Rehab Funds - Goretti photo

The offices of Goretti Health Services were in this building in Lawndale, Calif. The drug rehabilitation clinic’s Drug Medi-Cal contract was canceled in 2008, but it kept itself afloat with a second taxpayer-funded program, receiving 0,000 in federal Access to Recovery grants.Richard Hartog/For The Center for Investigative Reporting

Days after a Los Angeles County inspector identified possible forgery in the files of a small drug rehabilitation center, she received a hand-delivered letter expressing the clinic’s “profound gratitude.”

Inside was $1,000.

The county labeled it a bribe and dropped its contract with Goretti Health Services in 2008, records show. State investigators sent to check things out confirmed that a clinic leader had handed the inspector the cash.

But with its Drug Medi-Cal contract canceled, the Lawndale clinic kept itself afloat with a second taxpayer-funded program, receiving $380,000 in federal Access to Recovery grants.

The government funds are controlled by two different divisions of the same state department – housed in the same Sacramento building. One division is on the third floor; the other is on the fourth.

A recent series of reports by The Center for Investigative Reporting and CNN uncovered widespread fraud and regulatory breakdowns in the Drug Medi-Cal program, California’s publicly funded drug rehabilitation for the poor.

But the flow of drug rehab money to Goretti Health Services points to another problem. It shows what can happen when two bureaucracies overseeing many of the same rehab centers fail to compare notes.

Other rehab centers have taken advantage of similar communication gaps, CIR has found.

In all, state authorities in charge of the federal Access to Recovery funds have sent nearly $1.5 million to 11 rehab centers where Los Angeles County had documented questionable billing. Six of them were shut down in a recent sweep of clinic suspensions spurred by the CIR and CNN investigation.

The latest revelations about problems extending beyond the Drug Medi-Cal program alarmed lawmakers of both major parties.

Assemblyman Dr. Richard Pan, a Sacramento Democrat, convened a September legislative hearing examining state oversight of the rehab clinics. Shown documentation of the bribery incident, he asked: “How could that happen?’”

“Clearly, we need to catch fraud,” Pan said. “And when we catch it, we don’t want them to have an opportunity to defraud in other places as well.”

The issue provides “a whole new level of outrage,” state Sen. Joel Anderson, a Republican whose district includes part of the Inland Empire, said in a statement. Anderson, the Senate Health Committee’s vice chairman, is pushing for the Senate to hold more oversight hearings on Drug Medi-Cal.

The oversight breakdowns resulted in troubled clinics retaining their state certification, a seal of approval that allows storefront counseling centers to continue to qualify for public funds.

The state Department of Health Care Services confirmed in a seven-page statement that communication lapses were the reason public money went to providers that had been cut off in Los Angeles.

The department terminated Goretti after receiving inquiries from CIR. It said providers suspended from Drug Medi-Cal will be cut from the Access to Recovery program. And it listed communication improvements it is putting in place, including routine information sharing between counties and state divisions.

The department earlier this year absorbed staff and duties of the state Department of Alcohol and Drug Programs, which had run Access to Recovery for nine years.

“As we move forward, the strong policies we establish today will help protect the program from abuse tomorrow,” department spokesman Norman Williams said in a statement.

Since 2004, California has been issued $50 million in federal Access to Recovery funds, designed to reach teens and young veterans by supporting existing community- and faith-based organizations. Currently, grant funding goes to counseling services primarily in Los Angeles County, but also in Sacramento, Butte, Shasta and Tehama counties.

The Substance Abuse and Mental Health Services Administration, the federal agency that administers the grant program, declined to comment or provide a report it commissioned to evaluate the Access to Recovery program.

Federal and state authorities are grappling with more problems: No Access to Recovery provider, exemplary or otherwise, has been paid since June because of glitches with the program’s move between state departments.

Hand-delivered cash

In early 2008, Goretti Health Services was seeking a funding increase. But Los Angeles County authorities were moving in another direction.

The rehab center was launched in 2002 in part by Japhet Ifejoku, who currently is wanted by the state Department of Justice for alleged Medi-Cal fraud at another rehab clinic. Clinic leaders still at the helm today are Nigerian immigrants and brothers, Executive Director Richard Young Nzenwa and President Richard Bede Nzenwa.  

Funded by Drug Medi-Cal, the clinic drew $1 million in taxpayer dollars from 2005 to 2008. Records show it began performing poorly on government audits in 2006.

During a three-day inspection in February 2008, county auditor Antonne Moore discovered that client signatures in medical charts didn’t match signatures on session sign-in sheets. Moore also found that Goretti had documented group therapy sessions conducted by counselors during hours when time cards indicated the counselors weren’t working.

One week later, Goretti business manager Abdel “Charles” Alhassan hand-delivered a letter to Moore’s office in Alhambra, according to a Los Angeles County auditor-controller review. Sent by clinic leader Richard B. Nzenwa, the letter thanked the auditor for “invaluable … guidance,” the review says. It brimmed with cash.

A man who identified himself as Goretti Executive Director Richard Young Nzenwa told CIR in a telephone interview that the cash was a birthday present to the auditor. County authorities “just took it the wrong way,” he said.

Moore referred reporters to the Los Angeles County Department of Public Health, which declined an interview without explanation.

County staff whisked the bills into a safe and asked the controller’s office to investigate. Goretti leaders told auditors that their board had approved the gift and that such gifts of appreciation are customary in their culture.

The county concluded the gift was an attempt to influence that “constitutes a bribe” and in June 2008 did not renew its contract with Goretti.

It also referred the matter to the Los Angeles County district attorney’s office, saying “it appears that Goretti executives violated” state law against bribery. A DA spokeswoman said her office reviewed the matter but filed no charges. She offered no explanation.

Records obtained by CIR show that inspectors from the state Department of Alcohol and Drug Programs also confirmed the alleged bribe, calling it an isolated occurrence. They recommended against any additional state Drug Medi-Cal funding. But the state took no steps to strip Goretti of the certification it relied on to continue collecting hundreds of thousands in taxpayer money through federal Access to Recovery funds.

State authorities confirmed that one unit of the oversight department had known about the bribe since 2008, but it did not relay the information to Access to Recovery officials, who found out this year after inquiries from CIR.

In a September interview, Richard Young Nzenwa said he hoped the center would get its Drug Medi-Cal funding restored.

“We’re just barely making it,” he said of his after-school counseling business for 12- to 20-year-olds. The clinic, he said, is “hoping we can get back in (to Drug Medi-Cal), get a contract and do good by the city.”

Public money keeps coming

Until the recent state enforcement blitz spurred by the CIR and CNN investigation, records show that at least eight substance abuse providers that had drawn scrutiny for questionable billing practices continued to draw money from both the federal grant fund and Drug Medi-Cal.

Among them: a San Fernando Valley counseling center that billed for one-on-one crisis counseling sessions that clients said never occurred. Another Los Angeles center listed on-site care for a client who didn’t show up – he was on house arrest.

To the great frustration of Carol Silva, her former employer remains eligible to get money from both funding streams.

Silva was the clinical director at Reseda Substance Abuse Treatment Center for four months ending in 2009. She alleged in a wage lawsuit that the clinic’s top manager falsified client signatures. Silva also claimed that a colleague submitted false documentation and attempted to bill for a 2009 counseling session involving Access to Recovery clients that never happened. The manager “approved this behavior,” Silva’s lawsuit says.

Outraged, she said she reported the problem to grant program manager Susan Heavens in Sacramento.

Rehab Funds - Carol Silva photo

Carol Silva was the clinical director at Reseda Substance Abuse Treatment Center for four months ending in 2009. She says she reported that the clinic was falsifying documents to state officials, but the Department of Health Care Services says it has no record of the complaint.Richard Hartog/For The Center for Investigative Reporting

“The bottom line is the state had to have been aware of this,” Silva said in a telephone interview. Reseda Substance Abuse Treatment Center, she added, “is not doing what they should be doing. I know that.”

Williams, the state health department spokesman, said officials have no record of Silva complaining about Reseda.

Reseda also was singled out in a March 2010 Los Angeles County audit because four clients’ signatures varied noticeably on documents needed to justify billing – a signal of possible forgery.

Since that county audit, Reseda has drawn more than $100,000 from Access to Recovery and nearly $1.3 million in Drug Medi-Cal funds.

Reseda Executive Director Luba Shapiro denied Silva’s claims about falsified documents. “We were audited numerous times then and now, and this never was an issue,” Shapiro said.

Shapiro said the audit finding about mismatched signatures was the result of teens signing into group counseling for each other and was resolved with the county. She also said she has stopped billing the Access to Recovery program in recent months because it is “more headache than results.”

Access to Recovery plays an important role in getting drug-using teens back on the right path, said Dario Ghio, a registered therapist intern and founder of Harbor Area Substance Abuse Treatment Center in San Pedro – but only if the programs are legitimate.

The federal grant program relies on peer reviews by providers who recommend how much counseling clients get. In that role, Ghio says he has seen teens left in a room with pizza or signed up for care even if they never used alcohol or drugs.

“What it’s doing is it’s taking dollars … literally out of a system that could be providing services to people,” Ghio said. “If you have someone billing for ghost clients, stealing from the system, there might be people who need the services who don’t get them.”

Canceled county contracts don’t stop federal funds

Access to Recovery funding provided a second life to two other clinic operators who had been cut off by L.A. County regulators for phantom billing, the CIR investigation found.

In both cases, state officials overlooked public documents detailing deceptive practices. The state renewed the programs’ certifications, which would turn out to be worth hundreds of thousands of dollars.

Williams, the state spokesman, acknowledged L.A. County authorities had relayed key facts about the errant programs to state officials, but the information was not shared with Access to Recovery staff for years.

Former Pittsburgh Steelers wide receiver Charles Lockett ran Open Arms Men’s Center, where problems emerged in 2009. County regulators caught the center billing for counseling clients even though the clinic’s own notes called them a “no show.”

Los Angeles authorities gave the program another chance.

Then, during a January 2011 inspection, an auditor photocopied nine client charts that were missing required signatures. When the auditor returned two weeks later, the facility’s copies of the same documents bore all needed signatures, dated months earlier. Lockett told auditors that it was a staff oversight “due to financial hardship.”

Lockett did not return calls or emails seeking comment.

The county terminated Open Arms Men’s Center on April 5, 2011, and notified state officials. But the center went on to receive federal Access to Recovery funds for nearly two years.

The state halted that funding earlier this year after finding out about the county’s termination and conducting a site visit.

State officials also acknowledged that they were notified of L.A. County’s September 2009 decision to cut off Lunns Hope Corporation in Inglewood.

Among the issues: A client said she had no substance abuse problems and went to Lunns Hope only to fill out forms. Still, Lunns billed the county for 18 counseling sessions with the woman over two months.

Louis Nwoke, the program’s executive director, blamed the auditors’ scrutiny on a disgruntled employee. He also said his program later stopped receiving any government funding because of a state worker’s personal vendetta against him.

Nearly three years after the county cut ties with Lunns, state officials who oversee the federal fund noted “red flags” with the firm’s billing and performed a July 2012 audit. They discovered $24,500 in overbilling for transportation, such as claims for driving 22 miles when only two miles were traveled.

The state pulled Lunns Hope’s funding in mid-2012.

It didn’t have to take that long. After the county cut them off, both Lunns and Open Arms had filled out Access to Recovery applications asking if their “certification or licensure (has) been suspended, revoked, or fined by ADP (the state Department of Alcohol and Drug Programs) or other licensing entity for any reason.”

 Both checked “no” and, empowered by uneven oversight, continued collecting federal money – a combined $340,000 in all.

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

Correction: An earlier version of the story misstated Dario Ghio’s professional status.

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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 was a senior reporter and producer for Reveal, covering labor and tech. His reporting 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 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.