Governor Pritzker is leading a trade mission in the week ahead to Japan to talk up the merits of doing business in Illinois. And the owner of a Chicago COVID testing lab has pled guilty to a $14 million fraud scheme. And he was accused of spending some of those federal COVID dollars on cars, stocks, cryptocurrency, and other sort of personal or leisure items. I'll talk with Crane's health care reporter, Katherine Davis, about that story, and about a biotech startup out of Northwestern that's just landed new funding. I'm Amy Guth, and this is Crane's Daily Jist for Monday, October 7th. When I dive deeper into the topics you've heard here, read the full stories and get access to all of Crane's award-winning coverage with a Crane's Chicago Business subscription. Crane's Daily Jist listeners can get 20% off a one-year Crane's Chicago Business digital subscription by visiting ChicagoBusiness.com/Jist and using promo code JIST at checkout. Once again, to redeem this offer, visit ChicagoBusiness.com/Jist and enter code JIST to get this deal while it lasts. I'm joined by Crane's health care reporter, Katherine Davis, here to talk about how the owner of a Chicago COVID testing lab has pled guilty to a $14 million fraud scheme. Lots of layers to this. Katherine, tell me about what's going on with this. This story is sort of one in an ongoing saga about the Chicago-based COVID testing center called LabElite. Like many COVID testing centers during the pandemic, they were taking patients, taking samples and testing people for COVID back when it was so imperative that people knew whether they were positive or negative, especially when they were traveling, going to see family and friends. We all remember what that was like, right? You needed a negative COVID test to get on a plane for a while. So these sort of centers were really popular. Many of them sort of just popped up during the pandemic. It was sort of a new business that was spawned during the pandemic. But this particular one had some issues that have since come to light. To sort of start from the beginning, we know that in 2022, Black Club Chicago reported at the time that the FBI and other federal agencies were raiding the LabElite headquarters. After there were reports that people were getting false or inconclusive results from this testing lab. Which is not a small deal, right? And it had false results at that time when it was so dire. As you said, it was such a big deal to know your COVID status. And so where did the dominoes start to fall for this organization? Sure. So shortly after that FBI raid in 2022, a federal indictment was released about a year later showing that LabElite had accumulated about 83 million dollars from the federal government. You know, they were being reimbursed from the federal government for COVID tests, right? At that time, the government was largely funding this type of work. And to ensure that Americans of all incomes could get access to COVID care when they needed it. But in this specific situation at LabElite, the federal government indicted the owner. His name is Zishan Alvi. And he was accused of spending some of those federal COVID dollars on cars, stocks, cryptocurrency, and other sort of personal or leisure items. Right. So that brings us to now. He's pled guilty. What's the timeline from here and what are the next steps? What Alvi has pled guilty to is submitting more than $14 million in false claims to the US Department of Health and Human Services. He admitted that he was doing this from about February 2021 through February of 2022. And, you know, was pleading guilty to the fact that he was seeing federal COVID dollars for COVID tests that were never actually performed on patients. And in some cases, you know, some of those tests were also just completely inconclusive, which wouldn't have required reimbursement for anyway. So next phase is the sentencing. What is expected at that sentencing hearing? Yeah, so he'll be sentenced on February 7th of next year. And he pled guilty, you know, to one count of wire fraud, which is punishable by up to 20 years in federal prison. His case is being heard by US District Judge John Thark Jr. in US District Court here in Chicago. So it'll certainly be interesting to see if he is punished up to that, you know, full extent of the law up to the 20 years in federal prison or peace given a shorter sentence. I'm also curious to know if he will plead guilty to any other crimes related to this situation. It's still unclear to me exactly what else is to come. But we do know that the federal government has accused him of committing other crimes associated with this saga. Yeah, well, it will saga is the right word. It sounds like for sure. Well, Catherine, while I have you here, I know that you have just recently done some reporting about a biotech startup out of Northwestern that just landed some funding. Tell me about that. Yeah, so this is a relatively new startup called Amfixed Bio. And they are developing a new class of regenerative medicine therapies, essentially that are showing promise so far for regenerating bones, cartilage, even neural regeneration in the brain and spinal cord. And they recently landed a key approval from the US Food and Drug Administration for a breakthrough device designation for just the bone therapy. But this is a really big milestone for a company like this, you know, that spun out of a local university. And my understanding is that this designation will help them get to clinical trials faster, add new people to the team and ramp up sort of the research and development of their invention. I know so much of it depends on funding and how clinical trials go and things like that. But generally, what kind of timeline are we looking at for what we could expect next from this company? What they're saying right now is that they expect to test their bone regeneration therapy in human clinical trials by late 2025. So like I said, you know, they're still in the R&D process right now. But this FDA designation as well as a $1 million grant from the federal government will also help accelerate this process and sort of get them to where they need to go. Interesting that they are based out of portal innovations, which I know we've talked a lot about on the podcast before there that life sciences incubator and investor in Fulton Market. You know, I go over there pretty regularly just for, you know, source meetings or life sciences events. It's very much like a hub for these types of companies. And a lot of them are spun out of our local universities like Northwestern or University of Chicago. And so I think Amfix sort of being based there is a good place for this type of company. They're able to find talent nearby, they're able to connect with other entrepreneurs or companies that, you know, they have best practices or good advice to share. Yeah. And a detail that you noted in reporting that I thought was so interesting is this technology that we're talking about, this regenerative technology was developed over 20 years ago at Northwestern. And it did not spin out until 2019, which to me kind of speaks to just the painstaking process of developing new technologies and what a lengthy runway it is just to get to this point. Totally. I mean, you know, I talk with biotech founders all the time. And the timeline horizon is always just so much more extended than, you know, what we see for a food startup or even a tech startup, a software company, right? Just the science is, of course, a lot more complicated, but then just the process of getting FDA approvals and testing things in clinical trials. All of that takes a ton of time and a ton of money. Amy, you and me were kind of joking before we hopped on about how a million dollars seems like a lot to, you know, maybe the average entrepreneur. But if you're in biotech, a million dollars is really not that much just because it can take, you know, several tens of millions or even hundreds of millions of dollars to get a biotech company off the ground. Indeed. Well, I'm sure we'll be hearing more about this one. And we will all be following your reporting for the latest. Thanks so much, Katherine. Appreciate you stopping by today. Thanks, Amy. Coming up, Metra considers expanding service from Union Station to O'Hare. We'll talk about that and more right after this. Thanks for listening to Crane's Daily Jist. Remember, we provide a daily news brief that drops right in your inbox. It's our newsletter called The Crane's Morning 10. They're the 10 stories that will fuel a smarter workday. To subscribe, visit chicagobusiness.com/morning10. This is The Crane's Daily Jist with Amy Gu. Crane's John Pletz reported that Governor J.B. Pritzker and about two dozen corporate and university leaders are going to Japan in the week ahead on a trade mission to talk up the merits of doing business in Illinois. Pletz noted that the trip is expected to include a lot of discussion about quantum computing and a meeting with Rahm Emanuel, former mayor of Chicago and current U.S. Ambassador to Japan. Among the delegation will be Rashid Bashir, Dean of Engineering at the University of Illinois Urbana-Champaign, Harley Johnson, Director of the New Illinois Quantum and Microelectrics Park at the former U.S. Steel Southwork site and David Osholom, a University of Chicago researcher and Director of the Chicago Quantum Exchange. Pletz noted that joining them will be Kurt Bailey, President of Related Midwest and Michael Fassnot, Chief Growth Officer at Clayco, which is redeveloping the Southwork site and constructing the quantum campus. Josh Richmond, Senior Vice President of Corporate Development at SciQuantum, the anchor tenant of the campus, is also making the trip. Pletz noted in reporting that quantum computing is a major economic development focus for Pritzker, along with clean energy, electric vehicles and batteries, as well as life sciences, agriculture and semiconductors. Japan and Illinois have close ties when it comes to quantum. IBM and Google are funding a $150 million quantum research partnership with UChicago and the University of Tokyo, and Japan is Illinois's eighth largest export market. And as Pletz noted, it's the second Illinois trade mission to Japan since Pritzker took office five years ago, but he missed the first trip due to a broken leg. Pritzker has a much better story to tell these days, having shorted up the state's finances and worked with legislators to create a much broader package of economic development incentives. At the time the trip was announced, Pritzker said in a statement, quote, "I couldn't be more excited to meet with local and international leaders in Japan, highlighting our state's many accomplishments and ambitious goals across sectors like education, clean energy, manufacturing and business." A faster train ride between O'Hare and downtown Chicago, a dream scenario for the city's regular travelers, may finally be starting to come together. Crane's Po'an Naidu reported that after increasing service between O'Hare and Union Station for the Democratic National Convention over the summer, Metra says it's considering making the boost a permanent fixture. A Metra spokesperson told Crane's in an emailed statement, quote, "We are interested in more extensive permanent service because we are trying to develop new markets to build ridership, and it would be beneficial to Metra and the region to have fast, frequent connections between the region's two largest job centers, O'Hare and downtown." Naidu noted in reporting that the North Central Service line, which runs between Union Station and Antioch in far northern Lake County, currently has several weekday departures from Chicago and does not operate on weekends. During the DNC, Metra ran hourly service between downtown and O'Hare. Metra said it would require an agreement with Canadian National Railway, which owns most of the track the route runs on, and CPKC, which dispatches trains on portions of the track in order to permanently expand the service. Naidu also noted that additionally, the route would require further infrastructure improvements to prevent significant delays. That includes adding extra track, sightings, crossovers and flyovers. Metra recently received a $750,000 federal grant with the support of U.S. Representative Mike Quigley. The grant will help research and outline steps to enhance the O'Hare transfer station with the goal of making travel more comfortable and useful for riders. Naidu reported that the spokesperson said the agency is currently studying what upgrades would be needed and how much they would cost as part of a major study looking into how Metra can increase service across the system. Walgreens Boots Alliance will launch a program in January that allows workers paying down their student debt to qualify for the company's 401(k) matching contribution. The retail pharmacy and healthcare provider announced in a news release on October 2nd. Crane's sister publication, pensions and investments reported that the new Walgreens Student Loan 401(k) match program will treat workers' student loan payments as though they were contributions to the company's 401(k) retirement savings plan. Those paying down eligible student loans will receive a dollar-for-dollar matching contribution to their 401(k) accounts, up to 4% of their pay, that according to Walgreens. Elizabeth Berger, Executive Vice President and Chief Human Resources Officer at Deerfield Based Walgreens Boots Alliance, said in the news release, "We understand the burden student loan debt places on many of our team members, and this program empowers us to make a lasting impact on their financial well-being." Walgreens noted that roughly 30% of their workers are facing financial debt from higher education, including more than half of its pharmacists. Pensions and investments reported that student loan 401(k) matching programs like the Walgreens program are now much easier for employers to implement due to a provision in the secure 2.0 act that facilitated their use. North Chicago-based Abbott Labs was one of the first companies to adopt such a retirement savings model. Walgreens' retirement savings plan had $11.7 billion in assets at the end of 2022, according to the company's latest form 5,500 filing. A Harry Potter-themed concept and a Spanish fashion retailer have deals for space on the mag mile, signs of momentum from the vacancy-plague shopping strip. Crane's Rachel Herzog reported citing sources familiar with the transactions that Warner Bros. has signed a lease for a multi-level space that includes about 10,000 square feet on the ground floor of 676 North Michigan Avenue, with plans to open a Harry Potter store like it has in New York. And separately, Barcelona-based chain Mango has a deal for an approximately 16,000-square-foot store at the base of the Ritz-Carlton Residences condo tower at 664-670 North Michigan Avenue. Herzog noted that the deals could help reinvigorate North Michigan Avenue, where the retail vacancy rate has hovered around 30 percent for the last couple of years. Nearly twice what it was in 2019 amid decreased foot traffic due to remote work trends, as well as real and perceived problems with crime. But the tide could be turning, albeit slowly. The corridor got its biggest retail lease since 2015, when women's apparel chain Aretesia signed a deal for a store at 555 North Michigan Avenue in 2022, and Aloe Yoga is planning a store at 717 North Michigan. Herzog reported that the Harry Potter concept would take space formally occupied by Fashion Retailer Express, which closed its store there in 2021. The planned exhibit is said to be similar to one of New York City's flat-iron district, which allows fans of the fantasy franchise to shop for merchandise and enjoy interactive experiences like riding a broomstick and picking out a wand. A popular temporary Harry Potter-themed interactive experience at Watertower Place closed last fall. Dallas-based holding company TRT Holdings, which owns 676 North Michigan, did not respond to a request for comment. But at 664-670 North Michigan, the mango store would occupy space set to be vacated by apparel retailers Tommy Bahama and Loft, as well as a Chicago Cubs team store. Tommy Bahama has been looking for a tenant to sublease its 4,000 square foot space for the last few years. Herzog noted that the mango store would be the global retail chain's first location in Chicago, and comes as the company works on expanding its U.S. footprint, with plans to have a total of 40 stores in the U.S. by the end of 2024, according to a press release on its website. Ryan New York-based Akadia Realty Trust owns that retail space. That's Crane's Daily Just for Now. Check in on our continuous news feed at ChicagoBusiness.com. Thanks so much to today's guest, Crane's health care reporter, Katherine Davis. You can follow all of our conversations on Apple Podcasts, Spotify, or wherever you like to get your audio on demand. Don't forget to subscribe and please rate and review Crane's Daily Just. Our show is produced by Todd Manley at Earsight Studios. I'm Amy Gooth. Thanks so much for listening, and I'll meet you right back here next time.
