RICHMOND, VA, Feb. 23, 2021 – The Fourth Circuit Court of Appeals has soundly rejected challenges to a $114 million jury verdict obtained in a multi-whistleblower case against a former blood lab chief executive officer and two sales consultants, saying “we affirm the judgment of the district court in all respects.”

LaTonya Mallory, the former CEO of Health Diagnostic Laboratory (HDL), and Robert Johnson and Floyd (“Cal”) Dent, owners of HDL’s marketing partner, BlueWave Healthcare Consultants, had appealed the outcome of three separate whistleblower cases that were litigated as one, including a “qui tam” case brought by Phillips & Cohen LLP.

After a two-week trial in 2018 in Charleston, SC, a district court jury decided that Mallory, Johnson and Dent were liable for violating the False Claims Act and the Anti-kickback Statute. The three paid illegitimate “process and handling fees” to physicians in exchange for patient referrals for blood tests and caused HDL and another lab to bill federal health care programs for medically unnecessary testing.

Additionally, through HDL, Mallory unlawfully paid and Johnson and Dent unlawfully received tens of millions of dollars in volume-based sales commissions to induce doctors to order expensive blood tests of dubious medical value or necessity.

Because the False Claims Act requires liable entities and individuals to pay treble damages plus civil penalties, the district court entered judgment against all three defendants for $111,109,655.30 and against Dent and Johnson for an additional $3,039,006.56.

The appeals court decision, announced Monday, clears the way for the government to begin collecting damages and penalties.

“The appeals court decision shows how solid all of the district judge’s rulings in the case were,” said Peter Chatfield, a whistleblower attorney and partner at Phillips & Cohen. “This has been a very long road for our client, who decided to blow the whistle on the kickback scheme despite pressure from his colleagues to keep quiet.”

“We are very proud of Dr. Mayes for his strong ethics and his willingness to stand against fraud that hurts the Medicare program,” Chatfield said.

Dr. Mayes was the only whistleblower called to testify at the trial.

Chatfield also commended the other whistleblowers – Christopher Riedel and Karla Webster, who filed a qui tam case together, and Scarlett Lutz – for their efforts to stop the fraud.

Chatfield thanked the government attorneys for their outstanding work on the case, particularly those who handled the appeal, including appellate attorneys Melissa N. Patterson and Benjamin M. Shultz of DOJ’s Civil Division, and the trial lawyers – Assistant US Attorney James C. Leventis Jr. of the District of South Carolina, Assistant US Attorney Jennifer A. Short of the District of Columbia and US trial attorney Michael E. Shaheen.

Other defendants in the qui tam cases previously settled with the government. In 2015, HDL agreed to pay a total of more $48.5 million and Singulex agreed to pay more than $1.5 million. Two years later, Quest Diagnostics and Berkeley Heartlab, which Quest Diagnostics had acquired, agreed to pay a total of $6 million to settle similar charges.

The appeals court decision is posted here.

 

About Phillips & Cohen LLP

Phillips & Cohen is the nation’s most successful law firm representing whistleblowers. The firm’s cases have helped recover more than $12.8 billion in civil settlements and criminal fines. Phillips & Cohen represents whistleblowers in qui tam lawsuits as well as whistleblower claims with the reward programs of the Securities Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service. www.phillipsandcohen.com

 

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