Richard S. Kanowitz (admitted pro hac vice)

COOLEY LLP

1114 Avenue of the Americas

New York, New York 10036

Telephone: (212) 479-6000

Facsimile: (212) 479-6275

Email: rkanowitz@cooley.com

Counsel to Plaintiff Richard Arrowsmith, 

Liquidating Trustee of the HDL Liquidating Trust

Cullen D. Speckhart (VSB No. 79096)

WOLCOTT RIVERS GATES 

919 E. Main Street, Ste. 1040

Richmond, Virginia 23219 

200 Bendix Road, Ste. 300 

Virginia Beach, Virginia 23452 

Telephone: (757) 497-6633 

Direct: (757) 470-5566 

Email: cspeckhart@wolriv.com

Counsel to Plaintiff Richard Arrowsmith,

Liquidating Trustee of the HDL Liquidating Trust

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

In re: Chapter 11

HEALTH DIAGNOSTIC LABORATORY, 

INC., et al.,

Case No.: 15-32919-KRH

Debtors.1 Jointly Administered

RICHARD ARROWSMITH AS LIQUIDATING 

TRUSTEE OF THE HDL 

LIQUIDATING TRUST,

Plaintiff,

v. Adversary Proceeding No. 

17-_____

WILLOWBROOK CARDIOVASCULAR ASSOCIATES, 

P.A.,

SERVE: Nadim Nasir, Reg. Agent

6560 Fannin Street, Suite 620

Houston, Texas 77030

NADIM NASIR,

SERVE: 6560 Fannin Street, Suite 620

Houston, Texas 77030

ANTON P. NIELSEN,

SERVE: 6560 Fannin Street, Suite 620

Houston, Texas 77030

___________________________________________________________

1 The debtors in these cases, along with the last four digits of each debtor’s federal tax identification number, are: 

Health Diagnostic Laboratory, Inc. (0119), Central Medical Laboratory, LLC (2728), and Integrated Health 

Leaders, LLC (2434) (the “Debtors”).

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DOUGLAS R. BREE,

SERVE: 614 Asbury Street Apartment A

Houston, Texas 77007-5143

JOHN C. ISAAC,

SERVE: 6560 Fannin Street, Suite 620

Houston, Texas 77030

STANLEY DUCHMAN,

SERVE: 6560 Fannin Street, Suite 620

Houston, Texas 77030

VALENTINA UGOLINI,

SERVE: 3832 Chevy Chase Drive

Houston, Texas 77019-3014

and 

RAPAN RAMI,

SERVE: 13300 Hargrave Road, Suite 500

Houston, Texas 77070

Defendants.

COMPLAINT TO AVOID AND RECOVER AVOIDABLE 

TRANSFERS AND FOR RELATED RELIEF

Plaintiff Richard Arrowsmith, in his capacity as Liquidating Trustee (“Liquidating 

Trustee”) of the HDL Liquidating Trust (the “Trust”), appointed pursuant to the confirmed 

Modified Second Amended Plan of Liquidation (the “Plan”) in these jointly administered 

bankruptcy cases (the “Chapter 11 Cases” or the “Cases”), by his undersigned counsel, files his 

Complaint to Avoid and Recover Avoidable Transfers and for Related Relief (the “Complaint”) 

against Willowbrook Cardiovascular Associates, P.A. (the “Practice”), Nadam Nasir (“Nasir”), 

Anton P. Nielsen (“Nielsen”), Douglas R. Bree (“Bree”), John C. Isaac (“Isaac”), Stanley 

Duchman (“Duchman”), Valentina Ugolini (“Ugolini”) and Tapan Rami (“Rami” and 

collectively with Nasir, Nielsen, Bree, Isaac, Duchman, Ugolini, and the Practice, the

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“Defendants”) in the above-captioned adversary proceeding (the “Adversary Proceeding”) and 

respectfully states and alleges as follows:

JURISDICTION AND VENUE

1. On June 7, 2015 (the “Petition Date”), each of the Debtors filed with the United 

States Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the 

“Bankruptcy Court”), its respective voluntary petition for relief under Chapter 11 of Title 11 of 

the United States Code (the “Bankruptcy Code”), commencing the above-captioned Cases. On 

June 9, 2015, the Bankruptcy Court entered an order authorizing the joint administration of these 

Chapter 11 Cases [Docket No. 42]. On June 16, 2015, the United States Trustee for the Eastern 

District of Virginia appointed the statutory committee of unsecured creditors (the “Creditors’

Committee”). 

2. On May 12, 2016, this Court entered an order confirming the Plan [Docket No. 

1095] (the “Confirmation Order”). Pursuant to the Plan and 11 U.S.C. § 1123, the Liquidating 

Trustee is the successor, for all purposes, of the Debtors and the Creditors’ Committee, and is

thereby vested with standing to bring this action as a representative of the HDL Liquidating 

Trust.

3. The Bankruptcy Court has subject matter jurisdiction over this Adversary 

Proceeding pursuant to 28 U.S.C. §§ 157 and 1334(b).

4. The Adversary Proceeding constitutes a core proceeding by virtue of 28 U.S.C. 

§ 157(b)(2)(A), (E), and (O).

5. The predicates for the relief requested herein are sections 105(a), 502, 542, 544,

548, and 550 of the Bankruptcy Code; Rule 7001 of the Federal Rules of Bankruptcy Procedure 

(the “Bankruptcy Rules”); applicable state law and, as applicable, 28 U.S.C. § 3304.

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6. The Liquidating Trustee consents to entry of final orders and judgment by the

Bankruptcy Court in this Adversary Proceeding.

7. Venue is proper in this Bankruptcy Court under 28 U.S.C. §§ 1408 and 1409. 

8. Venue is proper in this Bankruptcy Court as to the Defendants because a 

substantial part of the events or omissions giving rise to the claims asserted herein against the 

Defendants occurred in this judicial district.

PARTIES

9. The Plaintiff is the Liquidating Trustee.

10. Upon information and belief, Willowbrook Cardiovascular Associates, P.A. is a 

professional association organized and existing under the law of the State of Texas. 

11. Upon information and belief, Nadam Nasir is a resident of Texas who owns 

and/or controls, or at the time of the alleged events, owned and/or controlled the Practice and 

ordered tests through the P&H Program (defined below).

12. Upon information and belief, Anton P. Nielsen is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

13. Upon information and belief, Douglas R. Bree is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

14. Upon information and belief, John C. Isaac is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

15. Upon information and belief, Stanley Duchman is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

16. Upon information and belief, Valentina Ugolini is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

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17. Upon information and belief, Tapan Rami is a resident of Texas who was 

employed by the Practice and ordered tests through the P&H Program (defined below).

NATURE OF THE ACTION

18. This Adversary Proceeding is to recover the transfers, losses and other damages 

caused to the Debtors and their creditors, including those creditors that assigned to the 

Liquidating Trustee and the Trust their Creditor Causes of Action as defined in Section 1.33 of 

the Plan (“Assigning Creditors”). A list of Assigning Creditors, as of the date of the filing of 

this Complaint, is attached hereto as Exhibit 1. 

FACTUAL BACKGROUND

19. Health Diagnostic Laboratory, Inc. (“HDL”) was formed as a start-up laboratory 

in Richmond, Virginia, offering a panel of blood tests for early detection of cardiovascular 

disease, diabetes, and related illnesses.

20. From the outset, HDL’s insiders relied on illegal business practices that 

incentivized health care providers (“HCPs”), including the Defendants, to use HDL. 

21. One such practice was the payment of illegal “processing and handling” (“P&H”) 

fees to HCPs, whereby HDL paid HCPs large P&H fees (the “P&H Program”) to induce HCPs 

to order HDL’s tests instead of those offered by other laboratories.

22. The P&H Program was a scheme that violated the federal Anti-Kickback Statute, 

42 U.S.C. § 1320(a)-7(b)(a)(A), the federal False Claims Act, 31 U.S.C. § 3729 et seq., and 

similar state anti-kickback laws that prohibit HDL from offering or paying, and HCPs from 

soliciting or accepting, such illegal payments.

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23. Each of the Defendants was actively engaged in the heavily regulated health care 

industry and knew, or should have known that the P&H Program was illegal and improper, but 

engaged in such practice because of the financial incentives provided under the P&H Program.

24. On or about February 16, 2012, the Practice executed and delivered an agreement 

whereby HDL agreed to pay the Practice illegal process and handling fees of $17.00 per 

specimen collected and sent to HDL for Advanced Cardiovascular/Metabolic Testing by HDL

and a $3.00 fee for phlebotomist and related physician services in collecting the specimen; a 

copy of the illegal P&H agreement is attached hereto as Exhibit 2.

25. The P&H Program resulted in compensation to the HCPs, including the 

Defendants, that exceeded the value of the HCPs’ uncompensated services for drawing blood 

samples, or for sending the specimens to HDL for testing. Acting in their own financial selfinterest, the Defendants exploited the P&H Program to obtain payment via the Avoidable 

Transfers that was far in excess of what the Defendants should reasonably have been paid for 

services provided. The Defendants’ illegal acts in this regard caused damage to HDL and

legitimate creditors of HDL, including the Assigning Creditors. 

26. In and around April of 2014, by email and phone discussions with HDL’s upper 

management, including its President and CEO, Tonya Mallory, the Practice and Nasir sought to 

remove themselves from the illegal P&H Program fearing de-selection by insurance companies 

and federal investigation. 

27. In those communications, the Practice and Nasir demanded re-execution of the 

P&H agreements directly with Isaac and Duchman (or other legal entities of their choice), but 

omitting the Practice, along with re-issuance of the 2013 IRS form 1099 as well as 

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“adjust[ments]” of 2014 payments to “the new entities” in an attempt to cover up approximately 

two full years of receiving illegal P&H payments. 

28. Despite these demands, Defendants continued to order HDL tests and the Practice 

continued to receive P&H payments for several more months. 

29. Upon information and belief, Nasir, Nielsen, Bree, Isaac, Duchman, Ugolini, 

Rami (“P&H Ordering HCPs”) participated in the P&H Program by ordering tests for their 

patients and the Practice received P&H payments and in turn, the Practice compensated the P&H 

Ordering HCPs.

30. The P&H Program and self-interested financial relationships induced the HCPs, 

including the Defendants, to order unnecessary tests and to utilize HDL instead of less costly innetwork diagnostic laboratories. Such practice perpetuated the submission of fraudulent and 

inflated claims to certain creditors, including the U.S. Government and Assigning Creditors, for 

reimbursement.

31. By participating in the P&H Program, the Defendants knowingly assisted HDL’s 

insiders in perpetuating their illegal practice. The Defendants willfully accepted monetary 

inducement to utilize HDL’s testing services. In exchange, the Defendants accepted illegal 

transfers of money under the P&H Program (each transfer, an “Avoidable Transfer,” and, 

collectively, the “Avoidable Transfers”). The Avoidable Transfers are set forth on Exhibit 3, 

which is attached hereto and incorporated by reference herein, and reflects the amounts of and 

dates on which the Avoidable Transfers were made.

32. Throughout the years, the improper and illegal practices worked as intended, and 

HDL appeared to be enormously successful. However, despite this illusion and outward 

appearances, HDL was never actually solvent or profitable. 

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33. HDL’s financial statements failed to reflect its actual liabilities, which, due to the 

improper business tactics, were hundreds of millions or even billions of dollars more than the 

liabilities it actually reported. HDL and its insiders wrongly reported revenues HDL should never 

have collected because they were obtained fraudulently, through false pretenses, or through 

improper business tactics. 

34. HDL faced catastrophic liabilities to the U.S. Government from the illegal and 

fraudulent conduct as described herein. These liabilities were immediate and soared into the 

billions of dollars. They resulted not only from the P&H Program, but from other illegal 

practices, such as the commission scheme conducted under HDL’s marketing contract (the 

“BlueWave Agreement”) and the practice of collecting certain monies from patients (the 

“Patient Responsibility Collection Practice”).

35. As the U.S. Government determined in its investigation of HDL, every single 

claim HDL submitted for payment by TRICARE or Medicare outside of Virginia was a false 

claim under the False Claims Act (“FCA”). Moreover, the Patient Responsibility Collection 

Practice created further liability to both the U.S. Government and private insurance companies 

each and every time it was used.

36. Each false claim submitted for payment by TRICARE or Medicare, as well as 

each penalty of trebled damages associated with such false claims, immediately created a debt to 

the U.S. Government under the FCA and an attendant liability for HDL. From the very first false 

claim submitted to the U.S. Government, HDL’s actual liabilities increased day after day. 

HDL’s liabilities, therefore, always exceeded its revenues and assets.

37. On January 27, 2014, the U.S. Government filed a lawsuit against HDL’s former 

CEO LaTonya Mallory (“Mallory”) and others. This lawsuit is currently pending in the U.S. 

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District Court for the District of South Carolina (Case No. 14-cv-00230-RMG) (the “FCA 

Action”). In the FCA Action, the U.S. Government’s damages expert filed a report detailing

more than $160 million in direct damages sustained by the U.S. Government due to false 

TRICARE and Medicare claims submitted by HDL through its insiders. The misconduct 

described herein created enormous liabilities not only in the form of direct damages sustained by 

the U.S. Government, but also to private insurers, such as certain of the Assigning Creditors, 

which liabilities exceed another $160 million. 

38. These extensive false claims immediately exposed HDL to catastrophic penalties 

and fines. For false claims resulting from the P&H Program, HDL’s exposure exceeded $3 

billion. For false claims generated by the illegal commission scheme under the BlueWave 

Agreement, HDL’s exposure exceeded $3 billion. HDL also faced civil monetary penalties of 

over $400 million for false claims stemming from the Patient Responsibility Collection Practice.

39. Actual liabilities faced by HDL for the illegal and fraudulent practices as 

described herein were measured not in the tens of millions, but in the billions of dollars. 

Accordingly, HDL was catastrophically insolvent throughout its history and at the time the 

Avoidable Transfers were made. 

40. Once HDL stopped the improper practices as described herein, HDL experienced 

predictable and precipitous financial collapse. As evidenced by, among other things: (i) the 

Debtors’ bankruptcy petitions (publicly filed with the Bankruptcy Court); (ii) the proofs of claim 

that have been filed against the Debtors’ estates; and (iii) the Debtors’ publicly-filed schedules, 

the Debtors’ liabilities exceeded the value of the Debtors’ assets well before the Petition Date. 

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41. From or around 2012 until or around 2014, Defendants’ participation in the P&H 

Program and the Patient Responsibility Collection Practice violated applicable federal and state

law, and caused damage to HDL and its creditors as set forth herein. 

COUNT I

Avoidance of Fraudulent Transfers Pursuant to 11 U.S.C. § 548(a)(1)(A)

42. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

43. The Avoidable Transfers were transfers of interest in the Debtors’ property.

44. The Avoidable Transfers were made with actual intent of the Debtors and HDL 

insiders to hinder, delay, or defraud the Debtors’ existing and/or subsequent creditors, including 

without limitation the Assigning Creditors.

45. The primary purpose of the Avoidable Transfers was to perpetuate the illegal 

scheme of inducing test referrals to HDL. 

46. Some of the factors evidencing actual intent of the Debtors and HDL insiders are 

(i) the continuation of P&H payments to various HCPs, including the Defendants, despite 

knowledge of the illegality of the P&H Program; (ii) payments of the Avoidable Transfers at the 

same time substantial new liabilities and debts were incurred through continuation of other 

illegal practices and/or schemes of the Debtors; (iii) insolvency of the Debtors at the time of the 

Avoidable Transfers or as a result thereof; and (iv) the lack of value or consideration in exchange 

for the Avoidable Transfers to the Debtors.

47. The Avoidable Transfers made after June 7, 2013 were made within two (2) years 

prior to the Petition Date and are sought to be avoided in Count I.

48. As a result of the Avoidable Transfers, creditors of the Debtors, including the 

Assigning Creditors, sustained significant damages. 

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49. The Avoidable Transfers are avoidable transfers pursuant to 11 U.S.C. 

§ 548(a)(1)(A). 

50. The Avoidable Transfers are recoverable from the Practice as the initial transferee 

of each of the Avoidable Transfers, or as the entity for the benefit of which the Avoidable 

Transfers were made, and from Nasir, Nielsen, Bree, Isaac, Duchman, Ugolini, and Rami as the 

immediate or mediate transferees of the initial transferee receiving the Avoidable Transfers. 

COUNT II

Avoidance of Fraudulent Transfers Pursuant to 11 U.S.C. §§ 544(b) and 550, 

Va. Code § 55-80 or Other Applicable State Fraudulent Conveyance or Fraudulent 

Transfer Law, and, as Applicable, 28 U.S.C. § 3304

51. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

52. The Avoidable Transfers were transfers of interest in the Debtors’ property.

53. The Avoidable Transfers were made with actual intent of the Debtors and HDL 

insiders to hinder, delay, or defraud creditors of the Debtors, including without limitation the 

Assigning Creditors.

54. The primary purpose of the Avoidable Transfers was to perpetuate the illegal 

scheme of inducing test referrals to HDL. 

55. Some of the factors evidencing actual intent of the Debtors and HDL insiders are 

(i) the continuation of P&H payments to various HCPs, including the Defendants, despite 

knowledge of the illegality of the P&H Program; (ii) payments of the Avoidable Transfers at the 

same time substantial new liabilities and debts were incurred through continuation of other 

illegal practices and/or schemes of the Debtors; (iii) insolvency of the Debtors at the time of the 

Avoidable Transfers or as a result thereof; and (iv) the lack of value or consideration in exchange 

for the Avoidable Transfers to the Debtors.

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56. The Department of Justice (“DOJ”) filed Proof of Claim No. 1335 in the Cases,

in the amount of $94,144,852.52, plus interest, based on HDL’s conduct dating back to 

November 2008.

57. The Defendants knew or should have known of the Debtors’ actual intent, as the 

circumstances surrounding the Avoidable Transfers should have put the Defendants on inquiry as 

to the bona fides of these transactions. 

58. As a result of the Avoidable Transfers, creditors of the Debtors, including the 

Assigning Creditors, sustained significant damages. 

59. The Avoidable Transfers are avoidable transfers pursuant to Virginia Code § 55-

80 or other applicable state fraudulent conveyance or fraudulent transfer law and Bankruptcy 

Code § 544(b). 

60. The Avoidable Transfers were made within five (5) years prior to the Petition 

Date.

61. Any Avoidable Transfers made within six (6) years before the Petition Date 

should be avoided pursuant to applicable provisions of the Federal Debt Collection Procedures 

Act, 28 U.S.C. § 3301, et. seq., and Bankruptcy Code §§ 544(b) and 550. 

62. Pursuant to 11 U.S.C. § 550, the Liquidating Trustee may recover the Avoidable 

Transfers from the Practice as the initial transferee of each of the Avoidable Transfers, or as the 

entity for the benefit of which the Avoidable Transfers were made, and from Nasir, Nielsen, 

Bree, Isaac, Duchman, Ugolini, and Rami as the immediate or mediate transferees of the initial 

transferee receiving the Avoidable Transfers. 

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COUNT III

Avoidance of Fraudulent Transfers Pursuant to 

Section 548(a)(1)(B) of the Bankruptcy Code

63. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

64. The Avoidable Transfers were transfers of interest in the Debtors’ property.

65. The Debtors did not receive reasonably equivalent value in exchange for the 

Avoidable Transfers. 

66. The Avoidable Transfers made after June 7, 2013 were made within two (2) years 

prior to the Petition Date and are sought to be avoided in Count III.

67. The Avoidable Transfers were made while the Debtors were insolvent, or became 

insolvent as a result of the Avoidable Transfers. 

68. At the time of the Avoidable Transfers, the Debtors intended to incur, or believed 

that they would incur, debts beyond the Debtors’ ability to pay as such debts matured.

69. At the time of, or as a result of, the Avoidable Transfers, the Debtors were 

engaged in business or a transaction for which any property remaining with such Debtors was 

unreasonably small in relation to its business.

70. At all relevant times, the Debtors had actual creditors holding unsecured claims 

allowable within the meaning of 11 U.S.C. § 502, including vendors, landlords, suppliers, and 

other creditors. 

71. As a result of the Avoidable Transfers, creditors of the Debtors, including the 

Assigning Creditors, sustained significant damages. 

72. The Avoidable Transfers are avoidable transfers pursuant to 11 U.S.C. 

§ 548(a)(1)(B). 

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73. The Avoidable Transfers are recoverable from the Practice as the initial transferee 

of each of the Avoidable Transfers, or as the entity for the benefit of which the Avoidable 

Transfers were made, and from Nasir, Nielsen, Bree, Isaac, Duchman, Ugolini, and Rami as the 

immediate or mediate transferees of the initial transferee receiving the Avoidable Transfers.

COUNT IV

Avoidance of Fraudulent Transfers Pursuant to 11 U.S.C. §§ 544(b) and 550, 

Va. Code § 55-81 or Other Applicable State Fraudulent Conveyance or Fraudulent 

Transfer Law, and, as Applicable, 28 U.S.C. § 3304

74. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

75. The Avoidable Transfers were transfers of interest in the Debtors’ property.

76. The Debtors did not receive consideration deemed valuable in law or reasonably 

equivalent value in exchange for the Avoidable Transfers. The Avoidable Transfers were 

improper and illegal, and as a consequence of such transfers, the Debtors became burdened with 

enormous liabilities, including the liability to the U.S. Government. 

77. The DOJ filed Proof of Claim No. 1335 in the Cases, in the amount of 

$94,144,852.52, plus interest, based on HDL’s conduct dating back to November 2008.

78. The Avoidable Transfers were made at the time when the Debtors were insolvent, 

or became insolvent as a result of the Avoidable Transfers. 

79. At the time of the Avoidable Transfers, the Debtors intended to incur, or believed 

that they would incur, debts beyond the Debtors’ ability to pay as such debts matured.

80. At the time of, or as a result of, the Avoidable Transfers, the Debtors were 

engaged in business or a transaction for which any property remaining with such Debtors was 

unreasonably small in relation to their business.

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81. As a result of the Avoidable Transfers, creditors of the Debtors, including the 

Assigning Creditors, were harmed. 

82. The Avoidable Transfers were made within five (5) years prior to the Petition 

Date.

83. The Avoidable Transfers are avoidable transfers pursuant to Virginia Code § 55-

81 or other applicable state fraudulent conveyance or fraudulent transfer law and Bankruptcy 

Code § 544(b). 

84. Any Avoidable Transfers made within six (6) years before the Petition Date 

should be avoided pursuant to applicable provisions of the Federal Debt Collection Procedures 

Act, 28 U.S.C. § 3301, et. seq., and Bankruptcy Code §§ 544(b) and 550. 

85. Pursuant to 11 U.S.C. § 550, the Liquidating Trustee may recover the Avoidable 

Transfers from the Practice as the initial transferee of each of the Avoidable Transfers, or as the 

entity for the benefit of which the Avoidable Transfers were made, and from Nasir, Nielsen, 

Bree, Isaac, Duchman, Ugolini, and Rami as the immediate or mediate transferees of the initial 

transferee receiving the Avoidable Transfers.

COUNT V

Disallowance of Claims Pursuant to Section 502(d) of the Bankruptcy Code

86. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

87. Property is recoverable from the Defendants under Section 550 of the Bankruptcy 

Code.

88. The Practice was the initial transferee of each of the Avoidable Transfers, or an 

entity for the benefit of which the Avoidable Transfers were made, and Nasir, Nielsen, Bree, 

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Isaac, Duchman, Ugolini, and Rami are the immediate or mediate transferees of the initial 

transfer. 

89. The Defendants have not paid to the Liquidating Trustee the amount of the 

Avoidable Transfers, or turned over such property to the Liquidating Trustee, for which the 

Defendants are liable under Section 550 of the Bankruptcy Code.

90. Pursuant to Section 502(d) of the Bankruptcy Code, any and all claims of the 

Defendants and/or its assignee must be disallowed until such time as the Defendants pay to the 

Liquidating Trustee all amounts sought herein.

COUNT VI

Aiding and Abetting Breach of Fiduciary Duty

91. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

92. From or around 2012 until or around 2014, the Defendants aided and abetted the 

breaches of fiduciary duty of due care and loyalty by one or more of the directors and officers of 

the Debtors, including Mallory, who owed such fiduciary duty to the Debtors and/or their 

creditors, including the Assigning Creditors, at all relevant times.

93. The Defendants did so knowingly, or having reason to know the nature of the 

injury to the Debtors and Debtors’ creditors, including the Assigning Creditors, brought about by 

such assistance.

94. The Defendants directly benefited from aiding and abetting such breaches of 

fiduciary duty and self-dealing by reaping financial rewards to which it was not entitled.

95. As a direct and proximate result of aiding and abetting breaches of fiduciary duty 

and self-dealing, the Debtors and their creditors, including the Assigning Creditors, sustained 

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significant damages, including but not limited to hundreds of millions of dollars of unpaid 

obligations.

96. The Defendants’ participation in the P&H Program and the Patient Responsibility 

Collection Practice violated applicable state and federal law and supported and otherwise aided 

and abetted the breaches of fiduciary duty committed by one or more of the directors and officers 

of the Debtors. 

97. As a result of the Defendants’ aiding and abetting of the aforementioned breaches

by one or more of the directors and officers of the Debtors, including Mallory, the Liquidating 

Trustee is entitled to recover the damages suffered by the Debtors and the Assigning Creditors 

from the Defendants in an amount to be proved at trial.

COUNT VII

Common Law Conspiracy

98. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

99. From or around 2012 until or around 2014, the Defendants and one or more of the 

Debtors’ directors and officers, including Mallory, acted in concert, agreed, associated, mutually 

undertook, or combined to accomplish, by concerted action, unlawful, illegal, and oppressive 

acts that caused catastrophic injury and damage to the Debtors and creditors of the Debtors, 

including the Assigning Creditors. 

100. The unlawful acts include, but are not limited to, establishing, making and 

accepting payments pursuant to the P&H Program and engaging in improper testing.

101. The Defendants and one or more of the Debtors’ directors and officers, including

Mallory, intentionally combined to accomplish these unlawful purposes, or even if determined to 

be lawful purposes, accomplish them through illegal and unlawful means.

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102. As a direct and proximate result of the conspiracy and agreement among the 

Defendants and one or more of the Debtors’ directors and officers, including Mallory, the 

Debtors and their creditors, including the Assigning Creditors, sustained significant damages, 

including but not limited to hundreds of millions of dollars of unpaid obligations.

103. The Defendants’ participation in the P&H Program and the Patient Responsibility 

Collection Practice violated applicable state and federal law and supported the conspiracy and 

otherwise illegal acts committed by one or more of the directors and officers of the Debtors, 

causing damage to the Debtors’ estates and their creditors. 

104. As a result of the conspiracy, the Liquidating Trustee is entitled to recover from 

the Defendants the damages suffered by the Debtors and their creditors, including the Assigning 

Creditors, in an amount to be proved at trial.

COUNT VIII

Statutory Conspiracy Pursuant to Va. Code §§ 18.2-499 et seq. 

105. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

106. From or around 2012 until or around 2014, the Defendants and one or more of the 

Debtors’ directors and officers, including Mallory, acted in concert, agreed, associated, mutually 

undertook, or combined to accomplish, by concerted action, unlawful, illegal, and oppressive 

acts that caused catastrophic injury and damage to the Debtors and creditors of the Debtors, 

including the Assigning Creditors.

107. The unlawful acts include, but are not limited to, establishing, making and 

accepting payments pursuant to the P&H Program and engaging in improper testing.

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108. The Defendants’ unlawful acts, undertaken willfully, intentionally, purposefully 

and without lawful justification, have injured the Debtors and their creditors, including the 

Assigning Creditors.

109. The Defendants’ wrongful conduct was aimed directly at damaging the Debtors 

and their creditors, including Assigning Creditors.

110. The Defendants’ wrongful conduct constitutes a violation of the Virginia Business 

Conspiracy Act (“VBCA”). 

111. As a direct and proximate result of the conspiracy and agreement among the 

Defendants and one or more of the Debtors’ officers and directors, including Mallory, the 

Debtors and their creditors, including the Assigning Creditors, sustained significant damages, 

including but not limited to hundreds of millions of dollars of unpaid obligations.

112. The Debtors and the Assigning Creditors, acting through the Liquidating Trustee, 

are entitled to recover three times the damages they sustained as a result of the conspiracy, in 

addition to reasonable attorneys’ fees and expenses, pursuant to the VBCA.

113. The Defendants’ participation in the P&H Program and the Patient Responsibility 

Collection Practice violated applicable state and federal law and supported the conspiracy and 

otherwise illegal acts committed by one or more of the directors and officers of the Debtors, 

causing damage to the Debtors’ estates and their creditors. 

114. As a result of the conspiracy, the Liquidating Trustee is entitled to recover from 

the Defendants the damages suffered by the Debtors and their creditors, including the Assigning 

Creditors, in an amount to be proved at trial.

COUNT IX

Common Law Fraud

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115. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

116. From or around 2012 until or around 2014, the Defendants and one or more of the 

Debtors’ directors and officers, including Mallory, made false representations of material fact, 

including without limitation, on the claims presented to the Assigning Creditors such as Aetna 

and Cigna, which purported to be for medically necessary tests.

117. The Defendants and one or more of the Debtors’ directors and officers, including 

Mallory, made such representations intentionally and knowingly with the intent to mislead and 

induce the Assigning Creditors such as Aetna and Cigna into making payments for the 

unnecessary tests. 

118. In justifiable reliance on the misrepresentations by the Defendants and one or 

more of the Debtors’ directors and officers, including Mallory, the Assigning Creditors, such as 

Aetna and Cigna, made payments for the unnecessary tests.

119. As a direct and proximate result of the foregoing misrepresentations, the Debtors 

and Assigning Creditors, such as Aetna and Cigna, sustained significant damages.

120. The Defendants’ participation in the P&H Program and the Patient Responsibility 

Collection Practice violated applicable state and federal law and supported the fraudulent and 

otherwise illegal acts committed by one or more of the directors and officers of the Debtors, 

causing damage to the Debtors’ estates and their creditors. 

121. As a result of the justifiable reliance by the Assigning Creditors, such as Aetna 

and Cigna, on these misrepresentations by the Defendants and one or more of the Debtors’ 

directors and officers, including Mallory, the Liquidating Trustee is entitled to recover the 

damages suffered by the Assigning Creditors and the Debtors in an amount to be proved at trial. 

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COUNT X

Constructive Fraud

122. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

123. From or around 2012 until or around 2014, the Defendants and one or more of the 

Debtors’ directors and officers, including Mallory, made false representations of material fact, 

including without limitation, on the claims presented to the Assigning Creditors such as Aetna 

and Cigna, which purported to be for medically necessary tests.

124. Pleading in the alternative, the Defendants and one or more of the Debtors’ 

directors and officers, including Mallory, negligently made such representations to the Assigning 

Creditors, inducing them to make payments for the unnecessary tests.

125. In justifiable reliance on the misrepresentations by the Defendants and one or 

more of the Debtors’ directors and officers, including Mallory, the Assigning Creditors made 

such payments.

126. As a direct and proximate result of the foregoing misrepresentations, the 

Assigning Creditors and the Debtors sustained significant damages. 

127. As a result of the justifiable reliance by Assigning Creditors, such as Aetna and 

Cigna, on these misrepresentations by the Defendants and one or more of the Debtors’ directors 

and officers, including Mallory, the Liquidating Trustee is entitled to recover the damages 

suffered by such Assigning Creditors and the Debtors in an amount to be proved at trial. 

COUNT XI

Unjust Enrichment

128. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

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129. From or around 2012 until or around 2014, the Debtors and/or the Assigning 

Creditors conferred a benefit on the Defendants through, as applicable, the Avoidable Transfers 

and payments for claims the Defendants and one or more of the Debtors’ directors and officers, 

including Mallory, caused to be presented to the Assigning Creditors.

130. The Defendants knew they received a benefit and should have reasonably 

expected to repay the Debtors and/or Assigning Creditors.

131. The Defendants accepted and retained the benefits without paying for their value.

132. Allowing the Defendants to retain the benefits they received would be unjust and 

result in unjust enrichment.

133. The Debtors and Assigning Creditors have no adequate remedy at law.

134. As a direct and proximate result of the foregoing wrongful acts, the Debtors and 

the Assigning Creditors sustained significant damages, including but not limited to the amount of 

the Avoidable Transfers.

135. As a result of the Defendants’ unjust enrichment, the Liquidating Trustee is 

entitled to recover the damages suffered by the Debtors and Assigning Creditors in an amount to 

be proved at trial. 

COUNT XII

Turnover of Property of the Estate Pursuant to § 542(a) of the Bankruptcy Code

136. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

137. Section 542(a) of the Bankruptcy Code provides in pertinent part “an entity, other 

than a custodian, in possession, custody, or control, during the case, of property that the trustee 

may use, sell, or lease under 363 of this title, or that the debtor may exempt under 522 of this 

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title, shall deliver to the trustee, and account for, such property or the value of such 

property . . . .” 11 U.S.C. § 542(a).

138. The Defendants are in possession of funds received from the Debtors and/or the 

Assigning Creditors, which do not belong to the Defendants, and which are property of the 

Debtors’ bankruptcy estates pursuant to section 541 of the Bankruptcy Code.

139. Accordingly, pursuant to section 542 of the Bankruptcy Code, the Defendants

should not retain such funds and should turn them over to the Liquidating Trustee and/or the 

Debtors’ bankruptcy estates in an amount to be proved at trial.

COUNT XIII

Conversion

140. The Liquidating Trustee repeats and re-alleges each and every allegation 

contained in the preceding paragraphs as if fully set forth herein.

141. The Debtors and/or Assigning Creditors had a right to possession of the monies 

transferred to the Defendants via the Avoidable Transfers and/or the payments for the 

unnecessary tests. 

142. The Defendants intentionally and substantially interfered with the monies of the 

Debtors and/or Assigning Creditors by wrongfully exercising dominion and control over the 

Avoidable Transfers and/or the payments for the unnecessary tests.

143. As a direct and proximate result of the foregoing wrongful acts, the Debtors and 

Assigning Creditors sustained significant damages, including but not limited to the amount of the 

Avoidable Transfers and overpayments made for unnecessary tests by Assigning Creditors.

144. Accordingly, the Liquidating Trustee is entitled to recover the damages suffered 

by the Debtors and Assigning Creditors in an amount to be proved at trial. 

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145. The Liquidating Trustee hereby reserves his right to supplement and/or amend 

this Complaint to include additional facts, theories, and/or transfers as such may be discovered 

during the course of this Adversary Proceeding and preserve all other claims and defenses 

relating to the Defendants.

WHEREFORE, the Liquidating Trustee respectfully requests that the Bankruptcy Court 

enter an Order and Judgment as follows: 

(a) On Counts I and III, awarding judgment to the Liquidating Trustee, pursuant to Sections

548 and 550 of the Bankruptcy Code, in an amount of the Avoidable Transfers, and 

directing the Defendants to pay to the Liquidating Trustee an amount that is not less than 

$106,000.00, pursuant to Section 550(a) of the Bankruptcy Code;

(b) On Counts II and IV, awarding judgment to the Liquidating Trustee, pursuant to Sections

544(b) and 550 of the Bankruptcy Code, Va. Code Sections 55-80 and 55-81, or pursuant 

to other applicable state fraudulent conveyance or fraudulent transfer law, and as 

applicable, 28 U.S.C. § 3304, in an amount to be proved at trial, and directing the 

Defendants to pay to the Liquidating Trustee an amount that is not less than the full 

amount of the Avoidable Transfers, pursuant to Section 550(a) of the Bankruptcy Code;

(c) On Count V, disallowing any claim of the Defendants pursuant to section 502(d) of the 

Bankruptcy Code;

(d) On Count VI, awarding judgment to the Liquidating Trustee for damages caused to the 

Debtors and their creditors, including the Assigning Creditors, as a result of the 

Defendants’ aiding and abetting breaches of fiduciary duties and self-dealing in an 

amount to be proved at trial;

(e) On Count VII, awarding judgment to the Liquidating Trustee for damages caused to the 

Debtors and Assigning Creditors as a result of the conspiracy in an amount to be proved 

at trial;

(f) On Count VIII, awarding judgment to the Liquidating Trustee, pursuant to the VBCA, for 

three times the damages caused to the Debtors and Assigning Creditors as a result of the 

conspiracy, in addition to reasonable attorneys’ fees and expenses, in an amount to be 

proved at trial;

(g) On Counts IX and X, awarding judgment to the Liquidating Trustee for damages caused 

to the Debtors and their creditors, including Assigning Creditors, as a result of their fraud 

and constructive fraud in an amount to be proved at trial; 

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(h) On Counts XI and XII, awarding judgment to the Liquidating Trustee for turnover of 

money or the value thereof, which does not belong to the Defendants, in an amount to be 

proved at trial;

(i) On Count XIII, awarding judgment to the Liquidating Trustee for damages caused to the 

Debtors and their creditors, including Assigning Creditors, as a result of the Defendants’ 

acts of conversion in an amount to be proved at trial;

(j) awarding pre-judgment interest at the maximum legal rate running from the date of the 

Debtors’ and/or the Liquidating Trustee’s first demand to return all Avoidable Transfers 

to the date of judgment with respect to this Complaint herein;

(k) awarding the Liquidating Trustee his costs and expenses incurred in connection with this 

Adversary Proceeding, including reasonable attorneys’ fees; 

(l) entering judgment in favor of the Liquidating Trustee and against the Defendants in an 

amount not less than $208,580.00, with interest accruing from the date of this Complaint 

at the judgment rate of interest (the “Judgment”); 

(m) awarding post-judgment interest at the maximum legal rate running from the date of the 

Judgment until the date the Judgment is paid in full, plus costs;

(n) directing the Defendants to pay forthwith all amounts awarded; and

(o) granting the Liquidating Trustee such other and further relief as the Bankruptcy Court 

deems just and proper.

Dated: June 7, 2017 Respectfully submitted, 

Richard S. Kanowitz (admitted pro hac vice)

COOLEY LLP

1114 Avenue of the Americas

New York, New York 10036

Telephone: (212) 479-6000

Facsimile: (212) 479-6275

Email: rkanowitz@cooley.com

Counsel to Plaintiff Richard Arrowsmith, 

Liquidating Trustee of the HDL Liquidating Trust

/s/ Cullen D. Speckhart_________

Cullen D. Speckhart (VSB No. 79096)

WOLCOTT RIVERS GATES 

919 E. Main Street, Ste. 1040

Richmond, Virginia 23219 

200 Bendix Road, Ste. 300 

Virginia Beach, Virginia 23452 

Telephone: (757) 497-6633 

Direct: (757) 470-5566 

Email: cspeckhart@wolriv.com

Counsel to Plaintiff Richard Arrowsmith,

Liquidating Trustee of the HDL Liquidating 

Trust

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