PORTLAND, Ore. (KOIN) – A co-owner of the now-defunct medical testing lab Northwest Physicians Laboratory was sentenced to two years in prison on Jan. 10 for illegally profiting from kickbacks in the medical testing industry.
U.S. Attorney Nick Brown said in a statement that 52-year-old Astoria resident Richard Reid was found guilty of five federal felonies after a six-day jury trial in U.S. District Court in Seattle for his role with the Bellevue-based company.
Under Reid’s leadership as the company’s vice president of sales, the U.S. Justice Department said, Northwest Physicians Laboratory received more than $3.7 million in kickback payments by intentionally sending drug test urine samples to two specific labs that charged the government for their services. The crime allegedly bilked the U.S. government of more than $6.5 million.
“Mr. Reid was the architect of a scheme to illegally profit on toxicology tests that were paid for by government insurance,” Brown said. “The web of referrals and kickbacks led to significant profits for NWPL and its owners. Such illegal kickbacks simply inflate medical costs for the rest of us.”
Court records filed in the case between January 2013 and July 2015, the DOJ said, show that the two labs utilized by Northwest Physicians Laboratory were not physician-owned. NWPL, however, was physician-owned and could not test urine samples for patients covered by government health programs. Instead, the company was paid by the non-physician-owned labs Medicare and TRICARE referrals, violating the federal anti-kickback statute.
“Paying remuneration to medical providers or provider-owned laboratories in exchange for referrals encourages providers to order medically unnecessary services,” the DOJ stated. “The anti-kickback statute functions, in part, to discourage such behavior.”
These kickback payments were allegedly concealed by Reid and other co-conspirators by labeling the kickbacks as “marketing services.” However, no marketing services were ever performed, according to the DOJ.
Reid was ultimately found guilty of one count of conspiracy to solicit and receive kickbacks involving health care programs and four counts of receipt of kickbacks. In a sentencing memo, prosecutors asked that U.S. District Judge John C. Coughenour give Reid the same two-year sentence as his co-conspirator CEO Jae Lee.
Coughenour obliged and proceeded to deny Reid’s motion to postpone the prison sentence while he appeals his conviction.
“Reid hid the truth and kept the cover story in place by lying to his sales force, lying to providers, and sharing fraudulent opinion letters from attorneys,” prosecutors described in the memo. “NWPL grew and the money – including illegal kickbacks – rolled in. The kickbacks increased as time went on, and totaled almost $5 million. As the proceeds of the crime rose, so did Reid’s monthly distributions — from $10,000 in 2013 to $50,000 in 2015.”
Three additional defendants have pleaded guilty to charges surrounding the case and await sentencing. NWPL’s Executive Director Kevin Puls was also sentenced to 90 days in prison and a year of supervised release in connection to the crimes.
The company pleaded guilty to related crimes in February of 2021 and was subsequently ordered to pay $8,114,417 in restitution through joint and several liability, in part with the other defendants. Surrounded by mounting criminal and civil litigation, NWPL has since dissolved. To date, the DOJ said, the labs and people tied to these crimes have paid more than $14 million to settle related civil suits.
Special Agent Richard A. Collodi, who oversees the FBI’s Seattle field office, said that greed ultimately motivated Reid and NWPL to defraud the people of America.
“Mr. Reid let his greed get in the way of doing what was right by taxpayers,” Collodi said. “He solicited and received hundreds of thousands of dollars in kickbacks. Ultimately, frauds like these inflate health care costs for the rest of us. I applaud the work of our investigators and partners to hold Mr. Reid accountable, provide justice to the victims, and bring his crimes to an end.”