Ellis Qui Tam Lawsuit

, . . .

THE STATE OF TEXAS

ex rei.

DR. CHRISTINE ELLIS, D.D.S.

Plaintiffs, v.

ASDC HOLDINGS, LLC (ASDC), ALL

SMILES DENTAL CENTER, INC., ALL

SMILES DENTAL PROFESSIONALS, PC,

DR. RICHARD MALOUF, DDS,

LEWISVILLE SMILES, PLLC, ST.

FRANCIS SMILES, PLLC, GARLAND

ROAD SMILES, PLLC, JACKSBORO

SMILES, PLLC, JACKSBORO SMILES

BY WIRE, PLLC, V ALLEYVIEW

SMILES, PLLC, PLANO MINY ARDS

SMILES, PLLC, HALTOM CITY SMILES,

PLLC, HALTOM CITY SMILES, PLLC

d/b/a ALL SMILES DENTAL & ORTHODONTICS, NORTHWEST

HIGHWAY SMILES, PLLC, FORT

WORTH SMILES BY WIRE, PLLC,

GARLAND ROAD SMILES BY WIRE,

PLLC, GARLAND ROAD SMILES PLLC,

d/b/a ALL SMILES DENTAL & ORTHODONTICS, S. HAMPTON

SMILES, PLLC, S. HAMPTON SMILES,

PLLC, d/b/a ALL SMILES DENTAL & ORTHODONTICS, PARK PLAZA

SMILES, PLLC, and PARK PLAZA

SMILES, PLLC, d/b/a ALL SMILES

DENTAL & ORTHODONTICS

Defendants.

§ IN THE DISTRICT COURT OF

§ § § § § § § § § § § § § § § § § § § § § § § § § § § § § § § § § §

Firf� fn !he District Court o ravrs County, Texas

TRAVIS COUNTY, TEXAS

/;)(f)7J/-9� JUDICIAL DISTRICT

PLAINTIFFS' FIRST AMENDED PETITION

. '

TO THE HONORABLE JUDGE:

The State of Texas ("State"), by and through the Attorney General of Texas, Greg

Abbott, brings this cause of action under the Texas Medicaid Fraud Prevention Act, (''the

Act" or "TMFPA"), TEX. HUM. REs. CODE ANN. chapter 36. The State has primary

responsibility for prosecuting this action under section 36.107(a) of the TMFPA. Private

Person Plaintiff/Relator Dr. Christine Ellis, D.D.S. ("Dr. Ellis") is the Relator in this case and

as such is a named party Plaintiff. The State and Dr. Ellis will be collectively referred to as

"Texas."

The action from which this case was severed was filed under seal on or about the 24th

day of Apri12012, by Dr. Ellis under section 36.102 of the TMFPA. On or about the 25th day

of June 2012, the State exercised its prerogative under section 36.104 of the TMFPA and

formally filed its Notice oflntervention. On or about June 25,2012, the Court granted leave

to Texas to sever and unseal the claims against these Defendants from the original case.

I. DISCOVERY CONTROL PLAN

1.1 Plaintiffs designate this case as a Level 3 case requiring a discovery control plan

tailored to the circumstances of this specific suit.

II. JURISDICTION & VENUE

Page2

. -

2.1 This court has subject-matter jurisdiction over this case pursuant to section 36.052( d)

of the TMFP A, which provides statutory remedies to redress the conduct of the Defendants.

The TMFP A provides authority for this action to be brought by the Attorney General and by

Dr. Ellis. Tex. Hum. Res. Code §§ 36.052, 36.102.

2.2 This Court has jurisdiction over each of the Defendants named in this Petition because

each Defendant does business in the State of Texas and committed the unlawful acts alleged

in whole or in part in the State.

2.3 Venue is proper in Travis County under section 36.052(d) of the Texas Human

Resources Code and additionally because many of the unlawful acts committed by the

Defendants were committed i� Travis County, including the making of the false statements

and misrepresentations of material fact to the Texas Medicaid Program.

III. PARTIES

PLAINTIFFS

3.1 Plaintiff THE STATE OF TEXAS, represented by the Attorney General, IS

authorized to bring this action under section 36.052 of the Texas Human Resources Code.

3.2 Relator I Plaintiff DR. CHRISTINE ELLIS, D.D.S., M.S.D., is an individual

authorized to bring this action under section 36.102 of the Texas Human Resources Code.

DEFENDANTS

3.3 Defendant ASDC HOLDINGS, LLC (ASDC) is a Delaware limited liability

company doing business in the State of Texas. Its principal place of business is 200 South

Page3

Michigan Avenue, Suite 1020, Chicago, Illinois. It may be served with process by serving

its registered agent, Alan B. Roth, at 225 Wacker Drive #2800, Chicago, Illinois. 60606. This

Defendant, owns, operates, or controls the business affairs of many of the other Defendants.

3.4 Defendant ALL SMILES DENTAL CENTER, IN C. is a Texas corporation with its

principal place of business at 4901 LBJ Freeway, Suite 100, Dallas, Texas 75244. It may be

served with process by serving its registered agent, CT Corporation System, 350 North St.

Paul Street, Suite 2900, Dallas, Texas 75201. This defendant, in combination with ASDC,

owns, operates, controls, and orchestrates the business affairs of many of the other

defendants.

3.5 DefendantALL SMILES DENTALPROFESSIONALS,PC is a Texas professional

corporation with its principal place of business at 4901 LBJ Freeway, Suite 100, Dallas,

Texas 75244. It may be served with process by serving its registered agent, Adrian Codel,

at 4901 LBJ Freeway, Suite 400, Dallas, Texas 75244. Dr. Richard Malouf is listed with the

Texas Secretary of State as this defendant's president and only director on its board. One of

its subsidiaries is AS Property Holdings, LLC, a Delaware limited liability company.

3.6 Defendant Dr. RICHARD J. MALOUF, DDS is a dentist licensed (#16206) by the

Texas State Board ofDental Examiners and may be served with process at his principal place

of busine.ss, 9090 Skillman Street, Suite 200C, Dallas, Texas 75243. On June 30, 2010,

Malouf entered into an agreement with ASDC Holdings, LLC (ASDC) under which ASDC

acquired approximately 71 percent of All Smiles Dental Center, Inc. In July 2010, ASDC

acquired all interest in All Smiles Dental Center, Inc.

Page4

3. 7 Defendant LEWISVILLE SMILES, PLLC is a Texas professional limited liability

company with its principal place of business at 4901 LBJ Freeway, Suite 100, Dallas, Texas

75244. It may be served with process by serving its registered agent, Adrian Codel, at 4901

LBJ Freeway, Suite 400, Dallas, Texas 75244.

3.8 Defendant ST. FRANCIS SMILES, PLLC is a Texas professional limited liability




3.9 Defendant GARLAND ROAD SMILES, PLLC is a Texas professional limited

liability company with its principal place of business at 4901 LBJ Freeway, Suite 100, Dallas,


at 4901 LBJ Freeway, Suite 400, Dallas, Texas 75244.

3.10 Defendant JACKSBORO SMILES, PLLC is a Texas professional limited liability




3.11 Defendant JACKSBORO SMILES BY WIRE, PLLC is a Texas professional

limited liability company with its principal place of business at 4901 LBJ Freeway, Suite 100,

Dallas, Texas 75244. It may be served with process by serving its registered agent, Adrian

Codel, at 4901 LBJ Freeway, Suite 400, Dallas, Texas 75244.

3.12 Defendant V ALLEYVIEW SMILES, PLLC is a Texas professional limited liability




3.13 Defendant PLANO MINYARDS SMILES, PLLC is a Texas professional limited

liability company with its principal place of business at 4901 LBJ Freeway, Suite 100, Dallas,


at 4901 LBJ Freeway, Suite 400, Dallas, Texas 75244.

3.14 Defendant HALTOM CITY SMILES, PLLC is a Texas professional limited liability




3.15 Defendant HALTOM CITY SMILES, PLLC d/b/a ALL SMILES DENTAL &

ORTHODONTICS is a Texas professional limited liability company with its principal place

of business at 4901 LBJ Freeway, Suite 100, Dallas, Texas 75244.It may be served with

process by serving its registered agent, Adrian Codel, at 4901 LBJ Freeway, Suite 400,

Dallas, Texas 75244.

3.16 Defendant NORTHWEST .HIGHWAY SMILES, PLLC is a Texas professional

limited liability company with its principal place of business at 490 1 LBJ Freeway, Suite 100,



Page6

3.17 Defendant FORT WORTH SMILES BY WIRE, PLLC is a Texas professional

limited liability company with its principal place of business at 4901 LBJ Freeway, Suite 100,



3.18 Defendant GARLAND ROAD SMILES BY WIRE, PLLC is a Texas professional

limited liability company its principal place of business at 4901 LBJ Freeway, Suite 100,


Codel, at 4901 BJ Freeway, Suite 400, Dallas, Texas 75244.

3.19 Defendant GARLAND ROAD SMILES, PLLC, d/b/a ALL SMILES DENTAL

& OTHODONTICS is a Texas professional limited liability company with its principal

place of business at 4901 LBJ Freeway, Suite 100, Dallas, Texas 75244. It may be served

with process by serving its registered agent, Adrian Codel, at 4901 LBJ Freeway, Suite 400,


3.20 DefendantS. HAMPTON SMILES, PLLC is a Texas professional limited liability




3.21 Defendant PARK PLAZA SMILES, PLLC is a Texas professional limited liability




3.22 Defendant PARK PLAZA SMILES, PLLC, d/b/a ALL SMILES DENTAL &

ORTHODONTICS is a Texas professional limited liability company with its principal place

of business at 4901 LBJ Freeway, Suite 100, Dallas, Texas 75244. It may be served with

process by serving its registered agent, Adrian Codel, at 4901 LBJ Freeway, Suite 400,


IV. PRELIMINARY STATEMENT AND NATURE OF THIS ACTION

4.1 This is a law enforcement action brought under the TMFPA. Plaintiffs seek to

recover: ( 1) the amount of any payments or the value of any monetary or in-kind benefits

provided under the Medicaid program, directly or indirectly, as a result of the Defendants'

unlawful acts; (2) pre-judgment interest on the amount of the payments or the value of such

payments; (3) two times the amount of the payments or the value of such payments; ( 4) civil

penalties ·in an amount not less than $5,500 or more than $15,000 for each unlawful act

committed by the defendants; (5) the costs, attorneys' fees, and expenses incurred by the

State and Dr. Ellis in obtaining relief under the TMFP A; and ( 6) any and all other remedies

that may be allowed under chapter 36 of the TEXAS HUMAN RESOURCES CODE. Additionally,

the State seeks injunctive relief pursuant to section 36.051 of the TEXAS HUMAN RESOURCES

CODE.

4.2 Medicaid dental/orthodontic providers who treat Texas Medicaid recipients are

entitled to be reimbursed by the Texas Medicaid Program for their services. 1 TEX. ADMIN.

CODE§ 354.1221.

PageS

4.3 Defendant Medicaid dental/orthodontic providers voluntarily and affirmatively sought

and attained participation in the Medicaid program. To do this, they enrolled and signed a

provider agreement with Texas Medicaid.

4.4. Defendant Medicaid dental/orthodontic providers are required by law to "maintain all

records necessary to fully disclose the services provided." 1 TEX. ADMIN. CODE§ 354.1004.

Defendants are required to retain these records for either "five years from the date of the

service, or until all audit questions are resolved, whichever is longer." ld.

4.5 As a matter of law, by becoming participants in the Medicaid program the Defendants

are charged with the duty to know the statutes, rules, and regulations of the United States and

of the State of Texas pertinent to the Medicaid program. 1 TEX. ADMIN. CODE§ 371.1615;

see also: Heckler v. Cmty Health Servs. of Crawford County, Inc., 467 U.S. 51, 64-5 (1984);

North Mem'l Med. Ctr. v. Gomez, 59 F.3d 735 (8th Cir. 1995). Defendants knowingly or

intentionally made false representations, including misrepresentations by silence and

omission, to the Texas Medicaid Program about dental/orthodontic services.

4.6 As a result of Defendants' misrepresentations of their provision of dental/orthodontic

services, Texas Medicaid overpaid those Defendants. Defendants' misrepresentations,

failures to disclose, and false representations caused the Texas Medicaid Program to pay far

more for dental/orthodontic services than was authorized by law.

Page9

v.

BACKGROUND

5.1 The federal government enacted the Medicaid program in 1965 as a cooperative

undertaking between the federal and state governments to help the states provide medical

care to lower income individuals. Each state administers its own Medicaid program.

Medicaid is funded jointly by the federal and state governments. 42 U.S.C. § 1396.

5.2 The Texas Medicaid Program reimburses dental/orthodontic providers who provide

dental/orthodontic services to Medicaid clients. This reimbursement is based on criteria set

out in state and federal law.

5.3 Orthodontic services may only be reimbursed if the providers obtained prior approval

from Medicaid. 25 TEX. ADMIN CODE§ 33. 71. This prior authorization requires significant

documentation. Additionally, orthodontic services are limited to strict criteria spelled out

in.the Texas Medicaid Providers Procedure Manual, the Texas Administrative Code, and

other state and federal law.

5.4 Defendants did not follow the proper criteria set out in state and federal law, which

resulted in overpayments to Defendants and others.

VI. ACTIONABLE CONDUCT OF DEFENDANTS

6.1 When Defendants applied for prior approval of orthodontic services and when

Defendants filed Medicaid claims and other documentation, Defendants had a duty to report

the true nature of the services, which they provide to Medicaid clients. The Defendants

knowingly or intentionally submitted false information, and misrepresented material facts,

when seeking prior approval for orthodontic services. Defendants also submitted false

information and misrepresented material facts when they submitted other Medicaid

documentation. Defendants submitted claims for services which they did not provide, and

misrepresented or concealed the true nature of the services which they provided. Defendants

thus committed unlawful acts under the TMFP A that resulted in the payment of excessive

reimbursement to Medicaid providers for the dental/orthodontic services.

6.2 Defendants knowingly misrepresented that they were providing: medically necessary

dental/orthodontic services as defined by Medicaid criteria, proper documentation of

dental/ orthodontic services, appropriate and qualified providers to provide dental/ orthodontic

services, and billing only for dental/orthodontic services which were actually provided.

Defendants also knowingly paid or received consideration as a condition of the provision of

dental/orthodontic services by unlawful recruiting and paying kickbacks for the recruiting

of Medicaid clients.

6.3 In one or more of the following ways, the Defendants acted knowingly in making false

statements and misrepresentations of material fact to the Texas Medicaid program, and in

concealing, or failing to disclose, the truth to the Texas Medicaid program:

A. By providing dental/orthodontic services which were not medically necessary as defined by Medicaid criteria;

B. By providing dental/orthodontic services whicp failed to meet the appropriate Medicaid standards;

C. By failing to properly document- as to medical necessity as defined by Medicaid criteria and otherwise-the dental/orthodontic services which were provided;

D. By allowing unqualified persons to perform dental/orthodontic services for which they were not legally allowed to perform, because those persons lacked the required qualifications, certification, or credentials;

E. By billing for dental/orthodontic services which were simply not provided;

F. By upcoding, or billing for dental/orthodontic services which were more expensive than those which were actually provided;

G. By recruiting Medicaid clients through a system of paying kickbacks to those clients, and to others; and

H. By otherwise failing to follow applicable law, including the Texas Medicaid Providers Procedure Manual, the Texas Administrative Code, and other state and federal law.

6.4 The Texas Medicaid program used Defendants' false representations of the services

they provided as a basis for calculating payment to those Defendants. Defendants' unlawful

conduct resulted in harm to the Texas Medicaid program, the beneficiaries thereof, and the

taxpayers of Texas.

VII. THE DEFENDANTS' ACTIONS CONSTITUTE "UNLAWFUL ACTS"

UNDER THE TEXAS MEDICAID FRAUD PREVENTION ACT

7.1 At various times in the past, and continuing through the present date, Defendants

knowingly or intentionally made false statements or misrepresentations to the Texas

Medicaid Program regarding dental/orthodontic services they provided to Medicaid clients.

7.2 Defendants began committing these unlawful acts on September 7, 2007.

7.3 Defendants committed unlawful acts by:

A. Knowingly making or causing to be made a false statement or misrepresentation of a material fact to permit a person to receive a benefit or

payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized. TEX. HUM. REs. CODE § 36.002(l )(A) & (B).

B. Knowingly concealing or failing to disclose information that permits a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized. TEX. HUM. RES. CODE § 36.002(2).

C. Knowingly making, causing to be made, inducing, or seeking to induce the making of a false statement or misrepresentation of material fact concerning information required to be provided by a federal or state law, rule, regulation, or provider agreement pertaining to the Medicaid program. TEX. HUM. REs. CODE§ 36.002(4)(B).

D. Knowingly paying or receiving consideration as a condition to the provision of a service if the cost of the service is paid for, in whole or in part, under the Medicaid program. TEX. HUM. REs. CODE§§ 36.002(5), 36.002(13).

E. Knowingly paying, charging, soliciting, accepting, or receiving an unauthorized gift, money, donation or other consideration as a condition to the provision, or continued provision, of a service or product when that service or product was paid for, in whole or in part, under the Medicaid program. TEX. HUM. REs. CODE § 36.002(5).

F. Knowing presenting or causing to be presented a claim for payment under the Medicaid program for a service rendered by a person who is not licensed to render the service or is not licensed in the manner claimed. TEX. HUM. REs. CODE§ 36.002(6).

G. Knowing making or causing to be made a claim under the Medicaid program for a service that has not been approved or acquiesced in by a treating health care provider, or a service that is substantially inadequate or inappropriate when compared to generally recognized dental/orthodontic standards. TEX. HUM. REs. CODE § 36.002(7).

VIII. CIVIL REMEDIES UNDER THE TMFPA

8.1 Under the TMFPA, each Defendant is liable to the State of Texas for the amount of

any payment provided under the Medicaid program, directly or indirectly, as a result of its

unlawful acts, plus interest from the date of the payment, two times the amount of the

payment, and a civil penalty for each unlawful act committed, in addition to the fees,

expenses, and costs of the Attorney General and the Relator in investigating and obtaining

civil remedies and injunctive relief in this matter. TEX. HuM. REs. CODE§§ 36.052, 36.007,

36.110(c).

8.2 Plaintiffs invoke in the broadest sense all relief possible under § 36.052, whether

specified in this pleading or not. Plaintiffs will seek an amount as civil penalties that will be

justified and appropriate under the facts and the law.

8.3 The amounts sought from each Defendant are in excess of the minimum jurisdictional

limits of this Court.

8.4 The TMFPA is a statute of absolute liability. There are no statutory, equitable, or

common law defenses for any violation of its provisions. Further, Texas jurisprudence

provides that the defenses of estoppel, laches, and limitations are not available against the

State of Texas, as a Sovereign. State v. Durham, 860 S.W.2d 63, 67 {Tex. 1993).

8.5 The Defendants' unlawful acts have cost the State of Texas many millions of dollars.

The State is unable, pending full discovery pursuant to the Texas Rules of Civil Procedure,

to determine the total extent of the overpayments caused by Defendants' fraudulent conduct.

IX.

STATUTORY INJUNCTION UNDER§ 36.051 OF THE ACT

9.1 There is good reason for the Attorney General to believe the Defendants are

committing, have committed, or are about to commit unlawful acts as defined by the

TMFPA. These illegal acts may be enjoined under § 36.051 of the Act, and under

TEX.GOVT. CODE§ 2001.202.

X. JURY DEMAND

10.1 Plaintiffs respectfully request a trial by jury pursuant to Texas Rule of Civil Procedure

216.

XI.

REQUESTS FOR DISCLOSURE

11.1 Defendants are requested to disclose, within 50 days of the service of this request, all

of the information or material described in Texas Rule of Civil Procedure 194.2(a)-(l).

XII. PRAYER

12.1 Plaintiffs ask that judgment be entered upon tri�l of this case in favor of the State and

the Relator against Defendants to the maximum extent allowed by law.

12.2 The State of Texas asks that it recover from Defendants:

(1) restitution of overpayments,

(2) prejudgment interest,

(3) two times the amount of the overpayments,

( 4) civil penalties, and

(5) expenses� costs and attorneys' fees.

12.3 The Relator asks that it be awarded:

( 1) its expenses, costs and attorneys' fees,

(2) Relator's share as provided by the TMFP A, currently 15% to 25% as provided

by Section 36.110(a).

12.4 The State asks the Court to grant an injunction, ordering Defendants to immediately

stop violating the TMFPA, as required by law.

12.5 Plaintiffs pray for such other and further relief to which they may show themselves

entitled.

Respectfully submitted,

GREG ABBOTT Attorney General of Texas

DANIEL T. HODGE First Assistant Attorney General

JoHN B. SCOTT Deputy First Assistant Attorney General

�� State Bar No. 21791950 Chief, Civil Medicaid Fraud Division MARGARET MOORE State Bar No. 14360050 (512) 936-1319 direct dial Deputy Chief, Civil Medicaid Fraud Division MARK EINFALT

State Bar No. 06502452 (512) 936-1703 direct dial DAVID DREW WRIGHT State Bar No. 00789965 (512) 936-1486 direct dial DAMON T. ONG State Bar No. 24065846 (512) 936-6615 direct dial MATTHEW MILLER State Bar No. 24051959 (512) 936-1420 direct dial BRADEN CIVINS State Bar No. 24080836 (512) 463-7975 direct dial

Assistant Attorneys General P.O. Box 12548 Austin, Texas 78711-2548 (512) 499-0712 fax

Attorneys for the State of Texas

�l!t£tibt fn»tAv DAN HARGROVE State Bar No. 00790822 600 Navarro, Suite 500 San Antonio, Texas 78205 (210) 349-0515 phone (210) 349-3666 fax CHARLES SIEGEL State Bar No. 18341875 3219 McKinney Avenue Dallas, Texas 75204 (214) 357-6244 phone (214) 357-7252 fax

Attorneys for the Private Person Plaintiff, Dr. Christine Ellis, D.D.S.

Ellis Qui Tam Lawsuit

Documents

Transcript of Ellis Qui Tam Lawsuit