LabCorp 2012 Annual Report Download - page 47

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Commonwealth of Virginia Office of the Attorney General
seeking documents related to the Company’s billing to state
Medicaid. In October 2009, the Company received a sub-
poena from the State of Michigan Department of Attorney
General seeking documents related to its billing to Michigan
Medicaid. The Company is cooperating with these requests.
On December 8, 2011, the Company announced that it had
reached an agreement with the Federal Trade Commission
(“FTC”) that allowed the Company to complete its acquisition
of Orchid Cellmark Inc. (“Orchid”), which closed on
December 15, 2011. Under the terms of the consent decree
with the FTC, the Company was required to divest certain
assets of Orchid’s U.S. government paternity business.
On December 16, 2011, the Company sold those assets to
DNA Diagnostics Center® (DDC), a privately held provider
of DNA paternity testing. A petition for appraisal of shares
of Orchid was resolved in November 2012.
In October 2011, a putative stockholder of the Company
made a letter demand through his counsel for inspection of
documents related to policies and procedures concerning
the Company’s Board of Directors’ oversight and monitoring
of the Company’s billing and claim submission process. The
letter also seeks documents prepared for or by the Board
regarding allegations from the California ex rel. Hunter
Laboratories, LLC et al. v. Quest Diagnostics Incorporated,
et al., lawsuit and documents reviewed and relied upon by
the Board in connection with the settlement of that lawsuit.
The Company is responding to the request pursuant to
Delaware law.
On November 18, 2011, the Company received a letter
from United States Senators Baucus and Grassley requesting
information regarding the Company’s relationships with
its largest managed care customers. The letter requests
information about the Company’s contracts and financial
data regarding its managed care customers. Company
representatives met with Senate Finance Committee staff
after receiving the request and subsequently produced
documents in response. The Company continues to
cooperate with the request for information.
On February 27, 2012, the Company was served with
a False Claims Act lawsuit, United States ex rel. Margaret
Brown v. Laboratory Corporation of America Holdings
and Tri-State Clinical Laboratory Services, LLC, filed in the
United States District Court for the Southern District of Ohio,
Western Division. The lawsuit alleges that the defendants
submitted false claims for payment for laboratory testing
services performed as a result of financial relationships that
violated the federal Stark and anti-kickback laws. The
Company owned 50% of Tri-State Clinical Laboratory Services,
LLC, which was dissolved in June of 2011. Tri-State Clinical
Laboratory Services, LLC filed a voluntary petition under
Chapter 7 of Title 11 of the United States Code. The lawsuit
seeks actual and treble damages and civil penalties for each
alleged false claim, as well as recovery of costs, attorney’s
fees, and legal expenses. The United States government has
not intervened in the lawsuit. The Company will vigorously
defend the lawsuit.
In June 2012, the Company and MEDTOX announced
that they had entered into a definitive agreement and plan
of merger under which the Company would acquire all
the outstanding shares of MEDTOX in a cash tender offer.
The review period under the Hart Scott-Rodino Antitrust
Improvements Act of 1976 (“HSR”) applicable to the
acquisition of MEDTOX expired on July 12, 2012, and the
transaction closed on July 31, 2012.
Three shareholder class actions, Carol A. Kiel v. Braun,
et al., Louise Perlman v. MEDTOX Scientific, et al., and John
Siciliano v. MEDTOX Scientific, Inc., et al., were filed in
connection with the acquisition of MEDTOX in the County of
Ramsey, Second Judicial District for the State of Minnesota.
The lawsuits challenged the MEDTOX acquisition on grounds
of alleged breaches of fiduciary duty and/or other violations
of state law. The Company and its merger subsidiary were
named only in the Kiel and Perlman cases. On July 20, 2012,
the parties, through their counsel, executed a Memorandum
of Understanding setting forth their agreement in principle
to settle all three of the putative shareholder class actions.
The Memorandum of Understanding was subsequently
superseded by a Stipulation of Settlement dated October 12,
2012, and the settlement was approved by the Court on
February 13, 2013. Under the terms of the settlement, all
claims were dismissed with prejudice.
On June 7, 2012, the Company was served with a putative
class action lawsuit, Yvonne Jansky v. Laboratory Corporation
of America, et al., filed in the Superior Court of the State of
California, County of San Francisco. The lawsuit alleges that
the defendants committed unlawful and unfair business
practices, and violated various other state laws by changing
screening codes to diagnostic codes on laboratory test
orders, thereby resulting in customers being responsible for
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements