Medicaid fraud guilty pleas for unnecessary urine tests

Medicaid Fraud kickbackMedicaid fraud scheme brings two guilty pleas from former executives of Calloway Laboratories.  The former CEO and former COO plead guilty on Friday.

Medicaid fraud scheme cost Medicaid millions of dollars

The elaborate Medicaid fraud scheme used “straw companies” to give kickbacks to sober houses.  In return, the sober houses ordered unnecessary drug screening urine tests from Calloway Laboratories.  The tests were neither ordered by a doctor nor medically necessary.  Medicaid was billed for the tests – costing millions of dollars.  Calloway Laboratories settled the charges in March for $20 Million.

If you have non-public information about Medicaid fraud or other health care fraud, a whistleblower attorney can help you determine whether you have a case.  We can help evaluate whether you may be eligible for a whistleblower reward and guide you through the steps that need to be taken.  Call 1-877-255-2676 today or contact us.

Reporting on the guilty pleas, the Boston Business Journal explains:

Former Calloway CEO Arthur Levitan, 40, of Barnstable, Mass.; former Calloway COO Patrick Cavanaugh, 49, of Gloucester, Mass.; and sober house owner William Maragioglio, 43, of Everett, Mass., pleaded guilty in Middlesex Superior Court on Friday to charges of engaging in a kickback scheme. The fraud involved two straw companies that funneled monetary incentives to several sober houses and a medical office to illegally obtain urine drug screening business paid for by the Massachusetts Medicaid program, MassHealth….

The defendants were accused of setting up two corporations, JAC Resources, Inc. (JAC) and MJK & Associates, LLC (MJK), and a bank account for the purpose of carrying out the scheme. Maragioglio, Levitan and Cavanaugh made a series of inappropriate kickbacks through JAC, MJK and the bank account in order to induce sober houses to order urine drug screens from Calloway, which were paid by Medicaid.

Massachusetts  Attorney General Martha Coakley also previously issued a statement:

“We allege that this kickback scheme was one of the most egregious abuses of the Medicaid program our office has handled,” AG Coakley said. “This agreement allows us to return significant and much needed funding to MassHealth and to taxpayers. We will continue to prosecute the individuals we believe were responsible for carrying out these serious allegations.”….

According to the indictments, Calloway Laboratories, engaged in a pervasive kickback scheme involving two straw companies that funneled monetary incentives to employees at several sober houses and a medical office to illegally obtain urine drug screening business paid for by MassHealth, the Commonwealth’s Medicaid program.

The indictments also alleged that the company falsely billed MassHealth for urine screening services that were not ordered by a doctor or authorized prescribers for a medically necessary purpose as required by law. The settlement resolves the 21 corporate indictments brought against Calloway Laboratories. The AG’s Office continues to prosecute the remaining 21 indictments against the individuals involved in the case.

In addition to reimbursing state taxpayers in the amount of $20 million, Calloway Laboratories has agreed that Levitan and Cavanaugh will be no longer be employed by or consult with the company, or any entity owned or controlled by the company, in any way. The company has also agreed to a comprehensive three-year compliance and monitoring program, involving an independent compliance reviewer, as well as annual site and record audits.


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