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Press Release

Court Enters $4.5 Million Judgment Against Owner Of Defunct Urine Drug Testing Laboratory Resolving Allegations Of Participation In Kickback Schemes

For Immediate Release
U.S. Attorney's Office, Western District of North Carolina

CHARLOTTE, N.C. – Acting United States Attorney for the Western District of North Carolina William T. Stetzer announced today that the United States District Court for the Western District of North Carolina entered final judgment in the amount of $4.5 million against Douglas Smith, resolving the United States’ claims against Smith, one of the former owners of Physicians Choice Laboratory Services (PCLS), a now-defunct diagnostic testing laboratory formerly located in Charlotte, North Carolina and Rock Hill, South Carolina.  Smith consented to entry of final judgment against him to resolve allegations that he violated the Anti-Kickback Statute (AKS), and, as a result, caused PCLS to submit millions of dollars in false claims for reimbursement to the Medicare program in violation of the federal False Claims Act (FCA).

In June of 2019 the United States filed its Complaint in Intervention asserting FCA claims against Smith, PCLS and other agents of the laboratory based on allegations that they participated in various schemes to offer or provide benefits to physicians in exchange for the referral of patient samples for drug testing.  The United States contended that such conduct violated the AKS, which specifically forbids any person or entity from knowingly and willfully offering, paying, soliciting, or receiving remuneration to influence the referral of items or services reimbursable by a federal health care program, and, that as a result, it was entitled to recover damages under the FCA. 

This settlement resolves the United States’ allegations that from September 2012 through July 2014, PCLS submitted false claims to the Medicare program as a result of Smith’s payment of kickbacks to the owner of a medical practice in Knoxville, Tennessee.

Last week, the U.S. Attorney’s Office for the Western District of North Carolina announced that another defendant, Philip McHugh, also a former owner of PCLS, had agreed to pay over $2 million to resolve claims asserted by the United States that he participated in schemes to illegally induce physicians to refer patients to PCLS for urine drug testing.  In December of 2019, the U.S. Attorney’s Office announced that another defendant, Manoj Kumar, a former sales representative and manager of PCLS, had paid $649,407 to resolve similar claims.

The United States’ civil action was filed in the District of North Carolina following the filing of two whistleblower complaints under the qui tam provisions of the FCA, titled United States ex rel. Jenkins et al. v. Physician’s Choice Laboratory Services et al., originally filed in the Eastern District of Tennessee, and United States ex rel. Hartnett & Shoched v. Physicians Laboratory Services, LLC et al., originally filed in the Middle District of Florida, which were transferred to the Western District of North Carolina and consolidated under Civil Case No. 17-cv-37. 

Resolution of this matter was the result of coordinated efforts and investigation by the U.S. Department of Health and Human Services Office of the Inspector General and U.S. Attorney’s Office. The claims resolved by entry of the judgment are allegations only and there has been no determination of liability.

Updated March 30, 2021