Two Doctors and a Salesman Admit Roles in Bribes-for-Test-Referrals Scheme Involving New Jersey Clinical Laboratory

NEWARK, NJ—Two New Jersey doctors and a company salesman pleaded guilty today to their roles in a long-running bribes-for-test-referrals scheme operated by Biodiagnostic Laboratory Services LLC (BLS), of Parsippany, New Jersey; its president; and numerous associates, U.S. Attorney Paul J. Fishman announced.

Angelo Calabrese, 56, of Pine Brook, New Jersey; Paul Ostergaard, 72, of Pompton Plains, New Jersey; and David McCann, 45, of Lyndhurst, New Jersey, all pleaded guilty today before U.S. District Judge Stanley R. Chesler in Newark federal court.

Calabrese, a doctor with an office in North Arlington, New Jersey, pleaded guilty to an information charging him with violating the Travel Act and admitted accepting more than $130,000 in bribes to refer at least $600,000 in lab business to BLS. Ostergaard, a doctor with an office in Pompton Plains, New Jersey, pleaded guilty to an information charging him with violating the Travel Act and admitted accepting more than $50,000 in bribes to refer at least $150,000 in lab business to BLS. McCann pleaded guilty to an information charging him with conspiring to violate the Anti-Kickback Statute and the Travel Act and admitted paying thousands of dollars in cash to doctors on behalf of BLS.

With today’s guilty pleas, 17 people have now pleaded guilty in connection with the sophisticated BLS bribery scheme, which its organizers have admitted involved the payment of millions of dollars in bribes and resulted in more than $100 million in payments to BLS from Medicare and various private insurance companies.

“We are continuing to pursue those defendants, including doctors, who put personal profits ahead of patient care,” U.S. Attorney Fishman said. “Patients need to be confident that their doctors are recommending providers who are best qualified to perform medically necessary tests. Those doctors who recommended providers in return for payoffs should know we are coming after them.”

“As is evident in the pleas entered today, and the investigation into the illegal activity of Biodiagnostic Laboratory Services, the FBI Newark takes very seriously the allegations of health care fraud, bribes, and kickbacks,” FBI Special Agent in Charge Aaron T. Ford said. “This investigation and prosecution remains ongoing, and those medical professionals that decided to make medical referrals in exchange for bribes are expected to be brought to justice. These pleas today are 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.”

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

Calabrese received more than $130,000 from BLS between 2010 and 2013 through a sham consulting agreement and a sham rental agreement, which combined to pay Calabrese more than $4,500 per month in bribes from BLS. Craig Nordman, 34, of Whippany, New Jersey, a BLS employee and the CEO of Advantech Sales LLC—one of several entities used by BLS to make illegal payments—who pleaded guilty in June to his role in the scheme, made many of the payments to Calabrese on behalf of BLS.

Ostergaard received more than $50,000 from BLS between 2006 and 2009 through a sham lease agreement and a sham service agreement. William Dailey, 42, of Wall, New Jersey, a BLS salesman who pleaded guilty to his role in the scheme in May, negotiated the sham agreements on behalf of BLS, with the knowledge and approval of BLS’s president, David Nicoll, 39, of Mountain Lakes, New Jersey. Ostergaard admitted today that while he was being bribed to make referrals to BLS, he noticed that BLS was adding tests that Ostergaard had not ordered for his patients but stayed silent about the added tests.

McCann paid thousands of dollars in cash on a monthly basis between December 2011 and April 2013 to numerous physicians on behalf of BLS in exchange for the doctors’ referral of blood specimens to BLS.

On April 9, 2013, federal agents arrested David Nicoll; Scott Nicoll, 32, of Wayne, New Jersey, a senior BLS employee and David Nicoll’s brother; and Nordman. They were charged by federal complaint with the bribery conspiracy, along with the BLS company and Frank Santangelo, 43, of Boonton, New Jersey. In June, David and Scott Nicoll, Nordman, and four other associates of BLS pleaded guilty to charges related to their involvement. Santangelo, a doctor, pleaded guilty last month to charges relating to his role in the scheme. So far, 11 employees or associates of BLS and six physicians have pleaded guilty to their roles in the bribery scheme.

“Offering slush fund payments for medical referrals, ultimately paid for by taxpayers, can have absolutely no place in our health care system,” Thomas O’Donnell, Special Agent in Charge of the Office of Inspector General at the U.S. Department of Health and Human Services region including New Jersey, said. “Such schemes will continue to be vigorously investigated and prosecuted, and these criminals will be brought to justice.”

The bribery count to which Calabrese and Ostergaard pleaded guilty is punishable by a maximum potential penalty of five years in prison and a $250,000 fine. McCann faces a maximum potential penalty of five years in prison and a $250,000 fine on the bribery conspiracy charge. Sentencing for all three defendants is scheduled for March 13, 2014.

Calabrese and Ostergaard have also agreed to forfeit $334,000 and $53,900, respectively. The investigation has so far recovered more than $3 million through forfeiture.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Ford; U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge O’Donnell; IRS–Criminal 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 Assistant U.S. Attorney Joseph Minish, Senior Litigation Counsel Andrew Leven, 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.