SAN FRANCISCO – A San Francisco Bay Area company at the center of a major doping investigation by U.S. athletic officials also faces a federal lawsuit involving a Medicare billing scheme in which physicians were allegedly paid kickbacks to order unnecessary medical tests.
The allegations against BALCO Laboratories Inc. of Burlingame, Calif., are contained in a civil case filed in U.S. District Court in San Francisco. The suit seeks reimbursement for more than $1 million in Medicare funds allegedly paid for needless trace mineral tests such as those BALCO performs for elite athletes.
“These claims are untrue,” BALCO President Victor Conte said in an e-mail Sunday responding to questions from the Los Angeles Times about the case. But Conte said he had been ordered by his attorneys “not to say anything more at this time.”
BALCO is the lone defendant in the case filed by the U.S. Attorney in San Francisco, and Conte is not mentioned by name in the complaint. Two other men described in the suit as carrying out the kickback scheme have since been convicted of criminal health-care fraud in a separate case and sent to prison.
One of the two, Michael Conte, described in the lawsuit as BALCO’s “agent,” is a cousin of Victor Conte, according to Michael Malecek, a former assistant U.S. Attorney who prosecuted the criminal case.
A nutritionist whose clients include such star athletes as San Francisco Giant slugger Barry Bonds, Oakland Raider linebacker Bill Romanowski and Olympic sprint champion Marion Jones, Victor Conte’s legal concerns go well beyond the Medicare case. He has been at the center of a storm since anti-doping officials last week named BALCO as the suspected source of a previously unknown performance enhancing drug that has been found in urine samples of an unspecified number of track and field athletes.
Terry Madden, chief executive of the U.S. Anti-Doping Agency, which oversees drug testing for sports federations under the U.S. Olympic umbrella, described the case as “a conspiracy involving chemists, coaches and certain athletes using what they developed to be ‘undetectable’ designer steroids to defraud their fellow competitors” and the public.
Conte has denied that BALCO is the source of the new chemical, tetrahydrogestinone, or THG. But Conte also has said it is not illegal, and has disputed claims that the substance is closely related to certain banned anabolic steroids.
BALCO’s offices were raided Sept. 3 by agents of the Internal Revenue Service, the Food and Drug Administration, the San Mateo County Narcotics Task Force and Olympic drug-testing officials.
In e-mails to news organizations, Conte has said he knows of about 40 athletes, including Bonds, who have been subpoenaed to testify before a federal grand jury in San Francisco beginning this week. The agent for U.S. shot put champion Kevin Toth said Toth has been subpoenaed, and sprinter Kelli White told the San Francisco Chronicle she had received a subpoena.
It’s uncertain how, or if, the Medicare billings in the government’s civil lawsuit figure in the criminal probe.
BALCO performs blood-testing services for top athletes – analyzing levels of trace minerals and providing supplements to correct any deficiencies.
The Medicare lawsuit involves just this type of testing, but for beneficiaries of Medicare, the health-care program for senior citizens and the disabled.
The suit filed last March claims that BALCO and a second company were paid as much as $1.8 million for unnecessary trace mineral tests. It states that such tests “are considered unusual” and normally needed only when a person believes he has been exposed to dangerous amounts of a toxic substance.
The complaint says the scheme was carried out from mid-1995 through January 1996.
Although the fact is not mentioned in the suit, Michael Conte and Llanes later became partners in a new business, Monterey Medical Labs, based in Monterey, Calif., that was implicated in a major billing scam.
In February 2000, Michael Conte, Llanes and three others were indicted on charges of health-care fraud and money laundering for cheating Medicare out of $1.5 million for bogus trace mineral tests.
Michael Conte and Llanes pleaded guilty to health-care fraud in exchange for dropping other charges. They were sentenced to prison last year for 14 months and 18 months, respectively.
The civil lawsuit says that some of BALCO’s billings were the focus of a federal audit that resulted in repayment of about $16,750 in 1998. Beyond that, however, the company “has not repaid the Medicare funds that it obtained for conducting trace mineral tests that were not reasonable and medically necessary,” the complaint says.
BALCO failed to file a response to the suit by the June deadline. But before government attorneys could obtain a default judgment, a company representative contacted them to discuss a settlement in the case, according to a document filed last month in court.
The document, a joint statement signed by Victor Conte and a government lawyer, said that BALCO’s failure to file an answer was “based on financial reasons.” The document did not elaborate and officials at the U.S. Attorney’s office would not discuss the case.
Levin reported from Los Angeles, Glionna and Reiterman from San Francisco.