Rehab Racket - Atlantic Recovery Services photo

Atlantic Recovery Services, one of the biggest Drug Medi-Cal counseling clinics in Los Angeles County, has long been suspected of wrongdoing.Joanna Lin/CIR

A Southern California physician pleaded guilty to falsely identifying teenagers as drug or alcohol addicts to justify millions in bills to the government’s rehabilitation program for the poor.

Dr. Leland Whitson’s June plea is the most significant so far in the U.S. Department of Justice prosecution of Long Beach-based Atlantic Recovery Services, one of the biggest Drug Medi-Cal counseling clinics in Los Angeles County.

An investigation by The Center for Investigative Reporting and CNN last year found that Atlantic and dozens of similar centers had shown signs of fraud or questionable billing while collecting $94 million from the state and federal government in recent years. Rehab centers in storefronts from Compton to Pomona routinely documented counseling sessions that never happened or bribed clients with cash or cigarettes to attend.

Atlantic’s addiction counselors met with students at middle and high schools throughout Los Angeles, serving 770 clients before it was shut down last year. Federal prosecutors say Whitson certified that teens needed substance abuse treatment even if they had used drugs or alcohol only occasionally or long ago.

The Redondo Beach doctor had been medical director since 1999 and was responsible for $46 million in fraudulent claims, prosecutors said. Whitson referred questions to his attorney, who declined to comment.

Four Atlantic counselors also pleaded guilty to fraud last year. They were accused of spending only a half-hour twice a week with students while fabricating the paperwork to bill for up to five 90-minute counseling sessions each week.

The ruse had long been in effect when Los Angeles County Supervisor Mark Ridley-Thomas appointed Atlantic’s chief executive, a campaign contributor, to a county commission on alcohol and drugs.

State officials responded to the CIR/CNN series by freezing funding to 235 clinic sites, admitting to inadequate oversight in a legislative hearing and creating new rules governing the rehab program.

Authorities also pledged to rein in physicians who certify that addiction treatment is medically necessary even though they rarely – if ever – meet their clients.

Critics of the troubled rehab program have long decried the clinics’ tendency to label low-income youth as addicts solely to justify billing the government.

“I think it’s just unconscionable that you take a teenager from a high school and start billing for them; you have given them a rap sheet,” said Joy Jarfors, a former manager with the state Department of Alcohol and Drug Programs, who tried but failed to crack down on fraud.

Whitson also signed off on counseling at nine other L.A. County clinics that, together with Atlantic, drew $10 million in funding for the fiscal year ending in 2013, according to county records. He had more than 1,200 clients. Like Atlantic, several of the clinics have been suspended amid fraud investigations.

Whitson’s sentencing is scheduled for January 2015.

A state Department of Health Care Services audit of the Drug Medi-Cal program released in January concluded that the system makes it easy for unethical doctors to “bypass the medical oversight intent” and sign sham documents. A spokeswoman for the department said officials are working on rules to change that.

At Atlantic, prosecutors stated that Margarita Lopez, Tamara Diaz, Cindy Leticia Ortiz and Arthur Dominguez enrolled students in substance abuse counseling even if they didn’t have an addiction problem. At the direction of their supervisors, they then fabricated counseling notes to justify billing the government for sessions that never happened. Dominguez, for example, was instructed to improve his fake paperwork if it appeared to be copied and pasted. 

Students at charter schools in Los Angeles County and in the Montebello, Long Beach, Los Angeles and Lynwood unified school districts were enrolled in Atlantic’s rehab program, according to county records. Three of the counselors worked with teens at Soledad Enrichment Action charter schools for struggling students.

Assistant U.S. Attorney Cathy Ostiller said the investigation into Atlantic is ongoing.

Richard Mark Ciampa was chief executive and president of Atlantic until state officials shut it down amid the criminal investigation in April 2013. The program had drawn $5 million annually in state and federal funding in recent years.

In 2012, Ridley-Thomas, the L.A. County supervisor, appointed Ciampa to a county advisory commission on alcohol and drugs. Ciampa had donated $1,500 to Ridley-Thomas’ campaign the previous year, $1,000 a month before his 2012 appointment and $500 later that year.

Ridley-Thomas’ top health deputy, Yolanda Vera, told CIR in an earlier interview that the money had nothing to do with the appointment. “I had no idea of the contributions,” she said.

Vera said county supervisors have to fill hundreds of spots on various commissions, and Ciampa’s appointment was based on his interest in the post and the fact that he was a rehab provider. “It was pretty pro forma,” she said.

Ridley-Thomas removed Ciampa from the commission last July after learning that he was under investigation and his clinic had been suspended by the state.

Records show that Atlantic and Ciampa have long been suspected of wrongdoing. A 2009 complaint lodged with the state Department of Alcohol and Drug Programs said Atlantic counselors were instructed to fabricate counseling sessions that never happened. When counselors complained about it, the document says, Ciampa or another Atlantic manager fired them.

Efforts to reach Ciampa were unsuccessful.

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

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Christina Jewett

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.