Ex-Executive Sues Lab for $1.3 Million

A Tarzana medical laboratory that was affiliated with a Pap smear laboratory closed by the state last year for misdiagnosing too many tests has been sued by a former employee for $1.33 million in back wages and other, unspecified damages.

Harry L. Lawrence Jr., former vice president of acquisitions and marketing for Central Diagnostic Laboratories Inc., has sued the company for misrepresentation and breach of contract. The complaint, filed Friday in Van Nuys Superior Court, also names MetWest Inc., which acquired Central Diagnostic last fall, Harry Sagheb, former president and chief executive of Central Diagnostic, and Allen Levy, the lab’s former owner.

Central Diagnostic, a full-service medical laboratory, was the sister company to Central Pathology Services Medical Group, a Tarzana Pap smear lab also owned by Levy. Central Pathology was shut down by the state last year and fined $558,000 after a state health inspection found that the lab had misinterpreted 21% of a random selection of Pap smears. The Pap smear test is used to detect cervical cancer and other diseases in women.

Both labs were founded by Levy, a pathologist, and were part of a large medical empire he built.

Central Diagnostic had used Central Pathology to evaluate Pap smear tests. But after the inspection uncovered problems with the tests, Central Diagnostic sent smears to other labs.

Both labs were named in a suit filed by the state last year. Under the settlement Central Diagnostic was not fined. However, both Central Diagnostic and Central Pathology agreed to rescreen Pap smear tests that had been processed at Central Pathology since 1984.

Central Pathology remains closed. Central Diagnostic was acquired last year by MetWest, an Irving, Tex.-based company that runs medical laboratories.

Lawrence’s complaint is reminiscent of another suit filed in 1985 against Central Diagnostic by Lawrence’s predecessor at the lab, Harvey J. Lippman. A jury at Van Nuys Superior Court awarded Lippman $9 million last March for his share of the lab, but Central Diagnostic has appealed.

In the suit filed Friday, Lawrence says that as part of a written contract signed by Levy and Sagheb in 1986, he was to receive $100,000 in annual salary, plus commissions equal to 1% of the annual sales of all companies acquired by Central Diagnostic. However, he contends that he was never paid commissions for many transactions that occurred during his tenure.

Lawrence was fired by the lab last January after it was acquired by MetWest.

Meanwhile, a date for a review of Lippman’s $9-million award against Central Diagnostic in a Los Angeles Court of Appeal will be set “any day,” Lippman said.

Lippman, who worked for Central Diagnostic for 14 years, sued the lab and Levy for a 20% share of the company he said he was entitled to at the time he was fired in 1985. During the trial, Lippman’s attorney argued that Lippman had built Central Diagnostic from a company that employed only nine workers in 1970 to a major business with 900 employees and $45 million in revenues in 1985.

In March, 1989, jurors found that Lippman did indeed have an oral contract with the company that entitled him to 20% of the $45 million in revenues--or $9 million.

But the jurors also decided that Lippman had misappropriated trade secrets and unfairly competed with Central Diagnostic, and ordered him to pay $600,000. However, the court lowered the amount to $450,000.

Lawrence, meanwhile, said he joined Central Diagnostic in 1986, after Levy and Sagheb recruited him away from American Cytogenetics Inc. in North Hollywood where he was president. Lawrence said his job was to keep Central Diagnostic growing by acquiring other full-service medical labs.

But Lawrence said he was not paid many of the commissions owed him, and that Levy and Sagheb conspired to hide the closing of many transactions from him in an effort to keep from paying him.

“When they saw the type of money I was making and the speed at which I was acquiring companies, Harry Sagheb nickel and dimed me out of as much commission money as he possibly could,” Lawrence said in a telephone interview from San Rafael, where he is working as a medical marketing consultant.

For example, Lawrence said, in 1987 he negotiated the acquisition of a Columbia, Md., company, ABLE Laboratories, for $400,000 and wrote the letter of intent for the deal. But after the acquisition was completed, Lawrence said he never received a commission.

In other cases, he said, he was ordered by Levy and Sagheb to split his commissions with others involved in the transactions, and in one case was told to pay a separation fee to a fired employee out of his commissions.

Through a secretary, Levy and Sagheb said they hadn’t seen the suit yet and couldn’t comment.

Betty Levine, one of the attorneys who represented Levy and Central Diagnostic in the Lippman case, said she “had no knowledge” of the Lawrence suit.

Bert Hood, president and chief executive of MetWest, said he was unaware of the Lawrence suit. He also said MetWest is not liable for any damages in the Lippman case because the events occurred before MetWest acquired Central Diagnostic.