Headshot of attorney George IndestBy George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

An investigation of a Long Beach, California-based counseling center, formerly known as Atlantic Recovery Services (ARS), revealed troubling allegations which reportedly cost the government nearly $50 million in bogus claims. The allegations resulted in an indictment charging eight defendants (all former employees of ARS) with health care fraud and aggravated identity theft.

Another eleven defendants have already pleaded guilty to health care fraud charges stemming from the same long-running ARS scheme, and one other defendant has pleaded guilty to making a false statement affecting a health care program. Those twelve defendants are awaiting sentencing by United States District Judge Paul S. Gutierrez.

The eight defendants named in the new indictment, formerly employed as counselors or management for ARS, are potentially facing decades in federal prison if convicted.

To see the full press release by the Department of Justice, click here.

The Alleged Scheme.

ARS received contracts to provide substance abuse treatment services through California’s Drug Medi-Cal program to students in Los Angeles County schools. The Drug Medi-Cal program was designed to assist underprivileged youth in drug and alcohol recovery. It is a part of the state’s federal Medicaid program, administered to qualifying low-income recipients under the California Medical Assistance Program (otherwise known as, Medi-Cal).

It is alleged that ARS submitted bogus claims for reimbursement to the Drug Medi-Cal program for an entire decade before California suspended payments to the company forcing ARS to close its doors in April of 2013.

The indictment alleged that the claims submitted to the Drug Medi-Cal program were false and fraudulent for a number of reasons, including the following:

(1) ARS billed for services provided to students who did not have substance abuse disorders or addictions and therefore did not qualify to receive Drug Medi-Cal services;

(2) ARS billed for counseling sessions that were not conducted at all;

(3) ARS billed for counseling services that were not conducted in accordance with Drug Medi-Cal regulations regarding length, number of students, content and setting;

(4) ARS personnel falsified documents, including treatment plans, group counseling sign-in sheets, progress notes and update logs (which listed the dates and times of counseling sessions); and

(5) ARS personnel forged student signatures on documents.

To read the full indictment, click here.

The Appalling Nature of the Allegations.

Defendants not only allegedly engaged in a scheme to deprive a program with already limited resources of millions, but also exploited several young individuals by improperly branding them as substance abusers and addicts. This appalling scheme allegedly assisted defendants in boosting enrollment numbers and billings, thereby profiting off of innocent youths.

To read one of our previous blogs on a similar news story, click here.

Medical identity theft can have very negative effects on the present and future quality of care for a patient. In some instances, a false diagnosis or inaccurate medical history can lead to serious illness or even death of a patient who has been provided with unnecessary medical treatments, or who has not been provided necessary medical care due to the erroneous medical records. Death of a patient due to health care fraud can result in life in prison should the health care provider be convicted. Section 1347(a)(2), 18 United States Code.

Click here, for more information on medical identity theft from the Department of Health and Human Services, Centers for Medicare & Medicaid Services.

In this investigation, Special Agent in Charge Christian Schrank for the Office of the Inspector General of the Department of Health and Human Services, stated the following regarding the concerning allegations:

“For counselors and supervisors to risk stigmatizing students as substance abusers, as alleged in this case, just to enrich themselves at taxpayer expense is outrageous. This decade-long conspiracy to defraud Medi-Cal while disregarding the true health care needs of children will not be tolerated.”

Psychologists and Other Mental Health Professionals Are Not Immune to Audits.

There have been an increasing number of Medicaid and Medicare investigations and audits being initiated against all mental health professionals. There is a two-part blog on our website on this topic. Click here for part one, and click here for part two.

Be aware that when the Florida Medicaid Fraud Control Unit (MFCU) gets involved, the situation has escalated from routine to serious. The MFCU is in charge of investigating and prosecuting health care providers suspected of defrauding the state’s Medicaid program. When the unit opens a case against a provider, the first step is usually the issuance of an investigative subpoena, requesting specific records. It is important to remember that the MFCU would not be involved unless criminal fraud was suspected. This is not a routine audit. Click here to read practice tips on how to properly respond to a subpoena.

Know that Medicaid Fraud is Serious.

Facing allegations of Medicaid or other health care fraud is extremely serious business. How serious? If you lose, it is highly likely you will spend many years in prison. You will lose your medical license. You will be excluded from Medicaid and other government health care programs. You will be a convicted felon. You will be left with nothing and will have a very difficult time in ever successfully reestablishing your life.

We have been consulted by many individuals, both before and after criminal convictions for fraud or related offenses. In many instances, we are convinced that the person is not actually guilty of fraud. However, in many cases those subject to Medicaid or Medicare fraud audits and investigations refuse to acknowledge the seriousness of the matter or they decide not to spend the amount of money required for a qualified attorney to defend them.

If you are accused of Medicaid or Medicare fraud, realize that you are in a fight to preserve your livelihood. Your liberty, possessions and profession are at stake. You need to sell everything you own, borrow everything you can and hire the absolute best criminal defense attorney available (who has experience in defending such cases) to represent you. If you win and are acquitted, at least you still have a professional license with which you can start over. Be prepared to give up whatever monetary value is necessary, if possible, to avoid a conviction.

Contact Health Law Attorneys Experienced in Handling Medicaid Audits, Investigations and other Legal Proceedings.

Medicaid fraud is a serious crime and is vigorously investigated by the state MFCU, the Agency for Healthcare Administration (AHCA), the Zone Program Integrity Contractors (ZPICs), the FBI, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS). Often other state and federal agencies, including the U.S. Postal Service (USPS), and other law enforcement agencies participate. Don’t wait until it’s too late. If you are concerned of any possible violations and would like a confidential consultation, contact a qualified health attorney familiar with medical billing and audits today. Often Medicaid fraud criminal charges arise out of routine Medicaid audits, probe audits, or patient complaints.

The Health Law Firm’s attorneys routinely represent physicians, dentists, orthodontists, medical groups, clinics, pharmacies, assisted living facilities (AFLs), home health care agencies, nursing homes, group homes and other healthcare providers in Medicaid and Medicare investigations, audits and recovery actions.
To contact The Health Law Firm please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.


Department of Justice, Office of Public Affairs. “Eight Indicted in Fraud Case That Alleges $50 Million in Bogus Claims for Student Substance Abuse Counseling.” Press Release: 2 Sept. 2015. Web. 2 Oct. 2015.

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

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