New Jersey Lab President Charged in Referral Scheme; Physician, Two Employees Arrested

Federal agents arrested the president and part-owner of Biodiagnostic Laboratory Services (BLS; Parsippany, N.J.), a New Jersey physician, and two employees in April on charges they participated in a long-running cash-for-referral scheme. Arrested were BLS President David Nicoll, 39, of Mountain Lakes, N.J.; his brother Scott Nicoll, 32, of Wayne, N.J., a senior BLS employee; and Craig Nordman, 34, of Whippany, N.J., the CEO of Advantech Sales LLC—an entity used by BLS to make illegal payments. They are charged with bribing doctors to refer patient blood samples to BLS and to order unnecessary tests, resulting in tens of millions of dollars in profit for the company. BLS is also charged with the conspiracy. The charges were announced by New Jersey U.S. Attorney Paul Fishman. Frank Santangelo, 43, of Boonton, N.J., a physician with offices in Montville and Wayne, is charged in the complaint for allegedly accepting bribes to refer patients to BLS and violating his duty of fidelity to patients. Santangelo allegedly received more than $700,000 in bribe payments from BLS and sent the company more than $4.2 million in blood referrals. “Kickbacks have no place in the health care industry,” said Tom O’Donnell, special agent in charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Federal and state taxpayers, and vulnerable patients, deserve better.” Inducement for Referrals According to the complaint, between 2006 and 2013, BLS and entities it funded paid millions of dollars to physicians to induce them to refer patient blood samples to BLS. From these referrals, BLS received at least tens of millions of dollars from private health insurance companies and Medicare. Numerous physicians were bribed under the guise of lease, service, or consulting agreements. Under the lease and service agreements, between 2006 and 2009, physicians were frequently paid thousands of dollars a month by BLS for space in medical offices that BLS did not need or actually use and to perform routine blood drawing services that had little real dollar value. In a text message referenced in the complaint, David Nicoll wrote to Santangelo about the status of their referral agreement, stating that BLS “really can’t afford the 40-50,000 [dollars] a month if the girls aren’t going to be drawing any blood,” to which Santangelo responded by stating, “U no u can count on me” and “I never let u down.” When the state of New Jersey sought to address the problem of laboratories using lease agreements to bribe physicians for referrals—effectively prohibiting all leases between blood laboratories and physicians in 2010—BLS, David Nicoll, Scott Nicoll, and Nordman funded and used at least half a dozen entities to disguise bribe payments to physicians. In one example from the complaint, a physician was paid $1,500 per month by Nordman—who identified himself as both a BLS employee and the CEO of Advantech—for spending less than two minutes each month filling out a one-page questionnaire asking how often sales representatives visited the physician’s office, which insurance companies were in-network for the physician, and which out-of-network insurance companies did the physician bill. In reality, the payments were to refer patients’ blood samples to BLS. Various recorded conversations are also detailed in the complaint, including one in which Nordman urges another physician to order more tests, stating, “That’s where it really is. I mean, if we get 10 bloods for $1,000, as opposed to 10 bloods for $4,000 or five bloods for $4,000, obviously there’s more. We get paid a percentage, obviously.” In a second conversation, Scott Nicoll tells this same physician, “I would like to be able to get you, you know, around 1,500 [dollars] a month if I can, but I need—we would either need more tests or more patients or something along those lines . . . you’re doing about $1,000 a bag per patient . . . if we could, we could somehow get that up in the two’s, then I’m looking at making 4,000, and I have no problem paying you know 1,500 [dollars] for it.” Profit of $200 Million From Conspiracy Over the course of the charged conspiracy, BLS has made more than $200 million from the testing of blood specimens and related services. David Nicoll received more than $33 million in distributions from BLS during that same period, during which he also spent millions on personal items: more than $5 million on high-end and collectible automobiles, including approximately $580,000 for a Yenko Nova and approximately for $365,000 for a Yenko Chevelle, approximately $300,000 for a Ferrari, and approximately $291,000 for a Corvette; more than $700,000 to purchase a Manhattan apartment for a female companion; $600,000 on private jet charters; $392,000 on tickets to sporting events; $216,000 at electronics stores; and $154,000 at a gentleman’s club and restaurant. “It is alleged in today’s complaint that the president and other employees of BLS bribed physicians to refer patients to their lab and order unnecessary lab tests, reaping millions of dollars, all in the name of greed,” stated Shantelle Kitchen, acting special agent in charge, IRS-Criminal Investigation, Newark Field Office. “Medical tests should only be run when medically necessary, not so someone can buy exotic cars and charter private jets. This type of health care fraud will not be tolerated and IRS-Criminal Investigation, along with our law enforcement partners, will vigorously investigate these crimes to bring the perpetrators to justice.” David Nicoll, Scott Nicoll, and Nordman are charged with one count of conspiring to violate the anti-kickback statute and the Federal Travel Act. Santangelo is charged in two counts—with substantive violations of the anti-kickback statute and the Federal Travel Act, for allegedly using the interstate mail in aid of commercial bribery. If convicted, the defendants face a maximum potential penalty of five years in prison on each of the counts with which they are charged. Each count also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense. BLS is also charged with the conspiracy and faces a maximum potential penalty of five years of probation and a $500,000 fine, or twice the gross gain or loss.