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Federal probe of COVID testing company with stunning error rate expands to Nevada

By ThisIsReno
Published: Last Updated on

by Anjeanette Damon, ProPublica
This story was originally published by ProPublica.

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Federal authorities are expanding an investigation into Chicago-based Northshore Clinical Labs following a ProPublica story that raised questions about its COVID-19 testing operations in Nevada, according to an email obtained by ProPublica.

In a May 17 email that referenced our reporting on Northshore, an investigator with the Inspector General’s Office of the U.S. Department of Health and Human Services indicated he planned to subpoena documents from Nevada health officials.

“Myself and other law enforcement agencies have had a case opened regarding Northshore Clinical Lab for quite some time,” wrote Special Agent Peter Theiler, who is based in Chicago. “After reading the ProPublica article on Northshore Clinical Lab regarding Nevada patients, we are interested in obtaining records related to testing for COVID-19 for Northshore Clinical Lab rapid test results and PCR test results for Nevada.”

The email did not name the other law enforcement agencies or provide further details on the OIG’s open investigation.

The state of Nevada had not received a subpoena as of Tuesday but will cooperate with one if it’s received, said Nevada Department of Health and Human Services spokesperson Shannon Litz.

Meghin Delaney, a spokesperson for Gov. Steve Sisolak, said the state won’t need to be compelled to aid the investigation.

“We’re not going to need a subpoena to cooperate,” she said. “Clearly complying with this federal investigation is important on our end.”

Our investigation documented Northshore’s stunning false negative rate — 96% on the University of Nevada Reno campus — and raised questions about the company’s billing practices. We also found that the company, which is managed by three Chicago men with a history of fraud allegations, used political connections to fast-track its license inspection and to win agreements with local government agencies across the state to provide testing.

The company was able to expand its testing operations in Nevada despite concerns raised by local government scientists about its erroneous results.

Northshore representatives have repeatedly declined to comment.

In a statement released last week, Sisolak’s office said Northshore’s “negligence is despicable.”

A sign at a Northshore testing site in Reno, Nev. Image: Bob Conrad / This Is Reno

“They took advantage of states and local municipalities at a time when millions of Americans were relying on their services,” Delaney said in the written statement. “In order to hold Northshore accountable for these fraudulent practices, the State of Nevada is assessing its legal options.”

Delaney also said Sisolak is making investments in the state’s public health infrastructure to increase testing capacity.

Sisolak, a Democrat running for a second term, is fending off attacks over his response to the pandemic from Republicans vying for the nomination to oppose him. Sisolak is friends with the father of two men Northshore contracted with to expand its business in Nevada.

“Sisolak’s friends made millions and we paid the price,” said Clark County Sheriff Joe Lombardo, one of 10 GOP contenders in the primary for governor.

Sisolak’s office has said repeatedly that he had no discussions with Northshore’s Nevada representatives, Greg and Angelo Palivos, or their father, Peter. The Palivos brothers have said they weren’t aware of the Federal Trade Commission’s past fraud accusations against the leaders of Northshore. They also said Northshore owes them a substantial amount of money for their work in Nevada.

Sisolak also pushed back against criticism of Nevada’s role in allowing Northshore to continue operating for so long, claiming in a statement that the state “ordered them to stop their PCR testing operation, opened an investigation and worked to correct testing issues” on the day it was made aware of the problems.

Nevada’s own internal documents, however, indicate Northshore voluntarily stopped PCR testing days before the state’s regulatory agency learned of the issues. The documents contain no formal orders to stop PCR testing. The agency also waited four days to open the investigation because the complaint came in late on a Friday afternoon before a holiday weekend.

The state also opted to allow Northshore to continue providing rapid antigen tests to the public outside of its license as the investigation progressed. Nevada officials said it is standard practice to allow a health care provider under investigation to continue operations as it works to correct deficiencies.

Northshore, citing a lack of demand, pulled out of the state before the investigation could be completed. Nevada regulators closed its license and notified the State Board of Nursing, the Occupational Safety and Health Administration and the U.S. Centers for Medicare and Medicaid Services of their findings.

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