Oregon ends investigation of Medicaid dental clinics, a tax credit broker and Wells Fargo

Companies that promised to expand Medicaid dental clinics in mostly rural Oregon using state tax credits will collectively pay the state $5.5 million to resolve an investigation by the Department of Justice.

The state’s review of two Advantage Dental subsidiaries, financial services firm Enhanced Community Development and Wells Fargo focused on discrepancies between the project costs listed on Advantage Dental and Enhanced Community Development’s applications for Oregon tax credits and the actual project costs, said Senior Assistant Attorney General Brian de Haan.

Prosecutors were pursuing civil claims against the companies based on Oregon’s False Claims Act, according to the Department of Justice. The companies admitted no wrongdoing in the settlements obtained by The Oregonian/OregonLive.

De Haan said prosecutors compared the project costs that Advantage Dental and its tax credit partners listed on their applications for state tax credits to their internal accounting of how they would use the tax credit proceeds.

“In this case we did not have anything remotely resembling a close match,” de Haan said. “These involved a high degree of budget inflation.”

The settlements end a years-long investigation by state lawyers who scrutinized tax credits issued to around three dozen projects since 2011 looking for irregularities. The review was prompted by documents given to the state around six years ago by a concerned insider at a different organization, Ecotrust, that arranged these types of tax credit deals. Two tax credit deals brokered by Ecotrust companies and the Advantage Dental projects are the only Oregon new market tax credit investigations that resulted in settlements.

In 2013, the companies in the latest settlement applied and were approved by Business Oregon for $3.1 million worth of state new market tax credits, based on stated clinic expansion costs including about $8.4 million to acquire land and buildings, according to their state tax credit applications. Advantage Dental affiliates would open nine new clinics in Eugene, La Pine, Brookings, Sutherlin, Milton-Freewater, Coos Bay, Albany, Canyonville and Lebanon.

However, building the new clinics cost only a fraction of the budget reported to Business Oregon and Advantage’s affiliate companies used some of the proceeds to acquire clinics already owned by other Advantage companies, including existing clinics in Eugene, Medford and Bend, de Haan said.

The Oregon Department of Justice reached its largest settlement in the case, $3.6 million, with Enhanced Community Development on Nov. 14. Wells Fargo signed a $900,000 settlement with the state in April and Advantage Dental agreed to pay more than $1 million in a January 2023 settlement, according to records.

Oregon lawmakers created a state new market tax credit program in 2011, then pulled the plug in 2016. It largely mirrored the federal new market tax credit program, which awards credits to one-time investors — often financial institutions — that contribute money to construction, property acquisition or major rehabilitation projects in low-income areas. Congress has repeatedly extended its new market incentive program, allowing project backers to receive $76 billion in tax credits since 2000, according to the U.S. Department of the Treasury.

Enhanced Community Development, the intermediary lender for the projects, is a major player in the new market tax credits industry. In October, the company announced it received another $40 million in federal tax credit financing authority, bringing its cumulative federal tax credit awards to $430 million.

Wells Fargo received all of the tax credits in the deals in question in exchange for its role as an investor in the Advantage Dental projects.

Advantage Dental today operates 53 clinics around Oregon, according to its website.

Under the tax credit deals, Advantage Dental’s affiliates were expected to provide dental services at each new clinic to about 8,000 low-income Oregonians on the Medicaid-funded Oregon Health Plan, reaching 64,000 new patients in all, the companies wrote in their funding applications. The companies estimated that the tax credits would help create 54 new jobs at those clinics. Job creation in economically distressed areas is a primary selling point of the new market tax credit program.

A spokesperson for Wells Fargo, who refused to be identified, emailed the following statement: “Wells Fargo reached an agreement with the Oregon Attorney’s General Office relating to a decade old Business Oregon Tax Credit program in which Wells Fargo held a limited role as an investor. While the Company maintains that it followed the law and fully complied with the program requirements, Wells Fargo believes resolving this legacy matter was in the best interest of the Company.”

“Wells Fargo is committed to low-income community investment. State tax credit programs are an important way that Wells Fargo provides investments to low-income, rural and tribal community businesses across Oregon, and we are proud to be an investor in numerous high-impact projects in the state that create jobs and provide vital human services,” the anonymous spokesperson said.

A spokesperson for Enhanced Community Development emailed the following statement on Friday: “Although Enhanced vehemently asserts they complied with all aspects of the program, Enhanced agreed to participate in a settlement in light of the costs and distraction of potential litigation. The matter is now closed and did not materially impact the company’s financials.”

Fred Menko, vice president for growth strategy and experience at Advantage Dental, noted in an email that the company’s settlement with the state of Oregon “relates to real estate financing arrangements” that took place under the company’s former owners, before DentaQuest acquired Advantage Dental in 2016. “Advantage Dental has fully cooperated with the DOJ in this matter,” Menko wrote.

In 2020, the Oregon Department of Justice separately reached a $4.4 million settlement with a for-profit subsidiary of the Portland environmental nonprofit Ecotrust to resolve an investigation into the company’s role handling two new market tax credit deals, including for a failed timber mill in southern Oregon that was detailed in a 2018 article in The Oregonian/OregonLive.

Have a tip about dental care in Oregon, or another topic? Contact investigative reporter Hillary Borrud at hborrud@oregonian.com; 503-294-4034.

— Hillary Borrud