Former hospital CEO headed to prison

TYLER – A former Texas hospital chief executive officer has been sentenced to 36 months in federal prison for conspiring to violate the Anti-Kickback Statute, announced U.S. Attorney Damien M. Diggs. Jeffrey Paul Madison, 49, of Burnet, Texas; Susan L. Hertzberg, 66, of New York, New York; Matthew John Theiler, 58, of Pinehurst, North Carolina; David Weldon Kraus, 66, of Maryville, Tennessee; and Thomas Gray Hardaway, 52, of San Antonio, Texas, were found guilty by a jury on November 30, 2023, following a seven-week-long trial before U.S. District Judge Jeremy D. Kernodle. Madison was sentenced to 36 months in federal prison by Judge Kernodle on January 15, 2025. Madison also agreed to pay $5,343,630 to resolve allegations under the False Claims Act involving illegal payments to physicians for laboratory referrals in violation of the Anti-Kickback Statute.

On November 20, 2024, Theiler was sentenced to 18 months in federal prison and ordered to pay a $75,000 fine. On December 5, 2024, Kraus was sentenced to 22 months in federal prison and ordered to pay a $25,000 fine.

On January 12, 2022, Hertzberg, Theiler, Kraus, Hardaway, and Madison, as well as Jeffrey Paul Parnell, 56, of Tyler; Laura Spain Howard, 50, of Lucas; Todd Dean Cook, 59, Ocala, Florida; William Todd Hickman, 61, of Anna; Christopher Roland Gonzales, 48, of Fairview; Ruben Daniel Marioni, 40, of Spring; Jordan Joseph Perkins, 40, of Conroe; Elizabeth Ruth Seymour, 42, of Corinth; Linh Ba Nguyen, 60, of Dallas; Thuy Ngoc Nguyen, 56, of Dallas; Joseph Gil Bolin, of Dallas; Heriberto Salinas, 64, of Dallas; and Hong Davis, 57, of Copper Canyon, were indicted for conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.  The statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federal health care programs.  The defendants were charged for their roles in a conspiracy through which physicians were incentivized to make referrals to rural hospitals and an affiliated lab in exchange for kickbacks which were disguised as investment returns; and in which marketers were incentivized to arrange for or recommend the ordering of services from rural hospitals and an affiliated lab.

Two rural Texas hospitals, Little River Healthcare (LRH) based in Rockdale, and Stamford Memorial Hospital based in Stamford, partnered with Boston Heart Diagnostics (BHD), a clinical laboratory based in Framingham, Massachusetts, that specialized in advanced cardiovascular lipid testing.  For a fee, BHD processed the blood tests while the hospitals billed the tests to insurers as hospital outpatient services, with the hospitals charging insurers a much higher rate than BHD could receive as a clinical laboratory.  The hospitals utilized a network of marketers who in turn operated management services organizations (MSOs) that offered investment opportunities to physicians throughout the State of Texas.  In reality, the MSOs were simply a means to facilitate payments to physicians in return for the physicians’ laboratory referrals.  Pursuant to the kickback scheme, the hospitals paid a portion of their laboratory revenues to marketers, who in turn kicked back a portion of those funds to the referring physicians who ordered BHD tests from the hospitals or from BHD directly.  BHD executives and sales force personnel leveraged the MSO kickbacks to gain and increase referrals and, in turn, to increase their revenues, bonuses, and commissions.

Parnell, Howard, Cook, Hickman, Gonzales, Marioni, Perkins, Seymour, Thuy Nguyen, Salinas, and Davis pleaded guilty prior to trial.

In January 2022, Robert O’Neal, 66, of Beaumont, pleaded guilty to conspiracy to commit illegal remunerations, in violation of Anti-Kickback Statute, and to conspiracy to commit money laundering. His role in the kickback conspiracy was to arrange for physician referrals and recommend the ordering of services to the rural hospitals and BHD. O’Neal also had kickback proceeds laundered on his behalf and, at various times, obtained proceeds from the kickback conspiracy.

In July 2023, Peter J. Bennett, of Houston, was convicted of money laundering conspiracy, money transmitting conspiracy, and perjury. According to information presented in court, Bennett created sham trusts and shell corporations through which he laundered at least $2,724,080.41 in healthcare kickback proceeds. Bennett used his law firm’s Interest on Lawyers Trust Account (IOLTA), operating account, and a personal bank account to launder and transmit the kickback proceeds.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remunerations in exchange for the referral of or arranging for or recommending the ordering of items or services payable under federal health care programs.  Under federal statutes, violations of the Anti-Kickback statute are punishable by up to five years in federal prison.

This case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General, and the U.S. Department of Defense – Defense Criminal Investigative Service (DCIS) with assistance from the U.S. Secret Service and the U.S. Department of Commerce – Export Enforcement. It was prosecuted by Assistant U.S. Attorneys Adrian Garcia, Nathaniel C. Kummerfeld, Lucas Machicek, and Robert Austin Wells.