In late 2018, Conduent Enterprise Providers, the enormous data firm previously a part of Xerox, was on the sting of a monetary cliff.
For greater than 4 years, the Texas legal professional basic’s workplace had aggressively pursued the corporate for what it asserted was Conduent’s large fraud overseeing a authorities program to repair poor kids’s tooth. As an alternative of evaluating therapy requests because it had been employed to do, Conduent merely rubber-stamped them whereas taxpayer {dollars} streamed out the door. The corporate tried accountable the dentists, however in June 2018 the Texas Supreme Court docket stated Conduent alone was accountable.
A civil trial that would price the corporate billions of {dollars} was quickly approaching. Texas had indicated it will settle, however Conduent had a cash drawback: Its legal responsibility insurance coverage coverage refused to pay authorized prices involving fraud.
So with the assistance of Legal professional Basic Ken Paxton’s workplace, Conduent hatched a plan to get the insurer to pay tens of thousands and thousands of the authorized settlement, in line with paperwork the insurer, AIG, filed in Delaware state court docket. If Texas agreed so as to add lesser fees to its case on the final minute — even when it by no means meant to pursue them — Conduent may then gather on the insurance coverage declare AIG was refusing to pay.
“This case is about Conduent’s improper scheme to control its settlement with the State of Texas with a purpose to trick my shoppers, to deceive the insurers,” considered one of AIG’s legal professionals stated on the trial. Two weeks in the past, a jury discovered the deal defrauded AIG.
The jury’s verdict didn’t implicate Texas, Paxton or his legal professionals within the scheme to deceive the insurer. But trial paperwork additionally present the legal professional basic’s employees knew Conduent was asking the company to amend its case in opposition to the corporate to assist with insurance coverage claims, and that the AG’s workplace agreed to do it.
Raymond Winter, chief of the legal professional basic’s Medicaid Fraud Division, referred questions on company’s position within the case to its press workplace, which didn’t reply. Jack Stick, who oversaw the state’s investigations into Xerox from 2011 to 2014, stated the company acted legally and responsibly.
“The state has an obligation to taxpayers to be a superb steward of their cash,” he stated. “If you’re settling a case like this, every part is on the desk. The place Xerox will get the cash just isn’t the state’s concern.”
That could be technically true, stated Jason Ray, an legal professional who has represented lots of the dentists within the long-running authorized mess. However, he added, “It’s fully unethical. They did this solely to generate the looks of insurance coverage protection. It seems unhealthy, smells unhealthy, and sends the incorrect message to the general public.”
The legal professional basic’s position in a deal a jury discovered fraudulent is the most recent in a string of current episodes elevating questions on Paxton’s stewardship of the company. Paxton, who’s searching for a 3rd time period, faces a Might runoff election in opposition to George P. Bush for the Republican nomination.
In October 2020, seven of Paxton’s high deputies accused him of misusing his workplace to assist rich Austin actual property developer and marketing campaign contributor Nate Paul escape a authorized bind. The allegations shaped the idea of a reported FBI investigation and whistleblower lawsuit. Each Paul and Paxton have denied any wrongdoing.
Extra not too long ago, Paxton has had authorized grievances filed in opposition to him for his shortly dismissed lawsuit searching for to overturn the 2020 presidential election; and for encouraging supporters to improperly stress judges on the Texas Court docket of Felony Appeals after Paxton disagreed with one of many court docket’s selections. He has spent thousands and thousands on a small handful of voter-fraud circumstances. Final month his workplace issued an opinion concluding some accepted medical remedies for transgender kids qualify as abuse, a authorized studying opponents decried as political posturing.
Dental critiques completed in solely seconds
Issues within the State of Texas’s Medicaid dental program first grew to become public in 2011, when a Dallas tv station reported some clinics have been billing extra for youngsters’s orthodontic care than total states. Though the practitioners have been first to be blamed, court docket paperwork later revealed Xerox had employed employees with little or no data of dental procedures to course of the purposes for therapy as shortly as doable, with scant evaluation.
About 90 % have been authorised, usually in a matter of seconds. Proof equivalent to molds and X-rays that dentists submitted with the purposes usually have been by no means even checked out. Xerox had solely a single dentist to evaluation a whole bunch of every day requests.
The corporate stated Texas officers have been conscious of the way it was dealing with the Medicaid work and did nothing, however the state eliminated Xerox from the dental program in 2012 and fired it two years later. Since then the case has spawned a thicket of authorized disputes as the assorted events have tried to pin blame and prices on the others.
Texas has repaid the federal authorities $133 million, the quantity the U.S. Division of Well being and Human Providers calculated it was due for the state permitting Xerox to approve pointless dental funds. Texas regulators, in flip, have tried with restricted success to get well cash from dentists they are saying abused this system.
However the state’s fundamental goal has been Xerox, which in 2016 spun off its enterprise providers division into Conduent. Launched in 2014, the state’s Medicaid fraud lawsuit in opposition to the corporate meandered by way of the court docket system for years. By late 2018 a trial was scheduled.
Texas was searching for $2 billion. Conduent denied it dedicated fraud, but it surely had motive to keep away from risking a foul verdict at trial. The federal authorities prohibits firms convicted of fraud from contract work; a jury discovering in opposition to it will jeopardize Conduent’s enterprise in different states.
The corporate entered a spherical of intensive negotiations with the legal professional basic’s workplace in late 2018, authorized paperwork from the Delaware case present. With AIG already having denied its legal responsibility insurance coverage claims due to the fraud cost, Conduent wanted the inspiration of the case in opposition to it to basically change if it wished to gather.
Trial paperwork present Ken Paxton’s employees knew Conduent was asking the company to control its case in opposition to the corporate to assist with insurance coverage claims.
Getty PhotosAnd for that it required an help from Paxton’s workplace.
‘This was all cooked up’
The Texas case in opposition to Conduent had all the time been about one factor. In variations of the state’s official grievance, filed in 2014 and 2016, the legal professional basic’s legal professionals have been clear they have been pursuing the corporate just for Medicaid fraud.
Ray, the dentists’ legal professional, stated he tried to persuade Paxton’s workplace to prosecute the case as a contract violation for years, a authorized adjustment he stated may have helped his shoppers settle their disputes. The company refused, he stated.
However in early January 2019, Conduent requested the legal professional basic’s workplace to file a brand new petition, court docket paperwork filed by AIG stated. Sometimes, defendants attempt to persuade prosecutors to drop crimes they’ve been accused of. On this case, Conduent requested Paxton’s workplace so as to add two new fees in opposition to it: breach of contract and negligence.
The rationale, in line with the Delaware lawsuit: If Texas prosecutors formally declared they have been pursuing Conduent for these violations, AIG’s legal responsibility insurance coverage coverage would kick in, permitting the corporate to gather tens of thousands and thousands of {dollars}.
Winter, the assistant legal professional basic, prompt that was his understanding, as properly. Conduent “indicated to the state that if the state amended its pleadings, it will be useful to [Conduent] of their efforts to get well on their insurance coverage claims,” he wrote in response to AIG’s legal professionals’ questions concerning the deal.
Texas had no intention of ever pursuing the breach of contract and negligence fees, he added. However by late January, when Conduent stated it was the one method it will conform to settle the case, the legal professional basic’s workplace agreed to the change, paperwork present.
In an indication of the company’s energetic involvement within the deal, AIG’s legal professionals identified how the 2 supposedly opposing sides labored carefully collectively all through January 2019, sending drafts of the brand new petition forwards and backwards to hone the wording Conduent sought. Paxton introduced a $236 million settlement lower than a day after the brand new petition was filed, proving that it “did nothing besides give Conduent the chance at hand it to insurers,” AIG legal professional Michael Carlinsky stated in the course of the path.
“This was all cooked up,” he stated in his closing. “This was all designed to create insurance coverage.”
Conduent’s legal professionals argued the deal was an above-board settlement that benefited everybody. The corporate may hold its enterprise in different states and Texas would get well a whole bunch of thousands and thousands of {dollars} with out having to show a troublesome case at trial. Paxton’s workplace might have even been the one to counsel it, they stated.
However the jury took lower than two hours to search out Conduent had defrauded AIG by orchestrating the association solely to gather insurance coverage, though it declined to search out Conduent and Paxton’s workplace had “colluded.”
The decision means AIG gained’t must pay on Conduent’s insurance coverage declare. The corporate additionally may very well be requested to pay AIG’s prices.
Conduent’s attorneys stated they may proceed preventing. The corporate “firmly disagrees with the jury’s choice and can pursue all choices to appropriate the decision,” one instructed Law360, “together with searching for restoration for the remaining insurance coverage for which Conduent paid vital premiums and for which it strongly believes it’s entitled to obtain.”
eric.dexheimer@chron.com