The father and son who ran one of New York's largest drug treatment programs were arrested again this week, along with four other executives, in a widening state probe into the “sober home” providers.
The New York Attorney General's office is accusing former Narco Freedom CEO Alan Brand and son Jason of defrauding Medicaid and syphoning company revenue.
Indictments detail an alleged crime ring headed by the Brands and Narco Freedom's current CEO Gerald Bethea, who was also indicted, along with its controller Richard Gross. Jonathan Brand, another son of Alan Brand, and John Cornachio, the brother of a business partner of Alan Brand, were also charged in a separate indictment.
The defendants face between one and 25 criminal counts each, including enterprise corruption, grand larceny and insurance fraud.
The group, called the “Brand Criminal Enterprise” in court documents, are accused of running a trio of interconnected non-profit substance abuse programs — Narco Freedom, Canarsie A.W.A.R.E. and NRI Group — that became a lynchpin for New York's prisoner re-entry and substance abuse treatment systems.
In a statement to The Crime Report, Michael McKeon, a spokesperson for Narco Freedom, defended the company and Bethea.
“Attorney General Eric Schneiderman’s actions against Narco Freedom and its Executive Director Gerald Bethea were both shocking and outrageous,” McKeon said. “Narco Freedom operates like any other addiction treatment provider, providing appropriate services to its patients under the close watch of several government regulators, and has for decades.”
“We can only assume the AG plans on indicting every operator in this field across New York State,” McKeon said.
The Brands were previously charged on October 22, 2015 by New York Attorney General Eric Schneiderman on criminal charges of fraud and money laundering in connection with the operations of Narco Freedom, a New York City-based nonprofit. Six days later, the federal government also sued Narco Freedom.
Attorneys for Narco Freedom have argued in federal court that, since Alan Brand was removed as CEO last year and replaced with Bethea, the company should not be penalized for Brand's misdeeds.
An investigative report published by The Crime Report and NBC News on January 5, cited all three companies for allegedly exploiting a lack of adequate official oversight for programs that are often the last hope for thousands of troubled individuals caught up in the justice system.
But prosecutors say the defendants also started a slew of companies that allegedly operated with the sole purpose of billing the non-profits — for services such as cleaning, maintenance and car rental — so they could funnel money back to themselves.
Narco Freedom receives nearly $40 million annually in taxpayer-funded Medicaid reimbursement, according to Schneiderman. The company is accused of stealing at least $27 million from Medicaid through a variety of schemes, including providing excessive services, kickbacks and insurance fraud.
“Criminal enterprises that use nonprofits to steal millions in public funds poison New York's charitable sector, which is one of the greatest in the nation,” Schneiderman said in a statement after the indicments were announced March 18.
Narco Freedom is also accused of operating unregulated residential treatment programs, known as “Freedom Houses.”
“In a practice started by Alan Brand and continued by Gerald Bethea, Narco Freedom has linked eligibility to reside in its Freedom Houses to participation in its treatment programs, as a coercive inducement for needy New Yorkers to attend its program,” the Attorney General's office said in the statement Wednesday.
'Freedom House' Beds
The Crime Report and NBC previously reported that Narco Freedom employees were sent into jails, prisons and detox programs to promise the soon-to-be-released a bed in a “Freedom House,” in exchange for attending its treatment programs. At one point, about 1,500 people lived in 21 “Freedom Houses,” mostly multi-story apartment buildings in poor areas.
While marketed as being linked to treatment, the houses offer no clinical care on site; so they were neither licensed nor overseen by any city or state agency, a point which was reiterated in McKeon's statement.
“Narco Freedom’s housing program is just that: a housing program, so to call it an unregulated treatment program is completely false and clearly an attempt to force a narrative that doesn’t exist,” McKeon said.
One agency that came to rely heavily on “Freedom Houses” was New York State parole. In early December, Department of Corrections and Community Supervision Deputy Commissioner Thomas Herzog testified that parole regularly directed those leaving prison to Narco Freedom in order to secure housing.
Herzog testified that parole recommended Narco Freedom even though the department was aware that the houses were potentially violating patient rights regulations designed to ensure patients are free from “undue influence” when choosing a provider.
“It becomes an issue of last resort for us,” said Herzog. “Sometimes we have to even settle on something that's sub-optimal.”
Interviews with residents and city citations reveal that the houses were often mired with violations and dangerous conditions.
In both state and federal cases, the issue of what to do with the 1,500 residents at Freedom Houses has become central to court proceedings.
Officials from New York State’s Office of Alcoholism and Substance Abuse Services (OASAS) has conducted inspections at multiple Narco Freedom facilities to determine if it will be possible to convert them to a different type of housing or appoint a receiver to take over management of the houses.
McKeon said state inspections at Freedom Houses have found “no significant issues.”
“Bully tactics to drive Narco Freedom out of business, or to turn its business over to a favored competitor, simply will not work,” McKeon said.
Graham Kates is deputy managing editor of The Crime Report. He can be found on Twitter, @GrahamKates. He welcomes comments from readers.