False Claims Counsel

One February 28, the Department of Justice announced that the owner of a Georgia medical testing laboratory pleaded guilty to paying kickabacks, and entered into a civil settlement agreement resolving a whistleblower’s False Claims Act allegations. According to DOJ’s press release:

Andrew (Drew) Maloney, 57, of Roswell, Georgia, has pleaded guilty to a criminal information charging him with conspiracy to pay health care kickbacks, the Justice Department announced today. Additionally, Maloney and the clinical laboratory that he owned, Capstone Diagnostics, of Atlanta, Georgia, have agreed to pay $14.3 million to resolve allegations that they violated the Anti-Kickback Statute by paying volume-based commissions to independent contractor sales representatives to arrange for or recommend medically unnecessary urine drug tests and respiratory pathogen panels (RPPs). Maloney and Capstone have agreed to cooperate with the Justice Department’s investigations of other participants in the alleged schemes.

As alleged in the criminal information filed in the Northern District of Georgia, between August 2017 and December 2018, Capstone entered into an arrangement with a program operating as Do It 4 the Hood (D4H), which held itself out as providing after school mentoring services to at risk teenagers in Georgia. Once enrolled, participants were required to submit to frequent urine specimen collections for drug testing without regard to medical need or the history of the participant. Maloney was aware that the participants needed the tests to participate in the program and that many of these participants were covered by Medicaid. Capstone, with Maloney’s knowledge and approval, paid the operators of D4H a percentage of Medicaid reimbursements for samples submitted by the program, in violation of federal law. While the scheme was ongoing, Capstone submitted over $1 million in claims, causing Georgia Medicaid to pay out at least $400,000 in claims related to the fraudulent drug testing. In addition to Maloney’s guilty plea, four other individuals have pleaded guilty in connection with this fraudulent drug testing scheme:

• Duriel Gray, 45, of Cartersville, Georgia, pleaded guilty to conspiracy to receive health care kickbacks in the Northern District of Georgia. Gray is licensed to practice medicine in Georgia and was recruited to be the “medical director” for D4H in Georgia. D4H used Gray to provide a “standing order” under which Capstone could submit the fraudulent drug testing claims to Medicaid. Gray did not have a physician-patient relationship with the students, never examined any of them, and did not review or discuss the drug tests with any of the participating students. For his role in the scheme, Gray received approximately $30,000. On April 13, 2023, Gray was sentenced to two years of probation and ordered to pay $417,200.40 in restitution.
• Bree’Anna Harris, 32, of Phoenix, pleaded guilty to conspiracy to commit health care fraud and money laundering in the Western District of North Carolina to charges filed in the Northern District of Georgia and Western District of North Carolina. Among other things, Harris incorporated an entity, BPolloni Consulting LLC, which entered into a purported marketing agreement with Capstone. The arrangement between BPolloni and Capstone was used to receive and conceal the fraudulent kickback payments and distribute them to her coconspirators. On Dec. 5, 2023, Harris was sentenced to 36 months in prison for her role in the D4H scheme and related schemes in North Carolina and elsewhere.
• Glenn Pair, 36, of Stonecrest, Georgia, pleaded guilty to conspiracy to commit health care fraud and money laundering in the Western District of North Carolina to charges filed in the Northern District of Georgia, Western District of North Carolina and District of South Carolina. On July 27, 2022, Pair was sentenced to 70 months in prison for his role in the D4H scheme and related schemes in North Carolina, South Carolina and elsewhere.
• Rachel Sheats, 48, of Woodstock, Georgia, pleaded guilty to conspiracy to pay health care kickbacks in the Northern District of Georgia in January. Sheats was Capstone’s chief operations officer during the relevant time and served as a key point person for D4H at Capstone. Sheats has yet to be sentenced.

Maloney and Capstone also entered into a civil settlement agreement under which they agreed to pay $14.3 million to the federal government and several states to resolve claims arising from the submission of false claims to government health care programs. In addition to the allegations described above, the civil settlement resolves allegations that, between April 2020 and December 2021, Maloney and Capstone sought to profit off the COVID-19 pandemic by paying independent contractor sales representatives to recommend RPPs to senior communities interested only in COVID-19 tests. RPPs are an expensive panel that tests for many different respiratory pathogens, some of which are very rare, do not cause overlapping clinical syndromes and are found only in specific patient populations. To generate orders, Capstone’s independent sales representatives completed test requisition forms for RPPs using forged signatures of physicians who had only ordered COVID tests and sham diagnosis codes that did not reflect the medical conditions of the senior community residents receiving the tests. Capstone subsequently billed federal health care programs for these medically unnecessary tests and paid its sales representatives a commission for each test. The federal share of the settlement is approximately $13.9 million and approximately $400,000 constitutes a recovery for state Medicaid programs.

The whistleblower, the company’s former laboratory manager, will receive $2.86 million of the civil settlement (a 20% relator’s share).