New York charges Narco Freedom executives in alleged Medicaid fraud scheme

[March 19, 2015]  By Jonathan Stempel

NEW YORK (Reuters) - Leaders of a Bronx nonprofit that provides drug and alcohol treatment to tens of thousands of New Yorkers have been indicted over an alleged scheme to plunder the charity and defraud Medicaid of more than $27 million, New York Attorney General Eric Schneiderman said.

The indictment announced Wednesday expands Schneiderman's criminal case announced last October against Narco Freedom Inc, its founder Alan Brand and his son Jason Brand.

It also adds new criminal charges against the nonprofit's chief executive, Gerald Bethea, Controller Richard Gross, Alan Brand's son Jonathan Brand and employee John Cornachio.

Schneiderman said Narco Freedom cheated Medicaid by submitting claims for excessive services, operating unregulated treatment programs and coercing patients who live in its Freedom Houses to remain in treatment.

The Brands and Cornachio have also been accused of misusing funds to support lavish spending habits, including vehicles such as a Tesla, a Porsche 911 Carrera, a Range Rover and a vintage Corvette.

"Criminal enterprises that use non-profits to steal millions in public funds poison New York's charitable sector," Schneiderman said in a statement.

The defendants face from one to 25 criminal counts each, including enterprise corruption, grand larceny and insurance fraud, Schneiderman said. Narco Freedom faces 18 counts.

Michael Bachner, a lawyer for Alan Brand, said his client "continues to vigorously deny any wrongdoing in connection with these charges, and will be vindicated after trial."

Narco Freedom and a lawyer for the nonprofit did not immediately respond to requests for comment. A lawyer for Bethea could not immediately be identified. Lawyers for the remaining defendants were not immediately available for comment.

Founded in 1971, Narco Freedom provides substance abuse, medical, mental health and social services to more than 36,500 people, including patients and family members, according to its website.

Schneiderman said the charity receives nearly $40 million annually in Medicaid reimbursements.

In October, U.S. Attorney Preet Bharara in Manhattan filed civil charges accusing Narco Freedom of cheating Medicaid through kickbacks.

(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)

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