Accident and Injury Chiropractic Lawsuit

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY, BOSTON OLD COLONY INSURANCE COMPANY, and THE GLENS FALL INSURANCE COMPANY, Plaintiffs/Petitioners § § § § § § § § § vs. § Civil Action No. 3-01-CV2247-N § RECEIVABLE FINANCE COMPANY, L.L.C, ADVANCED MEDICAL SYSTEMS & SOLUTIONS, P.L.L.C., MARLON D. PADILLA, M.D., P.A., ACCIDENT & INJURY PAIN CENTERS, INC., (d/b/a ACCIDENT & INJURY CHIROPRACTIC), ROBERT SMITH, LONE STAR RADIOLOGY MANAGMENT, L.L.C., WHITE ROCK OPEN AIR MRI, L.L.C. (d/b/a WHITE ROCK OPEN MRI), NORTH TEXAS OPEN AIR MRI, L.L.C. (d/b/a NORTH TEXAS OPEN MRI, HARRIS COUNTY MRI and BEXAR COUNTY M.R.I.), REHAB 2112, L.L.C., METROPLEX PAIN CENTER, INC. (d/b/a LONE STAR RADIOLOGY), LACIDEM MANAGEMENT, BS LIMOUSINE, L.L.C., STEVEN SMITH, § § § § § § § § § § § § § § § § § § 1 TINA CHESHIRE, THOMAS RHUDY, D.C., LOUIS SAUCEDO, D.C., JEFFREY CROCOLL, D.C., KENNETH LUSTIK, D.C., MARK RAYSHELL, D.C., LARRY PARENT, D.C., CHRISTOPHER HOLOWISKI, D.C., CAREY FABACHER, D.C., PATRICIA JOHNSON, D.C., GHOLAMREZA ASSADOLAHI, D.C., KYLE CAMPBELL, D.C., TAYANA STEFANOVIC, D.C., CHAD BLACKMON, D.C., RAMESH SANGHANI, D.C., MARLON PADILLA, M.D., JAMES LAUGHLIN, D.O., DOUGLAS WOOD, D.O., DEE MARTINEZ, M.D., and MOHAMMAD BORGHEE (d/b/a FAMILY CARE PHARMACY), Defendants/Respondents § § § § § § § § § § § § § § § § § FIRST AMENDED COMPLAINT TO THE HONORABLE UNITED STATES DISTRICT COURT: Come now ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY (previously misidentified as Allstate Personal Property & Casualty Company), BOSTON OLD COLONY INSURANCE COMPANY, and THE GLENS FALL INSURANCE COMPANY, hereinafter referred to as "Plaintiffs" and complain of RECEIVABLE FINANCE COMPANY, L.L.C., ADVANCED MEDICAL SYSTEMS & SOLUTIONS, P.L.L.C., and MARLON D. PADILLA, M.D., P.A., ACCIDENT & INJURY PAIN CENTERS, INC. (d/b/a ACCIDENT & INJURY CHIROPRACTIC), ROBERT SMITH, LONE STAR RADIOLOGY MANAGEMENT, L.L.C., WHITE ROCK OPEN AIR MRI, L.L.C. (d/b/a WHITE ROCK OPEN MRI), NORTH TEXAS OPEN AIR MRI, L.L.C. (d/b/a NORTH TEXAS OPEN AIR MRI, HARRIS COUNTY MRI and BEXAR COUNTY MRI), REHAB 2112, L.L.C., METROPLEX PAIN CENTERS, INC. (d/b/a LONE STAR RADIOLOGY), LACIDEM MANAGEMENT, BS LIMOUSINE, L.L.C., STEVEN SMITH, TINA CHESHIRE, THOMAS RHUDY, D.C., LOUIS SAUCEDO, D.C., JEFFREY CROCOLL, D.C., KENNETH LUSTIK, DC, MARK RAYSHELL, D.C., LARRY PARENT, D.C., CHRISTOPHER HOLOWISKI, D.C., CAREY FABACHER, D.C., PATRICIA JOHNSON, D.C., GHOLAMREZA 2 ASSADOLAHI, D.C., KYLE CAMPBELL, D.C., TAYANA STEFANOVIC, D.C., CHAD BLACKMON, D.C., RAMESH SANGHANI, D.C., MARLON PADILLA, M.D., JAMES LAUGHLIN, D.O., DOUGLAS WOOD, D.O., DEE MARTINEZ, M.D., and MOHAMMAD BORGHEE (d/b/a FAMILY CARE PHARMACY) hereinafter referred to collectively as "Defendants," and for such action would respectfully show the Court as follows: I. PREDICATE 1. Plaintiffs seek to recover sums fraudulently procured by Defendants from Plaintiffs since at least 1998, by means of medical and chiropractic billings for unnecessary and unreasonable treatment, examinations, diagnostic tests, and other services in regard to persons involved in automobile collisions. Plaintiffs also request relief under the Federal Declaratory Judgment Act, 28 United States Code, Section 2201, to determine their duty to pay for purported medical and chiropractic treatment of certain insureds, and third parties making claim against insureds, and their right to recover such payments previously made to Defendants. 2. Plaintiffs would show this Honorable Court that Defendants are co-owned or otherwise financially related. Patients were referred between various Defendants for a set course of chiropractic treatment, diagnostic tests and evaluation, medical consultation, and other services, regardless of medical/chiropractic need and necessity. Defendants would then generate narrative reports, itemized billing statements, and HCFA-1500 forms based on the unnecessary treatment and diagnostic testing, to substantiate the treatment and testing. These documents would be presented to automobile insurers, such as Plaintiffs, through personal injury attorneys. 3. Plaintiffs would also show Receivable Finance Company, L.L.C., acts as a device for the lay employment of medical and osteopathic doctors, and that Receivable Finance acts as a conduit for the billing and collection of medical fees and the disbursement of the majority of these medical fees to unlicensed lay persons and entities. Plaintiffs would, therefore, show that Receivable Finance, in combination with other Defendants, is engaged in the unauthorized and corporate practice of medicine, in violation of the Texas Medical Practice Act and Texas common law. Therefore, the contracts between Receivable Finance and various medical and osteopathic doctors are illegal, void, against public policy, and unenforceable against any person. Plaintiffs would further show that they are under no obligation to pay the purported medical fees billed through Receivable Finance, and that they are entitled to reimbursement from Receivable Finance and other defendants for all such payments previously made. 3 4. Plaintiffs would also show there has been a purported 2001 sale of some assets of Receivable Finance Company, L.L.C. (which were gained through the unauthorized practice of medicine) to Advanced Medical Systems & Solutions, P.L.L.C., and/or Marlon D. Padilla, M.D., P.A. Plaintiffs would further show that they are under no obligation to pay the purported medical fees billed through Receivable Finance, and later assigned, sold, or otherwise transferred to Advanced Medical Systems & Solutions, P.L.L.C., and/or Marlon D. Padilla, M.D., P.A., and that they are entitled to reimbursement for all such payments previously made. II. JURISDICTION AND VENUE 5. Pursuant to Title 28, United States Code, Section 1332(a), this Court has subject matter jurisdiction because the amount in controversy in regard to each of the Plaintiffs in this civil action exceeds $75,000.00, exclusive of interest and costs (see paragraph 214 herein), Plaintiffs are citizens and residents of the States of Illinois, Massachusetts, and Delaware, and Defendants are citizens and residents of the State of Texas (see paragraphs 7 through 44 herein). Plaintiffs would specifically show that they are incorporated under the laws of the States of Illinois, Massachusetts, or Delaware, and their principal places of business are in the State of Illinois. Plaintiffs would specifically show that: a. Defendants Robert Smith, Thomas Rhudy, D.C., Louis Saucedo, D.C., Jeffrey Crocoll, D.C., Kenneth Lustik, D.C., Mark Rayshell, D.C., Larry Parent, D.C., Christopher Holowiski, D.C., Carey Fabacher, D.C., Patricia Johnson, D.C., Gholamreza Assadolahi, D.C., Kyle Campbell, D.C., Tayana Stefanovic, D.C., Chad Blackmon, D.C., Ramesh Sanghani, D.C., Marlon Padilla, M.D., James Laughlin, D.O., Douglas Wood, D.O., Dee Martinez, M.D., Steven Smith, Tina Cheshire, and Mohammad Borghee are citizens and residents of the State of Texas. b. Defendants Accident & Injury Pain Centers, Inc., and Metroplex Pain Center, Inc. are corporations incorporated under the laws of the State of Texas, and their principal places of business are in the State of Texas. c. Defendants Receivable Finance Company, L.L.C., Advanced Medical Systems, P.L.L.C., Lone Star Radiology, L.L.C., White Rock Open Air MRI, L.L.C., North Texas Open Air MRI, L.L.C., Rehab 2112, L.L.C., and BS Limousine, L.L.C. are limited liability companies established under the laws of the State of Texas. 4 d. Defendant Marlon D. Padilla, M.D., P.A., is a professional association established under the laws of the State of Texas, whose only member is a citizen and resident of the State of Texas. e. Lacidem Management, L.P. is a limited partnership formed under the laws of the State of Texas, whose partners are residents of the State of Texas, with its principle place of business in the State of Texas. Plaintiffs would also show that all Defendants' principal places of business are in the State of Texas. There are no other parties to this civil suit other than those referenced above. Plaintiffs would show that there is complete diversity of citizenship between themselves and Defendants. 6. Venue is proper in this District pursuant to Title 28, United States Code, Section 1391 (a) and (c) in that a substantial part of the events or omissions giving rise to the claims alleged herein occurred within this District, and Defendants' principal offices are within this District. III. PARTIES 7. Plaintiff, ALLSTATE INSURANCE COMPANY, is a corporation incorporated under the laws of Illinois, with its principal place of business in Illinois. 8. Plaintiff, ALLSTATE INDEMNITY COMPANY, is a corporation incorporated under the laws of Illinois, with its principal place of business in Illinois. 9. Plaintiff, ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY (previously misidentified as Allstate Personal Property & Casualty Company), is a corporation incorporated under the laws of Illinois, with its principal place of business in Illinois. 10. Plaintiff, BOSTON OLD COLONY INSURANCE COMPANY, is a corporation incorporated under the laws of Massachusetts, with its principal place of business in Illinois. 11. Plaintiff, THE GLENS FALL INSURANCE COMPANY, is a corporation incorporated under the laws of Delaware, with its principal place of business in Illinois. 12. Defendant, RECEIVABLE FINANCE COMPANY, L.L.C., (hereinafter "Receivable Finance") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Receivable Finance may be served through its registered agent for service, Mr. Victor Zanetti, 1717 Main Street, Suite 4100, Dallas, Texas 75201, or through its sole manager, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. Receivable Finance has answered in this cause of action. 5 13. Defendant, ADVANCED MEDICAL SYSTEMS & SOLUTIONS, P.L.L.C., (hereinafter "Advanced Medical") is a professional limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Advanced Medical may be served through its registered agent for service, Dr. Marlon Padilla M.D., 381 Casa Linda Plaza, Suite 374, Dallas, Texas 75218-3423, or 7115 Lakeshore Drive, Dallas, Texas 75214. Respondent has answered in this cause of action. 14. Defendant, MARLON D. PADILLA, M.D., P.A., (hereinafter "Padilla PA") is a professional association organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Defendant's sole member, Marlon D. Padilla, is a citizen and resident of the State of Texas. Padilla PA may be served through its registered agent for service, Dr. Marlon Padilla, M.D., 381 Casa Linda Plaza, Suite 374, Dallas, Texas 75218-3423, or 7115 Lakeshore Drive, Dallas, Texas 75214. Padilla PA has answered in this cause of action. 15. Defendant, ACCIDENT & INJURY PAIN CENTERS, INC., (hereinafter "Accident & Injury") is a corporation organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Accident & Injury may be served through its registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 16. Defendant, ROBERT SMITH (hereinafter "Robert Smith") is a resident of the State of Texas. Robert Smith may be served at his place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 17. Defendant, LONE STAR RADIOLOGY MANAGEMENT, L.L.C., (hereinafter "Lone Star Radiology") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Lone Star Radiology may be served through its sole manager and registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 18. Defendant, WHITE ROCK OPEN AIR MRI, L.L.C., (hereinafter "White Rock Open Air MRI") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. White Rock MRI may be served through its sole manager and registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 19. Defendant, NORTH TEXAS OPEN AIR MRI, L.L.C. (hereinafter "North Texas Open Air MRI") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. North Texas MRI may be served through its sole manager and registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 20. Defendant, REHAB 2112, L.L.C., (hereinafter "Rehab 2112") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Rehab 2112 may be served through its sole manager and registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 21. Defendant, METROPLEX PAIN CENTER, INC., (hereinafter "Metroplex Pain") is a corporation organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Accident & Injury may be served 6 through its registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 22. Defendant, LACIDEM MANAGMENT, (hereinafter "Lacidem Management") is a limited partnership organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. Lacidem Management may be served through its registered agent for service, Steven Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 23. Defendant, BS LIMOUSINE, L.L.C., (hereinafter "BS Limousine") is a limited liability company organized under the laws of the State of Texas, with its principal place of business in Dallas, Texas. BS Limousine may be served through its sole manager and registered agent for service, Robert Smith, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 24. Defendant, STEVEN SMITH (hereinafter "Steven Smith") is a resident of the State of Texas. Steven Smith may be served at his place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 25. Defendant, TINA CHESHIRE, (hereinafter "Tina Cheshire"), is a resident of the State of Texas. Tina Cheshire may be served at her place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 26. Defendant, THOMAS RHUDY, D.C., (hereinafter "Dr. Rhudy"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Rhudy may be served at his place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 27. Defendant, LOUIS SAUCEDO, D.C., (hereinafter "Dr. Saucedo"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Saucedo may be served at his place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 28. Defendant, JEFFREY CROCOLL, D.C., (hereinafter "Dr. Crocoll"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Crocoll may be served at his residence, 427 Newberry, Grand Prairie, Texas 75052. 29. Defendant, KENNETH LUSTIK, D.C., (hereinafter "Dr. Lustik"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Lustik may be served at his place of business, 8080 Park Lane, Suite 500, Dallas, Texas 75231. 30. Defendant, MARK RAYSHELL, D.C., (hereinafter "Dr. Rayshell"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Rayshell may be served at his place of business, 200 Wynnewood Village, Dallas, Texas 75208. 31. Defendant, LARRY PARENT, D.C., (hereinafter "Dr. Parent"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Parent may be served at his place of business, 718 N. Buckner, Dallas, Texas 75218. 32. Defendant, CHRISTOPHER HOLOWISKI, D.C., (hereinafter "Dr. Holowiski"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Holowiski may be served at his residence, 802 Rock Springs Drive, Richmond, Texas 77459. 7 33. Defendant, CAREY FABACHER, D.C., (hereinafter "Dr. Fabacher"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Fabacher may be served at his residence, 6201 Automnwood Drive, Frisco, Texas 75035. 34. Defendant, PATRICIA JOHNSON, D.C., (hereinafter "Dr. Johnson"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Johnson may be served at her residence, 4315 Falcon Perch Circle, Arlington, Texas 76001. 35. Defendant, GHOLAMREZA ASSADOLAHI, D.C., (hereinafter "Dr. Assadolahi"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Assadolahi may be served at his residence, 4339 S. Capistrano Drive, Dallas, Texas 75287. 36. Defendant, KYLE CAMPBELL, D.C., (hereinafter "Dr. Campbell"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Campbell may be served at his residence, 9107 Lasater Street, San Antonio, Texas 78254. 37. Defendant, TAYANA STEFANOVIC, D.C., (hereinafter "Dr. Stefanovic"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Stefanovic may be served at her place of business, 601 W. Parker Road, No. 103, Plano, Texas 75224. 38. Defendant, CHAD BLACKMON, D.C., (hereinafter "Dr. Blackmon"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Blackmon may be served at his residence, 3408 Ruidosa Lane, McKinney. Texas 75070. 39. Defendant, RAMESH SANGHANI, D.C., (hereinafter "Dr. Sanghani"), is a resident of the State of Texas, and is licensed to practice chiropractic in the State of Texas. Dr. Sanghani may be served at his place of business, 2223 S. Buckner, No. 245, Dallas, Texas. 40. Defendant, MARLON PADILLA, M.D., (hereinafter "Dr. Padilla"), is a resident of the State of Texas, and is licensed to practice medicine in the State of Texas. Dr. Padilla may be served at his residence, 7115 Lakeshore Drive, Dallas, Texas 75214. 41. Defendant, JAMES LAUGHLIN, D.O., (hereinafter "Dr. Laughlin"), is a resident of the State of Texas, and is licensed to practice medicine in the State of Texas. Dr. Laughlin may be served at his residence, 12516 Indian Creek Blvd., Fort Worth, Texas 76116. 42. Defendant, DOUGLAS WOOD, D.O., (hereinafter "Dr. Wood"), is a resident of the State of Texas, and is licensed to practice medicine in the State of Texas. Dr. Wood may be served at his residence, 677 E. Muirfield, Garland, Texas 75044. 43. Defendant, DEE MARTINEZ, M.D., (hereinafter "Dr. Martinez"), is a resident of the State of Texas, and is licensed to practice medicine in the State of Texas. Dr. Martinez may be served at his residence, 3638 Cripple Creek Drive, Dallas, Texas 75224, or at his place of business, 904 N. Ewing, Dallas, Texas 75203. 44. Defendant, MOHAMMAD BORGHEE (hereinafter "Mohammad Borghee"), is a resident of the State of Texas, and is a licensed pharmacist in the State of Texas. 8 Mohammad Borghee may be served at his residence, 3504 Dripping Springs, Plano, Texas 75025. IV. STATEMENT OF FACTS PERTINANT TO ALL CAUSES HISTORY OF THE ENTERPRISE A. Initial Business Formations 45. Accident & Injury was incorporated in October 1990. Robert Smith is the president/CEO and sole shareholder of Accident & Injury. 46. Robert Smith is a layman, and has never been licensed as a chiropractor, medical doctor, or other healthcare professional. 47. Steven Smith is the vice president of Accident & Injury. Steven Smith is a layman, and has never been licensed as a chiropractor, medical doctor, or other healthcare professional. 48. Tina Cheshire is the head of the Accident & Injury Collections Department. 49. In September 1991, Accident & Injury filed an Assumed Name Certificate for an Unincorporated Business or Profession with the Texas Secretary of State, certifying it was to conduct business under the name "Accident & Injury Chiropractic." Robert Smith signed the certificate as President of Accident & Injury 50. In January 1992, the Articles of Incorporation of Metroplex Pain were filed with the Texas Secretary of State. Robert Smith was listed as sole initial director. In an August 2001 deposition of Receivable Finance in a Texas state court proceeding, Receivable Finance's chief financial officer, Steven Lambert, (who testified he is also an officer of Accident & Injury) admitted Metroplex Pain is wholly owned by Accident & Injury.1 B. Expansion of Facilities (1998 to Present) 51. Beginning in approximately 1998, a number of new Accident & Injury chiropractic clinics have been opened in the Dallas/Fort Worth, Houston, and San Antonio areas. Since that time, the number of clinics has approximately doubled. 52. In May 1998, Metroplex Pain filed an Assumed Name Certificate for an Unincorporated Business or Profession with the Texas Secretary of State and the Dallas County District Clerk, certifying it was to conduct business in Dallas County under the name "Lone Star Radiology." Robert Smith signed the certificates as President of Metroplex Pain. In December 2000, the Articles of Organization of Lone Star Radiology were filed with the Texas Secretary of State. Robert Smith is listed as sole manager of Lone Star Radiology. 53. In August 1998, the Articles of Organization of White Rock Open Air MRI were filed with the Texas Secretary of State. Robert Smith is listed as the sole manager of White Rock Open Air MRI. White Rock Open Air MRI thereafter commenced operation of a MRI facility ("White Rock Open MRI") in Dallas, Texas. 9 54. In November 1998, the Articles of Organization of North Texas Open Air MRI were filed with the Texas Secretary of State. Robert Smith is listed as the sole manager of North Texas Open Air MRI. North Texas Open Air MRI thereafter commenced operation of a MRI facility ("North Texas Open MRI") in Arlington, Texas. 55. Also in November 1998, the Articles of Organization of Rehab 2112 were filed with the Texas Secretary of State. Robert Smith is listed as sole manager of Rehab 2112. Subsequently, Rehab 2112 facilities were opened in Dallas, Arlington, and San Antonio. 56. In 1998, Robert Smith appointed Dr. Rhudy as chief of staff and "compliance officer" of Accident & Injury. Robert Smith also appointed Dr. Rhudy as compliance officer for North Texas MRI, White Rock MRI, and Rehab 2112. 57. In 1999, Dr. Saucedo was appointed Accident & Injury's assistant chief of staff. 58. In March 1999, the Articles of Organization for Receivable Finance were filed with the Texas Secretary of State. Robert Smith is listed as sole manager of Receivable Finance. 59. Also in or around March 1999, Dr. Padilla and Dr. Laughlin began to see Accident & Injury patients for 'second opinion' medical consultations at the various chiropractic clinics, and "sell" their medical fees from these consultations to Receivable Finance. Subsequently, certain other medical doctors, including Dr. Wood, commenced similar arrangements. 60. In July 1999, Robert Smith appointed Dr. Crocoll as Accident & Injury's "director of quality control" and head of the "production department." In October 1999, Dr. Crocoll's was redesignated Accident & Injury's Director of Operations. 61. In March 2000, North Texas Open Air MRI filed two Assumed Name Certificates with the Texas Secretary of State, certifying that it was to conduct business under the name "Bexar County MRI" in Bexar County, Texas, and "Harris County MRI" in Harris County, Texas. Robert Smith signed both certificates as President of North Texas Open Air MRI. North Texas Open Air MRI thereafter commenced operation of MRI facilities in San Antonio and Houston, under those assumed names. 62. In November 2000, the Articles of Organization for Metroplex Diagnostics, L.L.C., were filed with the Texas Secretary of State. Robert Smith is listed as sole manager of Metroplex Diagnostics. 63. In January 2001, a Texas District Court ordered Receivable Finance to produce a representative for deposition and to produce certain documents, and Receivable Finance subsequently filed unsuccessful mandamus actions against the deposition order in the Texas Court of Appeals and Texas Supreme Court. In February 2001, Receivable Finance purportedly 'sold' medical billings it held to a professional entity owned by Dr. Padilla. 64. Also in February 2001, the Articles of Organization for Advanced Medical were filed. The Articles show Dr. Padilla as sole manager and organizer. 65. Subsequent to February 2001, on information and belief, Advanced Medical and/or Padilla PA have 'employed' medical doctors who conduct 'second opinion' medical consultations at Accident & Injury chiropractic clinics, and pay those medical doctors a percentage of their fee. Advanced Medical and/or Padilla PA 10 transfer money to Accident & Injury through lease payments and possibly other 'service' fees. V. PATTERN OF TREATMENT AND SELF REFERRALS 66. Accident & Injury currently conducts business through nineteen (19) chiropractic clinics in the Dallas/Fort Worth area, San Antonio and Houston. 67. Each of the Accident & Injury clinics is headed by a Clinic Director. Clinic Directors during the period relevant to this lawsuit include the following Defendants: Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, and Dr. Sanghani (hereinafter, these defendants may be referred to collectively as "the Clinic Director Defendants"). Dr. Saucedo was a Clinic Director prior to his appointment as Accident & Injury's assistant chief of staff. The clinics also have varying numbers of "associate doctors," who report to the clinic directors. 68. Accident & Injury's chief of staff, Dr. Rhudy, and assistant chief of staff, Dr. Saucedo, office in Accident & Injury's corporate headquarters, and 'oversee' the clinics. Dr. Rhudy and Dr. Saucedo report directly to Robert Smith and Steven Smith. In addition to being a Clinic Director, Dr. Rayshell also acts as an additional supervisor of the other Clinic Directors. 69. Accident & Injury treats a large volume of patients making bodily injury claims as a result of automobile collisions. Claims made by these patients to automobile insurers, such as Plaintiffs, show a near universal pattern of patient treatment and referrals for diagnostic tests and medical consultations. The referrals are made to co-owned diagnostic entities, or to medical doctors employed by Accident & Injury or its affiliated entities. 70. As noted in greater detail in Section IV above, Accident & Injury owner Robert Smith organized a number of diagnostic facilities and other entities in the period 1998-2000. In the same period, an expansion of the number of "Accident & Injury" chiropractic clinics commenced. An organized and contrived pattern of treatment has subsequently developed: VI. Solicitation of Patients 71. Accident & Injury 'markets' itself to personal injury attorneys. Accident & Injury Clinic Directors2, as well as its chief of staff (Dr. Rhudy) and its assistant chief of staff (Dr. Saucedo), appear free of charge to testify as experts on behalf of plaintiffs. In recent (July 2002) trial testimony, Dr. Saucedo admitted he has testified in approximately ten trials since January 2001 alone. 3 Lengthy narrative reports are provided to assist plaintiffs and their attorneys to settle or litigate their claims. (As noted more fully herein, the reports make standard findings of serious injuries, and that the injuries were caused by "the accident that occurred on the above-referenced date"). Large numbers of persons involved in automobile collisions are referred to Accident & Injury clinics by attorneys. 11 72. Additionally, Accident & Injury aggressively markets itself to persons who have been involved in automobile collisions. During the relevant period, Accident & Injury advertisements advised such persons that automobile insurance would cover 100% of their treatment costs. Unrepresented persons who come to an Accident & Injury clinic are directed by Accident & Injury personnel to a limited number of personal injury attorneys. a. Attorneys or their representatives come to the chiropractic clinics to 'sign up' patients as clients. b. In 2001 state court testimony, a former law office employee affirmed that Accident & Injury chiropractors contacted the law office when they had an unrepresented patient and asked the law office to 'fax over a contract.' Accident & Injury personnel then had the patient sign the attorney employment contract and returned the signed contract to the attorney. 4 c. In July 2002 state court trial testimony, Dr. Saucedo testified that the Clinic Directors are in charge of referring Accident & Injury patients to attorneys.5 73. Defendants also maintain undisclosed standing agreements with cooperative attorneys to 'rebate' or 'discount' medical and chiropractic costs. The costs to be paid by such attorneys to Accident & Injury, Receivable Finance and other Defendants upon settlement of a case is significantly less than the fee cited in itemized billing statements and HCFA-1500 forms generated by the Defendants, and which are presented to Plaintiffs and other automobile insurers in demands for settlement as necessary and reasonable charges. VII. Initial Narrative Reports 74. An Initial Narrative Report is generated for all automobile accident patients. The initial narrative reports for all Accident & Injury clinics are generated at Accident & Injury's corporate office in Dallas. Dr. Crocoll and, subsequently, Dr. Saucedo head the "production department" that produces these reports. The reports are based on patient intake documents and pre-printed paragraphs in the computer, and not on dictation from a chiropractor seeing the patient. 75. The initial narrative reports bear the name of the Clinic Director of the particular Accident & Injury clinic, although the Clinic Director may not have been the chiropractor who examined the patient. The initial narrative reports are not signed. 76. The initial narrative reports contain a patient identification number. A new number is assigned for each accident, i.e., if a patient treated at Accident & Injury previously for another accident, the identification number would be different. 77. The initial narrative report's "Past History" section almost always represents: "Past history is non-contributory. The patient denies any significant history of same or similar condition. Prior to this incident the patient states that she was enjoying a good state of health." 12 The paragraph has been included in instances where available records refute it, and even in some cases where the patient has previously treated at an Accident & Injury clinic. In 2002 state court testimony, Accident & Injury's former director of operations, Dr. Crocoll admitted this history is a 'default' paragraph. 6 78. In other instances where the patient has previously treated at Accident & Injury, the "Past History" section is deleted, in order to deceive observers by concealing the fact of the prior treatment. 79. The initial narrative reports' "Initial Impression" section, contains standard paragraphs opining the existence of: "Traumatic injury of the cervical [lumbar, or thoracic] spine with tearing of the regional connective tissues including muscles, tendons, ligaments, blood vessels, joint capsules, and nerves; with subsequent . . ." These paragraphs are followed by a string of short, standardized supposed conditions, such as "discitis," "myositis," "joint stiffness," muscle spasm," "nerve root irritation," and "segmental dysfunction." In most instances, these "impressions" cannot be supported by clinical documentation. 80. The initial narrative reports' "Treatment Plan & Recommendations" section almost always call for electrical muscle stimulation, "cryotherapy," and "intersegmental traction," and represent the patient requires x-rays, MRIs, and medical doctor consultation. VIII. X-rays/Lone Star Radiology 81. Virtually all motor vehicle accident patients receive x-rays at the Accident & Injury clinic during their initial visit. This includes cases where the patient was already x-rayed at another facility. The x-rays are purportedly evaluated by an Accident & Injury chiropractor, and Accident & Injury bills for the entire procedure — both for the technical and professional components. Often, there is no documentation at all that the charged professional component was performed; for example, there is no x-ray report completed by the Accident & Injury chiropractor. At other times, a cursory one-page form "report," using circles and checkmarks, is made. 82. In virtually all cases, Accident & Injury represents the x-ray films require a second review by a chiropractic radiologist. The x-ray films are then referred to Lone Star Radiology. In June 2002 state court deposition testimony, Dr. Rayshell admitted all x-ray films sent for review went to Lone Star Radiology.7 The referral is typically made the same day as the patient's initial visit to the Accident & Injury clinic. 83. While on its face it would appear Lone Star Radiology is an independent facility, as noted above, it is in fact a related entity to Accident & Injury and owned by Robert Smith. From May 1998 to December 2000, "Lone Star Radiology" was 13 merely a "dba" of Metroplex Pain. In December 2000, Lone Star Radiology Management, L.L.C., was formed, with Robert Smith as sole manager. 84. Dr. Lustik interprets the vast majority of these x-rays. Lone Star Radiology/Dr. Lustik's office is located within Accident & Injury's corporate headquarters, at 8080 Park Lane, Dallas. In 2002 state court deposition testimony, 8 Dr. Lustik admitted: a. He is an Accident & Injury employee. b. Lone Star Radiology had no clerical staff of its own, and the only employees were himself and Dr. Tamara Uptigrove, D.C. The only other employee Lone Star Radiology ever had was Dr. Kenneth Hanson, D.C. c. Accident & Injury provides him with the x-ray films to read. d. Lone Star Radiology's business was limited to reading films from Accident & Injury clinics. e. Accident & Injury generates Lone Star Radiology's billings and reports, and maintains Lone Star Radiology's records. f. Accident & Injury's billing department collects Lone Star Radiology's fees. 85. A report is subsequently issued under Lone Star Radiology's name, which also represents that Dr. Lustik is the proprietor or chief executive of the company. As noted above, the report is in fact generated by Accident & Injury, and Dr. Lustik is an employee of Accident & Injury. 86. The Lone Star Radiology charge for interpretation of the x-ray films is in addition to the billing for the same professional component function billed by Accident & Injury, in its own name. Therefore, there is a routine duplication of service and billing. IX. MRI Referral and Interpretation 87. Accident & Injury almost always refers an automobile accident patient for a MRI or MRIs, regardless of the patient's purported symptoms. The MRI referral is 14 almost always made during the patient's initial visit to Accident & Injury. Therefore, no opportunity is given for conservative treatment to succeed or fail. Additionally, there is no opportunity for return and review of the 'second opinion' radiology report from Lone Star Radiology. 88. In most cases, multiple MRIs are ordered. 89. Standing agreements exist between Accident & Injury and some cooperative personal injury attorneys in regard to the number of MRIs that may automatically be conducted on those attorneys' clients, and when further permission of the law office must be obtained. Thus, MRI determinations are based on claims presentation, and not medical necessity. a. In a deposition conducted in the present case, former Accident & Injury 'collections department' employee L. Caprice Garcia testified of the existence of such agreements. For example, she testified certain law offices had agreements with Accident & Injury that two MRIs could be conducted of their clients without seeking approval of the law office. When authorization was needed, lay Accident & Injury corporate office personnel, such as Steve Smith and George Villaponda, would contact the law office. b. Ms. Garcia also testified that, on some occasions where Accident & Injury sought attorney permission to conduct MRIs, the attorney's office would determine (based on the low impact of a collision) that the MRIs would hinder their ability to negotiate the claim, and would disallow further MRIs. In cases where permission for MRIs was sought, lay Accident & Injury corporate office personnel, such as Steve Smith, would advise the clinic of how many MRIs could be performed for a particular patient. 90. Patients in the Dallas/Fort Worth area are referred to either White Rock Open MRI or North Texas Open MRI. Houston area patients are referred to Harris County MRI, and San Antonio area patients are referred to Bexar County MRI. 91. As noted herein, all four of these facilities are owned by Robert Smith. 92. A single physician, Dr. Martinez, interprets the vast majority of the MRI scans from these four facilities (which in turn conduct the MRIs for all nineteen Accident & Injury clinics). 93. From 1999 through at least January 2001, Dr. Martinez transferred his professional medical fee for his evaluation of MRIs conducted at White Rock Open MRI, North Texas Open MRI, Harris County MRI, and Bexar County MRI, to Receivable Finance. Receivable Finance collected Dr. Martinez's fee. Receivable Finance (pursuant to the 2001 state court testimony of its CFO) paid Dr. Martinez seven percent (7%) of his medical fee, which equated to $20 for a $300 charge.9 X. Medical Doctor Consultation A. Referral for 'Second Opinion' Consultation 15 94. Accident & Injury virtually always refers an automobile accident patient to a medical doctor (M.D. or D.O.) for "second opinion" medical examination. The medical doctor referral is almost always made during the patient's initial visit to Accident & Injury. 95. There are a limited number of medical doctors to whom the patients are referred, including (during the relevant period) Dr. Padilla, Dr. Laughlin, and Dr. Wood. Dr. Padilla's entire practice consists of seeing Accident & Injury referrals. 96. Robert Smith and Steven Smith are personally involved in the recruitment and selection of these medical doctors. 97. The "second opinion" medical examinations are typically conducted at the various Accident & Injury chiropractic clinics, rather than the medical doctor's own office. In state court deposition testimony, Dr. Padilla admitted that he did not maintain an examination office of his own. Accident & Injury provides one of its employees to assist the medical doctor in these examinations. 98. Medical doctors from the Dallas/Fort Worth area, including Dr. Padilla, Dr. Laughlin, and Dr. Wood, have traveled to San Antonio and Houston to perform 'second opinion' examinations at the Accident & Injury clinics in those cities. 99. The 'second opinion' examinations are cursory. The number of patients these medical doctors purportedly "examine" is ridiculous. For example: a. In late 2000 state court depositions, Dr. Padilla testified 98-100% of his patients were Accident & Injury referrals, he sees 150 to 200 patients per week at Accident & Injury chiropractic clinics in Dallas, Fort Worth, Arlington, Houston, and San Antonio.10 Dr. Padilla testified that he usually went to two Accident & Injury clinics a day. b. Dr. Padilla also testified that he introduced Dr. Douglas Wood to Robert Smith, and that Dr. Wood probably saw about the same number of patients he (Padilla) sees.11 c. In recent state court trial testimony (December 2001), Dr. Padilla testified that 99% of his professional association's patients were Accident & Injury referrals. Dr. Padilla personally saw 6,000 to 7,200 Accident & Injury referral patients over the prior year; his professional association as a whole had seen 12,000 to 14,000 Accident & Injury patients over the past year. 12 d. In a 2001 state court deposition, Dr. Laughlin testified he examined 40-60 patients a day at an Accident & Injury clinic; sometimes he saw up to eighty patients.13 He also testified he saw patients at San Antonio and Houston clinics. e. In a September 2001 state court deposition, Dr. Wood testified he examined up to thirty or forty Accident & Injury patients a day. Dr. Wood testified that he went to all the Accident & Injury clinics, including the ones in Houston and San Antonio, to conduct the examinations. 14 100. The 'second opinion' examinations referenced above are typically billed from $210 to $425, under CPT code 99243, although the medical doctor could not possibly expend the time required for such an examination, given the enormous volume of patients "examined." 16 101. Often, subsequent to the initial 'second opinion' medical consult, Accident & Injury will refer the patient to another one of the involved medical doctors for a further consultation examination. 102. Accident & Injury generates the medical doctor reports for these examinations, and maintains the medical records. a. In state court deposition, Dr. Padilla testified Accident & Injury generates his narrative reports and his patient files are maintained at 8080 Park Lane (which is the corporate headquarters of Accident & Injury). 15 b. Dr. Padilla testified he developed a "template" system for use during the medical examinations, in which preprinted items are circled or lined through. He developed the system after Robert Smith expressed concern that medical narrative reports were not being generated quickly enough. 16 c. Dr. Padilla testified that circling or lining through an item on the template led to a transcriptions entering a macro that entered an entire sentence in the narrative report. In an October 2000 deposition, Dr. Padilla testified that "each word that's circled is a sentence."17 In a 2002 deposition, Dr. Padilla testified "neck pain" on the template was translated as "the patient was complaining of neck pain and spasm" in the medical narrative report.18 d. In 2002 state deposition testimony, Dr. Padilla admitted that the assistant actually made many of the template entries.19 e. The 'template' contains numerous entries for MRI recommendations, but not for other diagnostic tests, such as CAT scans — Dr. Padilla admitted this was so because Accident & Injury 'preferred' MRIs; he also admitted Accident & Injury 'preferred' White Rock and North Texas MRI. 20 f. In a state court deposition, Dr. Padilla also testified he signs as many as fifty of the Accident & Injury generated narratives at a time, and that he only 'spot checked' ten percent of the reports. 21 g. In a 2001 state court deposition, Dr. Laughlin testified Dr. Rhudy gave him a template he was to use for patient examinations. He was pressured to include standard 'causation' findings in his reports, attributing injuries to the particular accident at issue. Reports generated by Accident & Injury often contained additions not included in his templates or dictation; particularly concerning causation and future medical needs. 22 103. Dr. Laughlin has testified that Robert Smith and Accident & Injury personnel requested him to make fraudulent medical findings, going as far as to request him to make bogus surgical recommendations. More specifically, Dr. Laughlin testified: a. Dr. Padilla approached him and advised he was relaying a message from Robert Smith — Robert Smith's message to Dr. Laughlin was that he was to recommend at least ten percent of the Accident & Injury patients he saw for surgery, if he wished to continue seeing Accident & Injury patients. 23 b. Dr. Rhudy requested he make standard 'causation' findings in regard to all Accident & Injury patients, attributing their supposed injuries to the particular accident at issue.24 17 c. In one instance, one of Dr. Laughlin's medical reports was critical of Accident & Injury's referral of a patient to Dr. Martinez for an epideral steroid injection. An Accident & Injury Clinic Director contacted Dr. Laughlin, complained 'you just killed the attorney's case,' and demanded Dr. Laughlin withdraw the report. Later, Dr. Rhudy also contacted Dr. Laughlin to request he withdraw the report. 25 104. In the vast majority of the cases, the patient did not see the medical doctor after the one time "consultation examination." Despite the fact that the patient is generally prescribed medication, there is usually no follow-up with the prescribing physician. 105. The medical narrative report generally states the patient is not recommended for continuing medical care, but is returned for chiropractic treatment. This occurs even where there is purportedly a suspected disc herniation. 106. The medical doctor will generally prescribe medications for the patient. The prescriptions are filled at a limited number of 'captive' pharmacies, particularly Family Care Pharmacy. The prescriptions are delivered to the patients by the mail or Federal Express, and the patients never speak with a pharmacist. The charges billed by Family Care Pharmacy for the prescriptions greatly exceed the charges that would be billed by an average pharmacy where patients could go in person to fill the prescription. Dr. Padilla has admitted he negotiated the relationship between Accident & Injury and Family Care Pharmacy. 26 107. The involved medical doctors split their professional medical fees with other lay Defendants. a. From 1999 through at least mid 2001, the involved medical doctors transferred their professional medical fees for these 'second opinion' consultations to Receivable Finance. Receivable Finance collected the medical fees, and paid the medical doctors a small percentage (11-18%) or flat fee. b. On information and belief, subsequent to February 2001, the involved medical doctors have transferred their professional medical fees for these 'second opinion' consultations to other lay Defendants through Advanced Medical and/or Padilla PA, under the guise of lease fees and possibly other service fees. In a recent (April 2002) state court deposition, Dr. Padilla testified that Dr. Wood and other physicians work for him, and that he (Padilla) 'leased' space from all the Accident & Injury chiropractic clinics.27 XI. Chiropractic Treatment and Therapy Modalities 108. Automobile accident patients almost always receive a set course of office visits and three therapy modalities at the Accident & Injury clinic, described in Accident & Injury reports as "Cyrotherapy" (which consists of the application of hot/cold packs), "electrical muscle stimulation," and "intersegmental traction" 18 (which consists of lying on a 'roller table'). These are billed as "hot/cold packs," "manual therapy," and ""EMS (Unattended)" in itemized billing statements. 109. Chiropractic adjustments by Accident & Injury chiropractors are routinely characterized as a combination of "problem focused" and "manual therapy" in itemized billing statements, under CPT Codes 99212 and 97140, and billed for a total charge of $77.00. On the other hand, CPT codes specifically relating to chiropractic manipulation, such as 98940, 98941, 98942, and 98943, are not used in Accident & Injury billings. 110. Patients are treated in a large common room, and timers are used to advise Accident & Injury personnel when to move patients among the various treating tables. Generally, each modality lasts about 10 minutes. At the sound of the bell, the patients move from one treatment modality to the next. 111. This course of treatment and modalities generally last two to three months. XII. Possible Further Referrals 112. On occasion, Accident & Injury refers automobile accident patients to Metroplex Diagnostics or Rehab 2112. As noted herein, both entities are also owned by Robert Smith. 113. On information and belief, Accident & Injury routinely refers its workers compensation patients to Metroplex Diagnostics and Rehab 2112. XIII. Narrative Report Generation 114. Accident & Injury issues a Final Narrative Report for virtually all automobile accident patients. The final narrative reports for all Accident & Injury clinics are also generated at Accident & Injury's corporate office in Dallas. A charge of $150 is assessed for the report. 115. The final narrative reports are repetitive of the initial narrative reports. The history, past history, and complaints portions are 'block and copies' of the same sections of the initial narrative report. Likewise, the "Initial Impression" and "Treatment Plan and Recommendations" sections of the initial narrative report are repeated as the "Final Diagnosis" and "Treatment" sections of the final narrative report. a. As noted above, the "Initial Impression" section of the initial narrative report contains standard findings of: "Traumatic injury of the cervical [lumbar, or thoracic] spine with tearing of the regional connective tissues including muscles, tendons, ligaments, blood vessels, joint capsules, and nerves; with subsequent . . ." b. The verbatim language is repeated as a "final diagnosis," even in cases where all MRI findings are normal and show no tearing of such connective tissues. 116. The final narrative reports contain standard "Discussion," "Prognosis," and "Future Medical" sections. These sections are drawn from preprinted paragraphs 19 at Accident & Injury's corporate office. Accident & Injury Clinic Directors complete a one-page interdepartmental memo (which is not retained in the patient's record), and write in code selections such as "4C" or "3L" for the discussion section, and a number such as "2" or "3" for the prognosis and future medical sections. Accident & Injury corporate office employees generating the reports enter these codes to obtain the pre-printed selection. 117. These sections contain apparent specific references to the patient's supposed condition, and often contain citation to medical and chiropractic authority, in order to give the appearance that a treating chiropractor conducted an extensive evaluation of the patient and dictated the report. In reality, as noted above, the sections are drawn from a limited number of selections. 118. As with the initial narrative report, the final narrative report contains the signature block of the Clinic Director. The Clinic Director's stamped signature is placed on the report. However, the Clinic Director may have seen the particular patient sporadically, or not at all. Often, the identity of chiropractors who purportedly treated the patient cannot be ascertained from Accident & Injury treatment records. In some instances, the Clinic Directors themselves have been unable to determine what chiropractors purportedly treated the patient, although the same Clinic Director will attest in HCFA-1500 forms that the chiropractic services were performed. 119. The final narrative reports generally relate that the patient's injuries are of a long term or permanent nature and/or that the patient will henceforth be predisposed to other injury. The final narrative reports generally represent the patient will require continuing care over eight to twelve months, and represent the patient will incur several thousand dollars in cost for care during that period. 120. Virtually all Accident & Injury final narrative reports for automobile accident patients conclude with an "Opinion" section that reads: "It is my opinion, based upon the history as presented by the patient, the above noted examination and test findings, that the injuries sustained by the patient were within a reasonable medical probability sustained as a result of the accident that occurred on the above-referenced date." Dr. Crocoll, the former head of the Accident & Injury production department that generates these reports, has admitted the Opinion section was a 'default' paragraph, and there were no alternative selections.28 XIV. ASSUMPTION OF INTEREST IN CLAIMS AND LAWSUITS 121. Accident & Injury purportedly takes an "irrevocable" assignment and transfer of an undivided interest in any claim or cause of action made by automobile collision patients. In 2001 state court testimony, Dr. Holowiski testified that Accident & Injury requires its patients to sign these purported assignments.29 20 122. In 2001 and 2002 state court trials, Accident & Injury chiropractors, including chief of staff Dr. Rhudy30 and Clinic Directors Dr. Parent31 and Dr. Fabacher32 , have admitted that Accident & Injury has a financial interest in the plaintiff's lawsuit. XV. THEORIES OF LIABILITY AND CAUSES OF ACTION SINGLE BUSINESS ENTERPRISE DOCTRINE 123. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 123 above. 124. Plaintiffs would show that the following entities constitute a "single business enterprise" as defined by Texas law: Accident & Injury, Receivable Finance, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem Management, and BS Limousine. 125. Plaintiffs would show that Robert Smith owns all these entities. 126. The entities share common offices. For example: a. Receivable Finance is located within Accident & Injury's corporate office at 8080 Park Lane, Dallas, Texas. b. Lone Star Radiology is located within the same corporate office (although in some documents, Lone Star Radiology also uses the physical address of White Rock Open MRI). c. Receivable Finance, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI share the same PO Box for billing purposes. 127. The entities share common officers and employees. For example: a. Documents filed with the State of Texas, and past state court testimony, establish that Robert Smith is the president/CEO of at least the following: Accident & Injury, Metroplex Pain, Receivable Finance, and North Texas Open Air MRI. b. Steven Lambert is chief operations officer of Accident & Injury, and chief financial officer of Accident & Injury, Receivable Finance, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, and North Texas Open Air MRI. c. Receivable Finance's sole employee, Brigitta Naughton, is also employed by Accident & Injury as its office manager. d. Dr. Thomas Rhudy, D.C., is compliance officer for Accident & Injury, White Rock Open Air MRI, North Texas Open Air MRI, Metroplex Diagnostics, and Rehab 2112. In December 2001 state court trial testimony, Dr. Rhudy testified that his position as compliance officer of North Texas Open Air MRI is "part of my job through Accident & Injury."33 128. Employees and officers of one entity are paid by another. For example, Mr. Lambert testified that he was only paid by Accident & Injury; however, he also testified he was an officer of Receivable Finance, Lone Star Radiology, North Texas Open Air MRI, and White Rock Open Air MRI. 34 21 Services are rendered by one entity on behalf of another. For example: a. Receivable Finance has only one employee (who it shares with Accident & Injury), and other Accident & Injury officers and employees, such as Steven Smith and Tina Cheshire, performed billing and collection services on behalf of Receivable Finance. b. Lone Star Radiology has no clerical employees of its own, and Accident & Injury employees perform billing and collections services, report generation, and document maintenance, for Lone Star Radiology. c. Accident & Injury's records department maintains the records of entities such as Lone Star Radiology, Receivable Finance, and North Texas Open Air MRI. 130. Discovery in this case to date reflects that Receivable Finance has transferred and/or received large sums of funds from and/or to the following entities: Accident & Injury, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem Management, and BS Limousine. 131. The Accident & Injury collections department, headed by Tina Cheshire, also collects billings for related entities such as Receivable Finance, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI. Tina Cheshire arbitrarily assigns funds arriving to the collections department to the various entities' accounts, and thereby commingles the funds. 132. Pursuant to the Single Business Enterprise doctrine, these entities have integrated their resources to achieve a common business purpose. Therefore, in addition to any individual liability for particular acts as set forth further in this complaint, the members of the Single Business Enterprise are jointly and severally liable for the acts and liabilities of the other constituent entities. XVI. STATUTORY VIOLATIONS 133. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 132 above. 134. Plaintiffs would show that Defendants have violated numerous provisions of the Texas Occupations Code. These violations are pertinent to the remaining causes of action asserted by Plaintiffs herein. A. Texas Occupations Code § 101.203 (and former Article 4512p, §5(b)) 135. Section 101.203 of the Texas Occupations Code mandates that "A health care provider may not violate Section 311.0025, Health and Safety Code." Section 311.0025(a) consist of the following prohibition: a. A hospital, treatment facility, mental health facility, or health care professional may not submit to a patient or a third party payor a bill for a treatment that the hospital, facility, or professional knows was not provided or knows was improper, unreasonable, or medically or clinically unnecessary. 129. 22 136. The predecessor Texas law, Revised Civil Statute Article 4512p, §5(b), which was in effect until September 1, 1999, mandated that "A health care professional may not persistently or flagrantly overcharge or overtreat a patient." 137. Plaintiffs would show that Defendants Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, North Texas Open Air MRI, Dr. Rhudy, Dr. Saucedo, Dr. Lustik, Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, Dr. Sanghani, Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez have violated §101.203 and Article 4512p, §5(b). Plaintiffs would show these Defendants have submitted bills for medical and chiropractic treatment, x-ray evaluations, MRIs, MRI evaluation, and medical consultations that they knew was improper, unreasonable, or medically or clinically unnecessary. 138. Specifically, Plaintiffs would show the treatment and referrals between these Defendants was based on enriching the common enterprise between these Defendants, rather than on reasonableness and necessity of treatment and diagnostic tests. Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI share a common ownership. Dr. Rhudy, Dr. Saucedo, Dr. Lustik, Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, and Dr. Sanghani are supervisory personnel of Accident & Injury, Lone Star Radiology, and/or the MRI entities. Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez became defacto employees of Defendants Robert Smith, Receivable Finance, and Accident & Injury, with Receivable Finance billing and collecting their professional medical fees for referrals from Accident & Injury, and retaining the vast majority of the professional fee. Due to these interrelationships, virtually all patients are referred for second opinion x-ray review, MRIs, and second opinion medical consultations. 139. Furthermore, Accident & Injury treats patients pursuant to a set pattern, rather than any determination of patient need. Accident & Injury bills for routine office visits, electrical stimulation, application of hot/cold packs, and for "intersegmental traction," which consists of merely lying on a 'roller table' for a short period of time. Accident & Injury Clinic Directors and former Clinic Directors, such as Dr. Saucedo, Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, and Dr. Sanghani, facilitate the improper, unreasonable, and unnecessary billings by ascribing their names to HCFA-1500 forms, or by allowing their names to be ascribed on the forms. 140. Additionally, the chiropractic costs are inflated through use of particular CPT codes, for example, using a combination of CPT codes 99212 and 97140, rather than a common chiropractic manipulation code such as CPT code 98940. Likewise, the medical doctors at issue, including Dr. Padilla, Dr. Laughlin, and Dr. Wood charge excessive amounts by routinely billing under code 99243, although the medical doctors could not possibly expend the time needed with each patient to perform such an examination, given the incredible volume of patients they purportedly examine. 23 B. Texas Occupations Code § 102.001 (and former Health & Safety Code §161.091(a)) 141. Section 102.001 of the Texas Occupations Code concerns solicitation of patients. Subsection (a) states: "A person commits an offense if the person knowingly offers to pay or agrees to accept, directly or indirectly, overtly or covertly any remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified, or registered by a state health care regulatory agency." 142. The predecessor Texas law, Health & Safety Code §161.091(a), which was in effect until September 1, 1999, contained an almost identical prohibition. 143. Plaintiffs would show that Defendants Robert Smith, Accident & Injury, and Receivable Finance have violated the above statutes by offering to accept, as a matter of routine, undisclosed remuneration from personal injury attorneys, in the form of set discounted payments, in order to solicit patients for Accident & Injury clinics. 144. Plaintiffs would show that that Defendants Robert Smith, Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, North Texas Open Air MRI, Receivable Finance, Dr. Rhudy, Dr. Saucedo, Dr. Lustik, Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, Dr. Sanghani, Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez have violated the above statutes in the manner in which patients are referred between these entities. Defendants Robert Smith and Accident & Injury, with the assistance of Clinic Directors such as the Clinic Director Defendants named herein, 'self refer' Accident & Injury patients to Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI, and in return the fees of those entities are returned to the common ownership of these entities. Defendants Robert Smith and Accident & Injury, with the assistance of Clinic Directors such as the Clinic Director Defendants named herein, refer patients to Dr. Padilla, Dr. Laughlin, Dr. Wood, Dr. Martinez, and certain other medical doctors; in exchange, Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez (as well as other physicians to whom patients were referred) transferred the vast majority of their professional fees to Receivable Finance, which in turn transfers the money to Accident & Injury, Robert Smith, and other Defendants (including Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem, and BS Limousine). C. Texas Occupations Code § 102.051 (and former Article 4505a). 145. Section 102.051 of the Texas Occupations Code also concerns solicitation of patients, in regard to persons practicing the art of healing, other than medical doctors. A person commits an offense if they practice the art of healing, with or 24 without the use of medicine, and "employ or agrees to employ, pays or promises to pay, or rewards or promises to reward another for soliciting or securing a patient or patronage." The statute also states "A person commits an offense if the person accepts or agrees to accept anything of value for soliciting or securing a patient or patronage for a person who practices the art of healing with or without the use of medicine." 146. Former Article 4505a of the Revised Civil Statutes, in effect until September 1999, was essentially the same as the current Occupations Code § 102.051. 147. Plaintiffs would show that Defendants Robert Smith, Accident & Injury, and Receivable Finance have violated the above statutes by offering to accept, as a matter of routine, undisclosed remuneration from personal injury attorneys, in the form of set discounted payments, in order to solicit patients for Accident & Injury clinics. 148. Plaintiffs would show that Defendants Robert Smith, Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, North Texas Open Air MRI, and Receivable Finance have violated the above statutes in the manner in which patients are referred between these entities. Defendants Robert Smith and Accident & Injury, with the assistance of Clinic Directors such as the Clinic Director Defendants named herein, 'self refer' Accident & Injury patients to Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI, and in return the fees of those entities are returned to the common ownership of these entities. D. Texas Occupations Code § 102.006(and former Health & Safety Code §161.092(a)). 149. Section 102.006 of the Texas Occupations Code concerns failures to disclose in regard to affiliations with other health care entities. A violation of the statute occurs if one accepts remuneration to secure or solicit a patient in a manner permitted under §102.001, and does not at the time of the initial contact and at the time of the referral, disclose to the patient (1) the person's affiliation, if any, with the person for whom the patient is secured or solicited, and (2) that the person will receive, directly or indirectly, remuneration for securing or soliciting the patient. 150. Former Health & Safety Code §161.092(a), which was effective until September 1999, is almost identical to the current Occupations Code § 102.006. 151. Plaintiffs would show that Defendants Robert Smith, Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, and North Texas Open Air MRI have violated the above statutes in the manner in which patients are referred between these entities. Specifically, automobile collision patients are referred by Accident & Injury to (1) Metroplex Pain or Lone Star Radiology, (2) an MRI facility that is a d/b/a of either White Rock Open Air MRI or North Texas Open Air MRI, (3) to Dr. Martinez for a reading of the MRI, and (4) a medical doctor or doctors, such as Dr. Padilla and/or Dr. Laughlin, for 'second opinion' medical consultations. At times, automobile accident patients are 25 also referred to Rehab 2112 and Metroplex Diagnostics (although referrals to those entities appear to be limited, for the most part, to worker's compensation patients). 152. Accident & Injury, and its chiropractors such as the Clinic Director Defendants named herein, do not disclose that Accident & Injury is affiliated with the entities to whom its chiropractors refer patients. Accident & Injury and its chiropractors and other employees do not advise that Lone Star Radiology, White Rock Open MRI, North Texas Open MRI, Harris County MRI, and Bexar County MRI are owned by Accident & Injury owner Robert Smith, or are "d/b/a's" of such co-owned entities. Accident & Injury and its chiropractors and employees do not disclose that the medical doctors to whom patients are referred, such as Dr. Padilla, Dr. Laughlin, and/or Dr. Wood, and the medical doctor evaluating the MRIs, Dr. Martinez, are the defacto employees of Receivable Finance, another entity owned by Robert Smith. They do not disclose that money from the fees generated by these referrals, including the medical doctor referrals, is returned to Accident & Injury or Robert Smith. E. Texas Occupations Code § 105.002 153. Section 102.006 of the Texas Occupations Code concerns unprofessional conduct. It prohibits a healthcare provider, in connection with the providers professional activities, from knowingly presenting (or causing to be presented) a false or fraudulent claim for the payment of a loss under an insurance policy. It further prohibits a health care provider, in connection with its professional activities, from knowingly preparing, making, or subscribing to any writing, with the intent to present or use the writing, or allow it to be presented or used, in support of a false or fraudulent claim under an insurance policy. 154. Plaintiffs would show that Defendants Accident & Injury, Receivable Finance, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, North Texas Open Air MRI, Dr. Rhudy, Dr. Saucedo, Dr. Lustik, Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, Dr. Sanghani, Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez, have violated the above statute. Specifically, these Defendants produce, or cause to be produced, various reports, itemized billing statements, and HCFA-1500 forms. These Defendants know the reports assert inflated injury allegations, and the billings and HCFA-1500 forms include charges for treatment, examinations, services, and diagnostic tests that were not reasonable or necessary. These Defendants know that these writings will be presented to Plaintiffs and other insurers in regard to claims of loss under automobile liability policies. 155. In regard to the Clinic Director Defendants, Plaintiffs would show that they cause or allow their names to be entered on HCFA-1500 forms, attesting that certain treatment and services have been performed, in cases where they did not personally treat the patients and are unable to ascertain the identity of the chiropractor, is any, who conducted any treatment. 26 F. Texas Occupations Code § 155.001 (and former Art. 4495b, §3.07(a)). 156. Section 155.001 of the Texas Occupations Code prohibits the practice of medicine without a license. Former Article 4495b, §3.07(a) of the Revised Civil Statutes, in effect until September 1999, contained the same prohibition. 157. Plaintiffs would show that Defendants Robert Smith, Steven Smith, and Receivable Finance has violated these sections. Specifically, as described in more detail herein below, Robert Smith, Steven Smith, and Receivable Finance have acted as the defacto employer of medical doctors, collecting the fees of medical doctors conducting 'second opinion' consultations of Accident & Injury patients, or reviewing the MRI scans of Accident & Injury patients, and paying the physicians a small portion of their fees. In effect, Robert Smith, Steven Smith, and Receivable Finance, nonphysicians, employed physicians and paid those physicians a salary. G. Texas Occupations Code § 164.052 (and former Art. 4495b, § 3.08(15)) 158. Section 164.052 of the Texas Occupations Code concerns prohibited practices by physicians. A physician violates the section if the physician "directly or indirectly aids or abets the practice of medicine by a person, partnership, association, or corporation that is not licensed to practice medicine by the board." Tex.Occ.Code § 164.052(17). Former Article 4495b, §3.08(15) of the Revised Civil Statutes, in effect until September 1999, contained the same prohibition. 159. . Plaintiffs would show that Defendants Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez violated these sections. Specifically, Dr. Padilla, Dr. Laughlin, and Dr. Martinez entered into a employment relationship with Robert Smith, Accident & Injury and Receivable Finance in regard to Accident & Injury patients, in which they were paid what in effect was a salary by Receivable Finance. Under this fee splitting arrangement, the lay Defendants received the vast majority of professional fee, as high as 89% or 93%. XVII. COMMON-LAW FRAUD - 33 charges 160. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 159 above. 161. As described above, Defendants have made false and fraudulent commissions of fact to Plaintiffs and other automobile insurance companies, namely false and misleading statements in regard to the existence, nature, and severity of supposed soft tissue injuries allegedly attributable to automobile collisions, and the rendition and reasonableness and necessity of examinations, consultations, treatments, testing procedures, and other services purportedly provided to automobile collision patients. 162. As described above, Defendants directed automobile accident patients through a set pattern of referrals and treatment, regardless of the patients' symptoms or apparent injury. The referrals are made among the various 27 defendants. Standardized chiropractic and medical narrative reports are generated. The narrative reports contain false and unsupported findings of serious injury, impairment, and future medical/chiropractic needs and costs. The final narrative reports issued by Accident & Injury have, as a 'default paragraph,' an "opinion" that alleges all the supposed injuries were caused by the accident at issue. 163. As described above, Defendants' false and misleading statements and omissions include: 1. Representations in Accident & Injury initial narrative reports concerning the extent of injuries and the probable existence of "traumatic" spinal injuries. 2. Representations in Accident & Injury initial narrative reports concerning the necessity for x-rays. 3. Representations in Accident & Injury initial narrative reports concerning the necessity for referral of x-ray films. 4. Representations in Accident & Injury initial narrative reports concerning the necessity for MRI referrals. 5. Representations in Accident & Injury initial narrative reports concerning the necessity for medical consultation referrals. 6. Representations in Accident & Injury initial narrative reports that the patient's past health history is non-contributory, in cases where there is contributory history. 7. Representations in Accident & Injury initial narrative reports that the patient was enjoying a good state of health "prior to this incident," in cases where there was pre-existing injuries or conditions. 8. Representations in Accident & Injury initial narrative reports that the patient has not previously treated at Accident & Injury, by assignment of new patient numbers and failing to include comment about past treatment, in cases where the patient previously treated at Accident & Injury. 9. Deletion of the past history section in Accident & Injury initial narrative reports in cases where the patient previously treated at an Accident & Injury clinic for another injury, in order to deceive Plaintiffs and other insurers by concealing past injuries and treatment. 10. Representations in Accident & Injury initial narrative reports that the patient will require three modalities of therapy. 11. Representing Lone Star Radiology is an independent entity, such as issuing reports under that name, while failing to disclose that Lone Star Radiology is related to Accident & Injury and that the common ownership will benefit financially from the referral. 12. Charging the same service twice, by billing for evaluation of the same xrays in both Accident & Injury and Lone Star Radiology itemized billing statements and HCFA-1500 forms. 13. Representing North Texas Open MRI, White Rock Open MRI, Harris County MRI, and Bexar County MRI are independent entities, such as issuing reports under those names, while failing to disclose that those entities are related to Accident & Injury and that the common ownership will benefit financially from the referral. 28 14. Exaggerating findings in MRI reports. 15. Representing that medical doctors are independent, by issuing reports under the physicians' names, and failing to disclose that the physicians maintain a relationship with Defendants under which the majority of their professional fees are transferred to non-physicians. 16. Failing to disclose that Robert Smith, Accident & Injury, and Receivable Finance will benefit from the referrals to medical doctors made by Accident & Injury. 17. Representing the necessity and reasonableness of treatment, diagnostic tests, need for future chiropractic treatment, future medical needs, and the need for surgery, in medical narrative reports. 18. Representations in medical narrative reports that supposed injuries and conditions were caused by the automobile collision at issue. 19. Representations in medical itemized billing statements and HCFA-1500 forms, through use of CPT Codes, that extensive medical examinations of patients were performed. 20. Representations in medical narrative reports that prescription medications were reasonable and necessary. 21. Failing to disclose that there is a relationship between Accident & Injury and the pharmacy which dispenses prescription medication to Accident & Injury patients by mail. 22. Representations in Accident & Injury final narrative reports concerning the extent of injuries and the existence of "traumatic" spinal injuries. 23. Representations in Accident & Injury final narrative reports that the patient's past health history is non-contributory, in cases where there is contributory history. 24. Representations in Accident & Injury final narrative reports that the patient was enjoying a good state of health "prior to this incident," in cases where there was pre-existing injuries or conditions. 25. Representations in Accident & Injury final narrative reports that the patient has not previously treated at Accident & Injury, by assignment of new patient numbers and failing to include comment about past treatment, in cases where the patient previously treated at Accident & Injury. 26. Representations in Accident & Injury final narrative reports that an extensive evaluation of the patient was made, when the discussion, prognosis, and future medical paragraphs are in fact pre-printed from code 'macros.' 27. Representations in Accident & Injury final narrative reports that the patient's injuries are of a long term or permanent nature. 28. Representations in Accident & Injury final narrative reports that the patient will henceforth be predisposed to other injury. 29. Representations in Accident & Injury final narrative reports that the patient will require surgery in the future. 30. Representations that the patient will incur future medical and/or chiropractic expense due to injuries received in the automobile collision at issue. 29 31. Representations that the patient's supposed injuries or conditions were caused by the automobile collision at issue. 32. Use of certain CPT codes in itemized billing statements and HCFA-1500 forms, such as codes 99212 and 97140, in place of codes regularly used for chiropractic treatment, in order to bill higher costs. 33. Representations that certain chiropractic and medical costs were being billed to patients in itemized billing statements and HCFA-1500 forms, when standing agreements existed with cooperative attorneys to charge substantially lessor amounts to those patients. 164. In short, the treatment, diagnostic testing, and medical referrals are not based on reasonable and necessary treatment of the patient, but on maximizing profit for the interconnected Defendants. 165. In automobile collision claims that are filed into suit, Defendants continue to perpetuate these fraudulent misrepresentations throughout the litigation process. As noted in paragraph 72 above, Accident & Injury's Chief of Staff (Dr. Rhudy), Assistant Chief of Staff (Dr. Saucedo), and Clinic Directors routinely testify at trial, free of charge, for plaintiffs in automobile collision lawsuits. Misrepresentations are made to the juries, through testimony and the above referenced narrative reports, concerning the matters detailed in paragraph 164 above. For example, in a recent state court deposition, Dr. Rayshell admitted no medical doctor had recommended surgery, although the Accident & Injury Final Narrative Report represented there was a probability surgery would be necessary, at a cost of $30,000 to $40,000. Dr. Rayshell further admitted that, although he was not qualified to make surgical determinations, he made the decision to include the sections concerning surgery and surgical costs in the narrative report. 166. Defendants also continue to conceal facts concerning the interconnections between Accident & Injury and the entities to whom it refers patients, throughout the litigation process. In trial testimony, Accident & Injury Clinic Directors deny knowledge of the interconnections or joint ownership of the entities, even though they have worked for Accident & Injury for a number of years and have direct knowledge of the pattern of patient referrals from their clinics. Accident & Injury's Chief of Staff, Dr. Rhudy, and Assistant Chief of Staff, Dr. Saucedo, have also represented to juries that they have no knowledge of these matters. 167. On numerous other occasions, in state court depositions, counsel for Accident & Injury and its related entities has instructed Accident & Injury chiropractors, including Drs. Rayshell, Parent, Holowiski, Campbell, and Crocoll, as well as Dr. Lustik and Dr. Padilla, not to answer questions concerning the ownership of, or relationship between, Accident & Injury and other Defendants. 168. The misrepresentations made by Defendants to Plaintiffs were material in that Plaintiffs relied on such representations to determine the settlement of claims made against them and their insureds. 169. When Defendants made such false and fraudulent misrepresentations, they were aware of the falsity of such misrepresentations. 170. Defendants made the misrepresentations with the intent to deceive Plaintiffs and other insurance companies and with the intent that Plaintiffs and other insurance companies act on the misrepresentations by paying sums of 30 money in settlement of the fraudulent claims made regarding the automobile collisions at issue. 171. Plaintiffs relied on the above misrepresentations in evaluating the bodily injury claims made by Accident & Injury patients, and thereby suffered by paying money to Defendants for fraudulent and inflated health care treatment. 172. Defendants also intentionally concealed and failed to disclose material facts within their knowledge, knowing that Plaintiffs were ignorant of those facts; specifically, that chiropractic, medical, and other healthcare bills and related records reflected services that were not reasonable or necessary, and that all entities to which Accident & Injury referred patients, including medical doctors, were either financially tied to Accident & Injury, if not owned by Accident & Injury owner Robert Smith. 173. Defendants also intentionally concealed and failed to disclose material facts within their knowledge, knowing that Plaintiffs were ignorant of those facts; specifically, that there were standing agreements with cooperative attorneys to discount the medical and chiropractic fees of patients represented by those attorneys. Therefore, medical and chiropractic costs represented in itemized billing statements and HCFA-1500 forms generated by Defendants were greatly in excess of the true amounts charged to those patients. 174. As a direct and proximate result of Defendants' conduct, Plaintiffs have paid sums in connection with the fraudulent treatment, billing, and referral practices arising from automobile collisions in which the claimant went to an Accident & Injury clinic. 175. In addition, Plaintiffs have incurred other substantial consequential damages, such as claim related, investigative, and litigation expenses, due to Defendants' conduct. 176. Plaintiffs are also entitled to consequential damages and punitive damages in an amount to be determined at trial. XVIII. COMMON-LAW CONSPIRACY 177. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 176 above. 178. Beginning in 1998 and continuing through the present time, Defendants willfully combined, conspired, and agreed with each other and others to defraud Plaintiffs. Defendants, in combination with themselves and others, knowingly made false and misleading statements in regard to the existence, nature, and severity of the supposed soft tissue injuries allegedly attributable to the automobile collisions at issue, and the rendition and reasonableness and necessity of examinations, medical consultations, treatments, MRIs, and other testing procedures purportedly provided to automobile accident claimants who went to Accident & Injury. 179. The object of the conspiracy was to defraud Plaintiffs and other insurers of millions of dollars. There was a meeting of the minds and agreement on this course of action by each Defendant, and each Defendant played a specific role in 31 the overall scheme to defraud Plaintiffs and other insurers. The Defendants, separately or in concert with other Defendants and/or other parties, committed overt, unlawful acts in furtherance of this cause of action, namely referring automobile collision claimants to other Defendants for unreasonable and unnecessary examination, treatment or continued treatment, and/or tests, and generating documentation, such as narrative reports, itemized billing statements, and HCFA-1500 forms, substantiating the unreasonable and unnecessary treatment and tests. For example: a. Robert Smith created a number of organizations in order to obtain money from the referrals made to these entities by his chiropractic clinics. Robert Smith, Steven Smith, Dr. Rhudy, and Dr. Saucedo instruct chiropractor employees to utilize these facilities for near universal referrals. b. Clinic Directors, such as Dr. Rayshell, Dr. Parent, Dr. Holowiski, Dr. Fabacher, Dr. Johnson, Dr. Assadolahi, Dr. Campbell, Dr. Stefanovic, Dr. Blackmon, Dr. Sanghani, and (prior to becoming assistant chief of staff) Dr. Saucedo, knowingly and intentionally make patient referrals (as a matter of routine rather than based on chiropractic reasonableness and necessity) for x-rays, 'second opinion' x-ray review, MRIs, and medical 'second opinion' examinations. The Clinic Director Defendants direct these referrals only to entities they know to be owned by Robert Smith. c. The Clinic Director Defendants also knowingly ascribed their names, or allowed their names to be placed, on HCFA-1500 forms, when they knew the treatment described therein was unreasonable and unnecessary, and that the forms were formatted in such a way, through use of particular CPT codes, to inflate costs for particular treatment. d. Medical doctors, such as Dr. Padilla, Dr. Laughlin, Dr. Wood, and Dr. Martinez, became the de facto employees of non-physician defendants, and allowed the vast majority of the money obtained from their professional medical fees to be disbursed to these laymen. The medical doctors also inflated costs by ascribing their names to HCFA-1500 forms reflecting comprehensive examinations, when, at most, only cursory examinations were performed. e. Accident & Injury production department employees, headed by Dr. Crocoll and, subsequently, Dr. Saucedo, generate standardized reports with fraudulent findings. f. Receivable Finance not only acts as a lay employer of medical doctors, but collects medical fees and then distributes the money to Robert Smith and other lay Defendants. 180. The false and fraudulent misrepresentations and omissions alleged above were made by Defendants and others with the purpose and intent to deceive Plaintiffs and to induce Plaintiffs to pay Defendants large sums of money to which they were not legally entitled. 181. As a direct and proximate result of Defendants' conduct, Plaintiffs have paid sums in regard to the fraudulent treatment, billing, and referral practices 32 arising from automobile collisions in which the claimant went to an Accident & Injury clinic. 182. In addition, Plaintiffs have incurred other substantial consequential damages, such as claim related, investigative, and litigation expenses, due to Defendants' conduct. 183. Plaintiffs are also entitled to consequential damages and punitive damages in an amount to be determined at trial. XIX. UNJUST ENRICHMENT 184. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 183 above. 185. As described above, Defendants have made false and fraudulent commissions of fact to Plaintiffs, in regard to the existence, nature, and severity of supposed soft tissue injuries allegedly attributable to automobile collisions, and willfully combined, conspired, and agreed with each other and others to defraud Plaintiffs. 186. As described above, Defendants are in violation of numerous statutes enacted by the State of Texas in regard to healthcare matters such as referrals for remuneration, disclosures of joint interest and ownership, overtreatment, and the unauthorized practice of medicine. 187. Defendants have obtained a benefit from Plaintiffs by fraud, namely the payment for chiropractic, diagnostic, and medical expenses that were unreasonable and unnecessary, and designed to enrich Defendants at Plaintiffs' detriment. Not only was the benefit gained by fraud, but it was gained through the willful violation of the beforementioned Texas statutes. 188. As a direct and proximate result of Defendants' conduct, Plaintiffs have paid sums, and Defendants have been benefited from those payments, in connection with the fraudulent treatment, billing, and referral practices arising from automobile collisions in which the claimant went to an Accident & Injury clinic. XX. REQUESTS FOR DECLARATORY RELIEF Medical Fees 189. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 188 above. 190. As described above, Accident & Injury patients are referred to a limited number of medical doctors for second opinion consultation and MRI evaluation. Accident & Injury provides the space for the medical consultation examinations at its chiropractic clinics, the assistant for the medical doctor, and medical narrative report generation. 191. Robert Smith and/or Steven Smith interviewed and selected the medical doctors used for the 'second opinion' examinations. 33 192. The involved medical doctors split the resulting professional medical fees with lay Defendants. The fees, at least through at least mid 2001, were transferred to Receivable Finance, another entity owned by Robert Smith. Receivable Finance is located within Accident & Injury's corporate headquarters, and the medical fees are billed and collected by Accident & Injury billing and collections employees, such as Tina Cheshire. a. According to the 2001 state court testimony of Receivable Finance CFO Steven Lambert, Receivable Finance's business consisted of purchasing medical accounts receivable, limited to: (1) receivables of medical doctors generated in regard to examinations of Accident & Injury patients, and (2) receivables generated from the professional fees for review and interpretation of MRI films from MRI's conducted at North Texas Open MRI, White Rock Open MRI, Harris County MRI, and Bexar County MRI.35 b. In a 2000 deposition, Dr. Padilla testified Receivable Finance did his billings, and was owned by "Bob Smith of Accident & Injury." The mailing address on his bills was "just a mailing box for a bank account where the checks are delivered," and Receivable Finance receives and deposits the checks.36 c. In a subsequent October 2000 deposition, Dr. Padilla initially claimed the P.O. box address listed on his medical bill was his, and was in his name. He then admitted that Receivable Finance, a "billing company," also used the P.O. box, and the box was really in Receivable Finance's name. Dr. Padilla refused to identify the owner of Receivable Finance. 37 d. Dr. Laughlin testified in a state court deposition in 2001. He testified he joined the "Association of Orthopedic and Dermatological Consultants, P.A." (or "AODC"), which in turn entered into an arrangement with Accident & Injury. Dr. Laughlin understood Receivable Finance is owned by Robert Smith or one of Mr. Smith's corporations. Robert Smith was involved in the negotiations between Receivable Finance and AODC. Receivable Finance would "buy" Dr. Laughlin's billing accounts from AODC, and pay AODC a monthly sum.38 e. In September 2001 state court deposition testimony, Dr. Wood testified that Dr. Padilla recruited him to see Accident & Injury patients. Dr. Wood's professional corporation, PMC, originally had an arrangement with Receivable Finance, and later with Dr. Padilla's professional association, to assign his medical fees. Dr. Wood had met Robert Smith and believed Robert Smith was a principle of Receivable Finance. 39 193. The medical doctors themselves are paid only a small percentage of their medical billing, or a flat fee. a. Dr. Padilla has previously testified that Robert Smith "purchases" the bill from him at a percentage; his $275 bill was purchased for about 11 or 12 percent, roughly $35. Dr. Padilla affirmed the remainder of the fee was 'the property of Bob Smith.'40 b. Dr. Laughlin has previously testified that his professional entity, AODC, received a set monthly sum of money from Receivable Finance, whether 34 Dr. Laughlin saw one patient a month or a thousand patients a month. The monthly sum was eleven percent of what Robert Smith anticipated collecting on the accounts.41 c. Dr. Wood has previously testified that, of his $275 fee for an examination of an Accident & Injury patient, he himself would receive about $35. 42 d. Receivable Finance CFO Steven Lambert has previously testified that Receivable Finance pays Dr. Martinez $20 for a $300 professional MRI evaluation fee, which is seven percent of the fee.43 194. Receivable Finance disburses money gained from the fees to Accident & Injury, Robert Smith, and other Defendants. a. Receivable Finance CFO Steven Lambert has previously testified Receivable Finance pays money to Accident & Injury:  For lease of space in Accident & Injury's corporate office, although there is no space particularly set aside for Receivable Finance's exclusive use.  Under a "management agreement," whereby Accident & Injury provides services, such as billings and collection services to Receivable Finance. Accident & Injury employees, such as Tina Cheshire, are authorized to negotiate and compromise medical billings on Receivable Finance's behalf.  Under an agreement with Accident & Injury, whereby Accident & Injury provides services, such as billings, narrative report generation, and assistants, to the medical doctors who sell their receivables to Receivable Finance. Receivable Finance pays a monthly fee to Accident & Injury for these services; in the case of Dr. Laughlin, the fee was $25,000.00 per month. b. Discovery in the present case to date shows that money is transferred from the Receivable Finance account to other non-licensed entities, such as White Rock Open Air MRI, as well as directly to Robert Smith. 195. Plaintiffs hereby request a declaration from this Honorable Court that they are not liable for, and do not owe, any sum of money for alleged medical fees orchestrated through the association between Receivable Finance, Accident & Injury, and medical doctors, and that they are entitled to recover any such payments previously made. 196. Plaintiffs hereby request a declaration from this Honorable Court that they are not liable for, and do not owe, any sum of money for any of the alleged medical fees referenced above, whose accounts receivable have been sold or otherwise transferred to Advanced Medical, Padilla PA, or any other person or entity, and that they are entitled to recover any such payments previously made. 197. In support of this request for declaratory relief, Plaintiffs would respectfully show that the Texas Occupations Code, § 155.01 (and former Article 4495b, § 3.07(a)) prohibits a person from practicing medicine in the state unless they are licensed to do so. Sections 164.051 and 164.052(17) of the Code (and former Article 4495b, §3.08(15)) prohibit a physician from directly or indirectly aiding or abetting the practice of medicine by a person or entity that is not licensed to practice medicine. 35 198. Plaintiffs would also respectfully show that Texas law provides a corporation comprised of lay-persons, that employs licensed physicians to treat patients and receives fees for the services provided, is engaged in the unlawful practice of medicine, in violation of the Texas Medical Practice Act. See Garcia v. Texas State Board of Medical Examiners, 384 F. Supp. 434 (W.D. Tex., 1974), aff'd 421 U.S. 995 (1975); Flynn Brothers, Inc. v. First Medical Associates, 715 S.W.2d 782 (Tex. App. —; Dallas 1986, writ ref'd n.r.e.). 199. Plaintiffs would show that the transfer of medical accounts receivable obtained by lay entities through the unlawful practice of medicine, to a professional medical association, does not validate said billings. 200. Petitioners would show that Receivable Finance, Accident & Injury, and Robert Smith are engaged in the unauthorized corporate practice of medicine, in violation of the Texas statutory and common law. Specifically: a. Receivable Finance, Accident & Injury, and Robert Smith are lay entities or persons, not licensed to practice medicine. b. Receivable Finance, Accident & Injury, and Robert Smith are the de-facto employers of medical doctors, including Dr. Padilla and Dr. Laughlin, to whom patients are referred for "second opinion" examination by Accident & Injury. Receivable Finance and Accident & Injury have a common ownership, and share an office and employees. c. Receivable Finance, Accident & Injury, and Robert Smith are the de-facto employers of another medical doctor, Dr. Martinez, to whom patients' diagnostic scans are referred for interpretation through North Texas Open Air MRI (and its assumed name entities — Harris County MRI and Bexar County MRI) and White Rock Open Air MRI. Receivable Finance, Accident & Injury, and these four MRI facilities have a common ownership, and the medical fees generated from these referrals are billed thorough Receivable Finance. d. Receivable Finance directly collects and deposits the payments for medical fees purportedly billed by these medical doctors through its bank. e. Receivable Finance pays the medical doctors only a small portion of the medical fee the physician generates. f. Receivable Finance retains the vast majority of the medical fees generated by these medical doctors. On information and belief, Receivable Finance disburses these funds to Robert Smith and to entities owned by Robert Smith. 201. Accident & Injury, through a "management agreement" with Receivable Finance, provides document maintenance, examination space, report generation, billing generation, and assistants to the medical doctors. Thus, these Defendants control the physician-patient relationship in regard to these referrals. 202. Any contracts or agreements between Receivable Finance and medical doctors in regard to medical fees are illegal and void as a matter of law and public policy, and are unenforceable against any person or company. 203. The alleged "sale" of medical accounts receivable to Advanced Medical, Padilla PA, or any other person or entity, does not change the illegal nature of these fees. 36 204. Defendants would further respectfully show that this matter is ripe for declaratory relief, and that the Court's determination of the issues presented will conclusively resolve the questions of Defendants' duty to pay sums to Receivable Finance, and its successor in interest, Advanced Medical and/or Padilla PA, and their rights to reimbursement for sums previously paid. 205. As shown herein, the purported "sale" of medical accounts receivable of Receivable Finance to Advanced Medical and/or Padilla PA occurred soon after a litigant sought Receivable Finance's deposition in a Texas state court proceeding. The transfer purportedly occurred in February 2001, the month following the Texas District Court's entry of an order allowing the deposition to proceed, and just prior to Receivable Finance filing a petition for writ of mandamus with the Texas Court of Appeals. The transfer was purportedly to a professional association of Dr. Padilla; Dr. Padilla is one of the "second opinion" medical doctors who saw Accident & Injury patients and "assigned" his medical fees to Respondent Receivable Finance. 206. Given the unusual nature and timing of the sale of medical accounts receivable to Advanced Medical and/or Padilla PA, it is possible that these assets may have been, or may again be transferred to another person or entity. It is also possible that the remaining medical accounts receivable held by Receivable Finance may be transferred to another person or entity. In such event, Defendants would show that the transfer or further transfer of these medical fees does not change the illegal nature of the fees, and that any "purchaser" or other transferee may be valid parties. 207. On information and belief, Advanced Medical, Padilla PA, or another entity has assumed the functions previously performed by Receivable Finance, such as procuring and paying medical doctors to perform 'second opinion' consultations of Accident & Injury patients, and transferring the sums gained through the examinations to non-physician Defendants. For example, Dr. Padilla has recently (April 2002) testified in a state court case that his organization now "leases" space at all the Accident & Injury chiropractic clinics, and that Dr. Wood is now his employee. 44 In such event, Plaintiffs would show that such activity also constitutes the unauthorized or corporate practice of medicine, and that any persons or entities so involved may be valid parties. XXI. Fees and Costs Generally 208. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 207 above. 209. As described above, Accident & Injury, Receivable Finance, North Texas Open Air MRI, White Rock Open Air MRI, and their associated chiropractors and medical doctors (including the Clinic Director Defendants and Drs. Padilla, Laughlin, Wood, and Martinez) have violated numerous provisions of the Texas Occupation Code concerning the practice of healthcare. 210. As also described above, Defendants have conspired together to defraud Plaintiffs through a scheme of unreasonable and unnecessary treatment and 37 referrals among themselves. Automobile accident claimants are routed through a set pattern of chiropractic treatment and diagnostic and medical referrals in order to enrich the enterprise. Narrative reports are generated containing false and inflated findings of injury, causation, and needed treatment. 211. Plaintiffs hereby request a declaration from this Honorable Court that they are not liable for, and do not owe, any sum of money for alleged chiropractic, diagnostic, medical, or other healthcare fees of bills orchestrated through the combination between Defendants, specifically all fees and bills for services purportedly performed by Accident & Injury, Metroplex Pain, Lone Star Radiology, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, and Receivable Finance, and that Plaintiffs are entitled to recover any such payments previously made. 212. Plaintiffs would further respectfully show that this matter is ripe for declaratory relief, and that the Court's determination of the issues presented will conclusively resolve the questions of Plaintiffs' duty to pay sums to Defendants, and their rights to reimbursement for sums previously paid. 213. In the period from January 1, 1999 to the present, at least the following sums of chiropractic, medical, diagnostic, and other related billings were submitted by Defendants to Plaintiffs, concerning Accident & Injury Chiropractic patients: a. Allstate Insurance Company : $3,432,409.00 b. Allstate Indemnity Company : $17,405,609.00 c. Allstate Property & Casualty Insurance Company: $19,821,750.00 d. Boston Old Colony Insurance Company: $158,035.50 e. The Glens Fall Insurance Company: $255,573.90 XXII. Joint Business Enterprise 214. Plaintiffs incorporate, as though fully set forth herein, each and every allegation contained in paragraphs 1 through 213 above. 215. As described above, the operation of Accident & Injury, Receivable Finance, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem Management, and BS Limousine constitutes a joint business enterprise under Texas law. 216. Plaintiffs hereby request a declaration from this Honorable Court that Accident & Injury, Receivable Finance, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem Management, and BS Limousine constitute a joint business enterprise. XXIII. JURY DEMAND 217. Trial by jury is requested on all issues triable by jury. PRAYER FOR RELIEF 38 WHEREFORE, PREMISES CONSIDERED, Petitioners Allstate Insurance Company, Allstate Indemnity Company, Allstate Property & Casualty Insurance Company, Boston Old Colony Insurance Company, and The Glens Fall Insurance Company, respectfully request that upon final trial of this cause, the Court enter a judgment against Defendants, each of them jointly and severally: 1. In favor of Plaintiff Allstate Insurance Company, for its claim of relief for common law fraud and conspiracy; 2. In favor of Plaintiff Allstate Indemnity Company, for its claim of relief for common law fraud and conspiracy; 3. In favor of Plaintiff Allstate Property & Casualty Insurance Company, for its claim of relief for common law fraud and conspiracy; 4. In favor of Plaintiff Boston Old Colony Insurance Company, for its claim of relief for common law fraud and conspiracy; 5. In favor of Plaintiff The Glens Fall Insurance Company, for its claim of relief for common law fraud and conspiracy; 6. In favor of Plaintiff Allstate Insurance Company, for its claim of relief for unjust enrichment; 7. In favor of Plaintiff Allstate Indemnity Company, for its claim of relief for unjust enrichment; 8. In favor of Plaintiff Allstate Property & Casualty Insurance Company, for its claim of relief for unjust enrichment; 9. In favor of Plaintiff Boston Old Colony Insurance Company, for its claim of relief for unjust enrichment; 10. In favor of Plaintiff The Glen Falls Insurance Company, for its claim of relief for unjust enrichment; 11. A declaration that Accident & Injury, Receivable Finance, Lone Star Radiology, Metroplex Pain, White Rock Open Air MRI, North Texas Open Air MRI, Rehab 2112, Lacidem Management, and BS Limousine constitute a joint business enterprise. 12. A declaration that Defendants Receivable Finance Company, L.L.C., Accident & Injury Pain Centers, Inc., and Robert Smith are engaged in the unauthorized employment of medical and osteopathic physicians; 13. A declaration that Defendants Receivable Finance Company, L.L.C., Accident & Injury Pain Centers, Inc., and Robert Smith are engaged in the unauthorized corporate practice of medicine; 14. A declaration that any contracts or agreements between Defendants Receivable Finance Company, L.L.C., Accident & Injury Pain Centers, Inc., and Robert Smith and medical and osteopathic physicians are illegal and void as a matter of law; 15. A declaration that any contracts or agreements between Defendants Receivable Finance Company, L.L.C., Accident & Injury Pain Centers, Inc., and Robert Smith and medical and osteopathic doctors are void as a matter of public policy; 16. A declaration that Plaintiffs are not obligated to pay any amount billed by or through Receivable Finance Company, L.L.C., in regard to any fee for medical services, including any such fees subsequently transferred to Defendants 39 Advanced Medical Systems & Solutions, P.L.L.C. or Marlon D. Padilla, M.D., P.A., or to any other person or entity; 17. A declaration that all medical services previously billed through Defendant Receivable Finance Company L.L.C., were billed in violation of the Texas Medical Practices Act, including any such fees subsequently transferred to Defendants Advanced Medical Systems & Solutions, P.L.L.C. or Marlon D. Padilla, M.D., P.A., or to any other person or entity, and that Plaintiffs are entitled to reimbursement for any such payments previously made by them; 18. A declaration that all health care services billed by or on behalf of Accident & Injury, Metroplex Pain, Lone Star Radiology, North Texas Open Air MRI, White Rock Open Air MRI, or Rehab 2112, as well as any medical or osteopathic doctor for services billed through Receivable Finance are void due to those entities and persons violations of the Texas Occupations Code, and due to the fraudulent nature of the bills. 19. A declaration that Plaintiffs are not obligated to pay any amount billed by or through Accident & Injury, Receivable Finance, Metroplex Pain, Lone Star Radiology, North Texas Open Air MRI, White Rock Open Air MRI, or Rehab 2112, as well as any medical or osteopathic doctor for services billed through Receivable Finance, and that Plaintiffs are entitled to reimbursement for any such payments previously made by them. 20. Prejudgment interest at the maximum rate allowed by law; 21. Post-judgment interest at the maximum rate allowed by law; 22. Punitive damages in such amount as the finder of fact may award at its discretion; 23. All such other and further relief, legal and equitable, special or general, to which Plaintiffs may be justly entitled. Respectfully submitted; ______________________________ DAVID KASSABIAN TEXAS STATE BAR NO. 11105600 BRET WEATHERFORD TEXAS STATE BAR NO. 20998800 KASSABIAN, DOYLE & WEATHERFORD, P.C. 1521 North Cooper Street Suite 650, LB 21 Arlington, TX 76011 (817) 460-5099 (Local) (817) 461-8855 (Metro) (817) 274-9863 (Facsimile) 40 ATTORNEYS FOR PLAINTIFFS CERTIFICATE OF SERVICE I hereby certify a copy of the foregoing First Amended Complaint has been served on the following by certified mail, return receipt requested, this _____ day of November, 2002: Mr. Lindy Jones Jones, Allen & Fuquay, L.L.P. 8828 Greenville Avenue Dallas, Texas 75243-7143 Attorney for Receivable Finance Company, L.L.C. Mr. Richard Young Glast, Phillips & Murray, P.C. 2200 One Galleria Tower 13355 Noel Road, L.B. 48 Dallas, Texas 75240-6657 Attorney for Advance Medical Systems & Solutions, P.L.L.C., and Marlon D. Padilla, M.D., P.A. 41