Lab Genomics settles kickback allegations for $1.25 million in California

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Lab Genomics $1.25M settlement

Highlights

Lab Genomics and CEO Parag Dalal settled for $1.25 million over allegations of paying illegal value- and volume-based commissions to marketers from January 2020 to September 2022.
Whistleblowers Sunil Wadhwa and Ken Newton, who launched the qui tam suit, will receive $225,000 from the settlement as part of the resolution in United States ex rel. Wadhwa and Newton v. Admera Health, LLC, et al.
The Department of Justice emphasized this settlement as part of a broader crackdown on health care fraud, following similar actions against Admera Health LLC and NEXT Bio-Research Services LLC.

Settlement terms and alleged payment scheme

As reported by U.S. Department of Justice, the settlement resolves allegations that the Fountain Valley, California-based laboratory and Dalal violated the False Claims Act through compensation arrangements that breached the Anti-Kickback Statute. Prosecutors alleged that from January 2020 through September 2022, the company knowingly and willfully paid value- and volume-based commissions to three independent contractor marketers to induce them to arrange for or recommend laboratory test orders and referrals to Lab Genomics.

Authorities also alleged that Lab Genomics and Dalal structured invoices to make the payments appear to be flat fees, masking commission-based compensation. The Anti-Kickback Statute bars offering or paying remuneration to induce referrals involving Medicare, Medicaid and other federally funded healthcare programs, and claims submitted in violation of that law can also trigger False Claims Act liability.

The case stems in part from a whistleblower lawsuit filed by Sunil Wadhwa and Ken Newton under the False Claims Act's qui tam provisions. The relators will receive $225,000 from the settlement proceeds, and the government said the matter is captioned United States ex rel. Wadhwa and Newton v. Admera Health, LLC, et al. in the Eastern District of California.

Enforcement push in healthcare fraud cases

Justice Department officials said the resolution reflects a broader effort to police healthcare fraud and protect the integrity of federal reimbursement programs. Assistant Attorney General Brett A. Shumate said kickback payments compromise healthcare programs, while U.S. Attorney Eric Grant said his office will continue to pursue schemes that evade safeguards for federal healthcare funds.

The Department of Health and Human Services Office of Inspector General also said unlawful laboratory compensation arrangements can distort medical decision-making and misuse taxpayer-backed healthcare dollars. The Justice Department noted that the United States previously resolved similar allegations against Admera Health LLC and NEXT Bio-Research Services LLC, doing business as Next Molecular Analytics.

The government said the matter was handled by the Civil Division's Commercial Litigation Branch, Fraud Section, the U.S. Attorney's Offices for the Eastern District of California, and HHS-OIG. The settlement resolves allegations only, and there has been no determination of liability.

Our earlier report on a Court of Appeal ruling in Malaysia examined how a lawyer described as a commission partner could still be treated as a full partner under the Partnership Act 1961 and held liable for a firm-related debt. We noted that the decision clarified that commission- or salary-based status does not necessarily shield individuals from liability, with potential implications for how professional firms structure roles and compensation.

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