21 Charged, Including Hospital and Lab CEOs, in Connection with Multistate Healthcare Kickback Conspiracy
TEXARKANA, Texas – A Temecula, California, man has been found guilty of federal violations related to a health care kickback scheme in the Eastern District of Texas, announced U.S. Attorney Damien M. Diggs today.
Steven Donofrio, 49, was found guilty by a jury on May 5, 2023, following a two-week trial before U.S. District Judge Robert W. Schroeder, III.
“This is the last of many defendants in this case who abused our healthcare system for the sake of stealing taxpayer dollars and in the process caused unnecessary medical procedures,” said U.S. Attorney Damien M. Diggs. “Protecting citizens from physical and financial harm is always a top priority for law enforcement and parasites like Donofrio, who prey on vulnerable citizens, will be brought to justice.”
“The reach of HHS/OIG is far and wide. Our agents and law enforcement partners will not be deterred by the scope of a healthcare fraud investigation or the location of its defendants,” said Jason E. Meadows, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General, Dallas Region. “Donofrio and others stole millions from American taxpayers for medically unnecessary services and all to line the pockets of greedy individuals across the country. HHS/OIG and our partners remain laser-focused in our pursuit of those who use the Medicare trust fund as their own personal piggy bank.”
“Illegal kickback schemes corrupt the healthcare system by causing billions of dollars in losses each year. They also directly affect patients who expect to receive quality care and to be billed for legitimate services from their health care providers,” said FBI Dallas Special Agent in Charge Chad Yarbrough. “We will continue to work tirelessly with our law enforcement partners to hold those who commit healthcare fraud accountable and seek justice for the patients that are harmed as a result of these schemes.”
According to information presented in court, Donofrio conspired with others to pay and receive kickbacks in exchange for the referral of, and arranging for, health care business, specifically pharmacogenetic (PGx) tests. Pharmacogenetic testing, also known as pharmacogenomic testing, is a type of genetic testing that identifies genetic variations that affect how an individual patient metabolizes certain drugs. The illegal arrangement concerned the referral of PGx tests to clinical laboratories in Fountain Valley, California; Irvine, California; and San Diego, California. More than $28 million in illegal kickback payments were exchanged by those involved in the conspiracy.
In December 2019, twelve individuals from three states were charged for their roles in the kickback conspiracy. A federal grand jury in the Eastern District of Texas returned an indictment against Philip Lamb, 48, of Eagle, Colorado; Nicolas Arroyo, 41, of Tempe, Arizona; Vincent Marchetti, Jr., 58, of Coronado, California; William Flowers, 58, of Houston, Texas; Steven Donofrio; James J. Walker, Jr. a/k/a Jimmy Walker, 49, of Frisco, Texas; Timothy Armstrong, deceased, formerly of Frisco, Texas; Virginia Blake Herrin, 57, of Frisco, Texas; Patrick Ridgeway, 53, of Jackson, Mississippi; Chismere Mallard, 42, of McAllen, Texas; Dr. Ray W. Ng, 65, of Dallas, Texas; and Ashley Kretzschmar, 37, of Aledo, Texas; for conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.
Philip Lamb, Nicolas Arroyo, Jimmy Walker, Timothy Armstrong, Virginia Blake Herrin, Patrick Ridgeway, Chismere Mallard, and Ashley Kretzschmar pleaded guilty prior to trial. Kimberly Willette, 61, of Friendswood, Texas, and Edwin Chad Isbell, 50, of Atascocita, Texas also pleaded guilty to related charges.
Vincent Marchetti, Jr., was found guilty by a jury on December 16, 2021, following a month-long trial. He was sentenced to 48 months in federal prison on August 30, 2022.
On April 25, 2022, Nicolas Arroyo was sentenced to 21 months in federal prison. On August 23, 2022, Kimberly Willette was sentenced to one year and one day in federal prison, and Patrick Ridgeway was sentenced to a three-year term of probation and ordered to pay a $100,000 fine.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remunerations in exchange for the referral of or arranging for or recommending the ordering of items or services payable under federal health care programs. Under federal statutes, violations of the Anti-Kickback statute are punishable by up to five years in federal prison.
This case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General, and the FBI Dallas – Frisco Resident Agency. It was prosecuted by Assistant U.S. Attorneys Nathaniel C. Kummerfeld, Lucas Machicek, and Adrian Garcia, with assistance from Assistant U.S. Attorneys Stephan E. Oestreicher, Jr., Brent Andrus, and L. Frank Coan, Jr., and Special Assistant U.S. Attorney Laurel E.P. Simmons.