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Embassy Closures Examined; Drug Rehab Fraud Investigated; Whitey Bulger Calls Trial A Sham
Aired August 03, 2013 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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ANNA COREN, CNN: Well, thank goodness for all those dash-mounted cameras in Russian cars these days. Without them, we would have never seen this.
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COREN: Now, for the record, we did not add that music. It's from the car radio. That is a Russian police officer holding on for dear life after he jumped on the hood of a suspect's car. Amazing video. And a quick update, we understand the suspect is in custody and the policeman was not badly hurt, but he did lose his hat, as you just saw.
Ask any graduate at the University of North Dakota was asked what they thought of their commencement speaker, they will tell you that he or she was out of this world. That's because she was. Astronaut Karen Nyberg delivered this year's address from the international space station. Nyberg is a University of North Dakota alum. In her pre- recorded speech, she told graduates to keep dreaming and reaching for their stars. A university spokesman says it was tough to book Nyberg because of her incredibly busy schedule.
Well, you are in the CNN NEWSROOM, and I am Anna Coren, sitting in for Don Lemon.
Nearly 22 embassies are just hours away from closing their doors amid fears of a terror attack.
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REP. PETER KING, (R-NY), HOUSE HOMELAND SECURITY COMMITTEE CHAIRMAN: There's very little doubt, if any, that something serious is being planned. It's a potential series of attacks. It really could be almost anyplace.
GEN. MARTIN DEMPSEY, CHAIRMAN, JOINT CHIEFS OF STAFF: We are taking it seriously, which I think you'd expect us to do. Yeah, there is a significant threat stream and we're reacting to it. REP. NANCY PELOSI, (D-CA), HOUSE MINORITY LEADER: The embassies will be closed. And there's a travel alert for Americans traveling abroad. There's some understanding of the seriousness of the threat.
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COREN: Well, let's delve into these closures a bit deeper.
Tom Fuentes joins us now. He's our law enforcement analyst and a former assistant director of the FBI.
Tom, 22 embassies and consulates will be closed and --
ANNA COREN, CNN ANCHOR: Well, let's delve in these embassy closures a bit deeper. Tom Fuentes joins us now. He is our law enforcement analyst and former assistant director of the FBI.
Tom, 22 embassies and consulates will be closed as of tomorrow. The U.S. government is announcing that. Why not close them immediately?
THOMAS FUENTES, CNN LAW ENFORCEMENT ANALYST: Well, I think the reason was because the threats that they intercepted were pretty date specific as to the end of Ramadan, which is tomorrow, Sunday. So I think that's why they didn't close them sooner. And actually, in those countries, the embassies would have already been closed on Friday and Saturday, the Muslim holy days. So, you know, their weekends are basically Friday and Saturday. Sunday is essentially the equivalent of Monday in the west. It's the first day of the workweek. So closing them on Sunday means closing them for the first day of the workweek, which coincides with the end of Ramadan.
COREN: And will they be closed for a protracted period of time?
FUENTES: That we don't know. I think, you know, once you call on a threat, how do you call it off? So I don't know how long they will keep them open or closed, I mean. Or if they will add more embassies or reduce and just have a few closed. We don't know that yet.
COREN: Tom, the alert put out by the government cites what they call growing intelligence that al-Qaeda might be going operational with plans for an attack. What could that growing intelligence actually be?
FUENTES: Well, it could be, again, the type of interceptions that they are getting, the type of human source information from our allies, from the authorities in Yemen. As a matter of fact, where they believe these discussions are coming from now. So, there's a variety of ways they could be gaining the information and hear an increase in the amount of information being discussed by the terrorists.
COREN: And, Tom, the people in those embassies and consulates, what would they be doing?
FUENTES: Good question. I think I'm sure they are being told to stay home and be safe and not be wandering around or going shopping or anything like that. But, again, these embassies are like fortresses, so by having them closed the real security will be local host country and law enforcement in most cases. I think Benghazi was an unusual circumstance because it was a small consulate in a remote area.
COREN: Now, this of course, coincide with al-Qaeda leader, al- Zawahiri's 14-minute audio message that he posted a message calling on Muslims to attack American interests. Is this just co-incidence?
FUENTES: No, I don't think so. And I think he is trying to, you know, essentially assume the mantle of bin Laden and issue a periodic recorded statement encouraging his followers to commit attacks against the U.S. and U.S. interests. So I think in a way it's similar to what we have heard for many years starting with bin Laden more than ten years ago.
COREN: Tom Fuentes, always good to talk to you. We appreciate the incite. Thank you.
FUENTES: Thank you, Anna.
COREN: Well, take a look at this. Shocking video that shows a very close call for firefighters. A burning home in Idaho collapsed while firefighters were battling the flames. Well, no one was seriously hurt, thanks to the fire captain. He realized the home was about to collapse, radioed the firefighters, and ordered them to back away. Several firefighters got hit with burning debris and some were knocked to the ground. Only minor injuries for a few firefighters. The fire chief says training and experience saved the day.
Well, after testifying this week in a Boston mobster's murder trial, a former FBI man is talking exclusively to us here at CNN. He spoke harshly about the man on trial and the FBI as well.
Also, CNN Special Report that the results of a year-long investigation, it's a look into shocking fraud and abuse involving a taxpayer funded rehab program. That's coming up.
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COREN: Welcome back.
Well, former mobster Whitey Bulger says his murder trial is a sham. Bulger lost his temper and got angry in court yesterday. Well, he is charged in connection with 19 murders and in dramatic fashion, Bulger waited until the final moments to announce a pivotal decision.
Deborah Feyerick has the story.
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DEBORAH FEYERICK, CNN CORRESPONDENT: Lawyers for James "Whitey" Bulger waited until the very last witness had testified before telling the court the reputed crime bust would not take the stand. Bulger addressed the judge calling it was a choice made involuntarily. He had wanted to argue that he was given immunity for is crimes by the former head of New England's organized crime strike force run by the justice department.
Well, Bulger appeared angry. He was shaking his finger at the judge and said he was, quote "choked off from making an adequate defense," and he said, quote "I didn't get a fair trial. This is a sham. Do what you want with me."
Well, the wife of one of the murder victims shouted, you are a coward. Patricia Donahue's husband, an innocent truck driver, was killed in the cross fire of a murder Bulger allegedly committed.
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PATRICIA DONAHUE, MOTHER OF ALLEGED VICTIM: I yelled out you're a coward because that's what he is. When you claim immunity -- when you believe that you have immunity and then you kill all these people and then you go to trial and you try to blame it on the justice department and then say, I didn't have a fair trial, well, get up there and tell us that.
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FEYERICK: Bulger's lawyer seemed to have two goals during their week- long defense. First, try to cast doubt on who killed two of the 19 victims, both of them women. Second, shift the blame onto the FBI, specifically agents who either did nothing or did too little to prevent several murders.
Bulger's crime partner, Steve "the" "the rifle man" said he saw Bulger strangled the women. But the defense team, however, presented evidence that Flemmi had the greater motive to kill his owned girlfriend and his stepdaughter. The girlfriend, Debbie Davis was about to leave him for another man. A witness testified that Flemmi admitted he quote "accidentally strangled" unquote the stunning 26- year-old. Flemmi acknowledged he lured her to a home because Bulger strangled her because she was talking too much and had become a liability.
As for Flemmi's common law stepdaughter, Deborah Hussy (ph), Bulger's lawyers presented evidence that Flemmi had apparently didn't sexually abusing the girl for years. He also called her among other things that prostitute doing drugs. Flemmi says he took her shopping before bringing her to a home where Bulger was waiting. And he said Bulger got a perverse high in strangling her.
A number of retired FBI agents and supervisors also took the stand. Several testified they believed Bulger should be shut down as an informant because he wasn't providing useful information. However, they never pressed the issue because apparently FBI headquarters felt Bulger was useful in taking down the mafia. Defense lawyers spent weeks trying to refute the notion that he was an informant which raises the question what was Bulger providing that would in his mind have given him immunity for the crimes in which he is accused, 19 murders, 13 counts of extortion and racketeering. Closing arguments are set for Monday. Each side has three hours and then the fate of James "Whitey" Bulger will be decided.
Deborah Feyerick, CNN, New York.
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COREN: Coming up, a CNN exclusive on the Whitey Bulger trial. You will hear from a key witness. A former FBI agent who spent years trying to take down former mobster Whitey Bulger.
Stay tuned.
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COREN: Well, a CNN exclusive.
The FBI agent who spent years trying to take down Irish mobster Whitey Bulger is now talking to us here at CNN. Robert Fitzpatrick testified days ago in the trial about his efforts to get the FBI to stop using Bulger as an informant. Fitzpatrick described an FBI riddled with corruption. He also wrote a book called "betrayal: Whitey Bulger and the FBI agent who fought to bring him down." Robert Fitzpatrick joins us live from providence, Rhode Island.
Mr. Fitzpatrick, good to have you with us. In a sense, the FBI is on trial. Do you believe that the FBI let Bulger get away with murder?
ROBERT FITZPATRICK, FORMER FBI SPECIAL AGENT: Well, they certainly helped him. They certainly were in his corner for a number of years, at least 25 years. They certainly protected him, and while he was committing murder, he felt protected.
COREN: Now, back in the day do you think that the FBI was any better than the Irish mafia or Bulger's winter hill gang?
FITZPATRICK: Well, the winter hill gang I think has been a little disseminated, and they're not as powerful as they were, but Bulger's going away is not going to materially affect the Irish gangs I don't believe.
COREN: OK. Do you think then that the FBI has cleaned up its act in recent years?
FITZPATRICK: Well, they are trying to. They are trying to, but, remember, they still have elements of organized crime in the mafia, Italian way, if you will, and we also have cultural crimes now which are different, Hispanic and otherwise. So, the nature of organized crime is really changing somewhat, and maybe the Irish crime is not as important as perhaps it used to be.
COREN: Let me ask you this, the prosecution actually questioned your credibility, that you embellished the story so you could tell your book. What's your take on that?
FITZPATRICK: Well, it's what I told him. You know, first of all, I have been attacked by the DOJ, department of justice, and the FBI ever since I reported that Bulger should be closed. In fact, my testimony wasn't that he was not in an informant. My testimony was that he should have been closed as an informant and never opened, in fact. And so all these years that was hanging over them if they're protecting him and I'm on the other side saying close him, that became a real problem. And so in court, when I was testifying, I felt kind of threatened. I felt they were still threatening me.
COREN: Yes. I think some people in the media felt that you were being bullied.
But, Mr. Fitzpatrick, if you could just sit tight, we are going to bring in one of Bulger's former associates. On this show, he challenged Bulger to take the stand. Well, that's not going to happen. We will see what he has to say about that next.
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COREN: Both sides have made their case in Whitey Bulger's murder trial. Closing arguments are set for Monday. The FBI agent who spent years trying to take down Irish mobster Whitey Bulger is talking exclusively to CNN. Robert Fitzpatrick is back with me. He took the stand during Bulger's trial.
Well, we are also joined by ex-mobster John Red Shay, a former associate of Whitey Bulger.
Red, good to see you. You've called Bulger a coward and a rat. Were you surprised when Bulger decided not to testify?
JOHN RED SHAY, FORMER BULGER'S ASSOCIATE (via phone): No. As I said last week to Don Lemon, that he wasn't going to take the stand, and don't believe the hype from what his lawyers were saying because it was just manipulation on his part.
COREN: Why didn't you think he was going to take the stand?
SHAY: Because they would have ate him alive if he got on the stand. Mr. Fitzpatrick -- Fitzgerald understands about that. The government basically ate him alive. I mean, you know, you go on the stand, and you give these people a chance to attack you if you have any discrepancies in your story, it's going to come out.
COREN: But he called the trial a sham. So, wouldn't he want to set the record straight?
SHAY: Yes, exactly, but he didn't want to get beat up on the stand. That's what it came down to.
COREN: Red, let me ask you this, why do you think the FBI protected Bulger for so many years?
SHAY: Well, because he was giving them plenty of information. Mr. Fitzgerald knows that. He knows he had given plenty of information and helped set up Italians with Stevie Flemmi.
COREN: If I can bring in Mr. Fitzpatrick. When you were with the FBI, was it considered glamorous for agents to work with mobsters?
FITZPATRICK: Yes. You know, overall we use informants like Bulger, if you will, but you may know that I went out and interviewed him, and certainly he lied during the interview. I didn't trust him. And so as a former profiler for the bureau, I found out right away he should be closed. He should not even be an informant and I reported that, and I did a memo. The memo went to the SAC. It was put in his safe. And I think if you recall, some of the testimony -- in fact, last week it was that they finally found, it was testified to, that that memo was actually destroyed about a little time back, which is news to me.
COREN: Certainly. Can I just bring in red very quickly? Let's talk about Stephen Rakes (ph) who died suddenly before he could testify against Bulger. Police now say that the suspect's business partner allegedly poisoned him. Do you believe that that suspect may have had links to Bulger?
SHAY: No, not at all, none whatsoever. Unfortunately for Stephen Rakes (ph), he was always in real estate deals that were a little shady and, unfortunately, it caught up to him. He caught up to a guy that was going to -- felt as though he was being betrayed and he did something that was very stupid on his behalf.
Well, gentlemen, we will have to leave the conversation there. Robert Fitzpatrick and John "Red" Shay, we appreciate your time, thank you.
SHAY: Thank you so much.
FITZPATRICK: Thank you, Anna.
COREN: OK. Well, moving right along, after a year-long investigation, our CNN Special Report "Rehab Racket" is coming up. It's a look into fraud and abuse involving a taxpayer rehab program. What you're about to see will shock you. That is ahead.
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COREN: Welcome back. I'm Anna Coren.
Well, for the next 30 minutes we are about to bring you a special CNN investigation into a state-sponsored taxpayer funded rehab program in California that gives an eye opening look at fraud and abuse.
The program looks like a noble cause on paper. Privately run rehab clinics get Medicaid money by billing to aged addict to get counseling. But a year-long investigation by CNN and the center for investigative reporting has found a system riddled with fraud and poor oversight from billing for phony patients to allowing convicted felons to run rehab centers. Because it's happening in California, it is big money. State and federal taxpayers are on the hook for tens of millions of dollars every single year.
Investigative correspondent Drew Griffin has this report.
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DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT: Mr. Iluono, Drew Griffin with CNN. How are you?
George Iluono has run a taxpayer funded drug rehab business in southern California for the past six years, which is surprising because for the last 11 years he has been on a list of people banned from billing Medicaid. Convicted of student loan fraud, George Iluono should never have been allowed to even open this clinic called GB Medical.
GEORGE ILUONO, GB MEDICAL: What's going on?
GRIFFIN: I'm asking you a few questions. You seem to be the center of fraud allegations.
ILUONO: No.
GRIFFIN: you been faking signatures onto sheets of paper and billing the state for the money?
Guess what else? Iluono is facing felony criminal charges for ripping off the state. Allegedly getting paid by taxpayers to rehab drug abusers who weren't even there.
Excuse me, sir, how can you bill the state for clients that don't exist?
Mr. Iluono, just one second, sir.
We never saw Iluono again.
Iluono's drug rehab business here in southern California has been part of the largest Medicaid program in the nation paid for with federal and state dollars. A one-year investigation by CNN and the center for investigative reporting found the rehab portion of that program called drug medical is rife with fraud, has operators who bill the government for made-up clients and often get away with it.
Joy Jarfers (ph) saw plenty of fraud in the nine years she spent working as a supervisor over drug medical.
JOY JARFERS (ph), SUPERVISOR: I believe the word got out that there was easy money to be made in the outpatient drug-free system.
GRIFFIN: How bad is it?
JARFERS (ph): It's bad. It was real bad. I left state service about three years ago, and we would have one provider that would bill for over $1 million in one year that we believe was 100 percent questionable billing.
GRIFFIN: And that one provider was no isolated instance. Over and over we found examples of fraud, not hidden fraud. This was happening in plain sight. For example, George Iluono. 19-year-old Darshea Miles (ph) was only 14 when she went to his rehab center along with her mother and three sisters. It's against the law to pay drug rehab clients, but that apparently didn't stop Iluono. Miles said he paid her and other clients $5 each time they signed in for group counseling so he could charge medical between 28 and $61 per signature.
DARSHAYE MILES, ATTENDED REHAB CLINIC: At first I didn't know it was illegal. I didn't know nothing -- I thought it was just a thing, you're supposed to get paid going there, until people was like, oh, George was like, you got to -- don't speak out loud about the money.
GRIFFIN (voice-over): And what did she do with the $5 given to her by the drug rehab center? She bought drugs.
MILES: We was going just to get the money to buy weed. So my whole thing was like y'all was paying us to get high.
GRIFFIN (voice-over): The day after our interview, the state charged Ilouno and three of his employees at G.B. Medical with grand theft in connection with more than 2,000 phony bills for rehab dating back to 2009. He's pled not guilty. But records show your tax dollars still paid him, even after he was arrested and out on bail.
Ilouno's attorney blamed the billing practices on counselors and employees who were not well-supervised. The attorney says Ilouno was a certified counselor himself who was allowed to bill Medicaid. Despite that, the clinic voluntarily shut down July 1st without explanation.
CNN and the Center for Investigative Reporting reviewed thousands of records in California's Drug Medi-Cal program, including program audits. We analyzed patient billings, even watched clinics undercover to see who was getting treatment and who wasn't.
The result? We found that in the last two fiscal years, half of the nearly $186 million spent for Drug Medi-Cal, about $94 million, went to clinics that had shown questionable billing practices or signs of fraud -- case in point, the man with the cigar, a convicted felon named Alexander Ferdman.
MARSHALL VOGT, LEAD INVESTIGATOR: Ferdman was the organizer.
GRIFFIN (voice-over): 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: A driver of an ice cream truck.
GRIFFIN (voice-over): 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.
GRIFFIN: 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: But 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 insurance 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 -- 15 years ago, what relevance does it have to today?
GRIFFIN: Does the county know about your criminal 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, and I chose a pick up a smaller sentence without and of it because I could have a much worse.
It's -- but there was no fraud and there was no record of it in any way.
It's a very long story.
(CROSSTALK)
GRIFFIN: It's a huge case in Houston, Texas, state-wide, actually.
FERDMAN: Yes. That's what they tried to build it, but -- and that's why they pursued it, but it wasn't what it seems and what they said it was.
GRIFFIN: Could you tell me real quickly how you left Texas and decided to come here and get into this business? How easy or hard was that?
FERDMAN: I don't want to talk about it right now, so...
GRIFFIN (voice-over): With such apparent widespread fraud in the program, former supervisor Joy Jarfors says it's not just taxpayers who are being cheated.
JOY JARFORS, FORMER SUPERVISOR: I'm not a -- the employee any more that has to look at this every day, but I'm a taxpayer that knows that 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)
ANNA COREN, CNN HOST: Well, Drew and his team found even more evidence of mismanagement and fraud. Up next, how some clinics got clients in the door.
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COREN: Well, you just saw how the nation's largest Medicaid program is riddled with fraud. Well, now the State of California is cracking down because of an investigation by CNN and the Center for Investigative Reporting. Well, in part two we uncover how teens who lived in group homes were used to milk the system. Investigative correspondent Drew Griffin continues his report.
(BEGIN VIDEOTAPE)
GRIFFIN (voice-over): 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 with other teens while living in a group home to SoCal Health Services in Riverside, California.
VICTORIA BYERS, FORMER POMONA ALCOHOL AND DRUG RECOVERY CENTER CLIENT: We used to do drug tests to us and we were sent to these classes that would teach us not to do Ecstasy or not to do this drug or whatever.
GRIFFIN (voice-over): 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 (voice-over): 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 SoCal Health Services as well. Mergetch (ph), now in college, says he was also driven in a van each week with other teens from a different group home.
GRIFFIN: You never abused alcohol or prescription drugs or illicit drugs?
MICHAEL MERGETCH (PH), FORMER SOCAL SERVICES CLIENT: Not at all.
GRIFFIN: So all the time you spent there, for three years, 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 at SoCal in Pomona with the same operator. She estimated that 30 percent of the teens didn't have a drug or alcohol issue, so counselors just made them up.
TAMARA SHEARER, FORMER MANAGER, SOCAL ALCOHOL AND DRUG RECOVERY CENTER: It took an audit for me to know how deep it was, how deep of a fraud was going on there.
GRIFFIN (voice-over): Other whistleblowers came forward and claimed that SoCal was committing Drug Medi-Cal fraud by labeling teens with fake addictions.
GRIFFIN: Riverside County officials told us they didn't have an easy way to prove SoCal was making up addictions, but the county pulled the clinic's funds anyway, because so many of its clients were dropping out. That forced SoCal to shut down.
GRIFFIN (voice-over): 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 deficiencies 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 Ejindu wouldn't tell us anything.
GRIFFIN: Mr. Ejindu?
TIM EJINDU, REHAB CLINIC OPERATOR: Yes?
GRIFFIN: Drew Griffin with CNN.
EJINDU: And? Who are you?
GRIFFIN: I just told you, my name is Drew Griffin with CNN.
(CROSSTALK)
EJINDU: OK, well, I don't --
GRIFFIN: Wait a minute now.
(CROSSTALK)
GRIFFIN: Your former employees say that you are billing for the county services you're not providing, sir.
GRIFFIN (voice-over): Ejindu soon left without talking to us.
GRIFFIN: Mr. Ejindu, if you have nothing to hide, why are you taking off?
GRIFFIN (voice-over): 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.
GRIFFIN: 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: No. 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 a client of this --
ASKEW: And still listed as a client.
GRIFFIN (voice-over): She said she confronted Godfrey Nwogene, the operator of Pride.
ASKEW: I told Godfrey, I said, look, I don't know how you want me to bill for clients I don't see or have, and he basically in a nutshell told me, how you think these lights are going to get paid?
GRIFFIN (voice-over): She said he then fired her.
GRIFFIN: Would you describe what you've been through as anything more than just throwing away taxpayers' money? ASKEW: It is -- I -- yes. Just throwing away taxpayers' money.
GRIFFIN: That was in 2009. Regulators have found severe deficiencies at Pride Health Services from 2005 to 2011, including evidence of ghost clients. Two years ago the county uncovered what appeared to be fraudulent 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.
UNIDENTIFIED MALE: OK. We're going to go in.
GRIFFIN (voice-over): So we went in ourselves with hidden cameras.
GRIFFIN: Do you have rehab going on today?
UNIDENTIFIED FEMALE: No. It's Mondays, Tuesdays, Thursdays and Fridays.
GRIFFIN: Mondays, Tuesdays, Thursdays and Fridays. Not Wednesdays?
UNIDENTIFIED FEMALE: (Inaudible).
GRIFFIN: But no group on Wednesdays? Today is Wednesday. There is no group today.
UNIDENTIFIED FEMALE: No.
GRIFFIN (voice-over): 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 the county two years ago that Pride accepted responsibility for deficiencies.
We went looking for Nwogene, seen in this police mug shot, for an unrelated arrest in 2003.
GRIFFIN: Hi, Drew Griffin with CNN, how you doing?
UNIDENTIFIED FEMALE: Hi, how are you doing?
GRIFFIN: Is Godfrey in?
UNIDENTIFIED FEMALE: He's (inaudible).
GRIFFIN: OK.
UNIDENTIFIED FEMALE: Godfrey?
UNIDENTIFIED FEMALE: He's asleep.
UNIDENTIFIED FEMALE: He's actually not here at the moment.
GRIFFIN (voice-over): Pride counselor, Marquita Jones (ph), denied any wrongdoing.
GRIFFIN: What we wanted to ask about an investigation we're doing about ghost patients, people signing names, faking signatures and billing the state and the 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 (voice-over): As we waited for Godfrey Nwogene to show up, employees inside called police.
GRIFFIN: They told us that the boss was coming. We've kind of been camped out here waiting for them to show up.
GRIFFIN (voice-over): Then abruptly shut down for the day.
GRIFFIN: Did he call back and say he's not coming?
GRIFFIN (voice-over): We never heard from anyone at Pride Health Services again.
(END VIDEOTAPE)
COREN: So what's the state's reaction to all of this? Well, you're about to see what happened when Drew Griffin tried to find out.
(COMMERCIAL BREAK) COREN: Welcome back. Well, moments ago, we showed you how taxpayers are being ripped off by some rehab clinics. Well, it took weeks for investigative correspondent Drew Griffin to get an interview with officials. 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.
(BEGIN VIDEOTAPE)
GRIFFIN (voice-over): George Ilouno shouldn't even be in California's drug rehab business.
GRIFFIN: You seem to be at the center of fraud allegations here.
GEORGE ILOUNO, G.B. MEDICAL: No, no, no.
GRIFFIN: Yes.
GRIFFIN (voice-over): 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.
GRIFFIN: Mr. Ejindu?
EJINDU: 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. Well, I don't --
(CROSSTALK)
GRIFFIN: Wait a minute, now. Your former employees say that you are billing for the county services you're not providing, sir.
GRIFFIN (voice-over): 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?
I mean, you have been convicted of a major insurance car crash scheme in Texas.
FERDMAN: I was convicted, but it's not what it seems. GRIFFIN (voice-over): 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.
GRIFFIN: We found billing records for people in jail, one person dead, people who said they didn't need this kind of treatment.
JARFORS: Yes.
GRIFFIN: Clinics closed on a certain day, billing for that certain day.
JARFORS: Yes.
GRIFFIN: None of this surprises you?
JARFORS: No. Not at all. We found all of those things.
GRIFFIN (voice-over): For more than a month now, 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 just ask you -- from you, why?
UNIDENTIFIED FEMALE: That wasn't my decision.
GRIFFIN (voice-over): State health officials in one Sacramento building after another refused to be questioned, including Toby Douglas, who oversees Drug Medi-Cal.
GRIFFIN: Will you make sure to provide a response as to why this widespread fraud is allowed to continue?
GRIFFIN (voice-over): 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.
GRIFFIN: Secretary Dooley?
DIANA DOOLEY, CALIFORNIA SECRETARY OF HEALTH AND HUMAN SERVICES: Yes?
GRIFFIN: Hi, Drew Griffin with CNN.
DOOLEY: Oh, how do you do?
GRIFFIN: Hey, we have been trying to reach you and talk to you 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.
GRIFFIN (voice-over): In an uncomfortable moment, the secretary at first refused to speak.
GRIFFIN: 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 that 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.
GRIFFIN (voice-over): 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 we have. Because we have --
DOOLEY: (Inaudible). 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 are 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 is 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 (voice-over): But that is hardly the end of the story.
DOOLEY: Would you get security for me?
GRIFFIN (voice-over): 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 was 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)
COREN: Well, yesterday the State of California temporarily suspended 46 clinics with 62 satellite counseling sites.
And after this series aired, state officials now say they are putting all necessary resources to fight fraud in the program.
Drew Griffin with that report.
Well, thanks for your company. I'm Anna Coren. "ANTHONY BOURDAIN: PARTS UNKNOWN" is next.
(COMMERCIAL BREAK)
