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Drug Rehab Fraud And Mismanagement Examined In CNN Investigative Series
Aired August 02, 2013 - 15:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT: Case in point? The man with the cigar, a convicted felon named Alexander Ferdman.
MARSHALL VOGT, LEAD INVESTIGATOR: Ferdman was the organizer.
Marshall Vogt was the lead investigator who helped prosecute Alexander Ferdman back in 2000 for running a Texas-based crime syndicate that staged car crashes, ripping off big insurance companies.
VOGT: He lists his occupation as a --
GRIFFIN: -- driver of an ice cream truck.
Ferdman pled guilty to organized crime and was sentenced to seven years in a Texas prison. He served just one year, was let out early for good behavior, and ended up in California.
Even though felons are barred from running Drug Medi-Cal centers, Ferdman soon opened a rehab clinic called Able Family Support.
Taxpayer-funded drug rehab has been easy money for Alexander Ferdman. Despite his organized crime conviction in Texas, his California Drug Medi-Cal contract is now worth about $2 million a year. His salary? $180,000.
Even after a 2011 review by Los Angeles County found evidence of what it considers to be fraudulent practices at his clinic, Ferdman was allowed to expand.
Drew Griffin with CNN. How you doing? I'd like to ask you some questions about your business if I could.
ALEXANDER FERDMAN, ABLE FAMILY SUPPORT: I really don't have time right now.
GRIFFIN: You can explain, how can a guy with a record like you be operating a drug rehab clinic in California?
You've been convicted of a major car crash scheme in Texas.
FERDMAN: I was convicted, but it's not what it seems. That's first of all.
And second, whatever happened -- I don't know -- 50 years ago, what relevance does it have to today?
GRIFFIN: Does the county know about your record?
FERDMAN: They probably do. I don't know.
GRIFFIN: What happened in Texas, Ferdman told us, should stay in Texas.
FERDMAN: Because I was facing 99 years, I chose a pick up a smaller sentence without -- because I could have a much worse.
But there was no fraud and there was no record of it in any way.
It's a very long story.
GRIFFIN: It's a huge case in Houston, Texas, state-wide, actually.
FERDMAN: Yeah. That's what they tried to build it, but -- and that's why they pursued it, but it wasn't what it seemed and what they said it was.
GRIFFIN: Could you tell me real quickly how you left Texas and decided to come here to get into the business? How easy was that?
FERDMAN: I don't want to talk about it right now, so --
GRIFFIN: With such apparent widespread fraud in the program, former supervisor Joy Jarfors says it's not just taxpayers who are being cheated.
JARFORS: I'm not the employees any more that I have to look at this everyday, but I'm a taxpayer that knows this is going on, and it angers me.
And there's story after story after story about Medicaid dollars being cut from people who need the services.
(END VIDEOTAPE)
BROOKE BALDWIN, CNN ANCHOR: Drew and his team found even more evidence of mismanagement and fraud.
Coming up next, how some clinics got clients in the door. You will be amazed.
(COMMERCIAL BREAK)
BALDWIN: You just saw how the nation's largest Medicaid program is riddled with fraud. Now the state of California is cracking down because of an investigation by CNN and the Center for Investigative Reporting.
In part two, we uncover how teens who live in group homes are used to milking the system.
Once again, here's our investigative correspondent, Drew Griffin. (BEGIN VIDEOTAPE)
GRIFFIN: Outside this drug rehab center in Southern California, teenagers from a group home are dropped off.
But according to former employees of the Pomona Alcohol and Drug Recovery Center, many of the teens they saw come here over the years didn't have substance abuse problems at all.
A one-year investigation by CNN and the Center for Investigative Reporting found that the drug Medi-Cal program in California, which cost taxpayers more than half a billion dollars over the last six fiscal years, is rife with fraud and plagued with weak government oversight.
Victoria Byers says she was driven in a van every week in a group home in Southern California.
VICTORIA BYERS, FORMER POMONA ALCOHOL AND DRUG RECOVERY CENTER CLIENT: We used to do drug tests and we were sent to these classes that would teach us not to do Ecstasy or not to do this drug or whatever.
GRIFFIN: But Byers, now 22-years-old, thought it was strange because she didn't have a drug problem.
BYERS: I told them, why should I be here? I have no drug issue. But I had to go because all the other girls had to go and they couldn't leave me at the house by myself.
GRIFFIN: We obtained these documents showing where she signed her name. That's a requirement allowing rehab centers to bill the state.
And signatures meant money. The more signatures, the more the Medi- Cal system reimbursed the clinic.
Michael Mergetch (ph) remembers the trips to So-Cal services as well. Now in college, he said he was also driven in a van to a different group home.
You never abused alcohol or prescription drugs or illicit drugs?
MICHAEL MERGETCH (PH), FORMER SO-CAL SERVICES CLIENT: Not at all.
GRIFFIN: So all the time you spent there, three years, was a waste of your time and a waste of taxpayers' money?
MERGETCH (PH): Yes. Definitely.
GRIFFIN: That doesn't surprise TaMara Shearer, a former manager and operator. She estimated that the teens didn't have a drug issue, so Medi-Cal made them up.
TAMARA SHEARER, FORMER MANAGER, SO-CAL ALCOHOL AND DRUG RECOVERY CENTER: It took a while to realize how deep a fraud was going on there.
GRIFFIN: Other whistleblowers came forward and claimed that So-Cal was committing fraud by labeling teens with fake addictions.
Riverside County officials said they didn't have a reasonable way to prove So-Cal was making up addictions, but the county pulled the funds, anyway, because so many of its clients were dropping out. That forced So-Cal to shut down.
But the other clinic in Los Angeles County, accused of similar practices, remains open. Just last year, a county report on Pomona Alcohol and Drug Recovery Center found significant and serious insufficiencies in the program.
The operator of both clinics is a man named Tim Ejindu, who told the county his business is a pillar in our community. The fraud allegations? They came from disgruntled, fired, ex-employees.
Tim wouldn't tell us anything.
I'm Drew Griffin with CNN.
TIM EJINDU, REHAB CLINIC OPERATOR: Who are you?
GRIFFIN: I just told you, I'm Drew Griffin with CNN.
Your former employees say you're billing for the county services you're not providing, sir.
Ejindu soon left without talking to us.
Mr. Ejindu, if you have nothing to hide, why are you taking off?
We found case after case of rehab centers, like Pomona, with a history of problems that are still allowed to keep billing the state.
Tamara Askew is a former counselor at Pride Health Services who claims she was told to bill for clients she didn't actually see.
Did you have client lists?
TAMARA ASKEW, FORMER COUNSELOR, PRIDE HEALTH SERVICES: I had a client list, yes.
When I first got there, they gave me about 20 folders, 20 folders of clients that they had.
GRIFFIN: Did you ever account for the 20 cases that you had in your folders?
ASKEW: Nope. I never could, because --
GRIFFIN: You couldn't find them?
ASKEW: Some were in jail. One was dead. A lot of --
GRIFFIN: Dead?
ASKEW: One was dead. GRIFFIN: And still listed as a client.
ASKEW: Still a client.
GRIFFIN: She said she confronted Godfrey Nwogene, the operator of Pride.
ASKEW: I told Godfrey, look, I don't know how you expect me to bill for clients I don't have, and he said, how do you expect me to pay for these lights you have?
GRIFFIN: She was then fired.
Do you feel it was throwing away taxpayers' money?
ASKEW: Yeah.
GRIFFIN: That was 2009. They have found other deficiencies uncovering evidence of ghost clients, fraud documentation used for billing
A state auditor urged Pride be shut down. Not only did Pride stay open, it got even more Medi-Cal money, more than a million dollars in a year.
In its most recent investigation, brought on by yet another employee accusing Pride of billing for ghost clients, county investigators found the allegations unsubstantiated
They couldn't prove it, but they did find the operation extremely troubling, discovering missing paperwork, signed and dated medical waivers with no client information, and missing treatment plans.
Despite that poor review, Pride is staying open.
If the county investigators couldn't find evidence of ghost patients, maybe they should do what we did -- go there on a Wednesday, when they are closed for treatment, but apparently still billing.
We saw no one entering the center on Wednesdays.
We're going to go in.
GRIFFIN: So we went in ourselves with hidden cameras.
Do you have rehab going on today?
UNIDENTIFIED FEMALE: No. Mondays, Tuesdays, Thursdays and Fridays.
GRIFFIN: Mondays, Tuesdays, Thursdays and Fridays. Not Wednesdays?
UNIDENTIFIED FEMALE: No.
GRIFFIN: There is no group on Wednesdays. Today is Wednesday. There is no group today. Even though it's closed for rehab, Pride has been billing for clients on Wednesdays, as these records show, including 60 on the day we went in with hidden cameras and found no clients there.
As for Nwogene, he told us two years ago that Pride accepted responsibility for deficiencies.
We went looking for Nwogene, seen in this police mug shot, related to do an arrest in 2003.
Hi, CNN, how you doing? Is Godfrey in?
UNIDENTIFIED FEMALE: He's actually not here at the moment.
GRIFFIN: Pride counselor, Marquita Jones (ph), denied any wrongdoing.
We wanted to ask about an investigation we're doing on ghost clients, people signing names, faking signatures and billing the state and county for treatment that's not happening.
Do you know anything about that?
MARQUITA JONES (PH), COUNSELOR, PRIDE HEALTH CARE: No, I don't because that's not going on at this office.
GRIFFIN: Godfrey has never asked you to sign a form that says all these patients came here and they didn't come here?
JONES: No, sir, he did not.
GRIFFIN: And you do the counseling yourself?
JONES: Yes, I do, and I actually see live clients.
GRIFFIN: As we waited for Godfrey Nwogene to show up, employees inside called police.
They told us that the boss was coming. We kind of camped out here waiting for them to show up.
Then abruptly shut down for the day.
Did he call back and say he's not coming?
We never heard from anyone at Pride Health Services again.
(END VIDEOTAPE)
BALDWIN: How about that? So what's the state's reaction to all of this?
Wait until you see what happened when Drew Griffin tried to find out.
(COMMERCIAL BREAK)
BALDWIN: Welcome back. We just showed you how taxpayers being ripped off by several rehab clinics. For weeks, CNN's investigative correspondent Drew Griffin tried to get answers from officials, but as you saw no one would talk on camera.
Instead, they couldn't get away from the camera and from Drew fast enough.
Well, they finally did sit down with us, and now there's a major crackdown on fraud in the state.
But watch what had to happen first. Once again, Drew Griffin.
(BEGIN VIDEOTAPE)
GRIFFIN: George Ilouno shouldn't even be in California's drug rehab business.
You seem to be at the center of fraud allegations here.
GEORGE ILOUNO, G.B. MEDICAL: No, no, no.
GRIFFIN: He's been banned from billing Medicaid since 2002, but it hasn't stopped him from billing the state of California.
Tim Ejindu is accused of fraudulent practices at his drug rehab clinic, but it hasn't stopped him from billing the state of California, either.
Mr. Ejindu?
TIM EJINDU, CLINIC DIRECTOR: Yes?
GRIFFIN: Drew Griffin with CNN.
EJINDU: And who are you?
GRIFFIN: I just told you. My name is Drew Griffin with CNN.
EJINDU: OK.
GRIFFIN: Wait a minute, now. Your former employees say that you are billing for county services you aren't providing, sir.
And then there's this man, Alexander Ferdman, convicted for running an organized crime ring in Texas that ripped off insurance companies.
It hasn't stopped him from coming to California, setting up a drug rehab clinic and billing taxpayers even though felons are barred from running Drug Medi-Cal centers.
GRIFFIN: Mr. Ferdman, how can a guy with a record like you be operating a drug rehab clinic here in California?
You have been convicted of a major insurance car crash scheme in Texas? ALEXANDER FERDMAN, FORMER CONVICTED FELON: I was convicted, but it's not what it seems.
GRIFFIN: In the last two fiscal years, taxpayers spent nearly $186 million supposedly treating drug and alcohol abuse patients in California.
Our investigation with the Center for Investigative Reporting found half of that money, or about $94 million, has gone to clinics that have shown questionable billing practices or signs of fraud.
Joy Jarfors, former Drug Medi-Cal supervisor, says she complained to the state for years about all the obvious fraud.
We found billing records for people in jail. One person dead. People who said they didn't need this kind of treatment.
Clinics closed on a certain day billing for that certain day. None of this surprises you?
JOY JARFORS, FORMER MANAGER, CALIFORNIA DEPARTMENT OF ALCOHOL AND DRUG PROGRAMS: Not at all. We found all of those things.
GRIFFIN: For more than a month, CNN has been asking for an explanation from the state of California and for more than a month, we have gotten nowhere.
UNIDENTIFIED FEMALE: I believe the on-camera interview was declined.
GRIFFIN: Can I ask you -- from you, why?
UNIDENTIFIED FEMALE: That wasn't my decision.
GRIFFIN: State health officials in one Sacramento building after another refused to be questioned, including Toby Douglas, who oversees drug medical.
Will you make sure to provide a response as why this widespread fraud is allowed to continue?
Finally, after weeks of calling the state's secretary of health and human services, Diana Dooley, and getting no for an answer, we decided to ask for a response in person.
Secretary Dooley, hi, Drew Griffin with CNN.
DIANA DOOLEY, CALIFORNIA SECRETARY OF HEALTH AND HUMAN SERVICES: How do you do?
GRIFFIN: We have been trying to reach you and talk about the widespread fraud that's in the Medi-Cal drug rehab business, but we're told that neither you nor the program director nor anybody at the state of California will talk to us about it.
In an uncomfortable moment, the secretary at first refused to speak. Secretary, do you know Alex Ferdman, a convicted felon who apparently runs one of these clinics and has been billing the state of California for several years despite the fact there have been complaints registered with the department about him?
He's convicted of a major insurance fraud in the state of Texas, but for somehow was able to get certified and has been billing.
I'm just wondering if there is anybody in the state of California that is concerned about this fraud.
Then finally answered a question.
DOOLEY: The state of California takes fraud very seriously and there are many investigations that are underway.
The allegations, all allegations are given full and fair consideration, and you have caught me running because I'm late for a meeting that I'm chairing.
GRIFFIN: I wonder if you would just do one thing and maybe ask Toby Douglas to sit down and talk to us and explain to us some of these questions.
DOOLEY: And if you want to give us a little bit of time ---
GRIFFIN: We have been giving you about a couple months.
DOOLEY: We have a budget that we're just completing and we have many priorities on our time. Information has been provided, answers have been provided. We have a very --
GRIFFIN: I understand.
DOOLEY: We have a very extensive fraud and investigation unit in Medi-Cal that's one of the best in the country.
GRIFFIN: Let me ask you two quick questions.
DOOLEY: No, that's all I have to say.
GRIFFIN: Are you concerned that there is massive fraud because that's what we're finding out and, number two, as secretary of health, could you have Toby Douglas just sit down and talk to us about our specific questions?
DOOLEY: Excuse me.
GRIFFIN: But that is hardly the end of the story.
DOOLEY: Would you get security?
GRIFFIN: Our confrontational exchange with California's secretary of health and human services may, in fact, may have been the trigger for a major statewide crackdown. One month later, nearly to the day, the state sent out this news release. Sixteen Drug Medi-Cal centers are under investigation and temporarily suspended.
Just this week, California announced that figure has now jumped to 29 rehab centers, and last week, California relented to CNN's interview request.
Chief Deputy Director of Health Care Services Karen Johnson tried to explain why it has taken so long.
KAREN JOHNSON, CALIFORNIA CHIEF DEPUTY DIRECTOR OF HEALTH CARE SERVICES: We are going to review all of the drug Medi-Cal providers in the state of California.
We are also going to require that they re-enroll in our program so that they become recertified.
GRIFFIN: Based on that answer, I think it's fair to say that the oversight by the state of California up until now has been seriously lacking. Agree?
JOHNSON: I wouldn't say that's not a fair characterization. Any complaints that were referred to the Department of Justice and to the Department of Health Care Services were investigated.
There are other complaints. Those complaints were investigated. That is going to be part of the ongoing active investigation, and as I mentioned, we are looking at all of the cases and what is emerging is a much larger, bigger picture that we need to address.
GRIFFIN: A bigger picture of fraud?
JOHNSON: A bigger picture of problems.
GRIFFIN: And only now two weeks before these two national news organizations are about to release a major study of what we found was extensive fraud is the state of California doing this extensive review.
Coincidence?
JOHNSON: It's not a fair characterization. We have been investigating all along.
GRIFFIN: My question is, why has it taken the state so long to catch up to this?
JOHNSON: Look, there are bad people who want to scam this program, and we are going to do everything possible to investigate and deploy the necessary resources to improve and enhance our enforcement effort.
GRIFFIN: So you feel the state of California has done enough?
JOHNSON: Obviously, what has happened and what we see clearly, there is more that needs to be done. (END VIDEOTAPE)
BALDWIN: Here he is, Drew Griffin. We're going to be brief. There is major action taking place in California government. Our chat after the break.
(COMMERCIAL BREAK)
BALDWIN: We just showed you, really for the last half, this CNN investigation into fraud at taxpayer funded rehab programs in California.
Now the state is now taking action. Drew Griffin is here.
And, first, if I may, I tell you. When you start walking toward people, they walk in the other direction, Drew Griffin. You have that effect on people.
GRIFFIN: Yeah, I know, personally, too.
No, it was interesting. And like we have always said, if there's nothing to hide, people stop and talk to you.
BALDWIN: Oh, yes, they do.
So what's happening with the state now?
GRIFFIN: The state has finally acted. We can tell you that 46 companies representing 108 of these clinics have had their state funding cut off until they can be fully reviewed.
There is a state-wide review going on and we do know from the state of California now that they are going to require every single one of these clinics to be recertified, basically reapply for the ability to bill the state.
BALDWIN: Because of this investigation.
GRIFFIN: Because of this investigation
And while we don't know the extent of that, that should at least cover the felons running the programs. They should be able to screen those people out of the system.
BALDWIN: And, again, this was big money, California, tens of millions.
GRIFFIN: And the takeaway here for the rest of us is we're sending -- we, federal taxpayers are sending a lot of money to the state of California.
But usually if something's happening in California it's happening elsewhere as well. We focused on California because they're the biggest. There's going to be state hearings on this, et cetera, so we'll keep an eye on it.
BALDWIN: We will watch for the follow-up with you, Mr. Griffin. Thank you very much to you and your entire team.
That's it for me here in Atlanta.
To Jake Tapper, "THE LEAD" starts now.
