Doors Stay Open on Family Rehab Empire Indicted for Fraud

Doors Stay Open on Family Rehab Empire Indicted for Fraud

By Neville Elder 03/31/15

Narco Freedom was indicted by the New York State Attorney's Office last year for milking approximately $40 million from Medicaid. But they're still open.

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Last year, Narco Freedom was indicted by the New York State Attorney’s Office for milking approximately $40 million from Medicaid. On March 18 of this year, police re-arrested the father-son team who ran the nonprofit rehab chain in New York. Adding further charges and prosecutions, Attorney General Eric T. Schneiderman said, "My office will not stop in our efforts to prosecute those who abuse that trust and rip off taxpayers." But the rehabs will still stay open.

Alan and Jason Brand, the drug-treatment moguls behind the rehab empire, were only allowed to continue because of alleged complicity by authorities that allowed Narco Freedom to become too big to fail. Shutting down their programs now could put thousands of addicts out on city streets, jeopardizing their recovery.

Narco Freedom holds $6.3 million in New York state contracts to administer drug and alcohol rehabilitation treatment programs to New York's most vulnerable and impoverished addicts in recovery—the homeless and ex-convicts returning to the community. The Brands allegedly channeled government funds to "for profit" side businesses, such as the arrangement made with property owner/contractor Jay Deutchman. His buildings were often converted into ¾ houses and leased to Narco Freedom. Deutchman then paid $13,000 a month to Alan Brand. Allegedly, those funds never made it into the nonprofit's accounts. 

Regulators, the Office of Alcoholism and Substance Abuse Services (OASAS), haven’t closed the so-called "Freedom Homes" or shut down the treatment facilities. Narco Freedom provides 10% of the methadone for recovering heroin addicts in New York City, so canceling the state’s contracts with the company could leave thousands of addicts and court-mandated parolees without either treatment or housing.

It is a weird perfect storm of misery for patients of Narco Freedom. New York State (NYS) and New York City (NYC), unable to shoulder the burden of administering its own treatment programs and desperately oversubscribed halfway houses, started relying on ¾ houses run by the private sector in the early 2000s. It became commonplace to send those leaving prison to Narco Freedom in order to secure housing. As these properties offered no clinical care they fell outside the remit of OASAS, and as private housing, remained unregulated or overseen by any city or state agency.

Interviews with residents by thecrimereport.org and NBC have described rodent and bedbug infestations. A report reveals code violations of mold, no hot water, and other conditions that made living conditions beyond squalid.

Apparently, residents were trapped in these substandard places. Some were court-ordered and others, despite technically being allowed to choose any treatment program, were coerced into sitting in Narco Freedom programs for fear of losing the roofs over their head. This is where Narco Freedom made their money. The Housing Resources Authority (HRA) pays the $215 rent per month but in order to stay a resident they must take 3-7 sessions a week from a Narco Freedom treatment program, which nets the company $84 per session. Federal charges say this amounts to a violation of the "anti-kickback statute."

The Crime Report website reports that OASAS complained about this in a 2011 letter to the executive director of CIS Counseling Services (one of Jay Deutchman’s properties and part of the network of sober homes linked to Narco Freedom). In the letter Charles Monson, OASAS associate commissioner for the Division of Quality Assurance and Performance Improvement pointed to:

“The practice of mandatory outpatient treatment as a requirement for admission into a sober home residence. . .This practice violates Patients' Rights regulations,” the letter continued, “It should be immediately ceased.”

The CIS Counseling building closed soon after, but it was a model adopted throughout the network of sober houses associated with Narco Freedom.

Though OASAS has no power to address housing issues, the Crimereport.org’s investigation found routine performance reviews turned up obvious problems in patients’ treatment. 

“In March 2012 a review of the Narco Freedom program at 250 Grand Concourse in the Bronx, found that patients were not responding to treatment or meeting their defined goals. For example, in 19 of the 20 cases studied, patients had tested positive for illicit drugs twice within three months. Their treatment plans had not been changed to address the continued drug use.” Yet, OASAS recertified the program anyway. 

The squalor in which tenants were allegedly forced to live is in direct contrast to the Brands' lifestyle. In the NYS indictment, prosecutors froze bank accounts, properties in Long Island and Florida, and six cars including a Jaguar and a Corvette. The Brands allegedly paid themselves massive salaries and through the network of for-profit companies, thousands more to themselves and family members. Alan’s son, Jonathan, drove a company Porsche and was paid nearly $100k for essentially a no-show job, according to NYS lawyers.

It is clear from performance reviews, tax filings and court documents and hundreds of associated pieces of information that authorities were concerned about the problems in the Narco Freedom network—so why did it take authorities so long to act? 

Simply put, the authorities in NYS may have relied on Narco Freedom to solve their housing crisis. Thomas Herzog, the Department of Corrections and Community Supervision Deputy Commissioner, testified in federal court that parole regularly sent ex-cons to Narco Freedom to find beds.

Herzog said parole officers knew parolees sent over would subsequently be required to attend Narco Freedom outpatient programs to keep their place in the house even if the parole officer felt another program was more suitable.

"It becomes an issue of last resort for us," said Herzog. "Sometimes, we have to even settle on something that's sub-optimal."

According to court documents, Narco Freedom employees were allowed to visit jails, prisons, and detox programs promising accommodation to those who would become homeless in exchange for attending the treatment programs. Narco Freedom said housing was always a perk and its patients weren’t obligated to stay. But, it stands to reason that if you’ve got nowhere else to live, you’ll put up with the rules for as long as you can.

If the allegations against them prove true, someone should take a hard look at how this was allowed to happen. Perhaps a combination of lack of oversight, and an overburdened and underfunded public system allowed the Brands to swoop in and exploit the poorest and most vulnerable for personal gain. Regardless, a lesson should be learned so this does not happen again.

Thankfully, the bad actors are being picked off one-by-one by the Feds and state prosecutors. Deutchman pleaded guilty to tax fraud, the Brands are no longer officially involved with Narco Freedom and the recent slew of arrests added second son, Jonathan, the current CEO Gerald Bethea, Richard Gross the controller, and another employee, John Cornachio. But, to close the doors on the company could lead to a humanitarian crisis, so for now, the Freedom Houses remain open for business.

Neville Elder is a regular contributor to The Fix. He's also a photographer and writer. Originally from the UK, he's lived in the unfashionable end of Brooklyn for 13 years. He last wrote about the farce of death penalty drugsrock 'n roll recovery and early morning sober raves.

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British born Neville Elder is a writer,photographer and filmmaker. He's been sober since 2006, lived in New York since 2001 and is in no hurry to move back to a Brexited Britain. He writes the odd murder ballad with his band Thee Shambels and teaches photography at the New York Institute of photography. Find him on Linkedin and Twitter.

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