Medical supplier Medline Industries LP has sued the former chief financial officer of United Medco LLC in Florida state court, alleging the executive ran an overbilling scheme that led to an inflated valuation and purchase price for Medco and defrauded a customer of millions of dollars.

In a suit filed Friday in Miami, Medline, which bought Medco in December 2023, said former Medco CFO William Cuervo overbilled one of the company's largest customers, leading the company to appear more profitable than it actually was.

Cuervo touted Medco's "sham success" throughout 2023 when Medline was exploring buying the company, the suit says. Medco's financials, inflated by the fraudulent scheme, led to a $40 million purchase price in December 2023 and up to $35 million in earnout compensation depending on 2024 and 2025 revenues, Medline says.

"Cuervo's fraudulent scheme and conduct induced Medline to purchase Medco and certainly at a valuation Medline would never have agreed to pay had it known the truth," Medline says.

The suit says that Medco's revenues soared in 2020 early in the COVID-19 pandemic, but by 2021, its revenues fell by about 60%. In early 2022, the company's owner, Richard Langnas, faced mounting personal debts, leading him to look to explore a potential sale.

After a sale to a private equity company fell through in 2022, Medline claims Cuervo and Langnas concocted the scheme to defraud one of Medco's largest customers, referred to as Customer A in the complaint.

"The crux of the fraud involved Medco overbilling Customer A and collecting millions of dollars for goods and services far in excess of what Customer A actually ordered and Medco actually provided," Medline said.

Some of the money were funneled to both Langnas and Cuervo, the suit says.

Medline says Cuervo, who stayed on as an employee after the merger, continued to overbill Customer A, and Medline did not discover it until after a forensic accounting investigation.

The suit says that when Cuervo was confronted, he voluntarily repaid part of the millions of dollars taken, but that Medline has not recovered it all or been compensated for the millions in additional damages it incurred in the investigation.

Medline says Customer A, which conducted its own investigation, is also seeking the return of its overpayments and reimbursement for its costs.

The suit is not the first in the fallout of the 2023 acquisition. In December, Langnas and his holding company UMI Consolidated Holdings LLC sued Medline in Delaware Chancery Court, claiming the company refused to make a $10 million earnout payment and is now acting in bad faith to avoid paying a key portion of the sale price.

Cuervo and an attorney for Medline did not respond to requests for comment Tuesday.

Medline is represented by Terra Reynolds and Kevin M. Jakopchek of Latham & Watkins LLP and Martin B. Goldberg and Lynnette Cortes Mhatre of LashGoldberg.

Counsel information for Cuervo was unavailable.

The case is Medline Industries LP v. Cuervo, case number 2026-003655-CA-01, in the Eleventh Judicial Circuit Court of the State of Florida.