that were disguised as draw or process and handling fees. The Government’s Complaint, filed in the District of South Carolina by Assistant United States Attorneys James Leventis and Jennifer Aldrich, marks the second phase of the Government’s and Whistleblowers’ joint pursuits of individuals, partnerships, or corporations (including Mallory, BlueWave, Dent and Johnson) who are allegedly responsible for submitting or causing the submission of $500 million in false claims to Medicare and Tricare.

Earlier this year, the Government announced settlements of certain claims with HDL ($47 million plus interest, with potential of a larger recovery upon certain contingencies) and Singulex ($1.5 million).  http://www.justice.gov/opa/pr/two-cardiovascular-disease-testing-laboratories-pay-485-million-settle-claims-paying; https://www.falseclaimsact.com/wp-content/uploads/2019/10/DOCS-2834271-v5-Singulex-Press-Release.pdf. Both settlements were based on the companies’ ability to pay.

Two whistleblowers, Scarlett Lutz and Kyla Webster, sued Singulex, its former CEO, HDL, its former CEO (Mallory), BlueWave, and its founders (Dent and Johnson). Their qui tam complaint was unsealed in April of this year, when certain claims were resolved within the Government’s settlement with HDL and Singulex. They continue to pursue additional claims against Mallory, BlueWave, Dent and Johnson in joint efforts with the Government and two other Relators who also sued HDL, Singulex, and BlueWave.

Ms. Lutz and Ms. Webster are represented by  attorneys Marc S. Raspanti, Pamela Coyle Brecht, and Michael Morse, members of the national qui tam practice at Pietragallo, Gordon, Alfano, Bosick & Raspanti, LLP of Philadelphia, PA.,  together with their local counsel, William J. Tuck of Florence, SC and James F. Wyatt, III of Charlotte, NC.  Ms. Lutz, a resident of Florence, SC, uncovered the illegal payments by HDL and Singulex while providing billing services to Dr. Lloyd Miller, a local primary care physician who received tens of thousands of dollars from HDL, Singulex in exchange for patient referrals. Ms. Webster, a resident of Timmonsville, SC, worked as Dr. Miller’s nursing Supervisor, and witnessed Dr. Miller’s allegedly fraudulent referrals of patients to HDL and Singulex.

As alleged in both the Relators’ Lutz and Webster’s Qui Tam Complaint and the United States’ recent Complaint in Intervention, two lab companies (HDL and Singulex)  retained Dent, Johnson, and their company, BlueWave, to facilitate the payment of kickbacks to doctors for each patient referred for expensive laboratory testing. The ensuing damage to Government healthcare programs quickly escalated, and the windfall to Dent, Johnson, and Mallory was staggering  – these individuals are alleged in the United States’ Complaint to have pocketed more than $100 million from this nationwide kickback campaign.

As illustrated in earlier unsealed Qui Tam Complaint filed by Lutz and Webster (https://www.falseclaimsact.com/wp-content/uploads/2019/10/2Complaint.pdf) and by the Government’s Complaint in Intervention, the scale of the alleged fraud payments is remarkable.   According to the Government’s Complaint in Intervention, combined, Berkeley, HDL and Singulex allegedly paid referring physicians $80 million in inducements, including $68 million in sham process and handling fees (kickbacks) paid by HDL to referring physicians. HDL’s profits allegedly grew rapidly under this scheme from a startup (incorporated in late 2008) to a major laboratory player in 2013 (with $383 million in 2013 revenues, and 41% of that from Medicare). See http://www.wsj.com/articles/a-fast-growing-medical-lab-tests-anti-kickback-law-1410143403. According to the United States’ Complaint, from 2010 to July of 2014, Medicare and Tricare suffered single damages of $333 million for  false claims submitted or caused to be submitted in a conspiracy that included HDL (now in bankruptcy),  and Defendants Mallory, BlueWave, Dent and Johnson.  The Government’s Complaint also alleges that during that same time, Defendant  Mallory  took home at least $26 million, that Defendant BlueWave received commissions of more than $223 million, and that Defendants Dent and Johnson each pocketed at least $58 million.

According to the Government’s Complaint, Defendants Mallory, BlueWave, Dent and Johnson also facilitated the payment of kickbacks by Singulex to referring physicians, causing additional damage Government healthcare programs for false claims that were submitted to Medicare and TRICARE. The Government alleges that  between 2010 and 2013, for their role in the kickback scheme, BlueWave, Dent and Johnson received at least $18.8 million as independent sales contractors of Singulex (based on a 24% commission).

The Government’s Complaint in Intervention can be found here: US Complaint in Intervention Filed.