NYC 'Sober Homes' Operators Accused of Fraud


The operators of Narco Freedom, a New York City non-profit that provides substance abuse treatment and so-called three-quarter housing, were indicted Wednesday in Bronx (N.Y) Supreme Court.

Prosecutors allege Alan Brand received kickbacks from a Bronx landlord and accuse him and his son, Jason Brand, of using the proceeds to “fund a lavish lifestyle.” They're also both accused of bilking an insurance company out of $3.5 million.

The two men are charged with money laundering, insurance fraud, commercial bribe receiving and two counts of grand larceny. They each face between eight and 25 years in prison.

The non-profit, receives an average of $38 million in Medicaid reimbursements each year, according to court documents.

Narco Freedom was the focus of a yearlong investigation by The Crime Report into New York City three-quarter (also known as “sober”) housing — the largely unregulated system of group homes that has emerged in cities throughout the country, often catering to poor people struggling with substance abuse, homelessness, or returning from prison.

The investigation, published in July 2013, revealed that real estate developers partnered with Narco Freedom to turn dilapidated buildings into a sober home network rife with tenant complaints and official violations.

In a statement released Wednesday, New York Attorney General Eric Schneiderman said the state's investigation, which began in 2013, found that the Brands funneled Narco Freedom funds into luxury items such as Florida condos, Long Island mansions and expensive cars.

Photo by Graham Kates

Narco Freedom’s Bronx, N.Y. headquarters. (Image by Graham Kates)

The state Attorney General's office received an order to seize six luxury cars and freeze the assets of multiple properties, including Narco Freedom's Bronx headquarters.

Prosecutors identified six sober homes operated by Narco Freedom, which was founded in 1971, but records and interviews with tenants and employees confirm that the organization has been affiliated with at least 20 homes, according to The Crime Report's investigation.

In a bail application filed Wednesday, prosecutors detailed an alleged kickback scheme run by the Brands.

“Since prior to 2009, Alan Brand, in exchange for the continued business of Narco, solicited a monthly $13,000 kickback from (a) landlord,” prosecutors wrote. They allege the landlord paid Brand more than $600,000.

The Narco Freedom facilities are among hundreds that bring in millions of dollars each year in taxpayer funds for landlords and operators, largely through welfare, Medicaid and disability payments.

“New York has the greatest nonprofit sector in the nation, but a case like this reminds us of the need to remain vigilant and strengthen our oversight of the industry,” Attorney General Schneiderman said in the statement released yesterday.

Housing and tenants' advocates estimate there are more than 300 of these buildings in New York alone. Most are located in the city's poorest neighborhoods, and many have been slapped with violations of city code.

In a study of the New York City homes, published in October 2013 by the Prisoner Reentry Institute (PRI) at the John Jay College of Criminal Justice, tenants “described small rooms with two to four bunk beds accommodating four to eight people. In some cases, bunk beds are placed in living rooms, hallways, and even kitchens.”

Ann Jacobs, Director of PRI, said in an interview yesterday that the charges against the Brands might mean authorities have begun to pay closer attention to the sober home industry.

“It's absolutely an indication that they're being watched, the attorney general is pretty astute about the many different angles that these operators can use,” Jacobs said.

No city or state agency is currently responsible for licensing or overseeing the homes, creating a system in which some houses institute rules that advocates say violates tenant laws and patient rights.

Photo via New York State Attorney General

One of six luxury cars seized by law enforcement. (Image via via New York State Attorney General)

But Jacobs and other advocates say officials should be careful about how they regulate the homes. The solution, Jacobs warns, shouldn't be to close the buildings wholesale, leaving residents with nowhere to live.

Matthew Main, an attorney with MFY Legal Services, which has represented tenants who were unlawfully evicted from Narco Freedom housing, says the charges against the Brands should be seen as a call to develop a better option for vulnerable residents.

“We should think about very long term sustainable housing,” Main told The Crime Report. “Just because you're poor doesn't mean you need to live in a facility that requires you to attend drug counseling.”

Graham Kates is Deputy Managing Editor of The Crime Report. He can be found on Twitter, @GrahamKates. He welcomes comments from readers.

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