Smith County Couple Guilty in $3.75M Medicare Fraud Scheme

Gerard Dengler, 61, and Suzanne Dengler, 52, of Tyler, Texas, have pleaded guilty to conspiring to commit health care fraud in a scam that defrauded Medicare of more than $160,000 in false mileage reimbursements. The Smith County couple, owners of Elite Lab Services, manipulated travel logs to inflate route distances and boost billings to the federal health program between April and October 2014, federal prosecutors revealed.

Elite Lab Services, a clinical diagnostic lab operating out of Tyler, billed Medicare for lab services provided to nursing homes across East Texas — including associated travel allowances. But beginning in April 2014, the Denglers systematically padded the mileage used in those calculations, submitting fraudulent claims for reimbursement on routes never driven. The scheme unraveled under scrutiny from a whistleblower and multiple federal and state agencies.

The criminal case stems from a civil qui tam lawsuit filed by Karen Malcolm, a former Elite Lab employee who accused the company and the Denglers of submitting false claims to Medicare dating back to 2010. The U.S. Department of Justice intervened in the civil action, ultimately securing a $3.75 million settlement. As part of the resolution, Elite Lab will be barred from Medicare for eight years; Gerard Dengler for 10 years; and Suzanne Dengler for eight years.

In addition to the civil penalties, the Denglers now face up to 10 years in federal prison each on the criminal charge of health care fraud conspiracy. They have already agreed to pay $160,000 in restitution — the amount determined as direct loss to Medicare from the fraudulent billing. Sentencing will be set following a presentence investigation by the U.S. Probation Office.

The investigation was a multi-agency effort involving the Federal Bureau of Investigation, the U.S. Department of Health and Human Services – Office of the Inspector General (HHS-OIG), the Texas Attorney General’s Medicaid Fraud Control Unit (OAG-MFCU), and the U.S. Attorney’s Office for the Eastern District of Texas. The criminal prosecution was led by Assistant U.S. Attorneys Frank Coan and Nathaniel Kummerfeld, along with Special Assistant U.S. Attorney Ken McGurk.

A separate civil forfeiture action, prosecuted by Assistant U.S. Attorney Bob Wells, resolved claims to funds and property obtained through the fraud. Federal authorities are urging anyone with knowledge of health care fraud to contact the HHS-OIG hotline at 1-800-HHS-TIPS (447-8477). This case underscores the reach of federal fraud enforcement — and the steep consequences for those who exploit public health programs for profit.

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