A whistleblower claims that the buyer of the assets of a dental practice is responsible for allegedly false Medicaid claims filed by the seller.
M&A Stories
July 6, 2023
Introduction:
In this M&A story, we discuss a case where the buyer of a dental practice is being sued for alleged Medicaid fraud committed by the seller.
Background:
A whistleblower has accused dentists in eastern Ohio of performing unnecessary dental procedures and submitting false claims to Medicaid. Under the False Claims Act, which aims to prevent fraud against the government, the whistleblower filed a legal action against multiple dental practices.
Lawsuit:
Following the purchase of a dental practice in Ohio by a Pittsburgh-based dental service organization, the whistleblower sued the buyer, claiming that they were responsible for the Medicaid fraud committed by the seller. However, the buyer sought to dismiss the claim, arguing that they were not legally liable for the seller’s fraudulent activities.
Outcome:
The court agreed with the buyer and dismissed the claim against them. The court noted that the buyer would have been held responsible if they had assumed the seller’s Medicaid fraud liability in the purchase agreement or paid the seller using buyer equity. However, neither of these circumstances applied to this transaction.
Case Reference:
See United States Ex Rel. Kramer v. Doyle, Case No. 1:18-cv-373, United States District Court, S.D. Ohio, Western Division (June 20, 2023).
Comment: It’s important to note that this risk of liability may not have been discovered during the due diligence process since the lawsuit was not publicly available before the transaction was completed.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
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Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
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