Eight Indicted in Fraud Case that Alleges $50 Million in Bogus Claims for Student Substance Abuse Counseling

LOS ANGELES – Eight people have been indicted for allegedly participating in a scheme that submitted more than $50 million in fraudulent bills to a California state program for alcohol and drug treatment services for high school and middle school students that, in many instances, were not provided or were provided to students who did not have substance abuse problems.

Six of the defendants who worked at the Long Beach-based Atlantic Health Services (formerly known as Atlantic Recovery Services, or ARS) were arrested this morning by federal authorities.

The indictment, which charges the defendants with health care fraud and aggravated identity theft, alleges that ARS received more than $46 million from California’s Drug Medi-Cal program after ARS submitted false and fraudulent claims for group and individual substance abuse counseling services.

“The defendants named in the indictment are accused of exploiting a program that was set up to help a particularly vulnerable population – young people who are confronting drug and alcohol abuse,” said United States Attorney Eileen M. Decker. “According to the indictment, ARS and its employees engaged in a long-running fraud scheme to steal tens of millions of dollars from a program with limited resources that was designed to help underprivileged youth in recovery. In the process, the defendants and ARS branded many innocent young people as substance abusers and addicts in order to boost enrollment numbers and billings.”

The defendants named in the indictment are:

• Lori Renee Miller, 54, of Lakewood, the program manager at ARS who supervised substance abuse recovery managers and counselors;
• Nguyet Galaz, 41, of Montclair, who oversaw services provided at approximately 11 schools in Los Angeles County;
• Angela Frances Micklo, 56, of Palmdale, who managed counselors at approximately nine schools in Los Angeles County, including several in the Antelope Valley;
• Maribel Navarro, 48, of Pico Rivera, who managed counselors at approximately 10 schools in Los Angeles County;
• Carrenda Jeffery, 64, of the Mid-City District of Los Angeles, who managed counselors at approximately three schools;
• LaLonnie Egans, 57, of Bellflower, who managed counselors at three schools;
• Tina Lynn St. Julian, 51, of Compton, who worked as a counselor at two schools; and
• Shyrie Womack, 33, Egans’ daughter, also of Bellflower, who worked as a counselor at three schools.

Galaz and Micklo are expected to self-surrender in the coming weeks. The six other defendants were taken into custody without incident this morning and are scheduled to be arraigned on the indictment this afternoon in United States District Court.

Today’s arrests are the result of a 40-count indictment that was returned by a federal grand jury on August 26 and unsealed this morning.

The eight defendants are all former employees of ARS, which received contracts to provide substance abuse treatment services through the Drug Medi-Cal program to students in schools in Los Angeles County. The schools included various sites operated by Soledad Enrichment Action, and public schools in Montebello, Bell Gardens, Lakewood, and the Antelope Valley.

ARS allegedly submitted bogus claims for payment to the Drug Medi-Cal program for a decade, according to the indictment. ARS shut down in April 2013, when California suspended payments to the company.

According to the indictment, the claims submitted to the Drug Medi-Cal program were false and fraudulent for a number of reasons, including:

• ARS billed for services provided to students who did not have substance abuse disorders or addictions and therefore did not qualify to receive Drug Medi-Cal services;
• ARS billed for counseling sessions that were not conducted at all;
• ARS billed for counseling services that were not conducted in accordance with Drug Medi-Cal regulations regarding length, number of students, content and setting;
• ARS personnel falsified documents, including treatment plans, group counseling sign-in sheets, progress notes and update logs (which listed the dates and times of counseling sessions); and
• ARS personnel forged student signatures on documents.

“For counselors and supervisors to risk stigmatizing students as substance abusers, as alleged in this case, just to enrich themselves at taxpayer expense is outrageous,” said Special Agent in Charge Christian Schrank, U.S. Department of Health and Human Services, Office of the Inspector General. “This decade-long conspiracy to defraud Medi-Cal while disregarding the true health care needs of children will not be tolerated.”

Previously, 11 other defendants pleaded guilty to health care fraud charges stemming from the ARS scheme. Those defendants are former ARS managers Cathy Fernandez, 53, of Downey; Erin Hoover, 37, of Long Beach; Elizabeth Black, 51, of Long Beach; Helsa Casillas, 44, of El Sereno; and Sandra Lopez, 41, of Huntington Park; and former ARS counselors Tamara Diaz, 45 of East Los Angeles; Margarita Lopez, 40, of Paramount; Irma Talavera, 27, of Paramount; Laura Vasquez, 52, of Pico Rivera; Cindy Leticia Ortiz, 29, of Norwalk; and Arthur Dominguez, 63, of Glendale.

Another defendant – Dr. Leland Whitson, 75, of Redondo Beach, the former Medical/Clinical Director of ARS – previously pleaded guilty to making a false statement affecting a health care program.

The dozen defendants who have already pleaded guilty are pending sentencing by United States District Judge Philip S. Gutierrez.

Each of the eight defendants named in the indictment unsealed today potentially faces decades in federal prison if convicted. For example, if convicted, Miller faces a statutory maximum sentence of 324 years in federal prison.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.

The cases against the 20 defendants are the result of an investigation by the U.S. Department of Health and Human Services, Office of Inspector General; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; and IRS - Criminal Investigation.