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Texas Not Immune from Whistleblower Claim to Share of $236M Fraud Recovery

In an important victory for whistleblowers exposing Medicaid fraud and abuse of government programs, a Texas appellate court has rejected efforts by the Texas Attorney General’s Office to bar Waters Kraus Paul & Siegel’s whistleblower client from seeking her portion of a record $236 million Medicaid fraud settlement.

Waters Kraus Paul & Siegel partner Caitlyn Silhan told Law360, “We’ve argued all along that any other holding would really gut the incentives that the Texas legislature had in mind in enacting the statute to encourage and reward whistleblowers who come forward with information that leads to successful recovery of taxpayer funds.”

The ruling is the latest development in a 13-year legal battle that began when three whistleblowers came forward in 2012 with claims that Xerox and its former subsidiary Affiliated Computer Services, Inc. (ACS) were fraudulently rubber stamping unauthorized dental and orthodontic procedures for Medicaid payment. The Attorney General’s Office intervened in their cases, and a subsequent investigation corroborated the allegations that the company approved requests for medically unnecessary procedures for thousands of Texas children in violation of the Texas Medicaid Fraud Prevention Act (TMFPA).

The $236 million settlement reached in 2019 was the largest single Medicaid fraud-related settlement agreement ever in this state. Despite provisions in the TMFPA that award whistleblowers up to 25 percent of financial recoveries, the state sought to exclude the whistleblowers from their rightful share.

In a November 15 opinion, a three-judge panel for the Texas Third Court of Appeals rejected the state’s claims, including arguments that the state was protected from the whistleblower’s claims to an award by sovereign immunity.

“Whistleblowers play such a critical role in exposing fraud and abuse by government contractors,” said Waters Kraus Paul & Siegel partner Charles Siegel. “We’re grateful that the appellate court considered our arguments and evidence and made this important ruling.”

The case is State of Texas v. Christine Ellis, D.D.S. et al., No. 03-22-00234-CV, in the Third Court of Appeals of Texas.

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