Health Diagnostic Laboratory (HDL) is on its way out the door, weighing a $32 million sale to rival True Health Diagnostics months after filing for Chapter 11 bankruptcy.
The Richmond, VA-based company selected blood testing outfit True Health as its "stalking horse bidder" for "substantially all" of its assets, setting the auction floor price while considering bids from other companies. Business will continue as usual until the auction, which is slated for Sept. 10 at the Richmond office of the company's counsel, HDL said in a statement.
"We are encouraged by the widespread interest shown by numerous possible bidders for the company, and will continue to seek the highest value available--all with the goal of serving the best interests of our creditors and other stakeholders," HDL executive VP and general counsel Douglas Sbertoli said in a statement.
Accepting a stalking-horse bid from True Health is "the latest positive step" in HDL's bankruptcy saga, helping the company make a "swift exit" from its Chapter 11 proceedings, Sbertoli added. In June, the company filed for Chapter 11 bankruptcy after agreeing to shell out $47 million to settle claims with the U.S. Department of Justice. The DOJ accused HDL of paying doctors to order its blood tests, "a substantial risk of fraud and abuse under the anti-kickback statute," the agency said at the time.
The DOJ accusations sparked a probe into doctor payments from HDL and other labs, sending the company into its current downward spiral. Former CEO and co-founder Tonya Mallory resigned from her position in September 2014 after the investigation was unveiled and faces more legal action as a defendant in a whistleblower suit.
A sale would help HDL escape from the muck, but Frisco, TX-based True Health could face a few obstacles as a stalking-horse bidder. As the Richmond Times-Dispatch reports, in June HDL asked the bankruptcy court to question True Health reps and agents about possible ties with a former sales contractor, BlueWave. HDL ended its contract with BlueWave in January amid DOJ allegations, prompting BlueWave to sue HDL for unpaid sales commissions.
Sbertoli told the newspaper that depositions were carried out but that he could not comment on the findings. "We have disputes with our competitors all the time," he said, as quoted by the Richmond Times-Dispatch. "It is just part of the process."
- here's HDL's statement
- read the Richmond Times-Dispatch story