San Diego, California-based nonprofit addict-counseling firm Mental Health Systems, Inc. (MHS) may have been making a profit on its annual revenues of $65 million, after all. In May 2006, the San Diego County Health and Human Services Agency asked MHS to reimburse the county $83,278 -- $40,000 alone for fees that top MHS executives charged for personally guaranteeing a $1 million line of credit for the firm. The balance was for other wrongfully billed expenses.
County contract compliance manager Diana Francis asked that the money be returned within one week. Her angst was understandable: two months earlier a state investigation into similar questionable expenses for a state prison therapy program resulted in MHS returning $61,000 to the state of California. Moreover, San Diego County had cited MHS for improper billing (including padding hours) for the past three years.
MHS?s board of directors had approved the loan guarantee fee, in the form of a $1,208 payment per month to MHS executives William Eastwood and William Mead. Having to pay expenses up front while waiting long periods for government reimbursement on its contracts, asset-poor MHS couldn?t qualify for the needed credit, so Eastwood and Mead put up their homes as collateral for a credit line. Critics called this practice a ?conflict of interest? for the $167,000 per year Eastwood.
But this purported self-sacrifice for the firm was not well received by the County. The San Diego Union-Tribune obtained public records showing MHS?s billing to be deficient in every one of its 23 program audits over a three-year period. In addition, MHS had failed to meet background checks on its employees, and continued to employ over 100 who should have been disqualified. Overbilling was another consistent complaint. Eastwood countered that with 12,000 daily patients, some errors were inevitable.
In an audit of MHS?s state prison drug-addiction counseling contracts, testimony was forthcoming that MHS used end-of-year funds to buy cars.
Eastwood claimed that purchasing cars for case-managers instead of paying them 32 cents per mile ?saved the state a considerable amount of money.? MHS was also castigated by the State Legislature for ?outrageous? spending of $322,000 (rather than returning this excess to the state) on musical instruments, cars and expensive furniture during the 2001 and 2002 fiscal years.
Sources: San Diego Union-Tribune, San Francisco Chronicle, North County Times.
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