Four Defendants Plead Guilty in Multi-Million Health Care Fraud and Money Laundering Scheme Involving Sober Homes and Alcohol and Drug Addiction Treatment Centers
Four defendants including two sober home owners, the clinical director of a substance abuse treatment center, and a sales representative for multiple laboratories pled guilty last week for their participation in a health care fraud and money laundering scheme that involved the filing of fraudulent insurance claim forms and defrauded health care benefit programs.
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, Kelly R. Jackson, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Dave Aronberg, State Attorney, Palm Beach County State Attorney’s Office, Jeff Atwater, Florida Chief Financial Officer, William D. Snyder, Sheriff Martin County Sheriff's Office, Robert Koons, Special Agent in Charge, Amtrak Office of Inspector General, Rafiq Ahmad, Special Agent in Charge, United States Department of Labor, Office of Inspector General (DOL-OIG), Isabel Colon, Regional Director, United States Department of Labor, Employee Benefits Security Administration (DOL-EBSA), Dennis Russo, Director of Operations, National Insurance Crime Bureau (NICB), Ric Bradshaw, Sheriff, Palm Beach County Sheriff's Office (PBSO), Bryan Kummerlen, Chief, West Palm Beach Police Department, Jeffrey S. Goldman, Chief, Delray Beach Police Department, Pam Bondi, Florida Attorney General, and Scott Rezendes, Special Agent in Charge, Office of Personnel Management, Office of Inspector General (OPM-OIG), made the announcement.
Michael Bonds, 45, of Delray Beach, Stefan Gatt, 27, of Deerfield Beach, and Fransesia Davis, a/k/a “Francine,”a/k/a “Francesa,” 44, of Lake Worth, pled guilty to one count of conspiracy to commit health care fraud, in violation of Title 18, United States Code, Section 1349. Davis also pled guilty to one count of managing, leasing, profiting from, and making available a place (one of her sober homes) for the purpose of for the purpose of the unlawful distribution and use of controlled substances, in violation of Title 21, United States Code, Section 856(a). Sentencing hearings are scheduled for April 24, 2017.
Trial is scheduled for March 20, 2017 for co-defendants Kenneth Chatman, a/k/a “Kenny,” 46, of Boynton Beach, Joaquin Mendez, 52, of Miramar, Laura Chatman, 44, of Boynton Beach, and Donald Willems, 40, of Weston. The co-defendants are are charged by criminal complaint, a formal charging document notifying the defendants of the charges. All persons charged by criminal complaint are presumed innocent until proven guilty in a court of law.
In a separate but related case, Licensed Mental Health Counselor Dr. Barry Gregory (case no. 9:17-cr-80033-DMM), 62, of Wellington, pled guilty to one count of conspiracy to commit health care fraud and one count of knowingly falsifying a matter involving health care benefit programs, in violation of Title 18, United States Code, Section 1035(a)(1) and 2. Sentencing for Gregory is scheduled for April 26, 2017.
According to court documents, defendants Kenneth Chatman, Davis, and Bonds established sober homes, including Stay’n Alive, Inc., Redemption Sober House, Inc., Total Recovery Sober Living LLC, and other sober homes, which were purportedly in the business of providing safe and drug-free residences for individuals suffering from drug and alcohol addiction. To obtain residents for the sober homes, members of the conspiracy provided kickbacks and bribes, in the form of free or reduced rent and other benefits, to individuals with insurance who agreed to reside at the sober homes, attend drug treatment, and submit to regular drug testing that members of the conspiracy could bill to the residents’ insurance plans. Although the sober homes were purportedly drug-free residences, Chatman, Davis, and Bonds permitted the residents to continue using drugs as long as they attended treatment and submitted to drug testing.
Defendants Kenneth Chatman, Bonds, and Davis referred the sober homes’ residents who had insurance to treatment centers owned by Kenneth Chatman but titled in the name of Laura Chatman. These treatment centers purportedly offered clinical treatment services for persons suffering from alcohol and drug addiction. In most instances, defendant Kenneth Chatman knew that the sober home residents referred to the treatment centers, Journey to Recovery LLC, in Lake Worth, Florida, and Reflections Treatment Center, LLC, in Margate, Florida, were using drugs. Defendant Gregory was the Clinical Director of Reflections Treatment Center and Journey to Recovery, and was responsible for supervising clinical services, including regularly reviewing the work performed by subordinate employees. Gregory was aware that Kenneth Chatman was the true owner of some of these sober homes, but they were placed in other people’s names in an attempt to hide Chatman’s true ownership and control over the businesses. Gregory also knew that Chatman was paying kickbacks and bribes to sober home owners for referring their residents to Reflections and Journey for treatment, and that these kickbacks and bribes were disguised as “case management fees,” “consulting fees,” “marketing fees,” and “commissions.” Bonds, Davis, and Gregory further admitted that bribes and kickbacks were paid to insured patients who attended treatment, in the forms of free or reduced rent and other items. Bonds and Davis also admitted that residents of their sober homes were continuing to use controlled substances and that their sober homes were not, in fact, places where persons abstained from the use of drugs and alcohol. Rather, the defendants allowed their sober homes to be used by residents to continue abusing drugs and alcohol while attending ineffective and improperly licensed treatment centers in exchange for free rent.
Defendant Kenneth Chatman hired doctors, including defendants Mendez and Willems, to serve as medical directors of his treatment centers. The doctors ordered drug treatment and drug testing for the sober home residents, specifically expensive urine and saliva drug screens and allergy testing, regardless of whether such treatment and testing were medically necessary. The defendants provided services meant solely to maximize insurance reimbursements. In some instances, defendants Kenneth Chatman and Davis submitted urine and saliva samples from employees instead of urine and saliva from patients. In other instances, defendant Kenneth Chatman caused confirmatory testing to be performed and billed for residents who left the sober homes and were no longer receiving treatment at the treatment centers. Defendants Mendez and Willems also falsely documented patient files to make it appear as though they reviewed the test results. Defendant Gatt admitted that he knew the bodily fluid samples that he collected from Reflections came from employees and that he paid kickbacks to Chatman for Chatman to continue referring lucrative lab testing to him. Defendant Gregory admitted that the drug testing was “useless” because it was not used to direct the patients’ treatment and that as many as 90% of patients were testing positive for the continued use of controlled substances while purportedly obtaining treatment. Gregory knew that Kenneth Chatman was advising patients that they were allowed to continue using controlled substances. On some occasions when Gregory recommended referring relapsed patients to detox or other facilities, Chatman, who had no medical or clinical training, would overrule Gregory’s recommendations because discharging the patients would end Chatman’s ability to bill the patients’ insurance plans.
Defendants Kenneth Chatman and Davis engaged in various tactics to keep patients from being able to leave Reflections and Journey, including threatening violence, and confiscating their belongings, such as car keys, telephones, medications, and food stamps, in order to maintain the ability to continue fraudulently billing their insurance companies.
Defendant Kenneth Chatman also recruited and coerced female patients and residents into prostitution, telling them that they would not have to pay rent or participate in treatment or testing so long as they would allow him to continue to bill their insurance companies for substance abuse treatment and testing that the patients did not receive.
Defendants Kenneth and Laura Chatman submitted to the Florida Department of Children and Families fraudulent applications for licensure for Journey to Recovery and Reflections Treatment Center, stating that Laura Chatman was the sole owner of those entities and hiding the fact that Kenneth Chatman owned and operated the treatment centers. Gregory, who also owned a consulting firm that assisted substance abuse treatment facilities in obtaining licensure, filed documents with the Florida Department of Children and Families and assisted with audits to help Chatman receive permanent DCF licenses for Reflections and Journey.
Potential victims should call (561) 822-5114 or submit complaints through the IC3 Complaint Form - https://www.ic3.gov/complaint/default.aspx and use the key word “Chatman Reflections” in the “Description of the Incident” field when submitting complaints related to this case.
Mr. Ferrer commended the investigative efforts of the Greater Palm Beach Health Care Fraud Task Force. Agencies of the task force include the FBI, IRS-CI, the Palm Beach County State Attorney's Office Sober Homes Task Force, Florida Division of Investigative and Forensic Services, Martin County Sheriff's Office, Amtrak OIG, DOL-OIG, DOL-EBSA, National Insurance Crime Bureau, Palm Beach County Sheriff's Office, West Palm Beach Police Department, Delray Beach Police Department, Florida Attorney General Office of Statewide Prosecution, and OPM-OIG. The cases are being prosecuted by Assistant United States Attorney A. Marie Villafaña.