Fuad Cochinwala: False Claims Act Penalty and Ownership Dispute

Fuad Rehman Cochinwala, owner of the Houston-area imaging chain One Step Diagnostic, paid $1.2 million in October 2014 to settle a False Claims Act case alleging his company paid physicians for Medicare referrals. Four years later, he and an affiliated entity paid an additional $35,000 stipulated penalty for breaching the compliance agreement that followed the settlement.¹²

What the Government Alleged

The Department of Justice alleged that One Step Diagnostic violated the federal Stark Statute and the False Claims Act by entering into sham consulting and medical director agreements with referring physicians. Under those arrangements, the government said, physicians were paid in exchange for agreeing to refer patients exclusively to One Step Diagnostic for imaging and other services.¹

The Stark Statute prohibits physicians from referring Medicare patients to entities with which they have certain financial relationships. Because those referrals produced the Medicare claims One Step Diagnostic submitted, the government contended the claims themselves were false. The settlement was reached without an admission of liability and without the filing of litigation by the DOJ.¹

How the Case Started

The matter began as a qui tam action. Three whistleblower relators, Maribeth Holderith, Leslie Flake, and Arthur Minguez Jr., filed the complaint on October 4, 2012, in the U.S. District Court for the Southern District of Texas. The case, United States ex rel. Holderith, et al. v. One Step Diagnostic, Inc., et al., Case No. 4:12-cv-02988, was assigned to Judge Sim Lake.³

A joint stipulation of dismissal incorporating the settlement was filed on October 14, 2014, and Judge Lake signed the dismissal order two days later. The relators’ share of the recovery was not disclosed in the available court records.³

The Compliance Agreement and 2018 Penalty

As part of resolving the case, Cochinwala and his company entered into a Corporate Integrity Agreement with the HHS Office of Inspector General. A CIA imposes ongoing compliance obligations, including a requirement to screen employees and contractors against federal exclusion lists so that no one barred from federal health care programs works in a covered role.

In November 2018, the OIG disclosed that OSD Management LLC and Cochinwala paid a $35,000 stipulated penalty for failing to screen “Covered Persons” as the CIA required. The penalty was paid on November 19, 2018. The screening failure meant the company had not properly verified whether individuals in covered roles were excluded from federal health care program participation.²

A Separate Ownership Dispute

Cochinwala was also a defendant in an unrelated civil matter over ownership of the imaging chain. In 2018, Muhammad Salim and the estate of his wife filed Muhammad Salim, et al. v. Fuad Cochinwala, et al., Cause No. 2018-68927, in the 234th Judicial District Court of Harris County, Texas, bringing derivative claims as one-third owners of the business. The dispute went to confidential arbitration, and in early 2022 the plaintiffs obtained a judgment confirming an arbitration award of more than $7.4 million. The specific findings behind the award were not made public.⁴ That case is separate from the federal False Claims Act settlement and involved different parties and different claims.

1
U.S. Department of Justice. Operators of Houston-Area Diagnostic Centers Agree to Pay $2.6 Million to Settle Alleged False Claims Act Violations
2
HHS Office of Inspector General. Independent Diagnostic Testing Facility Company and Owner Pay CIA Stipulated Penalty
3
CourtListener. Holderith, ex rel. v. One Step Diagnostic, Inc.
4
Burford Perry LLP. Representative Cases