You have to read to the bottom of the U.S. Department of Justice (DOJ) press release to learn the eight people indicted Wednesday for defrauding the Drug Medi-Cal program of more than $46 million were preceded by 12 others who pleaded guilty in cases stretching back a year.

The eight, who worked for the now-defunct, Long Beach-based Atlantic Recovery Services (ARS), face decades in prison even while sentences for the others are pending. The release describes six of the eight as managers of youth drug and alcohol treatment counselors and two as counselors.

ARS billed Drug Medi-Cal (DMC) for treatment it did not provide middle and high school students in Long Beach. Diagnoses were fabricated and fake claims were submitted for healthy students without their knowledge. 

The latest eight indicted don’t appear to be big fish. Assistant U.S. Attorney Cathy Ostiller told the Associated Press they did not profit from the scheme. Counselors were particularly vulnerable. “As far as we can tell, most of these employees were minimum-wage earners,” Ostiller said. “They were not doing this for luxury yachts.”

Some of the counselors were recovering addicts just trying to hold on to their jobs.

Dr. Leland Whitson was not a minimum-wage employee. He was the medical director at ARS since 1999. He diagnosed most of the kids and pleaded guilty (pdf) in June 2014 to billing fraud. ARS claimed 770 clients at the time of its demise in 2013.  

When Whitson’s involvement with ARS was revealed, Los Angeles County Substance Abuse Prevention and Control (SAPC) Director Wesley L. Ford reported that a quick check found 12 DMC-contracted providers employed the doctor. Eight of the providers were suspended by the state or terminated by SAPC.   

The millions worth of drug and alcohol treatment services were pretty much wasted, according to the DOJ, which accused ARS of scheming “to steal tens of millions of dollars from a program with limited resources that was designed to help underprivileged youth in recovery.”

Part of the scam involved signing up kids who weren’t actually druggies or alcoholics, without their knowledge, for counseling sessions that never occurred. A side-effect was the branding of “many innocent young people as substance abusers and addicts in order to boost enrollment numbers and billings.”

It’s a two-fer exploitation of the Drug Medi-Cal program that is practiced all over the state. The Center for Investigative Reporting and CNN began a joint series, Rehab Racket, in July 2013 with a story that said,

“Drug Medi-Cal paid out $94 million in the past two fiscal years to 56 clinics in Southern California that have shown signs of deception or questionable billing practices, representing half of all public funding to the program.”

The program had received half a billion dollars in federal funding over a six-year period.

–Ken Broder

To Learn More:

Dept. of Justice Indicts Eight for Fraud Scheme Involving Nearly $50 Million in False Claims for Student Substance Abuse Counseling in Long Beach (by Keeley Smith, Long Beach Post)

School Drug Counselors Charged in $46 Million Fraud Scheme (by Brian Melley, Associated Press)

Doctor Pleads Guilty to Billing Fraud at Los Angeles-Area Rehab Clinic (by Christina Jewett and Will Evans, The Center for Investigative Reporting)

Meet Dr. Howard Oliver, the Busiest Rehab Doctor in California (by Ken Broder, AllGov California)

Eight Indicted in Fraud Case that Alleges $50 Million in Bogus Claims for Student Substance Abuse Counseling (United States Attorney’s Office Central District of California)