Dentist Accused of Medicaid Fraud, Erecting Backyard Water Park, Is Losing a Media Fight

Dr. Richard Malouf's Preston Hollow estate/amusement park/lawsuit factory.
Dr. Richard Malouf's Preston Hollow estate/amusement park/lawsuit factory.
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In many ways, Dr. Richard Malouf is the very picture of success (See: "On Being Successful"; RichardMalouf.com). Born to Lebanese immigrants, he built a multi-million dollar chain of dental clinics from the ground up. He bought a French chateau on Strait Lane in Preston Hollow and set to work building a water park in the back. Through hard work, dedication and top-notch SEO skills, he has even managed to knock unflattering news articles from the top of his Google search results.

Alas, with ostentatious success comes great scrutiny. Malouf -- and we have to be careful how we phrase this because as we'll detail in a moment, the man files defamation lawsuits the way other dentists hand out free samples of dental floss -- was accused a few years back of defrauding Texas of millions in Medicaid dollars. His company, All Smiles Dental and Orthodontics, collected tens of millions of dollars in Medicaid for putting braces on poor children, more than a thousand of them under 12 years old. In 2010, for instance, it billed the state for $10.2 million for orthodontics work performed at its 51 dental clinics, or three times the amount paid out for braces by the Medicaid program in Georgia. Texas Attorney General Greg Abbott sued Malouf and All Smiles in the summer of 2012 over allegations of Medicaid fraud.

See also: Richard Malouf, the Dallas Dentist Accused of Fraud, Sues WFAA and Owen Wilson's Mom

Not long after the lawsuit was filed, real estate blogger Candy Evans noted on her blog that Malouf was building the backyard water park, complete with a bowling alley, rock-climbing wall, lazy river and 35-foot water slides. Malouf's brazenness -- here you have a dentist accused of simultaneously exploiting poor kids and Texas taxpayers using his millions to build his own private wonderland -- proved irresistible to many media outlets including The Dallas Morning News, WFAA, CultureMap, an AOL real estate blog called Curbed.com, and the Dallas Observer.

Malouf responded by suing 1) Evans, whom he accused of trespassing and being a terrible journalist; 2) almost every media outlet that mentioned the backyard water park, with the exception of the Observer, for defamation; and 3) movie star Owen Wilson's mother, who lives next door, for abetting the paparazzi. (In a separate lawsuit that was recently dropped, Malouf claimed that Wizard Works Product Development Co., the supplier of a half-million dollars worth of "aquatic recreational equipment" for his home, had defrauded him.)

Attempting to silence critics by crushing them with burdensome litigation is a time-honored tradition, but it hasn't been terribly effective for Malouf. Starting in October 2013, Dallas County Court at Law Judge Sally Montgomery in quick succession dismissed the case against CultureMap and AOL. She refused to dismiss the case against WFAA's Brett Shipp, but she was overruled on appeal last June. The same presumably would have happened with Curbed.com, whose appeal Montgomery similarly denied, but Malouf settled with the site last month, according to court documents. And just last week, an appellate court once again rejected one of Malouf's key legal arguments.

In a decision handed down on Thursday, Dallas' Fifth Court of Appeals ruled that the case against AOL should also be dismissed. Malouf's case against the company and blogger Graham Wood was that his October 2012 blog post, "Dentist Richard Malouf Builds Backyard Water Park While Charged with Massive Fraud," was defamatory. This, Malouf argued in court, gave the misleading impression that he'd been charged with a crime when in actuality the fraud allegations were leveled in civil court.

But to win his defamation case, Malouf would have had to prove that this damaged his reputation more than the truth would have, a proposition the appellate court didn't buy.

Put succinctly, the sting of the allegedly false statement that Malouf was charged in a criminal proceeding with "defrauding state taxpayers of tens of millions of dollars in a Medicaid scam" is no greater than the true statement that Malouf was charged in a civil proceeding with "defrauding state taxpayers of tens of millions of dollars in a Medicaid scam." We conclude a person of ordinary intelligence would not view the article as more damaging to Malouf's reputation than the truthful statement that he had been "charged with defrauding taxpayers" in civil proceedings.

The defamation claims against Byron Harris and a half dozen behind-the-scenes WFAA colleagues continues, as do the claims against Evans, so Malouf's hope of vindication isn't totally shot.

Send your story tips to the author, Eric Nicholson.


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