Bankruptcy has opened a new front in a legal dispute between True Health Group LLC and the U.S. government, putting federal lawyers on alert to protect a whistleblower lawsuit accusing the defunct laboratory diagnostics company of paying kickbacks to get business, WSJ Pro Bankruptcy reported. In new court papers, lawyers for the U.S. Department of Health and Human Services warn that True Health is trying to use chapter 11 unfairly to thwart the government’s pursuit of fraud. Lawyers for True Health yesterday responded with a court filing that said that grants of legal immunity in its chapter 11 plan don’t apply to any fraud prosecution by the government, and so won’t impede federal actions. True Health is slated to go before a bankruptcy judge today to seek approval of a chapter 11 plan that pays very little to creditors owed more than $177 million. According to federal lawyers, True Health’s plan goes too far in shielding the company from the legal consequences of operating its business. The government shut off or limited True Health’s stream of Medicare payments due to unspecified fraud allegations, which the company has consistently denied. In June 2019, the government cited “recent credible allegations of fraud” in a new suspension that pushed True Health into bankruptcy. True Health was already operating under a partial suspension dating back to 2017 that is related to a whistleblower suit. The lawsuit is still under seal, but government attorneys sketched out the contents in bankruptcy court papers that challenged True Health’s bid for court approval of its chapter 11 plan.
