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July 2, 2013 Healthcare Fraud

Illegal Kickbacks and Medicare Fraud: Seven BLS Defendants Plead Guilty

Last month, seven defendants in the Medicare fraud and bribery case against Biodiagnostic Laboratory Services LLC (BLS) opted to enter guilty pleas before United States District Judge Stanley R. Chesler in Newark federal court. Each defendant was charged with one count of conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of money laundering. All seven defendants are scheduled to be sentenced on September 11, 2013.

Earlier this year, authorities arrested and charged several people in connection with a long-running illegal kickback and Medicare fraud scheme at BLS. The seven defendants in this case were David Nicoll, Scott Nicoll, Cliff Antell, Luke Chicco, Doug Hurley, Kevin Kerekes and Craig Nordman. According to official court documents, BLS, which is headquartered in Parsippany, New Jersey, was accused of providing illegal kickbacks to doctors in exchange for patient referrals. Doctors allegedly sent hundreds of patients to BLS for blood and other unnecessary tests, which ultimately resulted in revenues of over $100 million for the defendants.

Details of Medicare Fraud and the Illegal Kickback Scheme

From 2006 through 2013, BLS, and other companies which it funded, paid out millions of dollars in illegal kickbacks to a select number of doctors, encouraging them to refer large numbers of patients to BLS for labwork. Through the bribery referrals, BLS was able to run an extremely profitable medicare fraud scheme.

Multiple doctors received illegal kickbacks in the form of leasing, servicing and consulting agreements. For example, when BLS executives were providing lease and service agreement kickbacks, they paid doctors thousands of dollars on a monthly basis so that BLS could “rent” a small space within the physician’s office. BLS claimed that, by renting a tiny portion of each doctor’s office, it was able to perform routine blood drawing services more easily and efficiently. In reality, however, BLS did not need, nor did it actually use, the rented space.

Defendants Reveal Additional Medicare Fraud

In addition to the seven defendants who were charged in the federal complaint, authorities charged BLS and one New Jersey physician, Frank Santangelo, in connection with the Medicare fraud scheme. Along with the bogus office rental scheme, BLS allegedly paid illegal kickbacks to doctors on a per-test basis in order to encourage them to order medically unnecessary tests. Recognizing that Medicare and other private health insurance companies paid a substantially higher fee for certain lab tests, BLS decided to offer bribes to doctors who ordered these expensive tests. BLS offered to pay illegal kickbacks in the form of cash for every high-dollar test that was ordered.

Court documents revealed that Dr. Santangelo was on track to send over $1 million of blood testing referrals to BLS in a one month period just through increasing the number of expensive and medically unnecessary blood tests that were ordered. In fact, in a text message conversation between David Nicoll and Dr. Santangelo, the doctor stated that he and another physician had devised a way to add “a significant amount of testing” that was “90 percent legit.”

The charges against BLS, the entity, and Dr. Santangelo are still pending.

Results of the Guilty Pleas

For the seven defendants who pleaded guilty, each now faces a maximum five year prison term and a $250,000 fine for the bribery charge. On the money laundering charge, the defendants each face up to 20 years in prison and a fine of $500,000, or twice the gross gain or loss from the bribery scheme. Two of the defendants also agreed to forfeit $50 million and $25 million to the government. The other five will forfeit anywhere between $1.3 million and $800,000.

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