Jason Jackson·May 8, 2025

How to Recover from a Fraudulent Seller | Jason Jackson Interview

Jason Jackson and his partner Ali Day raised a traditional search fund in 2015 and acquired a dental support organization (DSO) in the Detroit metro area in 2017 for approximately $5m. Within two weeks of closing — with Jason's second child 11 days old — a $17/hour employee revealed that the seller had been committing Medicaid insurance fraud: the business that was represented as $7m revenue and $1.5m EBITDA was actually $4.5m revenue and negative $500k EBITDA. The fraud was missed because they used a cheaper billing-and-chart-audit firm ($9k vs $20k) that allowed the seller to explain away discrepancies. The seller later fled to the Dominican Republic, was extradited by US Marshals, and received minimal legal consequences. Jason and Ali decided against pursuing full litigation on David Dodson's advice — building $166k in EBITDA would be worth more at a 6x exit multiple than winning $1m in best-case litigation. The turnaround centered on daily cash monitoring, a systematic culture rebuild (replacing 45 of 90 employees in 18 months using a color-coded org chart), and pivoting the clinical model during COVID from high-volume Medicaid billing to low-volume cash-pay specialty procedures, reducing government reimbursements to 1% of revenue. They sold in December 2023 with the business at roughly $2.5m EBITDA, having grown from deeply negative. Jason credits exceptional investor support — especially from David Dodson, Todd Tracy, Michael Aubrey, and Susan Pullmyer — as central to surviving the crisis. He now works at Fudalfu, David Dodson and Susan Pullmyer's search fund fund-of-funds, backing the next generation of searchers.

Deal facts

purchase price: ~$5m (implied: ~50% cash at close plus seller note; total ~$5m based on $1m representing ~20%)
sde ebitda: Represented as ~$1.5m EBITDA; actual was negative ~$500k at acquisition; grown to ~$2.5m EBITDA at sale
revenue: Represented as ~$7m; actual ~$4.5m at acquisition; ~$4m EBITDA run rate by late 2023 post-exit
financing structure: Traditional search fund; ~50% cash at close + seller note (seller note later wiped away due to fraud); SBA not explicitly mentioned
notes: Acquired dental support organization (DSO) in Detroit metro area in 2017. Seller committed Medicaid insurance fraud. Seller note forgiven/voided post-discovery. Second acquisition of 4 dental practices made ~2019 for ~$500k (negotiated down from $1m). Sold in December 2023. Partner Ali Day (also referred to as Elida/Eli Day) remained as CEO post-sale. Jason now at Fudalfu (David Dodson and Susan Pullmyer's search fund fund-of-funds).

Why this business

Jason and his partner were introduced to the dental support organization (DSO) concept mid-search by investor Kent Weaver, who highlighted the 'gray wave' of retiring dentists lacking traditional exit alternatives (fewer new dentists able to buy due to student debt, more seeking flexibility). They pivoted from their original thesis (water reclamation, electronics recycling) into the dental practice management space, seeing it as an opportunity to partner with clinicians and build a platform of dental practices.

What's working

Investor support and pattern recognition from experienced search fund investors (David Dodson, Todd Tracy, Michael Aubrey, Susan Pullmyer) who provided operational playbooks, frequent calls, and empathy through the crisis
Three C's turnaround framework: Cash (daily cash monitoring to drive operational discipline), Culture (rebuilding around ethics/integrity/respect), Communication
Color-coded org chart system to systematically evaluate and replace employees: green (rock stars), yellow (exit within 90 days), red (exit ASAP), purple (vacancy), gray (unclear)
Pivoting clinical model during COVID from high-volume low-cost Medicaid-dependent procedures to low-volume high-cost cash-pay procedures (implants, specialty), reducing government reimbursement to ~1% while increasing cash pay ~10x
Same-location revenue growth at or ahead of industry average in first two years post-acquisition
Second acquisition of four struggling practices for $500k, successfully integrated and turned around
Growing EBITDA from negative $500k to ~$2.5m at time of 2023 sale; business at ~$4m EBITDA run rate by late 2023/early 2024

What's hard

Seller committed Medicaid insurance fraud; represented $7m revenue / $1.5m EBITDA when reality was $4.5m revenue / negative $500k EBITDA
Fraud discovered only two weeks post-close from a $17/hour employee — $400k of due diligence missed it entirely because the cheaper billing/chart audit provider ($9k vs $20k) allowed the seller to explain away discrepancies
The dentist who was supposed to stay as clinical leader was the fraudster and had to be removed entirely, eliminating the key clinical dependency the business model was built on
Seller fled to the Dominican Republic, was extradited by US Marshals; litigation pursuit ultimately abandoned on David Dodson's advice (building $166k EBITDA worth more at 6x than pursuing $1m in best-case litigation recovery)
Had to replace over 45 of ~90 employees in first 18 months due to culture rot from fraud-era practices; waited two years too long to fire top-revenue-producing but disrespectful office manager and dentist
COVID hit at day 90 of integration of second acquisition, forcing full shutdown and a complete business model pivot
Severe personal toll: panic attacks multiple times daily for 18 months, sleep deprivation, health issues, stress on family (second child born 11 days before close)
Dental industry now extremely competitive: PE-backed strategics outbid DSO searchers, labor costs surged (hygienist pay from $26/hr to $38/hr post-COVID), tariff risk on dental supplies from China

Notable quotes

I had learned more about our business post-acquisition from a $17 an hour employee than I had learned from over $400,000 of due diligence.

You cannot structure around integrity. Structure just like it is with any building relies on a foundation, and it happens to be in our world the foundation is the seller's integrity. And so if that foundation is off, it doesn't matter how you structure and build on top of that.

A lot of what I'm going to say is going to end in question marks and not periods because I'm just trying to learn the business. So I'm not questioning you. I'm just trying to learn the business.

When David had said, 'Look, it's okay. We're going to get out of this situation together,' what I had heard was that you did not ruin the opportunity for people to fall back on you — to be the safety net when so many people were there for you.