Newport man pleads guilty in genetic testing kickback scheme

A Newport Beach man who federal authorities say was a key figure in a wide-reaching $28-million genetic testing kickback scheme has pleaded guilty to conspiracy to defraud.

Nicolas Arroyo, 38, pleaded guilty Tuesday in Texarkana, Texas, to conspiracy to defraud the United States. According to an indictment Dec. 11, Arroyo, a resident of the Newport Coast area, was chief executive of Vantari Genetics, a clinical laboratory headquartered in Irvine, when he conspired with others to pay and receive kickbacks in exchange for the referral and arranging of pharmacogenetic tests, authorities said. That is a type of testing that identifies genetic variations that effect how a patient metabolizes certain drugs.

The arrangement concerned the referral of tests to clinical labs in Fountain Valley, Irvine and San Diego, prosecutors said. More than $28 million in illegal kickback payments were exchanged by defendants and others during the conspiracy, according to prosecutors.

Arroyo, who faces up to five years in prison, is one of 12 people from four states indicted in the case. The co-defendants hail from elsewhere in Southern California and Texas, Arizona and Mississippi.

The case was investigated by the FBI, the U.S. Department of Health and Human Services and the Department of Homeland Security.

“We continue to see individuals in the healthcare industry creating illegal kickback arrangements, trying to cheat the system and turn healthcare decisions into financial decisions instead of what is best for the patient,” said Joseph Brown, U.S. attorney in the Eastern District of Texas, where several defendants lived. “This must stop, and doctors should be aware of the emphasis that is being put on stopping these practices.”

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