Doctor Admits Accepting $1.8 Million in Bribes for Test Referrals to New Jersey Clinical Laboratory

NEWARK, NJ—A Morris County, New Jersey doctor today admitted accepting $1.8 million in bribes to refer millions of dollars in business to Biodiagnostic Laboratory Services LLC (BLS), of Parsippany, New Jersey, as part of a long-running scheme operated by the lab, its president, and numerous associates, U.S. Attorney Paul J. Fishman announced.

Frank Santangelo, 43, of Boonton, New Jersey, pleaded guilty before U.S. District Judge Stanley R. Chesler in Newark federal court to an information charging him with violating the Travel Act, money laundering, and failing to file tax returns.

“Patients should be able to trust that their doctors are prescribing only tests that are necessary and are recommending providers who are best qualified to perform those tests,” U.S. Attorney Fishman said. “In pleading guilty today to the charges against him, Dr. Santangelo admitted he violated that trust. He committed the type of fraud that drives up the cost of health care and compromises patient care.”

“The investigation of Dr. Santangelo is another sad story of a doctor putting his greed ahead of his oath of fidelity to his patients,” FBI New Jersey Special Agent in Charge Aaron T. Ford said. “The plea today is a direct result of the joint efforts of Health and Human Services-Office of Inspector General, United States Postal Inspection Service, Internal Revenue Service, and Federal Bureau of Investigation, who remain committed to protecting the American public from those who would abuse the health care needs of innocent patients for their own financial gain.”

According to documents filed in this and other cases and statements made in court:

Santangelo, who has offices in Montville and Wayne, New Jersey, received more than $1.8 million in bribe payments from BLS for referrals for which the lab was paid more than $6 million by Medicare and various insurance companies. After receiving more than $800,000 from BLS through sham lease agreements and sham service agreements between 2006 and 2010, Santangelo began receiving bribes from BLS through a third party—often tens of thousands of dollars a month—totaling more than $1 million between 2010 and his arrest in April 2013.

Santangelo acknowledged the authenticity of text messages between himself and BLS president and part owner David Nicoll in which Santangelo referred to ordering unnecessary tests to increase referrals to BLS in exchange for bribes. In one text message conversation, Santangelo said he and another doctor had “put our heads together and added a significant amount of testing....The testing is 90 percent legit.” Santangelo detailed his plan to send $1 million per month in blood testing referrals to BLS by increasing the number of blood tests being ordered, including medically unnecessary tests.

In another text message conversation, David Nicoll wrote to Santangelo about the status of their referral agreement, stating that BLS “really can’t afford the 40-50,000 [dollars] a month if the girls aren’t going to be drawing any blood,” to which Santangelo responded by stating, “U no u can count on me” and “I never let u down.”

He also pleaded guilty to money laundering, admitting that he used another individual in an attempt to hide the bribes from BLS, and to failing to file tax returns from 2009-2011 and pay taxes owed during that time period.

On April 9, 2013, federal agents arrested David Nicoll, 39, of Mountain Lakes, New Jersey; Scott Nicoll, 32, of Wayne, New Jersey, a senior BLS employee and David Nicoll’s brother; and Craig Nordman, 34, of Whippany, New Jersey, a BLS employee and the CEO of Advantech Sales LLC—an entity used by BLS to make illegal payments. They were charged by federal complaint with the bribery conspiracy, along with the BLS company and Santangelo. Last month, David and Scott Nicoll and four other associates of BLS pleaded guilty to charges related to their involvement. So far, nine employees or associates of BLS, and four physicians have pleaded guilty to their roles in the bribery scheme.

“When a doctor prescribes a medical test, patients should feel confident that it is in their best interest,” said Thomas O’Donnell, Special Agent in Charge, Office of Inspector General, Department of Health and Human Services, New York region. “But when that doctor accepts more than a million dollars in bribes as Dr. Santangelo did, he jeopardizes patient-doctor trust, his patients’ health, and the integrity of the Medicare program, and he will be prosecuted accordingly.”

The bribery count to which Santangelo pleaded guilty is punishable by a maximum potential penalty of five years in prison and a $250,000 fine. He also faces a maximum potential penalty of 20 years in prison and a $500,000 fine on the money laundering charge, or twice the gross gain or loss from the offense, and a maximum potential penalty of one year in prison and a $100,000 fine on the tax charge. Sentencing for Santangelo is scheduled for October 24, 2013.

Santangelo has also agreed to forfeit more than $1.8 million. The investigation has so far recovered more than $2 million through forfeiture.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Tom O’Donnell; IRS– riminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; and the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates, with the ongoing investigation leading to today’s guilty pleas.

The government is represented by Senior Litigation Counsel Andrew Leven, Assistant U.S. Attorney Joseph Minish, and Jacob T. Elberg, Chief of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark, as well as Assistant U.S. Attorney Barbara Ward of the office’s Asset Forfeiture and Money Laundering Unit.