The owner of a Lexington drug-testing laboratory has been sentenced to three years and 10 months for health fraud and for evading $3.5 million in federal taxes as he pursued what a prosecutor called an “obscenely lavish lifestyle.”
Under the sentence, Ronald Coburn is liable for paying a total of $1.8 million in restitution to Medicaid and Medicare and $3.5 million to the Internal Revenue Service.
Chief U.S. District Judge Danny C. Reeves sentenced Coburn, 76, in federal court in Lexington on Monday, directing him to report to prison in February.
Reeves also sentenced Erica Baker, an employee at Coburn’s now-defunct lab, to 12 months and one day in prison followed by one year on home detention.
Baker is liable for restitution of $1.5 million to the Kentucky Medicaid program and $105,605 to Medicare.
Coburn owned LabTox LLC in Lexington. The services included analyzing urine samples for drugs.
Courts and substance-abuse recovery programs use the tests to check whether people are using drugs in violation of program rules.
Baker pleaded guilty to one charge of conspiracy to commit health fraud.
She got non-medical recovery programs — typically faith-based programs or homeless shelters — to send drug samples to LabTox to be tested, and the company billed Medicaid and Medicare for the work.
That was fraudulent because the tests were not medically necessary.
In court Monday, Baker’s attorney, Kent Wicker, sought a sentence for Baker that did not include any time behind bars, saying she is a “genuinely good person” whom friends describe as hard-working, kind and loving.
Baker has a 2-year-old son, so being locked up will be particularly hard for her, Wicker said.
Wicker also argued that Coburn is the one who set policy for LabTox and directed the illegal acts, and that Baker only carried out the scheme she was taught to pursue.
Coburn also sexually harassed and assaulted Baker and controlled her, Wicker said.
“She was the classic abuse victim,” Wicker said.
The prosecutor, Assistant U.S. Attorney Paul McCaffrey, agreed that Baker was naive when she first started working at LabTox, and that Coburn set her on a bad path.
But by 2019, during the period covered in the charges, Baker was fully aware that her actions were wrong and kept taking part in extensive fraud anyway because she wanted to be rich, McCaffrey said.
“She made a deliberate choice to engage in criminal conduct,” McCaffrey told Reeves.
Reeves said that a sentence of probation for Baker would unduly diminish the seriousness of the offense.
However, the judge sentenced her to less time than outlined under advisory guidelines, partly in recognition of her effort to provide information to prosecutors.
Coburn pleaded guilty to one charge of health care fraud and one charge of tax evasion.
His attorney, Daniel Fetterman, asked Reeves to place Coburn on probation, citing his age, health problems that include a heart condition, and his 17 years of military service.
But prosecutors argued Coburn should receive a substantial sentence.
“He profited greatly from the illegal billing, failed to pay taxes on the income he earned, and used those profits to fund his outrageously luxurious lifestyle — expensive cars, a personal plane, yachts, jewelry, and more, possible only because of his health care fraud and tax evasion,” McCaffrey and Assistant U.S. Attorney Andrea Mattingly Williams said in a sentencing memorandum.
Coburn put his assets in the name of another person and didn’t pay personal income taxes for 20 years, the memo said.
His payment to the IRS as a result of the criminal case covers only five years.
In addition to his fraudulent conduct, Coburn also was a bully at work, running LabTox through fear and intimidation and sexually harassing Baker, the prosecutors said.
Coburn apologized in court and and noted his Air Force service, but said yes when Reeves asked whether his crimes dishonored his military service.
Reeves imposed the maximum prison time on Coburn outlined in the advisory sentencing guidelines.
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