Documents detail Medicaid fraud allegations, investigations of dentist

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by BYRON HARRIS

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WFAA

Posted on July 23, 2013 at 10:10 PM

Updated Tuesday, Oct 29 at 7:18 PM

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DALLAS –– An unprecedented release of documents by the Dallas County District Attorney’s office tracks the investigation of All Smiles Dental Centers (ASDC) for eight years and illustrates how local, state and federal officials responded to information and complaints about the clinics.

Dr. Richard Malouf and his wife Leann displayed the trappings of wealth as owners of ASDC,  as their clinics treated children under the Texas Medicaid dental program. D Magazine named their mansion as one of the city’s 40 largest. A private water park and pair of corporate jets were theirs to enjoy as well. 

News 8 obtained hundreds of pages of documents in the investigation of Malouf and his former company, All Smiles Dental Centers, under the Texas Public Information Act.  

Dr. Malouf actually showed up on the radar screen of the Texas Dental Board in 2004. The agency  suspended his dental license, records show, for faulty patient record-keeping that dates back to 1999. But the suspension was changed to one year’s probation. Records say that was done to save the expense of taking Malouf to court.  

The records include interviews with former employees and patients of ASDC conducted by the FBI and the Texas Attorney General. There are notes from attorneys in the Dallas County DA’s office and letters from Malouf’s criminal attorney. The state also released Medicaid billing records from the Texas Department of Health and Human Services.  

These public documents illuminate what concerned state and federal officials about Malouf’s practice of dentistry and billing of Medicaid. 

Most unusual are FBI Form 302s. Rarely released in unredacted form, the 302s are recorded interviews between FBI agents and former All Smiles employees.  News 8 has stricken names of witnesses and patients from the documents. 

The case is outlined in “All Smiles Dental Centers,” a summary of the investigation, prepared by the Texas attorney general

 The document shows:

  • How federal and state investigators began a probe of ASDC in 2004 on dental services that were allegedly not rendered but billed to Medicaid.
  • How the case was reassigned three times between the Texas Attorney general and the FBI. (See this document for details.)
  • How the proceeding broadened to orthodontic care, and ended with a whimper seven years later in the Dallas County District Attorney’s office. 

Witnesses spoke about how All Smiles had income goals for some clinics of as much as $200,000 a month.

FBI interviews show that to meet those goals, offices would typically see 80 to 100 patients a day. Some employees were concerned about the quality of care. (See here, here, here, here and here for transcripts of those interviews.) 

Two mentioned to the FBI that dental equipment was not being properly sterilized.

FBI agents were told Malouf was often not present in his offices, and that dental assistants performed work often done by dentists. (See here for more details.)

Others mentioned that All Smiles was billing Medicaid $200 to $450 each for some orthodontic appliances that it wasn’t putting in children’s mouths. (Here's one more document with that information.)

State investigators were told that when Malouf learned he was under scrutiny, he and assistants began altering dental records. One assistant described a session where she and Malouf worked together on patient charts. “He (Malouf) leaned back in his chair and stated, ‘Just so you know, I didn’t ask you to do this,’” she told the FBI. 

FBI documents show that as early as 2006, at least one All Smiles dentist was having ethical problems with what was going on at her office.  In an email to Leann Malouf, wife of Dr. Malouf in addition to being vice president of operations at All Smiles, the dentist wrote, “I’m sure you care just as much as I do about the fradulent (sic) practices going on.” 

In an accompanying letter to Mrs. Malouf, the dentist complained that her patient notes were being changed without her knowledge.  

“This is fraud,” the dentist wrote, “which I’m sure you know is a criminal act! If Medicaid audits the charts, which I am sure they routinely do, I would not be able to explain those entries — even though they appear as my own.” 

By December of 2008, the case was being handled by Dallas County District Attorney Craig Watkins. It was reassigned several times within his department. The District Attorney had an indictment drawn up against Richard Malouf, but it was never signed.

Problems were developing with the case.

In undated handwritten notes obtained by News 8, an unidentified investigator outlines “Holes” in the case.

“It would be difficult to make a case against Dr. Maulof (sic)”

“The dental work in question had pre-authorization from TMHP (the state).”

“A fired employee was one who did questionable billing?”

“Was Dr. Malouf directing the billing?”

In a letter to the district attorney, Malouf’s criminal attorney Mike Gibson argued that Texas was vague in defining the need for braces under Medicaid, and that judging the need for braces is “more an art than a science.” Gibson also argued that the state approved the braces that investigators were questioning. 

In the background, Malouf was allegedly threatening witnesses.

“There were several veiled threats, in that, first of all, apparently Dr. Malouf was firing people at his office,” assistant DA Rocky Jones told News 8 in February. “He was firing people at the clinics. Also, he was threatening several of the witnesses with civil actions. I don’t know if he was claiming libel or slander.” 

Assistant DA Jones stressed that Malouf’s threats were alleged rather than proven. “He threatened several of the witnesses who were dentists that he would have their license or that they wouldn’t be allowed to practice any more, so yes, there were threats made.” 

In March of 2010, Malouf paid $46,000 in restitution for Medicaid overbilling to the Dallas County DA. (County district attorneys prosecute Medicaid fraud cases for the Attorney General in Texas).

Malouf was banned from Medicaid for 18 months as part of that settlement.

In 2012, Malouf paid the federal government $1.2 million to resolve charges against him. He admitted no wrongdoing. He is now under criminal investigation by the state.

The Maloufs still have their house on tony Strait Lane. They’ve built a new house next door and are completing a private water park. And they still have at least one Grumman Gulfstream business jet to fly where they wish. 

News 8 informed Richard Malouf’s attorneys of the subject of this story. In response, J.D. Reed wrote for his client: 

“In light of the defamation suit I have against Belo, WFAA and Byron Harris for previous untrue statements in their reporting about me, and considering a Dallas judge has granted a temporary injunction against all three to not trespass on my family’s residence, my comment about their current story is that in 1991 a jury of ordinary Texans awarded the largest libel judgment in U.S. history up to that point in time, $58 million, against Belo, WFAA and their investigative reporter Charles Duncan.  I look forward to my day in court and that Texas legal history may repeat itself.”


Here are links to investigative transcripts and documents obtained by News 8. Some names and information have been redacted:


E-mail bharris@wfaa.com

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