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					                            CAUSE NO. 2010-DCL-4929

 BROWNSvaLEINDEPENDENT                  §
 SCHOOL DISTRICT                        §
     Plaintiff,                         §
                                        §
 vs.                                    §
                                        §
 HEALTHSMARTBENEnTS                    §
 SOLUTION, INC. formally               §
 AAG AMERICAN                          §       l07th JUDICIAL DISTRICT
 ADMINISTRATIVE GROUP and              §
 DAVID HALL, Individually, dba         §
 DAVID HALL MARKETING AND              §
 DEVELOPMENT COLONIAL                  §
 LIFE/MONARCH MANAGEMENT,              §
 AND HEALTHSMART PREFERRED             §
 CARE dba HEALTHSMART                  §
 PREFERRED CARE IT L.P.,               §
 TED PARKER, Individually              §
      Defendants.                      §      CAMERONCOUNTY,TEXAS



       PLAINTIFF, BROWNSVILLE INDEPENDENT SCHOOL DIsTRICT'S
                      FIRST AMENDED PETITION



        BROWNsvaLE        INDEPENDENT         SCHOOL      DISTRICT         (Hereinafter
referred to as caISD" or "District"), Plaintiff in the above styled and numbered
case states a cause of action at common law for breach of contract, Deceptive
Trade Practices, Fraud, Fraud in the Inducement, Civil Conspiracy, Negligence
and Gross Negligence against Defendants, HealtlrSmart Benefits Solution, Inc,
formally AAG American Administrative Group (Hereinafter referred to as
"HealthSmarf')   and   Defendant, David Hall, Individually, dba David Hall
Marketing and Development Colonial Life/Monarch Management (Hereinafter
referred to as "Hall"),Defendant HealthSmart Preferred Care dba HealthSmart
Preferred Care Il, L.P. (Hereinafter referred to as "HealthSmart Preferred Care
Ir') and Ted Parker, Individually (Hereinafter referred to as "Parker"].
                              I.     DISCOVERYLEVEL
           Discovery in this litigation is intended to be conducted under Level 3,
 Texas Rule of Civil Procedure 190.0.


                                     n.    PARTIES
           Plaintiff, Brownsville   Independent   School     District,   is   a   political
 subdivision of the State of Texas, namely a public school district entirely
 located in Cameron County with its principal office at 1900 E. Price Road,
 Brownsville, Cameron County, Texas.


          Defendant, Hea1thSmart is a Corporation incorporated under the laws of
 the State of illinois and may be served with process by serving its Registered
 Agent in the State of Texas as follows:
          Prentice Hall, 211 E. 7th Street, Suite 620, Austin, Texas 78701


          Defendant, David Hall is an individual and a resident of Cameron
 County, Texas and may be served at his principal place of business as follows:
     David Hall Marketing and Development Colonial                        Life/Monarch
Management, 611 E Loop 499, Harlingen Texas 78550

          Defendant, Hea1thSmart Preferred Care dba HealthSmart Preferred Care
II, L.P. is a Texas Limited Partnership and may be served as follows:
    Corporation Service Company dba CSC - Lawyers Incorporating Service
Company, 211 E. 7tlJ Street, Suite 620, Austin, Texas 78701

          Defendant, Ted Parker is an individual and a resident of the State of
Texas and may be served with process at:
      222 W. Las Colinas Boulevard, Suite 600N, Irving, Texas 75039

      Service of citation on Defendants is requested via a private processor
server.


                                              P1ain1:iff, BISD's First Amended Pet:i:t:i.on
                                                                            Page 2 of 12
                        m.    JURISDICTION       AND VENUE
       The Court maintains jurisdiction of the parties by virtue of the PlaintifPs
 status as a political subdivision of the State of Texas and by virtue Defendants
 Hall's and Parkers residency in the State of Texas.           The Court maintains
 jurisdiction   over HealthSmart by virtue of HealthSmart's           substantial   and
 continuous contacts with the State of Texas including maintaining a principal
 place of business at 222 W. Las Colinas Boulevard, Suite 600N, Irving, Texas
 75039. The Court maintains jurisdiction over HealthSmart Preferred Care Il as
 a result of its status as a Texas Limited Partnership.


       Venue is proper in Cameron County, Texas by virtue of Plaintiff and
 Defendant Hall being residents of Cameron County. Additionally, the contract
 was approved, executed, entered and substantially performed in Cameron
 County as evidenced in HealthSmart's actions in maintaining a part-time
employee at Plaintiff's Employee Benefits Department.           All or a substantial
amount of the events and actions alleged occurred in Cameron County.


                                  IV.    FACTS
      BISD maintains a self-funded Employee Health Benefit Plan (Plan). BISD
contracts with Third Party Administrators (TPA)to administer the Plan on
behalf of BISD. On October 1, 2007 Plaintiff BISD entered into a contract with
Defendant HealthSmart regarding the Plan.        Hea1thSmart was to administer
the Plan on behalf of BISD which includes the responsibilities of providing a
Preferred   Provider   Organization     (PPO), adjudicating      claims,    providing
prescription services, paying claims and other services such as coordinating
benefits, pursuing BISD's subrogation rights and providing diseased employee
management services. The bulk of the total expenses of the Plan to BISDis the
payment of the claims to the medical providers.       The fixed costs of the Plan
which include the administrative fee paid to the TPAand Stop-Loss insurance


                                             Plai.nt:iff, BISD's First Amended Petition
                                                                           Page 3 of 12
 purchased to limit BISD's exposure, represent between 10 and 15 percent of
 the total costs of maintaining the Plan. Approximately 85 percent of the costs
 of maintaining the Plan are the net payments to the medical providers.


        The most important component of the contractual relationship between
 BISD and HealthSmart is the provision of the PPO. The PPO has in place
 contracts with medical providers which allow for discounts to be provided to
 members of the PPO.            Therefore, the most important part of the services
 provided by the TPA is the available discounts provided by the PPO. The
 greater the PPO discounts, the greater the savings to BISD.


        Prior to contracting with HealthSmart on October 1, 2007 BISD's Plan
was administered by Mutual of Omaha.                Total Plan costs to BISD in previous
contract years were as follows:


Mutual of        Mutual of         Mutual of        Mutual of     Hea1thSmart       Hea1thSmart
                 Om.aha            Omaha            Omaha
Omaha                                                             (2007-2008)       (2008-2009)
                 (2004-2005)       (2005-2006)      (2006-2007)
(2003-2004)
$28,528,381.00   $26,400,789.00    $29,709,312.00   $31,760,569   $37,665,462.00   $43,449,912.00



        As noted in the above chart, BISD's Plan cost increased substantially
during the 2 years that the Plan was administered by HealthSmart. The 2008-
2009 total of $43 449,912.00 does not include approximately 2.5 million in
                     7



additional claims that were discovered by BISD to exist, potentially payable to
Valley Baptist Health Systems and undisclosed by HealthSmart prior to
HealthSmart's departure as BISD's TPA at the end of the second contract
period in September 30, 2009.            This has the potential of making total plan
costs   for 2008-2009          total   approximately     $46      million an       increase   of
approximately of $14.5 million during the 2 year contract with HealthSmart.




                                                    Plaintiff, BISffs First Amended Petition.
                                                                                Page 4 of 12
         Alarmed by the substantial increase during HealthSrnart's 2 year tenure,
 and subsequent discovery of the undisclosed claims by Valley Baptist Health
 Systems, BISD secured the services of Claims Technologies Incorporated (CTI},
 an independent out of state specialty audit firm to audit the previous 4 years of
 BISD's Plan in order to provide an explanation for the substantial rise in Plan
 costs. CTIconcluded its assigned audit functions in August of2010.


        CTI determined that in 2006-2007, the final year in Mutual of Omaha's
 role as TPAfor BISO, the Provider Discounts were 42.5 percent. As a result of
 Mutual of Omaha withdrawing from the health administration business in
 Texas in 2007 BISD solicited proposals for a new TPA. During this period of
 time HealthSmart represented      to BISD that it would match or beat the
 discounts which were provided by Mutual of Omaha in 2007.             As a result of
 this   representation   by HealthSmart,   the   TPA contract     was awarded to
 HealthSmart. CTI's findings determined that during HealthSmart's first year
the discounts provided by its PPO, HealthSmart Preferred Care II, were 40.5
percent, 2 percent less than the 42.5 percent provided by Mutual of Omaha the
previous year. Each percentage point represents approximately $700,000.00 in
savings to BISD, therefore, during the first year of HealthSmart's tenure there
were additional costs to the Plan of almost $1.5 million as a direct result of
HealthSmart's failure to meet its promised discounts.          The second year of
HealthSmart's tenure 2008-2009, HealthSmart began to make representations
to BISD that it was bringing "Plan savings" to BISO of over 66 percent.          This
was an intentional misrepresentation by Hea1thSmart in an attempt to bolster
its position in order for BISO to renew its contract in 2008-2009. Hea1thSmart
was adding the deductibles, co-payments and co-insurance payments of the
employees, plus any Plan disallowed charges to its formula to arrive at this new
"Plan savings" of 66 to 67 percent. This representation by HealthSmart served
to cause BISO to renew the HealthSmart's contract for 2008-2009.                 The
effective discount as determined by    en   for the 2008-2009 period in fact


                                            Plai.n.tiff, BISD's First Amended Petition
                                                                          Page 5 of 12
 declined to 36.1 percent, approximately 7.5 percent less that in Mutual of
 Omaha's final year.      This resulted in additional Plan costs to BISD of $5.3
 million for 2008-2009.


       As a result of the 2 year performance by HealthSmart and HealthSmart
 Preferred Care II, BISD solicited proposals for TPA services for the 2009-2010
 year. HealthSmart submitted a proposal and engaged in a campaign to retain
 its contract which included a continuation of its representation of large Plan
 savings, openly disparaging BISD's independent insurance consultant with
 statements that later proved to be false and obtaining information on the
 proposals surreptitiously then acting on that information by attempting to ex-
 parte the Interim Superintendent and Board members and providing responses
regarding the consultant's recommendation to Board members prior to the
consultant's report being officiallyreleased.


      CTI further discovered in its audit that HealthSmart was overcharging
the District approximately $15,000.00 a month for its disease management
service.     The contract   called for a fee of $2.49 per diseased member.
HealthSmart was charging this fee for every employee of BISD. The number of
identified diseased    employees was approximately 1,700 yet HealthSmart
charged its fee on approximately 7700 employees resulting in $15,000.00
monthly overcharge.       This gross deviation was first discovered by BISD's
insurance consultant and confirmed by CTL


      Additionally, HealthSmart and HealthSmart Preferred Care IT, the PPO
contracted    by HealthSmart     were under     the     same   corporate    umbrella.
HealthSmart engaged in gross deviations from accepted industry customs and
practices by renegotiating discounts with the PPO and charging an access fee
in addition to a 30 percent fee on the "'savings'"on a claim by claim basis.
HealthSmart and HealthSmart Preferred Care II were essentially dealing


                                           Plaintiff,   BISD's First Amended Petition.
                                                                         Page 60f 12
 beneath its corporate umbrella and basically paying itself twice at the expense
 ofBISD.


       Additionally, CTI confirmed that       prescription     rebate   checks made
 payable to BISD by the contracted prescription           service, ScriptCare were
 negotiated by HealthSmart and the funds withheld for an unreasonable time by
 HealthSmart and later submitted to BISD only upon inquiry by the insurance
 consultant during the period of time that Health.Smart was attempting to retain
 the contract in August 2009.


       During the 2 year period of time in which HealthSmart was BISD's TPA,
 David Hall acted as the local agent for Hea1thSmart. He was listed specifically
 in the contract as Broker of Record with a fee payable to him of $2.00 per
 employee per month       or approximately $15,400.00        per month averaging
approximately $184,800.00 a year.        During this period of time David Hall
actively worked with BISD and in concert with HealthSmart and HealthSmart
Preferred Care II to promote the misrepresentations of the available discounts
and touted on behalf of Defendants, the gross misrepresentation of the alleged
66   percent    "Plan   savings."      David Hall      actively    supported     these
misrepresentations due to the substantial commission that he received under
the contract.


      Defendant Parker at all times relevant during the contract period
between the Plaintiff and the Defendants substantially owned and controlled
HealthSmart and Hea1thSmart Preferred Care ITand was responsible for all
major decisions made by these Defendants.           Parker maintained the sole
authority to allocate funds and resources of the Defendants between the
respective entities and for his personal benefit with a result of HeaIthSmart and
Hea1thSmart Preferred Care ITbeing the alter egos of Parker.




                                            Plain:ti.ff, BISD's First Amended Petition
                                                                          Page 7of12
              v.     TEXAS DECEPTIVE TRADE PRACTICES ACT
                                            (DTPA)
        BISD is a consumer as defined in Section 17.45(4}of the DTPA. It is a
 subdivision of the state of Texas. Defendants committed false, misleading and
 deceptive acts or practices in their representations to BISD in regards to the
 services provided, the costs of the           services and in the execution and
 performance in the delivery of the services in violation of the DTPASection
 17.46 as follows:
        I.    causing      confusion   or    misunderstanding        as   to   the   source,
              sponsorship, approval, or certification of goods or services;
       2.     representing that goods or services have sponsorship, approval,
              characteristics, ingredients, uses, benefits, or quantities which
              they do not have;
       3.     representing that goods or services are of a particular standard,
              quality, or grade;
       4.     disparaging the goods, services, or business of another by false or
              misleading representation of facts;
       5.     failing to disclose information concerning goods or services which
             was known at the time of the transaction if such failure to disclose
              such information was intended to induce the consumer into a
             transaction into which the consumer would not have entered had
             the information been disclosed;


       Plaintiff BISD seeks relief· under Section 17.50(a}(I)(A)and (B) and
17.50(a)(3). Plaintiff states that Defendants' acts were a producing cause of
economic damages and that Defendants acted knowingly or intentionally in
committing the alleged acts and further that Defendant's acted unconscionably
in regards to Plaintiff.




                                                Plaintiff,   BISIYs First Amended Petition
                                                                              Page 8 of 12
       Plaintiff BISD seeks economic damages as provided by the DTPAin
 excess of the minimum jurisdictional amounts of the Court.


                           VI.    ALTER EGO (pARKER)
       As stated above, Parker substantially owed and controlled Defendants,
 Hea1thSmart and HealthSmart Preferred Care II and other entities under the
 Hea1thSmart umbrella.      Parker at his sole discretion, allocated, moved and
-corningled assets   of the various entities within the entities and for his
 individual benefit and use.     Plaintiff seeks to pierce the corporate shield and
 the limited partnership    protections due to Parker individually using and
 benefiting from the assets of the various entities.


                        vn,      BREACH OF CONTRACT
       Defendants materially breached Section 4.1 of the contract and Section 7
of the referred Exhibit "A.'" The reference section states as follows:
      o Elements Disease Management Services. A fee of $2.49 per
      diseased member per month for Q Elements disease management
      services. This fee shall remain fixed for the initial term of the
      Agreement and, if elected, for each one-year renewal option term
      described in Section 1.2 of the Agreement.

      Defendants did not charge the fee as per diseased member, as required
by the contract, but rather charged for every employee resulting in substantial
overcharges to BISD.

      Defendants oral representations to the Board and Administration acted
as amendments to the contract and Defendants breached the amended
contract by failing to deliver on the discounts as represented.


                     vm.   FRAUD IN THE INDUCEMENT
      Defendants fraudulently misrepresented to BISD the amount of the
discounts available to BISD. Defendants knew that the discounts were not as
represented yet intentionally made claims of equal or superior discounts of the
previous TPA. The intent of the Defendants was that BISD act upon these


                                             Plaintiff, BISD's First Amended Petition
                                                                         Page 9 of 12
 representations   and award the contract.            BISD did in fact rely on the
 misrepresentations and awarded the contract to Defendants and as a direct
 and proximate cause of this reliance suffered economic damages.


                                     IX.     FRAUD
       Defendants, in an effort to renew the contract for the 2008-2009 year,
 intentionally misrepresented the discounts by alleging a 66 percent "Plan
 savings" with the intent to misinform BISD as to its performance knowing that
 the figures provided included deductibles, co-payments, co-insurance and
 charges not allowed under the Plan. The intent of the Defendants was that
 BISD act upon this information. BISDdid act on this information and renewed
 the contract.   BISD suffered economic damages as a direct and approximate
 cause of this reliance.


                   X.      NEGLIGENT MISREPRESENTATION
       Pleading in      the   alternative,   Defendants     were negligent       ill   their
misrepresentations to BISDof the available discounts, representations of "Plan
savings," and in servicing the contract. Defendants had a duty to accurately
and professionally service the contract, represent the available discounts and a
duty to report provider discounts in the usual and customary fashion as a
similarly   situated    healthcare     professional    in    the   same     or     similar
circumstances.     Defendants negligently breached the industry's standard of
care and as a direct and proximate cause of that breach, BISD suffered
economic damages.


                              X. CIVIL CONSPIRACY
      HealthSmart, HealthSmart Preferred Care II, Hall and Parker conspired
within the corporation, limited partnership, individual and other unknown
entities to engage in schemes and practices which generated unnecessary costs
and expenses to the Plaintiff and- substantially increased the revenues of the


                                               Pla:iTd:iff,BISIYs First Amended Petition
                                                                           Page 10 of 12
 Defendants.      This included, but was not limited to, the renegotiation of
 discounts     between HealthSmart, Health.Smart Preferred Care II and other
 entities    owned and     controlled by Parker which generated access and
 renegotiation fees for the Defendants.


                                     XI. DAMAGES
         As a result of the Defendants action described above Plaintiff suffered
 actual economic damages in excess of the minimum jurisdictional amounts of
 the Court.


                    XII.   EXEMPLARY AND PUNITIVE DAMAGES
         Defendants' actions in defrauding BISD were committed knowingly
and/or      willfully and/or intentionally and/or maliciously and/or with gross
negligence.      Defendants in the past engaged in a pattern and practice of
aggressively taking over as TPAs for governmental entities and engaging in
knowing, willful, intentional, deceptive or grossly negligent conduct and
deceptive practices resulting in significant increases in Plan costs to the
governmental entities. BISDseeks exemplary and punitive damages as a result
of Defendants' conduct.


                             XIII.     JURy DEMAND
      Plaintiff BISDseeks a trial by jury and has paid the appropriate fee.


                                XIV.      PRAYER
      Plaintiff BISD prays that after a jury trial and judgment on the merits it
be awarded as follows:
      I.      Actual economic damages in excess of the minimum jurisdictional
              amounts of the Court;
      2.      Punitive and exemplary damages         ill   excess of the minimum
              jurisdictional amounts of the Court;


                                             Pla:in:tiff, BISD's First Amended Petition
                                                                          Page 11 of 12
3.   Pre- and post judgment interest as allowed by law;
4.   Allcosts of Court as allowed by law;
5.   Reasonable and necessary attorneys fees; and
6.   Any and all further relief deemed just as allowed by law or in
     equity.


                             Respectfully submitted,

                            WALSH,     ANDERSON,                   BROWN,
                            GALLEGOS & GREEN, P.C.

                            103 E. Price Road, Suite A
                            Brownsville, Texas 78521
                            Telephone: (956) 541-6555
                            Facsimile: (956) 542-2786


                      By:   \~~o,,~~
                            Migt(e~A~afia
                            State .~o~   17529450

                            ATTORNEY FOR DEFENDANT,
                            BROWNSVILLE INDEPENDENT
                            SCHOOL DISTRICT




                                  Plai.n:tiff, BISIYs First Amended Petition
                                                               Page 12 of 12

				
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