Fourth Circuit Court of Appeals Affirms $114 Million Judgment Against 3 Defendants Found Liable of Defrauding Medicare and Tricare

Columbia, South Carolina --- Acting United States Attorney for the District of South Carolina M. Rhett DeHart announced today that the United States Court of Appeals for the Fourth Circuit has affirmed a $114 million judgment against Floyd Calhoun “Cal” Dent, III, of Lexington, and his two co-conspirators, all of whom a South Carolina jury found liable for defrauding the federal healthcare programs Medicare and Tricare.

At trial, the United States contended that, when specialty labs Health Diagnostics Laboratory, Inc. (“HDL”) and Singulex, Inc. paid commissions to Dent’s marketing firm, BlueWave, based on the number of blood tests sold, the parties violated the Anti-Kickback Statute.  The United States argued these volume-based commissions constituted “remuneration” intended to induce BlueWave’s sales representatives to sell as many blood tests as possible.  The United States also contended the Anti-Kickback Statute prohibited BlueWave from paying its salespeople for recommending the tests.  By paying these kickbacks, the defendants caused false claims to be submitted to federal healthcare programs for millions of dollars in unnecessary blood tests.  The jury agreed, and now the Fourth Circuit has affirmed the jury’s verdict in a published opinion.

“This is an important victory for patients, the Medicare Program, and American taxpayers,” said Acting U.S. Attorney M. Rhett DeHart.  “Individuals who scheme to defraud our federal health care system must be held personally accountable for their actions.  This judgment, which was affirmed by the Court of Appeals, will send a strong deterrent message that this kind of conduct will not be tolerated.  I am extremely proud of our office, particularly our Affirmative Civil Enforcement section, for its tireless work on this case.  It takes a true team effort to protect the great people of South Carolina.”

“This result underscores the department’s commitment to holding accountable those who pay improper commissions or other financial incentives,” said Acting Assistant Attorney General Brian M. Boynton for the Justice Department’s Civil Division.  “Kickbacks undermine the public’s trust in the healthcare system and the integrity of federal healthcare programs.”

The Fourth Circuit found the United States “provided abundant evidence as to Defendants’ knowledge and intent” to pay kickbacks.  The court acknowledged that attorneys within HDL and BlueWave warned the defendants that paying commissions to independent contractors might well violate the Anti-Kickback Statute.  The United States also presented sufficient evidence that outside lawyers warned all three defendants about the illegality of the commissions.

The Fourth Circuit also rejected the defendants’ contention that commissions to salespeople can never constitute kickbacks under the Anti-Kickback Statute, and found that the scheme violated the Statute and, in turn, violated the False Claims Act.  Additionally, the court found the defendants’ contention that they were entitled to a new trial based on a variety of purported legal errors in the jury instructions to be “meritless.”

Finally, the Fourth Circuit rejected Dent’s challenge to the district court’s determination that pre-judgment transfers of three properties to Dent’s wife and two corporations controlled by her were fraudulent.  The court upheld the district court’s finding, citing the timing of the transfers, the nominal amount paid for the properties, the fact that the transfers were made to family members, and the fact that the transfers were made several months after Dent knew he was under federal investigation.

The published opinion, U.S. v. LaTonya Mallory et al., No. 18-1811, filed February 22, 2021, may be found at https://www.ca4.uscourts.gov/Opinions/181811.P.pdf.

The appeal was handled by the Appellate Staff of the Justice Department.  The underlying case was handled by Assistant U.S. Attorneys James Leventis, Tina Cundari, and Johanna Valenzuela of the U.S. Attorney’s Office for the District of South Carolina; the Commercial Litigation Branch of the Justice Department’s Civil Division; Health and Human Services, Office of the Inspector General; the Federal Bureau of Investigation; the U.S. Office of Personnel Management Office of the Inspector General; and the Department of Defense Office of Inspector General, Defense Criminal Investigative Service.

The civil lawsuit was filed in the District of South Carolina based on several whistleblower complaints and is captioned United States of America et al v. BlueWave Healthcare Consultants Inc., 9:14-cv-00230-RMG.

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This case illustrates the government’s emphasis on combating health care fraud.  Tips and complaints from all sources about potential health care fraud, waste, and abuse can be reported to the Department of Health and Human Services at 1-800-HHS-TIPS (800-447-8477) or HHSTips@oig.hhs.gov.