Funny how these things keep cropping up. It’s almost as if it were habitual or something.
Best mugshot ever
In late 2018, Conduent Business Services, the giant information company formerly part of Xerox, was on the edge of a financial cliff.
For more than four years, the Texas attorney general’s office had aggressively pursued the company for what it asserted was Conduent’s massive fraud overseeing a government program to fix poor children’s teeth. Instead of evaluating treatment requests as it had been hired to do, Conduent simply rubber-stamped them while taxpayer dollars streamed out the door. The company tried to blame the dentists, but in June 2018 the Texas Supreme Court said Conduent alone was responsible.
A trial that could cost the company billions of dollars was rapidly approaching. Texas had indicated it would settle, but Conduent had a money problem: Its liability insurance policy refused to pay legal costs involving fraud.
So with the help of Attorney General Ken Paxton’s office, Conduent hatched a plan to trick the insurer into paying up to tens of millions of the legal settlement, according to documents the insurer, AIG, filed in Delaware state court. Two weeks ago, a jury found the deal defrauded AIG.
The jury’s verdict did not implicate Texas, Paxton or his lawyers in the scheme to deceive the insurer. Yet trial documents also show the attorney general’s staff knew Conduent was asking the agency to manipulate its case against the company to help with insurance claims, and that they agreed to the plan.
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Problems in the State of Texas’s Medicaid dental program first became public in 2011, when a Dallas television station reported some clinics were billing more for children’s orthodontic care than entire states. Although the practitioners were first to be blamed, court documents later revealed Xerox had hired workers with little or no knowledge of dental procedures to process the applications for treatment as quickly as possible, with scant review.
About 90 percent were approved, often in a matter of seconds. Evidence such as molds and X-rays that dentists submitted with the applications often were never even looked at. Xerox had only a single dentist to review hundreds of daily requests.
The company said Texas officials were aware of how it was handling the Medicaid work and did nothing, but the state removed Xerox from the dental program in 2012 and fired it two years later. Since then the case has spawned a thicket of legal disputes as the various parties have tried to pin blame and costs on the others.
Texas has re-paid the federal government $133 million, the amount the U.S. Department of Health and Human Services calculated it was due for the state allowing Xerox to approve unnecessary dental payments. Texas regulators, in turn, have tried with limited success to recover money from dentists they say abused the program.
But the state’s main target has been Xerox, which in 2016 spun off its business services division into Conduent. Launched in 2014, the state’s Medicaid fraud lawsuit against the company meandered through the court system for years. By late 2018 a trial was scheduled.
Texas was seeking $2 billion. Conduent denied it committed fraud, but it had reason to avoid risking a bad verdict at trial. The federal government prohibits companies convicted of fraud from contract work; a jury finding against it would jeopardize Conduent’s business in other states.
The company entered a round of intensive negotiations with the attorney general’s office in late 2018, legal documents from the Delaware case show. With AIG already having denied its liability insurance claims, Conduent needed the foundation of the case against it to fundamentally change if it wanted to collect.
And for that it required an assist from Paxton’s office.
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But in early January 2019, Conduent asked the attorney general’s office to file a new petition, court documents filed by AIG said. Typically, defendants try to convince prosecutors to drop crimes they’ve been accused of. In this case, Conduent asked Paxton’s office to add two new charges against it: breach of contract and negligence.
The reason, according to the Delaware lawsuit: If Texas prosecutors officially declared they were pursuing Conduent for those violations, AIG’s liability insurance policy would kick in, allowing the company to collect tens of millions of dollars.
Paxton announced a $236 million settlement with Conduent in January of 2019, shortly after the new charges were filed. AIG’s attorney argued that the state never intended to pursue those charges, they were just included to get Conduent to settle because then they could recover the funds from their insurer. The jury agreed with AIG and called what Conduent did “insurance fraud”. For which they got an assist from the Texas Attorney General’s office.
There’s a lot we don’t know yet. Maybe Conduent blatantly misrepresented their intentions to the AG’s office, and is solely responsible for all fraudulent actions. Maybe the AG’s office just erred in adding those extra charges, and didn’t pursue them because they were never going to get anywhere. Maybe all of the fault for the AG office’s activities belongs to the attorneys on the case, while Paxton himself wasn’t involved. I hope that now that we have this story, we’ll find out more. It’s obviously easy to believe that Paxton did something shady – it’s his brand, after all – but we need more information before we can conclude anything like that. Let’s see what else gets dug up. Reform Austin has more.