A False Claims Act, pending in The United States District Court for the District of New Jersey against Allied Dental Practices of New Jersey and a number of individual dentists, has been settled. The complaint alleges that local Dentists Edward Poller, Glenn Prager, Christopher Emma, Todd Prager, and Daniel DiCesare instructed employees to “delete” all credit balances for the patients in their 22 locations in New Jersey and Pennsylvania. This complaint is one of the first cases settled under the New Jersey False Claims Act and is believed to be the first “whistleblower” case involving a novel allegation under the New Jersey Unclaimed Property Act. The complaint alleges violation of the Federal and New Jersey False Claims Acts. The defendants have agreed to pay over $420,000.00 including payment for the State and Federal false claims ($200,000), a penalty to the New Jersey Unclaimed Property Office ($75,000), a wrongful discharge settlement ($87,500) and all attorney’s fees. It is not known whether insurance companies will also seek reimbursement.

Although somewhat brazen, the dentists eliminated the balance owed to patients, the Federal and State government, insurance companies and businesses to make the sprawling practice look more financially sound. The complaint alleges that on July 12, 2011, an email was sent to 30 individual employees directing the employees in every Allied office to:

“For all of these credit balances, we must debit the account to bring it to zero.”

The action that the dentists had their employees undertake would “wipe out” every credit balance in the practice. At the time of the directive from the dental professionals, Allied Dental had 22 locations and tens of thousands of patients. Money owed to the United States of America, the State of New Jersey, insurance companies and individuals was simply deleted; as if it never happened.

In some cases, the “credit” balance was money that an individual patient had overpaid. In other instances, the dental practice had been erroneously paid twice by the Federal government, State government, insurance company or private businesses. Instead of attempting to return the monies which were overpaid to Allied Dental, the dental professionals instead chose to eliminate the credit balances as if they did not exist.

The complaint indicates that some of the credit balances owed to a patient exceeded $1,000.00. The total amount “wiped out” by the dentists was significant.

The complaint was filed in the Federal court under the False Claims Act by a former employee, Ms. Jennifer D’Agostino. Ms. D’Agostino was working in the Toms River office and was one of the employees instructed to “zero out” the accounts. The claim was filed by her attorney and reported to the Federal government under seal while Ms. D’Agostino was still employed. The employee refused to zero out the account and, in fact, told her supervisor in an email that the Federal and State programs, along with the agreements with insurance companies, required Allied Dental to return any overpayment on a patient account. After she tried to do the right thing, she was fired.

The False Claims Act provides a way in which an individual can report fraud against the Federal and State government. If fraud is found, the False Claims Act provides for a penalty of three times the damages and an additional penalty of between $5,500.00 and $11,000.00 for each individual false claim. The person that reports the fraud, referred to as a “relator”, is entitled to receive between 15% – 30% of the Government’s recovery. Lawyers that specialize in this area of law generally take a percentage of the reward paid to the successful relator. In this case, Ms. D’Agostino will receive a 28% relator share in this non-intervened suit. The New Jersey False Claims Act was enacted in 2008.

Dr. Emma, whose spouse has enjoyed some notoriety on the Dr. Oz show, is no longer with the Allied Dental practice and claimed to have left the practice before the alleged action was taken. Dr. Emma was represented by Matthew G. Wapner, Esquire of McCARTER & ENGLISH. All other dentists and the various corporations are represented by Stuart J. Polkowitz, Esquire of BRACH EICHLER.

Michael D. Fitzgerald, a Eatontown, New Jersey attorney who filed the complaint on behalf of the “whistleblower” stated; “It takes a courageous individual to do the “right thing” when faced with being ordered to take an action which they believe is, at best, unfair and, at worst, illegal. The whistleblower was fired by Allied after refusing to “zero out” the accounts. Nothing can make up for the trauma of being fired, nor can these licensed professionals hide from their actions.”

Although the matter was settled in 2015, Ms. D’Agostino was terminated in 2012. “I am pleased that these individuals finally paid for their improper actions. Although the settlement resulted in a payment to me, I will never fully recover from being fired and evicted from my apartment. In spite of it all, I still believe it was the right thing to do,” said Ms. D’Agostino.

“The settlement amount is not particularly large, however, this case defines a new area of whistleblower law in the state of New Jersey”, Fitzgerald went on to say.

The New Jersey Unclaimed Property Act applies to any individual, professional or corporation holding money on behalf of another. It is certain that many similar claims will be filed in New Jersey specifically and throughout the United States generally.

As many know, the Unclaimed Property Act in New Jersey provides for the orderly return of property to its rightful owner. Very often, the “property” is in the form of money from bank accounts or insurance proceeds. Nearly everyone has had an experience of seeing a name they recognize (sometimes their own!) in the newspaper publication done by the Unclaimed Property Office.

Although most know of the publication of the names, very few know of the actual workings of the office. Fewer still are aware of provisions such as N.J.S.A. 46:30B-74(c) which directs the Unclaimed Property Office to deposit 75% of the money received into the “General State Fund” in New Jersey. Most states have a provision providing for transfer to a General State Fund.

This provision is significant as the lawyers representing the state of New Jersey were initially unsure as to whether or not the failure to transmit any unclaimed property to the Unclaimed Property Office constituted a “False Claim”. After reviewing the statutory provision, and the realization that $.75 of every dollar sent to the Unclaimed Property Office actually goes to the General State Fund, the state agreed to negotiate a settlement.

This is the first escheat case in the state of New Jersey under the False Claims Act. In fact, there are very few national escheat cases. One case in Virginia involved the failure to transmit escrow funds from the Naval Federal Credit Union to the state Unclaimed Property Office. Another matter, in the Midwest, involved the nonpayment of cash values on insurance policies to the Unclaimed Property offices throughout the country.

“It is difficult to tell how many claims will be filed as a result of this novel approach, however, as the unclaimed property statute applies to so many entities, including lawyers, it is believed that this will be an interesting and burgeoning arena in the near term”, Fitzgerald said. Lawyers should examine their own trust accounts for monies which should be sent to the state and also consider the federal and state False Claims Act when speaking with prospective clients due to the far reaching applicability.

Mr. Fitzgerald has settled over $10 million of False Claims Act cases in the last year.