Feds charge NJ lab, doctor with kickback scheme

NEWARK, N.J. (AP) -- A northern New Jersey medical laboratory bribed doctors to refer patients and perform unnecessary tests, reaping millions of dollars that its president used to fund a passion for high-end sports cars and other luxury items, the U.S. attorney's office alleged in a criminal complaint released Tuesday.

David Nicoll, president and part owner of Parsippany-based Biodiagnostic Laboratory Services, was arrested along with three others Tuesday morning. They were charged with engaging in the scheme over a seven-year period. One of the others arrested was Frank Santangelo, a doctor with offices in Montville and Wayne who is accused of taking more than $700,000 in bribes from BLS.

U.S. Attorney Paul Fishman likened BLS' actions to those of "a salesman trying to make a buck" off unsuspecting patients. While Santangelo was the only doctor charged, Fishman said at least dozens of other doctors were involved in the scheme and that more arrests were likely.

"These doctors put illegal profit before the interests of their patients," he said.

Nicoll, 39, of Mountain Lakes; his brother and BLS employee Scott Nicoll, 32, of Wayne; and BLS employee Craig Nordman, 34, of Whippany, were charged with conspiracy to bribe physicians. Santangelo was charged with accepting a bribe and another bribery-related count. Each count carries a maximum five-year prison sentence plus a fine of at least $250,000.

The four made initial appearances in U.S. District Court on Tuesday afternoon and were released on bail amounts ranging from $250,000 to $1 million, according to the U.S. Attorney's Office.

Biodiagnostic Laboratory Services also was charged with conspiracy and faces a maximum penalty of five years' probation plus a fine of at least $500,000. Attorneys for the defendants and the company couldn't immediately be reached for comment.

BLS earned $200 million over the course of the scheme, Fishman said, but he wasn't able to say how much of that total was the result of the scheme. He estimated that BLS defrauded Medicare of "tens of millions" of dollars for the unnecessary tests.

Nicoll used the profits to buy, among other items, a $580,000 Yenko Nova automobile and a $300,000 Ferrari. He also allegedly spent $392,000 on tickets to sporting events and $154,000 at a gentlemen's club and restaurant, according to the complaint.

To persuade the doctors to refer their patients' blood specimens to BLS for analysis, the company set up bogus lease agreements, the U.S. attorney's office alleged. In one example, a doctor was paid $2,200 per month to lease out a 676-square-foot office area to BLS, when the space allocated to BLS was actually about 100 square feet.

When New Jersey lawmakers cracked down on physicians' lease agreements in 2010, BLS continued the scam by creating bogus consulting companies to disguise bribe payments to physicians, according to the complaint.

While Fishman said there wasn't any evidence that patients had been harmed by the alleged scheme, he noted that the unnecessary blood tests were often justified by diagnoses that may or may not have been accurate. An incorrect diagnosis of a medical condition could stay in a patient's file for years and affect future treatment, he said.