Three Indicted In Medicaid Fraud Conspiracy Scheme

MINNEAPOLIS – A 13-count indictment charges three defendants with conspiracy to commit wire fraud, wire fraud, and money laundering of proceeds derived from fraud, announced U.S. Attorney Andrew M. Luger. 

According to court documents, between March 2018 and July 2024, Shawn Ashley Grygo, 37, of Forest Lake, Minnesota, Shantel Rene Magadanz, 34, of Stacy, Minnesota, and Heather Lynn Heim, 46, of St. Paul, Minnesota, devised and carried out a health care fraud scheme to systematically overbill for drug and alcohol treatment services. The defendants used an outpatient drug and alcohol treatment center called Evergreen Recovery, Inc. to defraud Medicaid and other health care programs by billing for treatment that was not provided, services that were not eligible for reimbursement, and billing for treatment services clients were required to attend as a mandatory condition of remaining in free housing provided as a kickback.

According to court documents, in order to maximize the amount of fraudulent Medicaid claims, the defendants used free housing in Evergreen-controlled “sober” homes as a kickback to induce clients to enroll and remain in Evergreen Recovery treatment so that the defendants could use those clients’ names and identifying information to overbill Medicaid. In order to induce Medicaid-eligible patients to enroll in the program, the defendants recruited people from homeless shelters and encampments, residential drug treatment programs, and county probation offices looking for places to put people being released from jail. As part of their conspiracy scheme, the defendants told clients at intake – and repeatedly throughout their stay – that their entitlement to free housing was contingent on their attendance at least five group counseling sessions per week and a weekly individual session with their primary counselor. If a client’s attendance fell short of the requirement, the defendants and others threatened clients with being locked out of free housing and having their belongings put on the curb, all in order to compel utilization of services.  

According to court documents, the conspiracy scheme also involved fraudulent practices designed to facilitate overbilling for group counseling, one-on-one counseling, and treatment coordination services. 

As part of their scheme, the defendants created and caused to be created electronic health record chart entries weeks or months after the purported date of services. On at least one occasion, the defendants and others stayed at the office all night before a visit by licensing regulators in order to create hundreds of untimely chart entries. The defendants also hired Peer Coaches and directed them to log their time and activities in a manner that misrepresented the circumstances under which they were interacting with clients in order to facilitate systematic overbilling. 

Grygo, Magadanz, and Heim are each charged with one count of conspiracy to commit wire fraud  and nine counts of wire fraud. Grygo is also being charged with three counts of money laundering. Grygo is expected to make her initial appearance on Monday, December 23, 2024. Magadanz and Heim made their initial appearances on December 19, 2024, and were released on conditions, including a condition prohibiting contact with former clients and employees of Evergreen Recovery and its related entities.

This case is the result of an investigation conducted by the FBI and the Health and Human Services – Office of Inspector General. The U.S. Attorney’s Office would also like to thank the Medicaid Fraud Control Unit (MFCU) at the Attorney General’s office for their assistance in this matter.

Assistant U.S. Attorney Lindsey E. Middlecamp is prosecuting the case.

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.