Trustee Marshall Grade Charges Reliance Laboratory Testing, Piper Berkowitz & Others of Involvement in an Alleged “Fraudulent and Unlawful Scheme”
May 26, 2021, Northern District of Florida – Trustee Marshall Glade for the bankruptcy estate of Campbellton-Graceville Hospital Corporation (the “Debtor” or “CGH”) sues Defendant Piper Berkowitz & Co. to recover alleged “fraudulent transfers” in the total amount of $2,320,695.46 under § 548 and 550 of the Bankruptcy Code.
CGH operated as a rural critical access hospital (“CAH”) with 25 beds located in Graceville, Florida. CGH was apparently “in financial distress” and allegedly “entered into a business arrangement with an independent group to boost the revenue of the hospital” by creating a significant stream of clinical laboratory work for CGH (“Laboratory Outreach Program”). As alleged in the complaint, in actuality, “the arrangement involved a fraudulent and unlawful pass-through billing scheme perpetrated by its architects”. CGH allegedly “billed claims to third-party payers for laboratory tests of non-patients that were never performed at CGH”. CGH allegedly “billed more than $300 million” and “collected more than $130 million per approximately 12-month period in furtherance of the scheme”.
As a part of the Laboratory Outreach Program, CGH made transfers worth $67.5 million to Reliance Laboratory Testing for its role and participation (“Reliance transfers”). Further, during the same period, Reliance allegedly “transferred a sum of $32.5 million to KTL labs for facilitating kickbacks and payments to individuals and companies”. KTL Labs subsequently “made payments totaling $2.3 million to Defendant for its participation in the billing scheme”.
The Trustee alleges that the Reliance transfers constituted a “transfer of an interest of the Debtor in property” in which the Debtor “did not receive reasonably equivalent value”. Further, the Trustee argues that the alleged transfers were “made within four years of the petition date” with “actual intent to hinder, delay or defraud Debtor”. The Trustee accused Defendant to be “immediate or mediate transferee” of the transfers and urges the court to direct Defendant to “turn over” the transfers to the Trustee “for benefit of the estate”. According to the Trustee, the alleged transfers were “kickbacks”, “disguised as independent contractor payments”, paid to Defendant “for its participation in the billing scheme”.
Campbellton-Graceville Hospital Corporation commenced its bankruptcy case on May 5, 2017, by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101, et. seq.