Former HDL CEO appeals $111M verdict

tonya mallory

HDL’s Tonya Mallory speaks at a 2014 ribbon-cutting ceremony. (BizSense file photo)

The former head and co-founder of collapsed Richmond lab company Health Diagnostic Laboratory is renewing her fight with Uncle Sam.

Tonya Mallory, who founded HDL in 2008 and resigned from the firm in 2014, is appealing a federal jury verdict that in May put her on the hook for a share of more than $100 million in damages and found her liable for defrauding Medicare and Tricare based on the company’s practice of paying what the government argued were kickbacks to doctors.

Mallory filed an appeal with the U.S. Court of Appeals in Richmond, as did Floyd Calhoun Dent III and Robert Bradford Johnson, the two heads of HDL’s former third-party sales force, BlueWave Healthcare Consultants. Dent and Johnson were also found liable in the case, which was tried in South Carolina.

The case, prompted by complaints from whistleblowers in the health care industry years earlier, in the end slapped Mallory, Dent and Johnson with $111 million in damages and civil penalties to be paid to the government.

Their appeals, filed July 13, seek to have the verdict and damages overturned or at the least have the case sent back down to a lower court for another trial.

The suit centered on whether Mallory, Dent and Johnson knowingly caused HDL to pay doctors to induce them to use its tests, whether those payments amounted to kickbacks that violated the federal False Claims Act, and whether they knew it was fraudulent.

Mallory’s attorney, Beattie Ashmore of Greenville, South Carolina, said he and his client have no comment while the appeal is being heard.

Dawes Cook, who is representing Dent and Johnson, had no comment other than to say that his clients are “challenging both the finding of liability and the assessment of damages.”

The next steps in the appeals process will involve both sides filing briefs, followed by respective responses and likely an oral argument held before a three-judge panel in Richmond.

HDL fell into bankruptcy in June 2015, after the U.S. Department of Justice claimed the company was paying kickbacks to doctors. The once fast-rising downtown company couldn’t survive the aftermath and filed Chapter 11, sold off the bulk of its assets to a Texas competitor and left lawyers to go after the rest for creditors.

That bankruptcy case is still playing out in Richmond, with the trustee digging for money with which to repay HDL’s many creditors. Mallory earlier this summer agreed to pay $10 million into the bankruptcy estate to settle claims filed against her and her husband by the trustee.

As part of that settlement, Mallory agreed to turn over to the trustee any potential proceeds from the $150 million malpractice lawsuit she filed this year against LeClairRyan, a case that is still pending in Richmond Circuit Court.

And Mallory, with the help of the trustee, will continue her fight against two insurance companies that have not paid out on D&O policies held in her name during her time at HDL.

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