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Press Release

Former CEO of defunct medical testing laboratory sentenced to prison for medical kickback scheme

For Immediate Release
U.S. Attorney's Office, Western District of Washington
Signed phony agreements to market other testing labs; payments were actually kickbacks for referring government business

Seattle – The former Chief Executive Officer of Northwest Physicians Laboratory (NWPL) was sentenced today in U.S. District Court in Seattle to two years in prison and $7.6 million in restitution for conspiracy to solicit kickbacks, announced U.S. Attorney Nick Brown.  Jae Lee, 51, of Bellevue, Washington, served as the CEO of Northwest Physicians Laboratory (NWPL).  Between 2013 and 2015, Lee conspired with others to get kickbacks from medical testing labs in exchange for government testing business referred to the labs.   In pronouncing sentence, U.S. District Judge John C. Coughenour noted, the scheme was large and clearly illegal.

“Mr. Lee knowingly set up a scheme to profit by referring government health care business to other labs – even more disturbing he tried to play one lab off against another to increase his ill-gotten gain,” said U.S. Attorney Nick Brown.  “Such conduct increases healthcare costs for all of us.  This case should be a warning to others who may consider such schemes.”

The activities of Bellevue-based Northwest Physicians Laboratory (NWPL) have been the subject of extensive civil and criminal litigation. CEO Lee helped NWPL obtain more than $3.7 million in kickback payments by steering urine drug test specimens to two labs that could bill the government for testing. This resulted in government payments to those two labs of more than $6.5 million.

According to records filed in the case between January 2013 and July 2015, two labs, that were not physician owned, made payments to NWPL in exchange for referrals of Medicare and TRICARE program business, in violation of the Anti-Kickback Statute.  Paying remuneration to medical providers or provider-owned laboratories in exchange for referrals encourages providers to order medically unnecessary services.  The Anti-Kickback Statute functions, in part, to discourage such behavior. NWPL was physician-owned, and for that reason could not test urine samples for patients covered by government health programs such as Medicare, Medicaid, and TRICARE.  In order to conceal the payment of the kickbacks, Lee and other co-conspirators involved described the fees as being for marketing services; however, no marketing services were performed. 

The kickback payments to NWPL were commingled with other company revenue.  Over the course of the scheme, Lee received more than $800,000 in distributions from NWPL’s commingled funds.  As prosecutors wrote in their sentencing memo, “The crime was based purely on Mr. Lee and the others’ greed. The NWPL business model was profitable.  It could afford to pay doctors thousands of dollars a month in dividends.  It could afford to pay healthy distributions to its owners.  This did not satisfy Mr. Lee.  He was determined to maximize profits even if it meant breaking the law.” 

The company, NWPL, pleaded guilty in February 2021 and was sentenced to pay $8,114,417 in restitution joint and several with the other criminal defendants.  NWPL has dissolved. To date, the labs and individuals involved in this investigation have agreed to pay more than $14 million to settle related civil allegations

"Mr. Lee’s sentencing culminates his illicit, greed-driven scheme to defraud federal healthcare programs, including the Department of Defense's TRICARE program," said Bryan D. Denny, Special Agent in Charge for the Department of Defense Office of Inspector General, Defense Criminal Investigative Service, Western Field Office.  "Fraudulent healthcare billings inflate costs, erode public confidence, and in the case of the Department of Defense, ultimately degrade American warfighter readiness and undermine the missions of our military services.”

“Individuals who participate in kickback schemes do so at the risk of undermining the integrity of federal health care programs,” said Special Agent in Charge Steven J. Ryan with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to work with law enforcement partners to bring to justice those who steal from these programs for personal gain.”

“Mr. Lee was one of the ringleaders of a conspiracy that stole more money per month than some honest Americans make in a year” said Donald M. Voiret, Special Agent in Charge of the Seattle FBI Field Office. “By stealing from these benefits programs, he wasn’t only stealing from taxpayers, but taking funding from people who legitimately relied on these programs for their health and well-being.”

In addition to Lee, two other defendants await sentencing.  Kevin Puls, 57, the former Executive Director of NWPL, is scheduled for sentencing September 6, 2022.  Richard Reid, 53, was convicted following a six-day jury trial.  He is scheduled for sentencing on October 11, 2022.

The case was investigated by the FBI, Health and Human Services Office of Inspector General (HHS-OIG), and the Defense Criminal Investigative Service (DCIS).

The case is being prosecuted by Assistant United States Attorneys Brian Werner and Michael Dion.


Press contact for the U.S. Attorney’s Office is Communications Director Emily Langlie at (206) 553-4110 or

Updated May 27, 2022

Consumer Protection
Financial Fraud
Health Care Fraud