Connecting the dots between HDL and its buyer

HDL's headquarters on Fifth Street downtown. Photo by Burl Rolett.

HDL’s headquarters on Fifth Street downtown. Photo by Burl Rolett.

The pending $37 million deal that would put ownership of Richmond’s Health Diagnostic Laboratory into the hands of a Texas suitor isn’t the first time the two companies have crossed paths.

And their history includes a few familiar bedfellows with ties to HDL’s past payments to doctors to use its lab tests – a practice the federal government labeled as kickbacks during an investigation that ultimately sent the once fast-rising company down the path toward bankruptcy and a sale.

True Health Diagnostics, a 1-year-old competitor to HDL that also offers blood tests to help prevent heart disease and other ailments, was announced as the winning bidder in a bankruptcy court-approved auction last week to purchase the bulk of the embattled downtown lab company’s assets for $37.1 million. A federal bankruptcy court judge is set to approve the sale at a hearing Wednesday.

Documents filed early on in HDL’s Chapter 11 bankruptcy in June give a glimpse at its relationship with True Health. Two weeks after its bankruptcy filing, HDL asked for court permission to conduct what’s called a 2004 examination of True Health. The examination also included Robert Bradford Johnson and True Health salesman Jeffrey “Boomer” Cornwell. Johnson is an HDL shareholder and founder of its former sales contractor, BlueWave Healthcare Consultants, and Cornwell was previously an employee of BlueWave who sold HDL tests to doctors.

A 2004 examination is a type of deposition that allows a debtor in bankruptcy to ask a witness questions under oath. HDL sought to examine whether True Health was improperly recruiting BlueWave salespeople who had previously sold HDL tests and had confidential information about the company; whether Cornwell was badmouthing HDL to its physician clients to steer them toward True Health; whether True Health was interfering with HDL’s business with a North Carolina research company; and whether Johnson violated a court order related to non-compete agreements he signed as an HDL shareholder.

Johnson founded BlueWave with Floyd Calhoun Dent to peddle HDL’s blood tests to doctors around the country. Those lucrative sales were fueled largely by offering payments, which the government claims amounted to kickbacks, to doctors for each test they ordered. Johnson, Dent and BlueWave, along with HDL’s founder and former CEO Tonya Mallory, were all named as defendants in the federal government’s most recent lawsuit, which claims they personally had a hand in scamming the federal healthcare system out of hundreds of millions of dollars in improper reimbursements.

Johnson was named in the 2004 examination for representing True Health at a trade show, a move that HDL claims violated a court order enforcing his shareholder non-compete agreement.

It is unclear to what degree Johnson is presently involved with True Health beyond his alleged representation of the company at the trade show. Johnson could not be reached for comment. His attorney Eric Walker of the law firm Perkins Coie did not return requests for comment.

The connections between BlueWave and True Health also intersect with Cornwell. According to the 2004 exam documents, Cornwell sold HDL tests as a member of BlueWave’s sales force until earlier this year, when HDL cut ties with the company in the midst of government scrutiny. The split between the two companies led to lawsuits from both sides.

From there, court documents state that Cornwell has been “holding himself out as an agent or corporate officer of True Health,” allegedly offering employment with True Health to other members of BlueWave’s sales force.

Cornwell has also allegedly interfered with HDL’s relationships with physicians and was “spreading misinformation to physicians and physician practices who have established relationships with (HDL) that such practices should order testing services through True Health because (HDL) will be out of business within a few months,” the document states.

It’s unclear how many former BlueWave salespeople currently work directly for True Health or sell for the company as contractors. True Health did not return a request for comment about the pending sale or any of its past connections to HDL.

True Health referred calls for Cornwell to a cell phone number. He did not return a message seeking comment.

This was not the first time HDL went after True Health and Cornwell. In April, before filing for bankruptcy, HDL attempted to go through a Texas court to conduct a probe similar to the 2004 examination but moved the effort into bankruptcy court two months later.

The results of the 2004 examination as part of HDL’s bankruptcy process have not been made public.

Another player with ties to both HDL and True Health is Sam Fillingane, a physician from Mississippi. A June 2014 Wall Street Journal report, which thrust HDL’s kickback investigation into the national spotlight, named Fillingane as one of the physicians who referred the most patients for HDL tests for a period of 2010, during the time it paid doctors for using its services.

Fillingane sent 1,179 blood samples to HDL in the first half of 2010, the WSJ found, an amount that could have earned him $23,580 in what HDL called processing and handling fees.

In addition to his medical practice, Fillingane previously worked as a teaching consultant at HDL and was on the company’s medical advisory board, which would have earned him $3,000 a month in 2010 from the company, according to the WSJ. According to his LinkedIn profile, Fillingane has worked for True Health since May of this year as the company’s chair and director of medical education.

Fillingane left HDL in December of 2014, his LinkedIn profile shows. A message left for him at True Health’s office was not returned.

Now with the $37 million sale pending, questions linger over whether the federal government has any objections or reservations about the company falling into the hands of True Health, given its connections to BlueWave and HDL.

A representative of the Department of Justice, which has handled the investigations into HDL, BlueWave, Johnson, Mallory and others, said the agency has no comment.

When asked last week about the relationship between True Health and individuals like Johnson, Cornwell and Fillingane, HDL’s corporate counsel Douglas Sbertoli provided a statement:

“HDL’s primary objective in a bankruptcy court supervised Section 363 auction is to maximize the economic value obtained from the purchaser of substantially all its business assets for the benefit of the company’s creditors. True Health is one of multiple bidders. We cannot comment upon the operational activities or affiliations of any prospective purchaser at this time.”

HDL did not comment as of press time as to how the sale to True Health will affect its Richmond operations, including whether its remaining local executives and employees will stay on and how True Health might use HDL’s downtown headquarters going forward.

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Andy Traino
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Good article Katie. I’m glad someone is doing their research. The ties between these two are deep, and I’m very curious as to what the Feds are thinking. Despite my hope for the best possible outcome for HDL’s employees, there is a lot of unsettled corruption and theft being overlooked. Several doctors, BW’s sales reps, etc. Hopefully, the judge is aware of these concerns and is communicating with the right people at the USJD. If this sale happens with no scrutiny, it seems it would be an encouragement to those who seek to repeat such fraudulent activity.