CBS News investigation alleges Cockerell Dermatopathology used service members to bill military health insurance system for millions of dollars of unnecessary screening tests
Following its investigation, CBS News reported allegations that a Texas dermatopathology laboratory has bilked the military healthcare system out of millions of dollars by enticing service members to sign up for unnecessary genetic and drug screening tests in exchange for $50 gift cards.
This latest incident adds to the growing number of investigations and health insurer lawsuits in recent years alleging fraudulent business practices within the clinical laboratory industry. Although only a handful of companies have been prosecuted by the federal government for fraud and abuse, The Dark Report last year noted that the hundreds of millions of dollars involved in these cases represent just a portion of the fraudulent clinical laboratory test claims that federal officials believe have been submitted in recent years by a much larger number of lab companies performing toxicology, pain management, and cardiology tests.
Clinical Laboratory Allegedly Committed Insurance Fraud According to CBS News
In its June 8, 2016, broadcast, CBS News exposed this latest alleged insurance scam involving Cockerell Dermatopathology Laboratory in Dallas. CBS News claims soldiers and their family members were drawn to makeshift clinics near Fort Hood Army base in Texas by a marketing campaign that offered a $50 Walmart gift card in exchange for providing DNA, a urine sample, and a copy of their military identification card. CBS said screening tests were then conducted and billed to Tricare, the health insurance program for military members, retirees, and their family members.
Linda Bozeman, wife of a service member, stated in the CBS News report that she visited a Fort Hood area clinic several times last year to earn extra money during the Christmas holiday season.
“They said they had this clinical research going and that they paid you by Walmart cards, so you’d give your urine,” said Bozeman, whose photocopied ID card was found by CBS News in a shed filled with discarded DNA specimens, medical information, Social Security numbers, and other paperwork.
CBS News reported that Cockerell Dermatopathology used Bozeman’s samples to bill Tricare 418 separate times for unneeded screenings for dozens of drugs such as PCP, cocaine, and methadone at a cost of nearly $7,000.
Accused Lab Received Millions in Payments from Tricare
According to CBS News, Cockerell Dermatopathology received more than $5 million in Tricare payments last year for allegedly unnecessary lab tests performed by Origen Laboratories in Dallas. The lab conducts molecular, genomics, and toxicology testing for Cockerell Dermatopathology, and also is owned by Clay Cockerell, MD, who is past President of the American Academy of Dermatology. Origen Laboratories is managed by ProGen Lab Systems, an independent laboratory management organization.
Retired 2-star General Richard Thomas (left), former head of Tricare, speaks with Jim Axelrod (right) of CBS News, about the investigation into Cockerell Dermatopathology of Dallas. The investigation was sparked by a CBS News story that alleged the clinical laboratory was part of a scheme to entice service members near Fort Hood Texas to provide DNA and urine samples that were used to bill the military health insurance system for millions of dollars of unnecessary genetic and drug screening tests. (Photo copyright: CBS News.)
During a briefing with reporters that took place the day after the CBS News report aired, Pentagon Press Secretary Peter Cook did not confirm a Pentagon investigation was under way to determine who made money at Tricare’s expense, but noted, “Reports like this are obviously of concern to us and something we want to address.”
Cockerell Lab Responds to Allegations of Wrongdoing
An estimated 2,000 soldiers may have been duped, CBS News stated in its report.
In response to the CBS broadcast, Cockerell Dermatopathology posted a statement on its website in which the lab stated it would be refunding money received from the tests in question, which was reported by Military.com. The clinical laboratory company did not provide details on the amount being refunded or indicate who would receive reimbursements. Cockerell Dermatopathology stated that the lab would “vigorously defend [itself] against allegations of wrongdoing.”
“When Origen became aware that certain individuals were operating outside of the organization’s strict compliance requirements regarding the manner in which laboratory services are marketed, we took immediate action, including terminating individuals and relationships with those that acted in violation of the laboratory’s compliance policies,” Cockerell Dermatopathology wrote in that statement. “We are also voluntarily refunding monies resulting from these activities. In no case did Origen or Cockerell profit from these activities as suggested by the CBS story.”
The original statement is no longer available to be read on the Cockerell Dermatopathology website. However, in a “Clarification of Facts,” statement posted on July 11, Cockerell admitted to having a “relationship” with Origen Laboratories, which is managed by ProGen. He also claims that “months prior to the airing of the CBS story” ProGen learned of “individuals operating outside of the company’s compliance policies and requirements” and immediately terminated those individuals.
In July, following the CBS broadcast, Baylor University Medical Center announced that Alan Menter, MD, would remain as the university’s Chairman of Dermatology indefinitely. According to Dallas/Fort Worth Healthcare Daily, Clay Cockerell had been scheduled to take over Menter’s post on July 1. In a statement, Baylor praised Cockerell, stating, “Dr. Clay Cockerell is a well-regarded dermatologist who has an excellent clinical reputation. We were previously in discussions with Dr. Cockerell about a leadership position at Baylor University Medical Center. However, both parties have formally paused the talks.”
The article also reported that, in an e-mail, Cockerell stated, “While I work to correct the misinformation in the story, we thought it best to delay my appointment temporarily and mutually agreed to a short term pause.” Cockerell also wrote, “I do not own a lab in Killeen. The lab that is managed by ProGen performed tests on specimens that were sent to us that were induced by dishonest individuals. We learned about it over nine months ago. ProGen terminated relationships with all individuals involved, notified the payer, and began voluntarily returning all monies garnered by the tests associated with the scheme.” The amounts of the refunds have not been disclosed, however, CBS News did confirm in its report that an investigation by the federal government has begun.
Tricare is managed by the Defense Health Agency and is divided into three regions in the United States and multiple regions overseas, with each region served by a health insurance contractor. The Tricare South region, which includes Texas, is administered by Humana Military. A Humana media relations manager did not respond to Dark Daily’s request for a response to the CBS News report.
Over the past year, Dark Daily and its sister publication, The Dark Report have been contacted by numerous individuals claiming knowledge of businessmen, often located in Texas, who are organizing clinical enterprises designed to remunerate physicians for clinical laboratory test referrals in ways that would be recognized by experienced medical laboratory professionals as illegal inducements and kickbacks under federal law.
In several cases, these scammers have approached established clinical labs, such as hospital labs, to ask for an agreement wherein the established labs would perform testing on specimens referred by the clinical enterprises being organized by these individuals. Where such agreements have been negotiated, the scammers then use the credibility of their “reference lab” to persuade physicians to send patient lab test samples to their shell companies. Anyone with knowledge of similar arrangements is encouraged to contact the editors of The Dark Report in confidence.
Keith J. Gray’s conviction underscores rising enforcement and audit risk as Medicare spending shifts toward high-cost genetic testing.
A federal jury in Dallas has convicted Texas laboratory owner and former NFL player Keith J. Gray for orchestrating a $328 million Medicare fraud scheme tied to unnecessary cardiovascular genetic testing. Gray, age 39, owned and operated Axis Professional Labs LLC and Kingdom Health Laboratory LLC, which billed Medicare for tests that were not medically necessary, according to the US Department of Justice (DOJ).
The jury convicted Gray on multiple counts, including conspiracy to defraud the United States, violations of the Anti-Kickback Statute, and money laundering. He now faces up to 10 years in prison for each count, with sentencing to be determined by a federal judge.
Gray briefly pursued a professional football career after playing at the University of Connecticut, signing as an undrafted free agent with the Carolina Panthers in 2009 and later spending time on the Indianapolis Colts practice squad, though he never appeared in a regular-season NFL game, according to Fox Sports.
Kickbacks and Sham Contracts Drove Genetic Testing Fraud
According to evidence presented at trial, Gray paid illegal kickbacks to marketers in exchange for Medicare beneficiaries’ DNA samples, personal information, and signed physician orders, the DOJ said. These marketers relied on aggressive telemarketing tactics and a practice known as “doctor chasing,” in which they identified patients’ primary care physicians and pressured them to approve genetic testing orders, prosecutors noted. In many cases, these approvals were based on pre-screening conducted by non-medical personnel rather than legitimate clinical evaluations.
To conceal the scheme, Gray used sham contracts and falsified invoices that were labeled as payments for marketing services, software, or loans. In reality, these payments were structured to match per-sample kickbacks. “Evidence at trial included text messages between Gray and his co-conspirator becoming giddy over the amount of money they were making from Medicare,” the DOJ noted.
Photo credit: NFL Photos
The two laboratories billed Medicare approximately $328 million in fraudulent claims, resulting in about $54 million in payments. Gray used some of these proceeds to purchase luxury vehicles, including high-end trucks and SUVs, as part of efforts to launder the illicit funds.
The case was investigated by multiple federal and state agencies, including the FBI, HHS Office of Inspector General, Texas Medicaid Fraud Control Unit, and the VA Office of Inspector General, underscoring ongoing enforcement efforts targeting fraud in clinical laboratory testing.
The Gray case underscores exactly the risk highlighted in a recent article from The Dark Report on a report from the Department of Health and Human Services’ Office of Inspector General that found genetic tests make up just 5% of volume but now drive 43% of Medicare Part B lab spending. As Medicare spending becomes increasingly concentrated in high-cost genetic testing, enforcement agencies are intensifying scrutiny around medical necessity and billing practices.
Gray’s $328 million fraud scheme—built on kickbacks, questionable ordering practices, and medically unnecessary tests—reflects the same misbehaviors regulators are now targeting. Because of fraud cases such as this, honest laboratories must make greater effort to strengthen compliance, validate ordering patterns, and prepare for heightened audits in the molecular diagnostics space.
Strategies to mitigate diagnostic testing fraud will be a key focus at the 31st Annual Executive War College taking place in New Orleans April 28-29.
Genetic, toxicology, and even routine panels can create pitfalls for clinical laboratories.
Clinical laboratory professionals involved with diagnostic billing and coding should double check claims submitted for routine, toxicology, and genetic testing. Those three testing types are inviting private payer scrutiny and possibly worse.
“Between audits, denials, and government crackdowns, the risks are higher than ever,” said Jamel Giuma, founder and CEO at JTG Consulting Group, a laboratory IT consulting company.
Routine Panels Can Create Headaches for Lab Billing
Giuma explained that when it comes to diagnostic billing and coding, three testing areas often get oversized attention from commercial payers and the Medicare program:
Routine panels. Lab professionals should beware of overordering these types of tests, such as lipid or metabolic panels. High volumes have attracted payer audits, Giuma said. The US Department of Health and Human Services’ Office of Inspector General (OIG) has previously noted investigations where lipid panels were billed with direct low-density lipoprotein cholesterol tests to the same patient on the same day, which the OIG said was medically unnecessary.
Toxicology tests. Some drug testing panels to detect pain management or substance abuse have received scrutiny in 2025 for their ordering frequency.
Genetic testing. Expensive DNA and molecular assays may get an extra look from insurers, particularly services that get tagged with CPT code 81479. The code is a vague catch-all for unlisted molecular pathology procedures. The Dark Report has noted that using 81479 is essentially begging a payer to review the claim. Giuma added that this can be a tricky area for labs developing investigational tests.
Giuma said based on data he has reviewed, payers initially deny one in five clinical lab billing claims. “That is staggering,” he noted.
Jamel Giuma noted that one of every five clinical lab billing claims gets denied by payers, making the submission process a thorny one for laboratories. (Photo credit: JTG Consulting)
Investigators Eye Laboratory Test Fraud
Meanwhile, the OIG, auditors from the Centers for Medicare and Medicaid Services, and investigators from the US Department of Justice also scrutinize diagnostic billing and coding patterns.
“They’re looking for repeat offenders or systematic over-coding,” Giuma said.
Earlier this year, as part of the largest healthcare fraud bust in US history, dozens of clinical laboratories were charged with Medicare fraud for alleged telemedicine and genetic testing schemes where deceptive telemarketing campaigns targeted Medicare beneficiaries.
Even the most scrupulous labs should heed the indictments from the fraud investigations. All laboratories can run into trouble if they don’t stay on top of compliance efforts to detect fraud risks.
Documentation of billing code justifications and claims submissions are a solid first line of defense, Giuma said.
Also, labs should closely monitor prior authorization processes and understand associated rules from payers, he added.
Giuma’s advice emphasizes that diagnostic billing and coding is an area that clinical labs can unnecessarily get snarled in if providers are not careful about how and when they order tests.
Clinical laboratory genetic testing labs and telemedicine groups among those charged
In the largest healthcare fraud bust in US history, the US Department of Justice (DOJ) announced it had levied criminal charges against 324 defendants for allegedly participating in various fraudulent healthcare schemes—including clinical laboratory genetic testing and telemedicine fraud—totaling over $14.6 billion in losses.
A DOJ press release states the agency’s 2025 National Health Care Fraud Takedown represents an unprecedented effort to alleviate fraud in healthcare that exploits patients and taxpayers.
The defendants include 96 doctors, nurse practitioners, pharmacists, and other licensed medical professionals. The cases are being prosecuted by Health Care Fraud Strike Force teams from the Criminal Division’s Fraud Section, 50 US Attorneys’ Offices, and 12 State Attorneys’ General Offices.
“This record-setting Health Care Fraud Takedown delivers justice to criminal actors who prey upon our most vulnerable citizens and steal from hardworking American taxpayers,” said Attorney General Pam Bondi in the press release. (Photo copyright: US Department of Justice.)
49 Clinical Lab Defendants Charged
The takedown relied on coordinated investigations from several agencies, including the:
Health Care Fraud Unit of the DOJ Criminal Division’s Fraud Section,
Department of Health and Human Services Office of Inspector General,
Federal Bureau of Investigation,
Drug Enforcement Administration, and,
Multiple US Attorneys’ Offices.
Clinical laboratory testing fraud was addressed in the takedown. Forty-nine defendants were charged with telemedicine and genetic testing fraud schemes where deceptive telemarketing campaigns targeted Medicare beneficiaries, resulting in $46 million in fraudulent claims being submitted to Medicare for durable medical equipment (DME), genetic tests, and COVID-19 tests.
“Make no mistake—this administration will not tolerate criminals who line their pockets with taxpayer dollars while endangering the health and safety of our communities,” said Attorney General Pam Bondi in the press release.
Other High-Profile Cases
The most prominent cases include a $10 billion urinary catheter scheme where foreign straw owners secretly purchased medical supply companies and then used stolen identities and personal health data of more than one million Americans to file erroneous Medicare claims. Known as Operation Gold Rush, the hoax resulted in the arrests of nineteen defendants, including four in Estonia and seven individuals attempting to avoid capture at US airports and at the Mexican border.
In another case involving foreign influence, owners and executives in Pakistan were charged in connection with a $703 million scheme where artificial intelligence (AI) was allegedly used to create fake recordings of Medicare recipients consenting to receive various products. The data was then sold to clinical laboratories and DME companies to fraudulently submit false claims to Medicare. In addition, some of these defendants allegedly conspired to conceal and launder proceeds from US bank accounts to overseas bank accounts.
Also, a defendant who owned a billing company allegedly planned a sham in which Arizona Medicaid was fraudulently billed $650 million for addiction treatment programs where services were never rendered or patients received substandard care. The defendant, who is based in Pakistan and the United Arab Emirates, supposedly received at least $25 million from the scheme and is also charged with a money laundering offense.
“It’s not done by small time operators,” said Mehmet Oz, MD, who leads the Centers for Medicare and Medicaid Services (CMS). “These are organized syndicates who are designing to hurt America.”
Other notable cases include a scam involving $1.1 billion in fraudulent claims for unnecessary amniotic wound allografts for elderly patients resulting in defendants receiving millions in illegal kickbacks. In another scheme, 74 defendants were charged with the illegal distribution of prescription opioids and other controlled substances.
DOJ Property Seizures
As a result of the fraud bust, the US government seized over $245 million in cash, luxury vehicles, cryptocurrency, and other assets and prevented an additional $4 billion from being paid out by CMS due to false and fraudulent claims.
“These criminals didn’t just steal someone else’s money. They stole from you,” Matthew Galeotti, JD, who leads the DOJ Criminal Division, told the Associated Press. “Every fraudulent claim, every fake billing, every kickback scheme represents money taken directly from the pockets of American taxpayers who fund these essential programs through their hard work and sacrifice.”
This latest bust demonstrates the DOJ’s increased resolve to pursue healthcare fraud, including cases involving clinical laboratory testing. Look for further coverage of this aspect in the 7-14-2025 issue of The Dark Report.
NPR reports that the shamed Theranos founder/CEO is providing advice to Evans, but the startup denies that claim
Prison bars can’t block Elizabeth Holmes from finding her way back into the news spotlight. The disgraced founder and former CEO of Theranos is reportedly advising her partner Billy Evans on his new artificial intelligence (AI) diagnostic startup company, named Haemanthus after the blood lily.
According to sources who spoke with NPR, Evans’ new company Haemanthus, Inc. is developing a blood testing device and has patented a process that uses Raman spectroscopy, which, according to NPR, “has been shown to help diagnose ALS, also called Lou Gehrig’s disease, as well as some forms of cancer. It has also been used to discover improvised explosive devices on battlefields.”
Evans has already raised millions of dollars for the fledgling startup, NPR reported, adding that a source claimed finances for the company have come from “mostly friends, family, and other supporters so far.”
According to Newsweek, Evans’ goal is to raise $50 million toward the development of a “medical testing product.”
The company will “do medical tests using bodily fluids,” Newsweek reported, adding, “An image of the alleged device published by The New York Times is eerily similar to Theranos’ ‘Edison’ testing machine.”
Elizabeth Holmes is currently housed in a federal facility in Bryan, Texas. Sources told NPR that she has been “providing advice” to Billy Evans, her partner, on his new AI/medical testing company Haemanthus, which denied those claims stating on X that Holmes “has no role, now or future.” (Photo copyright: Wikimedia Commons.)
Haemanthus Denies Holmes’ Involvement
Holmes has reportedly been providing insight to Evans throughout her prison term, though her role with his budding company is unclear, NPR noted.
As previously reported by Dark Daily, Holmes is “barred from receiving payments from federal health programs for services or products, which significantly restricts her ability to work in the healthcare sector.”
Haemanthus denied Holmes’ involvement with the company, claiming that she “has no formal role” and that “Haemanthus is not Theranos 2.0,” Fortune reported.
Previous lengthy posts by Haemanthus on social media platform X fully denied any involvement with Holmes but have since been deleted. The company now uses their platform to curtly retort the significance of Holmes’ involvement, leaning on their advancements and high standards. “Skepticism is rational. We must clear a higher bar,” they said. “When The NY Times contacted us, we invited them to see our lab, tech, and team. They declined. The headline was already written. Our reality inconvenient.”
Further posts on X showcase Haemanthus’ desire to have the same groundbreaking prowess Holmes clung to throughout her Theranos venture. The company claims to have developed “the world’s first AI-native sensors for health,” adding, “Our technology captures thousands of biomarkers simultaneously.”
And the Holmes Saga Continues
Haemanthus is comprised of about a dozen people, including individuals who “worked with Evans at Luminar Technologies, which develops sensor technology for autonomous vehicles, according to the company’s patent and Delaware incorporation paperwork,” NPR reported.
Holmes is currently serving an 11-year federal prison sentence for her role in fraud involving Silicon Valley startup Theranos, which boasted clinical laboratory blood-test breakthroughs that turned out to be riddled with faulty equipment and fraudulent results.
Though whistleblowers brought Holmes scheme to the light, she has never admitted wrongdoing for her actions and continues to claim her innocence. In May, the Ninth Circuit of Appeals denied her request for a rehearing of her case.
