Steven Proshak was naked and furious when police arrived at his North Hollywood home. His girlfriend, who had called 911 for help, was slumped on the floor.

Proshak yelled expletives at the officers. He told them to get “out of my house” and made obscene threats, court records say.

A Los Angeles jury convicted Proshak of domestic violence in 2011. Earlier this year, a grand jury indicted him on charges of bilking Medicare for unnecessary ambulance rides in an unrelated case.

Now, Proshak has a new battle: He is one of at least 35 drug rehabilitation center operators fighting to get their clinics reinstated to the fraud-ridden Drug Medi-Cal program, California’s publicly funded drug rehabilitation for the poor.

For more than a decade, Steven Proshak has been a leader of Circle of Friends Outpatient Services, a suspended Los Angeles rehab center that is seeking to be reinstated. He was convicted of domestic violence in 2011 and has pleaded not guilty in a pending Medicare fraud case at another business.Facebook.com

State Department of Justice investigators are scrutinizing more than 60 rehab centers referred to them as a result of Rehab Racket, an investigation by The Center for Investigative Reporting and CNN.

A new CIR investigation provides a glimpse of what investigators might now be discovering: Some operators were embroiled in other crimes and controversies for years, even as state authorities continued to send government money to their clinics.

The findings raise the question of whether these illicit sidelines will influence whether providers get the second chances many of them are demanding.

Founders of one clinic that is appealing its suspension were convicted in 2011 after enlisting members of their church to perpetrate a massive medical equipment scam.

Another clinic leader operated for nearly a decade with document falsification and grand theft convictions on her record. Her efforts to turn around a Florida charter school drew sharp criticism in 2012 for fiscal mismanagement and pushing Scientology on children.

A third was the chief executive of a now-suspended Van Nuys rehab center when he was indicted for his role in a $440 million prescription drug trafficking case last year. One center counselor said he traveled to Sacramento as part of the clinic’s effort to fight the suspension.

In a field of controversial rehab clinic providers, Proshak stands out for his brash leadership of one of Los Angeles County’s larger Drug Medi-Cal operations.

Proshak has been a leader of the Circle of Friends Outpatient Services clinic for more than a decade. During that time, he defeated a state Department of Justice fraud probe into the Hollywood-based rehab clinic. More recently, though, the law caught up to him outside of the substance abuse treatment field.

Late in the afternoon on April 22, 2011, two Los Angeles police officers went into Proshak’s home, responding to a woman’s pleas for help. Officers found her lying limp against a hallway door, her mouth open and eyes closed, court records say.

Proshak, naked, flailed his arms and made aggressive gestures toward the officers, according to court filings.

The officers interviewed the woman, who said she came home and found Proshak drunk less than an hour earlier. He had punched her, kicked down the bedroom door, threatened death and choked her, the woman told officers at the time.

At trial, she changed her story, saying her injuries were the result of rough sex. A jury convicted Proshak of domestic violence. He served nearly a year in prison.

Proshak did not return calls after a brief telephone interview in which he identified himself as Circle of Friends’ chief financial officer. Records show that he signed documents as the “individual legally responsible” for the clinic through mid-2011 and lists his job on LinkedIn as its owner.

The ambulance fraud indictment followed last April. Prosecutors allege that from May 2008 to January 2011, chief executive Proshak and two staff members at ProMed Medical Transportation in Gardena submitted more than $5.9 million in false claims to Medicare.

The firm provided Medicare’s most expensive level of ambulance care – with gurneys and constant monitoring by a medical technician – that is intended for people who can’t walk, said Richard Raynor, a Redondo Beach attorney for one defendant in the case. However, prosecutors say ProMed specialized in transporting dialysis patients who could get around on their own, Raynor said.

ProMed staff members tried to justify their hefty bills by avoiding terms like “walk” or “assisted to gurney” to ensure that Medicare would pay their claims, an indictment in the pending case says.

Proshak’s attorney, Elon Berk, said he has pleaded not guilty.

The ambulance probe could have put an earlier end to Proshak’s career as a drug rehab provider. State law allows Medi-Cal authorities to temporarily suspend providers if they are aware of a criminal investigation for fraud or abuse.

But that did not happen. For years, Proshak dodged officials who suspected fraud at his rehab clinic.

A critical 2007 review by the state Department of Alcohol and Drug Programs found that the clinic billed for care by counselors whose timesheets showed they weren’t working and did not always have a medical director on staff, as required.

The Department of Justice opened an investigation, records show, but closed it in 2008 citing a “lack of criminal intent” after Proshak provided documents indicating that a medical director was continuously in place.

Back in business, Circle of Friends employed classic industry tactics to pad its bills, according to former counselor Art Hill.

Under the direction of Proshak, clinic staff created counseling notes for therapy sessions that never happened, Hill said.

“They just wanted quick money,” said Hill, who worked at Circle of Friends from 2009 until he said he was fired in 2011 for client complaints. Hill said those complaints were cooked up by clinic management. Previously, Hill was a counselor at GB Medical Services, where the director pleaded guilty to Medi-Cal fraud. 

Proshak also confronted a county auditor in 2009 in the middle of an unannounced review of Circle of Friends’ records. The audit report says Proshak demanded that the auditor provide a list of charts to be reviewed “or the audit was over.”

The auditor left after photocopying four client charts. When he returned three months later, he discovered that the documents he’d reviewed had been falsified to justify the rehab center’s bills, records show.

County authorities called the matter “directly indicative of a lack of integrity.” Still, they continued paying the rehab center nearly $2 million per year until it was suspended in the wake of the Rehab Racket series.

Arrest in drug smuggling case

Late last year, 23 people were charged after $440 million in prescription drugs were whisked out of the continental United States and shipped to Puerto Rico.

Dimitry Ashbel was the chief executive of a Van Nuys, Calif., drug rehabilitation center in December 2012 when he was indicted for his role in a massive prescription drug trafficking case. He has pleaded not guilty, and the now-suspended rehab center, Community Alcohol and Drug Treatment Foundation, has sought to get its public funding back.About.me

One was Dimitry Ashbel, who since 2004 had been a board member or chief executive of Community Alcohol and Drug Treatment Foundation in Van Nuys. He was indicted on felony charges of conspiracy to commit mail fraud, mail fraud and conspiracy to commit unlicensed distribution.

The ring relied on operatives on both coasts securing cut-rate or expired medications.

From August 2009 to March 2011, Ashbel was part of an L.A.-based group that is accused of selling $34 million in drugs to a Puerto Rico firm. That company then sold the diverted medications to U.S. commercial pharmacies at a big markup and left consumers with questionable drugs, the indictment says.

Two members of the community advisory board for Ashbel’s drug rehab center are pharmacists, records show. But Assistant U.S. Attorney Charles Walsh said there is no evidence that Community Alcohol and Drug Treatment Foundation was linked to the pharmaceutical case.

As the alleged smuggling was going on, Los Angeles County auditors discovered a billing oddity at Ashbel’s clinic: One counselor was listed as leading three group therapy sessions – simultaneously.

A year later, another county review determined that reams of required paperwork were inadequate, lapses that authorities called “chronic.”

Documents filed with California’s Secretary of State show Ashbel at the helm of the clinic through last February. That was more than two months after the drug ring indictment was unsealed, a move that could have alerted state authorities to the fraud allegations against Ashbel.

The indictment could have led to a Drug Medi-Cal suspension and cutoff. The Department of Health Care Services, which would have cut the funds, did not respond to requests for comment on the matter by deadline.    

In May, Ashbel’s attorney told CIR that his client had pleaded not guilty to the pending federal charges related to the drug ring and stepped down from his leadership role at the clinic. The Van Nuys rehab center was suspended during the state’s recent enforcement action.

Church members used in scam

Arms of Grace Humanitarian Services, operating out of a rundown Los Angeles storefront, was not following the rules when county auditors examined its operations in 2005 and 2006.

While keeping clients in the short-term drug rehab program for more than six months requires a doctor’s clearance, keeping them for a year calls for a top county official’s sign-off. The center had no such approval when auditors demanded that the center pay back $74,000 for keeping clients for more than a year and for other overbilling.

By the time the payback demand came in 2010, rehab center leaders Christopher Iruke and Connie Ikpoh had been charged in an unrelated Medicare fraud scheme that prosecutors say went on from 2002 to 2009.

Christopher Iruke (in gray shirt) and Connie Ikpoh (in white shirt) were charged in 2009 and later convicted of federal fraud charges in a Medicare scam. The couple founded and ran a Los Angeles drug rehabilitation center, Arms of Grace Humanitarian Services, which was suspended in recent months in an unrelated state regulatory sweep.Video still courtesy of CNN

Ikpoh and Iruke were pastors at a church that shares the rehab center’s name, Arms of Grace. In the federal case, prosecutors say the couple tapped parishioners to perpetrate a scam that billed the government for motorized wheelchairs prescribed to people who didn’t need them – some of whom were dead.

Federal agents interviewed one wheelchair recipient who was so insistent about his disinterest in a wheelchair that he performed jumping jacks.

Iruke and Ikpoh had worked with marketers who pressed Medicare beneficiaries to accept the chairs, prosecutors alleged. The couple paid $900 wholesale for the chairs but billed Medicare $6,000 for them. They drew $6.7 million in fraudulent reimbursement before they were caught, court records say.

As Iruke and Ikpoh faced sentencing in the case, Ikpoh’s attorney listed her virtues, which included helping widows and orphans in Nigeria and founding the Arms of Grace drug rehab program, “in which they invested a good amount of their time, energy and savings.”

In early 2012, Iruke was sentenced to 15 years in prison while his wife, Ikpoh, faced three years.

As investigators closed in on Iruke and Ikpoh, tax documents show that Alexander Ferdman became the new chief executive in 2008. As the previous operators headed toward prison, the new one already had been there. Ferdman’s 2000 conviction: engaging in organized crime.

Current Arms of Grace Executive Director Raffi Boyadjian said he never met Iruke. He insists Ferdman has not been involved for years, even though documents filed with state and federal authorities list Ferdman as chief executive as recently as May.

Boyadjian said he was shocked when Arms of Grace rehab received a suspension notice from state officials in July. The clinic hadn’t done anything wrong and is appealing, he said.

“We’re waiting,” he said, “until they’re going to give us permission to start again.”

Turning to Scientology

Hanan Islam is fighting to have public funding restored to her Compton, Calif., drug rehabilitation clinic, American Health and Education Clinics. She has been involved in controversies over a mismanaged charter school in Florida and a low-income housing voucher scam in Los Angeles.Facebook.com

Hanan Islam founded a drug rehabilitation center to help Los Angeles teens in 2004, according to her official biography.

Throughout her decadelong tenure at American Health and Education Clinics, authorities seemed to take no note of her criminal history. In the mid-’90s, she had pleaded guilty to a federal charge of providing a fake name on a passport application. She also had been convicted of grand theft for forging a $29,000 check.

In emails, Islam said it would be inappropriate to comment on the investigation of her suspended clinic.

“I am not asking that you not report on matters which are public record or to candy coat my past,” she wrote in an email. “I am asking that your article be focused on the real issue at hand, that is, did our agency comply or substantially comply with the rules and regulations required of it as a public service agency.”

For years, no amount of controversy seemed to hinder her counseling center’s growth.

At the Compton center, she used a detoxification program designed by Church of Scientology founder L. Ron Hubbard, according to the website of Islam’s other Scientology-affiliated organization, World Literacy Crusade. A biography Islam sent to state officials describes her “dry heat sweat therapy” approach to treating teens.

“It’s easy to take a kid, put him in a sauna, sweat out all the drug residue, so that he’s not constantly restimulated and wanting to use drugs,” Islam said in a promotional video for her program.

A county commission charged with inspecting group homes found that one of them was sending its foster children to Islam’s program in 2005. The commissioners went out for a visit and were disturbed by what they saw. 

They noted that the curriculum was not centered on substance abuse treatment but rather the teachings of Scientology, according to the commission’s minutes. Instructors were rude, and the foster children didn’t want to be there, the commissioners reported.

They determined that the program was not “a positive or constructive influence on the children and, indeed, may have a completely opposite affect.” The county told the group home to stop sending its children there.

Islam’s clinic site made news in 2008 when the Los Angeles Times covered a protest there about Section 8 low-income housing vouchers. The news report said about 100 people had demonstrated at the World Literacy Crusade, which is in the same building as the rehab center, after buying vouchers that turned out to be fake.

Taisha Swain told CIR that Islam took her check for about $2,000 for a housing voucher. When she returned to the Compton center, though, she said it was locked and phones went unanswered.

“That was the scam she ran on me,” said Swain, who sued in small claims court but let the case drop when she could not find Islam to serve her with papers.

Public furor also followed Islam’s recent attempt to turn around a taxpayer–funded charter school in Dunedin, Fla. The Tampa Bay Times reported that Islam had drawn criticism for fiscal mismanagement and indoctrinating low-income kids with the tenets of Scientology. By 2012, the local school district had pulled the school’s charter.

At Islam’s Compton counseling center, county auditors discovered in 2009 that notes documenting counseling sessions were written and dated before they took place, a common red flag for false billing. Auditors also noted “chronic deficiencies” in two subsequent reviews.

That didn’t stop the center from drawing a nearly threefold boost in annual funding in 2012 – to more than $1 million. The public money stopped flowing only after the center was suspended during the recent state enforcement.

Islam took her case public, telling Berkeley’s KPFA radio in September that “there is an attack right now on” substance abuse treatment agencies like hers that are being shut down without explanation. She said she planned to meet with state officials to find out how to get funding restored to her counseling center, which she said served about 500 youths.

“When you have the state coming in and shutting these programs down, it’s illegal,” Islam said. “Who is suffering are these children who now have no place to go.”

This story was edited by Amy Pyle and copy edited by Nikki Frick and Christine Lee.

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Christina Jewett

cjewett@revealnews.org

Christina Jewett is a reporter for Reveal, covering labor and workplace issues with a focus on the workers' compensation system. With reporting partner Will Evans and CNN, she exposed widespread fraud and failed government oversight of California’s network of addiction treatment centers for the poor. The stories led to the defunding of more than 200 rehab clinics and changes in state law. The Emmy-nominated series won the 2013 broadcast award from Investigative Reporters and Editors. Jewett – as part of California Watch, a project of The Center for Investigative Reporting – won the 2011 George Polk Award for medical reporting with Lance Williams and Stephen K. Doig. The series exposed outsized rates of rare but lucrative medical conditions at a rapidly growing hospital chain and spurred a federal investigation. She was also a Livingston Award finalist in 2010. Previously, Jewett worked at ProPublica and The Sacramento Bee, where a story she broke about contracting malfeasance led to arrests and convictions. She and a colleague also chronicled jail abuse and medical mistreatment, spurring countywide policy reforms. Those stories were honored with awards from the John Jay College of Criminal Justice and the National Council on Crime and Delinquency. Jewett is based in Sacramento, California.

Will Evans is a senior reporter and producer for Reveal, covering labor and tech. His reporting has prompted government investigations, legislation, reforms and prosecutions. A series on working conditions at Amazon warehouses was a finalist for a Pulitzer Prize and won a Gerald Loeb Award. His work has also won multiple Investigative Reporters and Editors Awards, including for a series on safety problems at Tesla. Other investigations have exposed secret spying at Uber, illegal discrimination in the temp industry and rampant fraud in California's drug rehab system for the poor. Prior to joining The Center for Investigative Reporting in 2005, Evans was a reporter at The Sacramento Bee. He is based in Reveal's Emeryville, California, office.