Whistleblower Says Firm Faked Reports

SAN DIEGO (CN) — A newly unsealed whistleblower lawsuit claims a suburban San Diego company defrauded the federal and state governments by submitting phony reports on medical equipment it claimed to have inspected.

Quality Assurance Services contracts with hospitals and clinics to test and calibrate the complex machines doctors use to look inside patients or provide radiation therapy, such as mammography, MRI and ultrasound devices and X-rays, according to the lawsuit and the company website.

Known as QAS, the company also contracts with California to inspect X-ray and mammography machines used in state hospitals and prisons.

In her federal lawsuit, fired office manager Erin Hayes Lupo claims that instead of testing some machines, a company official took old inspection reports, put in the new machines' identifying information and submitted the altered reports to customers.

Lupo's complaint accuses one of the company owners, Glenn Russell Deacon II, of regularly asking her to provide him "reports that had been previously completed for medical equipment, for the purpose of changing the device identifying information and institution name, and submitting to the institution the fraudulent report as if he had inspected and tested that particular piece of equipment, when in fact no inspection or test had been performed."

Sometimes when working on contracts from state hospitals and prisons, Deacon "simply invented numbers to input into the reports, rather than perform the test, and then submitted the fraudulent report," Lupo says in the complaint. Or he would place "'inspection on [date]' stickers on the machines, indicating that the machine had been inspected when it had not." (Brackets in complaint.)

In a telephone interview Wednesday evening, Deacon's father, QAS senior vice president Glenn Russell Deacon, called the accusations "absolutely false."

"That is so against our principles," the senior Deacon said. If it happened, "whoever did it would be gone in a heartbeat."

In addition to the Deacons and QAS, Lupo sued Susan Deacon and Shelley Becker. All four are co-owners of the company and live in Chula Vista, according to the complaint.

According to the company website, all four are medical health physicists. Susan Deacon is company president, Glenn Deacon senior vice president, his son — called Russ Deacon on the website — is vice president of diagnostic imaging and Becker is vice president of nuclear medicine and P.E.T.

Glenn Deacon was unaware of the lawsuit Wednesday. "Our company has never been sued, to my knowledge," he said.

The complaint claims the defendants violated the False Claims Act and defrauded the federal and state governments by accepting payments from hospitals and other providers funded by Medicare, Medicaid and other government programs. It seeks $10,000 per act violation, treble damages, punitive damages and attorney's fees.

The complaint was filed under seal on March 29. As a False Claims Act lawsuit, it was sent to the U.S. attorney in San Diego and to the Department of Justice in Washington, D.C., who investigate such allegations and may take over the case if they wish.

Typically, a False Claims Act lawsuit stays sealed while under investigation, according to Mark Labaton with Labaton Azar in Los Angeles, a former federal prosecutor and False Claims Act expert. He called the unsealing of this complaint "a rather quick turnaround," which may indicate that prosecutors were not interested.

Kelly Thornton, spokeswoman for the U.S. Attorney's Office in San Diego, confirmed Thursday that the office had concluded its investigation.

Lupo's attorney, Dennis Grady in San Diego, did not respond to several calls seeking comment.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit