Supreme Court Urged to Review $114 Million Kickback Ruling

Sept. 28, 2021, 3:23 PM

The co-owner of a marketing firm urged the U.S. Supreme Court to review a decision that upheld a $114 million False Claims Act verdict in a kickback scheme to defraud Medicare involving unnecessary blood-test orders.

The government convinced a jury that Health Diagnostics Laboratory Inc. and Singulex paid commissions to Floyd Calhoun Dent III’s marketing firm BlueWave Healthcare Consultants Inc. based on blood-test sales numbers and that this violated the Anti-Kickback Statute.

The U.S. Court of Appeals for the Fourth Circuit on Feb. 22 affirmed the award, ruling that Dent and others knowingly made unlawful payments to salespeople to increase orders.

Dent and others received clear warnings from attorneys about the payments’ potential illegality, which showed willful offering of payments in violation of the kickback law, the Fourth Circuit said.

The Supreme Court should review this decision because it “vastly expands the reach of the AKS to reach a broad range of completely innocent conduct,” Dent said in his petition for review docketed Sept. 22.

The kickback law’s purpose is to protect patients from doctors whose medical judgments may be clouded by improper financial considerations, Dent said.

This purpose isn’t served by barring commissions to independent sales contractors who don’t arrange referrals of patients, Dent said.

But payments the laboratories paid to Bluewave that Bluewave paid to its marketers couldn’t violate the kickback law because the marketers were never in a position to make referrals or exercise control over any physician’s decision to refer a patient for testing, Dent said.

The government provided no evidence that commissions increased amounts paid by Medicare or allowed the marketers to improperly influence physicians’ exercise of medical judgment, Dent said.

The Fourth Circuit ignored Dent’s objectively reasonable interpretation of the kickback statute that was based on the advice of experienced lawyers and created a circuit split, Dent said.

Dent said the Fifth Circuit ruled in 2004 that the kickback law doesn’t bar the payment of commissions to non-employee marketers who neither participate in nor make referrals for medical services.

The jury found in January 2018 that Dent, Bluewave co-owner Robert Bradford Johnson, and Latonya Mallory, the former CEO of Health Diagnostics Laboratory, were liable for about $17 million in damages for submitting thousands of false claims to the federal government.

After tripling the damages and adding civil penalties, a district court entered judgment for $114 million.

Barnwell Whaley Patterson & Helms LLC, Nexsen Pruet, and Joe Griffith Law Firm LLC represented Dent.

The case is Dent v. United States, U.S., No. 21-445, petition 9/20/21 .

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com

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