Millennium Founder Sued Over $1.8 Billion in Loans

  • Creditors say lab company failed to disclose government probes
  • Voya funds file racketeering claim against founder, ex-CFO

Funds managed by Voya Investment Management Co. sued a founder of Millennium Health LLC and other parties, saying the bankrupt lab-testing company failed to disclose government probes of its business while borrowing almost $2 billion.

In a racketeering suit filed Wednesday in Delaware against Millennium’s owners, founder and former chief financial officer, Voya said it wouldn’t have agreed to fund the loans if “truthful and accurate disclosures concerning the real state of play at Millennium” were made.

Millennium filed for bankruptcy last month after agreeing to pay $256 million to settle claims that it improperly billed the government for unnecessary tests. The company is due back in bankruptcy court Friday to seek approval of a Chapter 11 plan that hands ownership of the company to lenders involved in the $1.8 billion credit agreement.

Voya said it wouldn’t have funded the loans if Millennium executives had disclosed the federal criminal and civil probes. They knew that Millennium was “two-years and 11-million-pages-of-document-productions deep into criminal and civil government investigations,” the Voya funds said in court papers.

Millennium founder James Slattery; Howard Appel, the former CFO; TA Associates Inc., a private-equity firm; and Millennium’s owners were sued in federal court. The funds are seeking restitution of their funds and damages.

Governments’ Claims

The U.S. Justice Department, the Centers for Medicare & Medicaid Services, 29 states and the District of Columbia threatened to revoke the company’s access to federal funds because of the alleged irregularities. According to a complaint filed in a Massachusetts court, Millennium received more than $630 million from Medicare for drug testing from 2007 to 2014.

Millennium filed for bankruptcy after settling federal claims it improperly billed the government for running urine tests on dead people and checking elderly people for crack cocaine.

The San Diego-based company said it might lose lender backing if it doesn’t meet certain milestones or pay the government by Dec. 30. About $1.8 billion in loans under its current credit agreement are to be replaced by a new $600 million term loan.

The case is ISL Loan Trust v. TA Associates Management LP, 15-01138, U.S. District Court, District of Delaware (Wilmington). The bankruptcy case is In re Millennium Health LLC, 15-12285, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Related ticker:
1165391D US (Voya Investment Management Co.)

(Corrects defendant in headline and first paragraph.)
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