Skip to main content

CNN/CIR rehab fraud investigation spurs lawmakers into action

By Christina Jewett and Will Evans, Special to CNN
August 3, 2013 -- Updated 2020 GMT (0420 HKT)
HIDE CAPTION
Troubled drug rehab clinics
Troubled drug rehab clinics
Troubled drug rehab clinics
Troubled drug rehab clinics
Troubled drug rehab clinics
Troubled drug rehab clinics
<<
<
1
2
3
4
5
6
>
>>
STORY HIGHLIGHTS
  • NEW: California Department of Health Care Services announces temporary suspension of 13 more clinics
  • Lawmaker sets hearing to examine disclosures of fraud in Drug Medi-Cal program
  • Yearlong investigation by CIR and CNN found fraud and poor oversight in California program
  • Attorney for several clinics: "These people have done nothing wrong"

Editor's note: To uncover this story on widespread fraud linked to California's drug rehab program, CNN's Special Investigations Unit has teamed up with the independent, nonprofit Center for Investigative Reporting as part the "Keeping Them Honest" reports on Anderson Cooper's "AC360." The show airs 8 and 10 p.m. ET Monday through Friday on CNN.

(CNN) -- A California lawmaker has scheduled a hearing to examine disclosures of significant fraud in taxpayer-funded drug rehabilitation by The Center for Investigative Reporting and CNN.

Dr. Richard Pan, chairman of the Assembly Health Committee, wants to know how the problem persisted for so long, even as state health authorities expanded their efforts this week to shut down questionable clinics.

"A lot of people seemed to know what was going on, but for some reason, they didn't seem to be acting on what was going on," said Pan, a Democrat who represents the Sacramento area. "It seemed like it was hiding in plain sight."

A yearlong investigation by CIR and CNN found widespread fraud and poor oversight in the state's alcohol and drug counseling program for the poor, called Drug Medi-Cal. It is part of the nation's largest Medicaid program.

Report: Fraud in taxpayer funded programs
Rehab Racket Update
Rehab program rife with fraud
Were teens used as fake rehab patients?
California's rehab fraud crisis
Will California get tough on rehab?

In the wake of that investigation, another California lawmaker has called for an independent audit into the troubled program. Los Angeles County officials also are proposing reforms aimed at tightening clinic oversight.

Some clinics say they've done nothing wrong

Some of the clinics, however, are fighting back. Several of those temporarily suspended by the state are filing appeals.

"These people have done nothing wrong," said Arthur Barens, a Los Angeles attorney who is appealing the suspensions of several clinics. "They have not shown us any evidence of wrongdoing. I think that offends any concept of due process."

Pan said he will examine the issue during a hearing on Medi-Cal oversight already scheduled for September. "I'm hoping first to identify where the gaps are that allow the Drug Medi-Cal fraud to happen," he said. "Basically, what broke down?"

State Sen. Ted Lieu, a Democrat who represents parts of Los Angeles County, called for an independent review of the rehab program by the state auditor.

"I want to know ... what can we do to change laws or regulations so the fraud doesn't occur in the future," Lieu told CNN on Tuesday.

He said he was motivated by his belief in rehabilitation programs as a crucial tool for reducing crime and the prison population.

"I became very concerned," Lieu said, "that if we don't fix this fraud immediately, it would undercut the public support for this entire program."

Watch Anderson Cooper's interview with Lieu

Related: California lawmakers order audit of taxpayer-funded rehab program

Infographic: Rehab investigation gets results

State agency widens crackdown this week

The state agency responsible for policing the rehab clinics, the Department of Health Care Services, widened its crackdown this week, announcing Friday it had temporarily suspended 46 clinics with 62 satellite counseling sites -- raising its previous total of suspended clinics by 13. The department won't disclose which clinics have been targeted.

Department spokesman Norman Williams pledged that the dragnet would be expanded even further.

"We're going to make sure people who have defrauded the program are punished," he said on Bay Area public radio station KQED on Tuesday. "You can expect penalties, you can expect jail time and the top thing you can expect is a refocus, a stronger focus on making sure that these things are not happening in the future."

On Wednesday, the state Department of Justice said 36 clinics so far have been referred for investigation.

One client of Barens confirmed that her two South Los Angeles rehab clinics, Changing Steps and Pom-Pom's Castle, were suspended. The state's suspension letter stated that Belinda Baker's clients do not meet requirements for receiving services -- implying that they might not be addicts.

California rehab by the numbers

"Every single person we have (has) an addiction problem," Baker said. "They're condemning us without really investigating us."

Baker said another suspended clinic might be the source of her problems. She said a county auditor recently informed her that Able Family Support -- a clinic run by a man with a 2000 organized crime conviction in Texas -- was billing for clients she was serving.

"That place is billing the same people we're billing, and they're sitting right here in group," Baker said. "We're getting caught up in something, and I don't even know what's going on."

Able Family's executive director, Alexander Ferdman, did not respond to a phone call. County authorities have been trying to determine why reporters observed no more than 30 people enter Ferdman's clinic during a stakeout in April. The clinic later billed for seeing 179 clients that day.

Related: Ferdman responds to CNN's questions

Group therapy patient: 'All you can do is pray'

Jerome Sanders, 53, said he's gone to group therapy sessions for a year at Baker's Changing Steps clinic.

He credits the facility with helping him stay off crack cocaine and said he's disappointed that it's stopped offering counseling. "You never get strong enough; all you can do is pray," Sanders said.

Sanders said he hasn't been to another Drug Medi-Cal clinic since Changing Steps closed its doors in mid-July because "there's nowhere to go."

"Every now and then, I'll go to an AA meeting just to keep my sobriety going," he said.

Baker's clinics have been cited in county audits for problems including billing for therapy sessions when counselors were off work and other practices investigators labeled as "directly indicative of a lack of integrity."

Her lawyer, Barens, said audits tend to "result in some kind of adjustment being made, but it's always been very minor."

Barens said his other clients are R.I.G.H.T. Program, the New Choice Recovery Treatment Center, all also in Los Angeles County. Another of Barens' clients was eventually taken off the suspension list, according to county officials.

Barens has requested in-person hearings, he said, and is filing appeals with state officials to speed up the process and restore funding.

All five of his clients and at least three other suspended clinics, including Able Family Support, employ the same medical director, Dr. Howard Oliver. Oliver said the clinics do important work but might be sloppy with their paperwork and employ "uneducated" counselors who make mistakes.

"I don't think it's fair," Oliver said. "They're not dishonest."

The attorney for Immaculate Care Center in Riverside County also said that clinic has been suspended and is appealing.

"It's a really sad state of affairs, especially because we don't know what went wrong," said Joseph Benincasa. "If we did something wrong, we want to correct it."

The suspension letter cites a 2009 fraud prosecution against Immaculate Care's leaders, Godday Imakavar and Japhet Ifejoku. Imakavar was convicted and banned from billing Medi-Cal. The attorney said Imakavar remains on the clinic's board of directors but has little to do with the clinic.

Ifejoku has been a fugitive avoiding the 2009 charges, yet remained the clinic's executive director. Benincasa said he was removed from his post in June, an action that occurred after CIR made inquiries.

Regulators suggest reforms to Drug Medi-Cal

Noting the CIR and CNN investigation and the state crackdown, Los Angeles County regulators suggested reforms to the Drug Medi-Cal program.

... we've been frustrated in the past over the lax standards of state certification and the time it has taken the state to investigate and take action ...
Los Angeles County Public Health Director Dr. Jonathan Fielding

In a memo to the county Board of Supervisors, Public Health Director Dr. Jonathan Fielding recommended that the state toughen requirements for clinics to become certified and make certification provisional for the first two years.

"Quite frankly," he wrote in an e-mail, "we've been frustrated in the past over the lax standards of state certification and the time it has taken the state to investigate and take action suspending and removing certification from bad actors."

Fielding called the fraud uncovered by reporters "a tragedy." He said the county won't be satisfied until "every unscrupulous operator is out of business and brought to justice."

At the same time that state authorities began suspending clinics suspected of illegality, county officials announced a more than $191,000 funding increase for New Choice Recovery Treatment Center.

The county immediately suspended those payments, Fielding said, adding that the mistake was "unacceptable" and underscores the need for better communication between the state and county.

Rehab racket: A CNN/CIR investigation of fraud, fakes and felons Part 1, Part 2, Part 3

Got a story idea or tip for CNN's investigations team? Go to cnn.com/investigate or click here to submit.

CIR reporter Joanna Lin, CNN senior investigative producer Scott Zamost and CNN investigative correspondent Drew Griffin contributed to this report. This story was edited by Amy Pyle. It was copy edited by Nikki Frick and Christine Lee.

Reprinted with permission of Center for Investigative Reporting.

ADVERTISEMENT
Part of complete coverage on
July 1, 2014 -- Updated 0124 GMT (0924 HKT)
A $23.8 million settlement follows a three-year CNN investigation.
June 24, 2014 -- Updated 1329 GMT (2129 HKT)
Records of dead veterans were changed to hide how many people died waiting for care at the Phoenix VA hospital, a whistle-blower told CNN.
June 22, 2014 -- Updated 1605 GMT (0005 HKT)
Albuquerque police shot a homeless man in the back and killed him, and it was all caught on gruesome detail in a police video.
June 25, 2014 -- Updated 1148 GMT (1948 HKT)
A ship's captain, kidnapped by pirates in 2013, says the money used to pay his ransom went to Boko Haram.
Share your tips or story ideas with CNN's team of investigative reporters and producers. Click on the link or go to cnn.com/investigate.
May 2, 2014 -- Updated 0138 GMT (0938 HKT)
The director of the Phoenix Veterans Affairs Health Care system and two others have been placed on administrative leave amid claims of a secret waiting list for care.
April 24, 2014 -- Updated 0119 GMT (0919 HKT)
At least 40 U.S. veterans died waiting for appointments at the Phoenix VA Health Care system, many of whom were placed on a secret waiting list.
February 4, 2014 -- Updated 0345 GMT (1145 HKT)
Embattled New Jersey Gov. Chris Christie forcefully stood by his account that he only found out about notorious traffic lane closures after they appeared in the media.
December 18, 2013 -- Updated 1944 GMT (0344 HKT)
Records show problems with the Carnival Triumph more than a year before its ill-fated cruise earlier this year.
January 31, 2014 -- Updated 0234 GMT (1034 HKT)
U.S. veterans are dying because of delays in diagnosis and treatment at VA hospitals.
January 23, 2014 -- Updated 1324 GMT (2124 HKT)
The former president of Shell Oil USA didn't candy-coat it: America's political fund-raising system, he said, amounts to legalized extortion.
November 16, 2013 -- Updated 1717 GMT (0117 HKT)
Consumers left angry and confused after the botched Obamacare rollout now have something else to worry about: misleading letters from insurance companies.
January 15, 2014 -- Updated 1838 GMT (0238 HKT)
The president of an advertising firm that lost a $25 million contract said her team was asked to feature New Jersey Gov. Chris Christie in ads promoting the Jersey Shore.
October 30, 2013 -- Updated 2012 GMT (0412 HKT)
White House officials have pressured insurance industry executives to keep quiet amid mounting criticism over Obamacare's rollout, insurance industry sources told CNN.
Lawmakers set hearings on alleged fraud in America's largest Medicaid system exposed by The Center for Investigative Reporting and CNN.
Felons are supposed to be blocked from running California drug rehab clinics. That didn't stop Alexander Ferdman.
October 17, 2013 -- Updated 2314 GMT (0714 HKT)
So much for a "clean" bill. The measure passed by Congress to fund the government and raise the debt ceiling also contains some goodies and gifts tucked into the 35-page bill.
Victoria Byers told rehab counselors she didn't do drugs. Whistle-blowers say a clinic billed taxpayers to treat her anyway.
CNN's Drew Griffin confronts California health officials about alleged fraud at Medicaid rehab clinics.
Thousands of charities actually spend billions helping marketing executives get rich.
All evidence pointed police to one conclusion: A priest had killed a beautiful 25-year-old schoolteacher.
The same day a documentary featuring a government whistle-blower premiered, the IRS told him he was being audited. Coincidence?
An American father fights for the return of his sons who were illegally taken to Egypt.
A surprise inspection by the Centers for Disease Control has resulted in a failing grade for one of the plushest cruise ships afloat.
A white Mississippi teen faces 27 years in prison after killing a black man walking along a rural highway. The victim's family calls it a hate crime.
Critics say a federal data system that costs $1 million-plus offers very little help to authorities who investigate, identify and track hate crimes.
ADVERTISEMENT