In 2012, a dentist in north Texas blew the whistle on the bilking of taxpayers through the state’s program to put braces on kids with Medicaid.

In 2019, her courage paid off as the state announced a $235.9 million deal to settle claims against Xerox and its former subsidiary, a major player in that alleged fraud. And in 2020, a judge ordered biller Dr. Richard Malouf to pay $16.5 million plus interest in repayment, fines, and legal fees for defrauding the state.

Dr. Christine Ellis had seen news reports about how Texas was paying almost 10 times as much as California per year for orthodontic services for children. And with her own eyes, she had seen young patients at her practice who needed her to straighten their teeth properly after receiving substandard care elsewhere.

“In Texas we have used the mouths of children to enrich unethical providers and private equity investors,” Dr. Ellis wrote in testimony to Congress.

Dr. Ellis called on the Law Offices of James R. Moriarty for help holding these abusive dental practices accountable. Our office teamed up with Waters & Kraus, The Hargrove Law Firm, the Law Offices of James R. Tucker, and the Kharod Law Firm.

Dr. Ellis helped state investigators audit the orthodontists whose high-volume billings raised red flags. She helped the news reporter who was shining a light on the issue.

She filed a whistleblower lawsuit against nearly two dozen dental corporations (and one dentist) who racked up the questionable payments. 

Dr. Ellis went to Washington to help educate lawmakers. Dr. Ellis said she was concerned the flagrant abuse of the program, coupled with bad policy, would end up shortchanging the kids the program was supposed to help. Texas was spending money “straightening basically already straight teeth,” while children with the most severe cases ― with teeth so out of position it makes it hard for them to eat or talk ― were at risk of being left out.

She warned that with all that cash sloshing around in the Texas Medicaid program, profit-seekers had pounced. The questionable payments were not to dental practices where patients know and see the owner as he or she leans over to peer at their teeth. Instead, the money was lining the pockets of absentee fat-cat owners and private equity investors.

Dr. Ellis’ decision to speak out caught the attention of the Texas state attorney general’s office, who in June 2012 piggybacked on Dr. Ellis’ whistleblower suit.

Two years later, the attorney general’s office filed its own lawsuit against the company that OKed the payments, Xerox, using Dr. Ellis’ findings in its investigation.

That suit culminated in the announcement of the $235.9 million deal announced in February 2019 to settle claims that the company rubber-stamped the orthodontic claims. As part of the deal, the company admitted no wrongdoing. (In 2016, Xerox Corp. spun off a subsidiary, Conduent Inc., which has shielded the larger corporation from paying out. Following announcement of the settlement, Conduent issued a statement about the benefit of putting “this legacy issue behind us,” as reported by Courthouse News Service.)

The state painted a picture of rank-and-file clerical workers making what amounted to medical decisions and getting paid more if they processed more requests from dental clinics and corporations to get paid for placing braces. Dr. Ellis’ complaint had pointed out that the corporations were providing braces without documenting what condition the patient had that made those medically necessary (not just an optional cosmetic upgrade). 

The sequence of events showed that even as some employees within state government were growing alarmed by the apparent rubber-stamping of Xerox’s approvals for braces ― an inspector general’s report in 2008 sounded an early warning ― the company was awarded a second contract, in 2010, to carry on with the work.

It seemed no one in state government could quite get a handle on how to stop the abuse.

When Dr. Ellis in 2011 filed a state complaint against one of the more egregious billers, Dr. Richard Malouf ― whose backyard water park became the visual code for Medicaid-funded king-making in Texas ― regulators with the board that licenses dentists dismissed her complaint.

What our firm continues to try to address is the underlying structural problem in dental clinics in Texas that creates a culture ripe for abuse.

It is the same issue Dr. Ellis pointed out in her state complaint ― of corporate ownership of dental practices. Even though state law requires that dental practices be owned by dentists, corporations run afoul of this law with little consequence. The aim is to ensure treatment decisions are made with the patient’s medical needs, not profits, prioritized.

Dr. Ellis in her state complaint pointed out that Dr. Malouf’s All Smiles Dental Centers were owned and run by a private equity firm, which cut a deal in 2010 to purchase a majority stake in the clinics. In 2012, All Smiles and Dr. Malouf agreed to pay $1.2 million to settle a Medicaid fraud case brought by state and federal investigators. The company then filed for bankruptcy protection. But Dr. Richard John Malouf is still licensed to practice in Texas. His papers allowing him to work on teeth are good through Feb. 2022.

So what happens next for Dr. Ellis, the whistleblower whose warnings have helped punish Xerox and recoup taxpayer funds? 

For whistleblowers like Dr. Ellis, who undertake the trouble (and potential fallout) of a lawsuit, they share in the money recouped by the government. In Texas, this is capped at 30 percent but varies based on the significance of the information from the whistleblower and whether the state piggybacks on the suit, as it did in Dr. Ellis’ case. The related law is called the Texas Medicaid Fraud Prevention Act.

Dr. Ellis' legal team is working together with the state to finalize her award and reimbursement for attorney’s fees and litigation expenses.

Cases like Dr. Ellis’ are also known as “qui tam” suits (an archaic term that in Latin means one is suing on behalf of the king ― or as in America, the government). The related laws are known as “false claim” acts.