California Man Sentenced to Federal Prison for Role in Healthcare Kickback Conspiracy

A Temecula, California, man has been sentenced to federal prison for conspiring to commit health care kickbacks, announced U.S. Attorney Damien M. Diggs today.

Steven Donofrio, 49, was found guilty by a jury on May 5, 2023, following a two-week-long trial.  Donofrio was sentenced to 42 months in federal prison by U.S. District Judge Robert W. Schroeder, III on October 11, 2023.

“Donofrio leveraged the access, influence, and relationships that his employees wielded to secure physicians’ referrals. He added costs, not value, to an overburdened, taxpayer-funded system. The taxpayers deserve better,” said U.S. Attorney Damien M. Diggs.  “Today’s sentence sends the clear message that no matter who you are, if you do wrong, you will be found out, and you will be brought to justice.”

“While this health care fraud scheme appeared complex on the surface, it was simple greed and theft at its core,” said Jason E. Meadows, Special Agent in Charge of the United States Department of Health and Human Services Office of Inspector General (HHS-OIG). “Illegal kickback payments lead to unnecessary medical procedures and cost taxpayers millions of dollars. HHS-OIG will continue to work with our law enforcement partners to hold accountable those who blatantly steal taxpayer money for their personal benefit.”

“Today’s sentence brings a conclusion to an illegal kickback scheme that defrauded our health care system for millions of dollars. The defendant and his co-conspirators enriched themselves and in turn affected the quality of care of innocent taxpayers,” said FBI Dallas Special Agent in Charge Chad Yarbrough. “The FBI is committed to working with our law enforcement, public, and private sector partners to combat health care fraud and seek justice for the patients that are harmed because of these schemes.”

According to information presented in court, Donofrio conspired with others to pay and receive kickbacks in exchange for the referral of, and arranging for, health care business, specifically pharmacogenetic (PGx) tests.  Pharmacogenetic testing, also known as pharmacogenomic testing, is a type of genetic testing that identifies genetic variations that affect how an individual patient metabolizes certain drugs.  The illegal arrangement concerned the referral of PGx tests to clinical laboratories in Fountain Valley, California; Irvine, California; and San Diego, California.  More than $28 million in illegal kickback payments were exchanged by those involved in the conspiracy.

In December 2019, twelve individuals from three states were charged for their roles in the kickback conspiracy.  A federal grand jury in the Eastern District of Texas returned an indictment against Philip Lamb, of Eagle, Colorado; Nicolas Arroyo, of Tempe, Arizona; Vincent Marchetti, Jr., of Coronado, California; William Flowers, of Houston, Texas; Steven Donofrio; James J. Walker, Jr. a/k/a Jimmy Walker, of Frisco, Texas; Timothy Armstrong, deceased, formerly of Frisco, Texas; Virginia Blake Herrin, of Frisco, Texas; Patrick Ridgeway, of Jackson, Mississippi; Chismere Mallard, of McAllen, Texas; Dr. Ray W. Ng, of Dallas, Texas; and Ashley Kretzschmar, of Aledo, Texas; for conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute.

Philip Lamb, Nicolas Arroyo, Jimmy Walker, Timothy Armstrong, Virginia Blake Herrin, Patrick Ridgeway, Chismere Mallard, and Ashley Kretzschmar pleaded guilty prior to trial.  Kimberly Willette, of Friendswood, Texas, and Edwin Chad Isbell, of Atascocita, Texas also pleaded guilty to related charges.

Vincent Marchetti, Jr., was found guilty by a jury on December 16, 2021, following a month-long trial.  He was sentenced to 48 months in federal prison on August 30, 2022.

On April 25, 2022, Nicolas Arroyo was sentenced to 21 months in federal prison.  On August 23, 2022, Kimberly Willette was sentenced to one year and one day in federal prison, and Patrick Ridgeway was sentenced to a three-year term of probation and ordered to pay a $100,000 fine.  On September 11, 2023, Jimmy Walker was sentenced to five months in federal prison and ordered to pay a $50,100 fine.

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 FBI Dallas – Frisco Resident Agency.  It was prosecuted by Assistant U.S. Attorneys Nathaniel C. Kummerfeld, Lucas Machicek, and Adrian Garcia, with assistance from Assistant U.S. Attorneys Stephan E. Oestreicher, Jr., Brent Andrus, and L. Frank Coan, Jr., and Special Assistant U.S. Attorney Laurel E.P. Simmons.