A purportedly non-profit organization run by a father-and-son team that operated methadone clinics and so-called “sober houses” across New York City faced indictments in October 2014 for stealing millions of dollars in public funds and fraudulent insurance claims.
Alan Brand, 64, and his son Jason, 35, who ran Narco Freedom – a drug rehab empire generating over $44 million in annual revenue – were arrested for allegedly using the money to buy flashy cars and luxury homes on the sunny beaches of Long Island and Florida.
Conditions at the sober houses, also known as three-quarter houses, rented by the Brands to more than 500 recovering addicts and alcoholics at any given time – many of them recently released from prison – were reportedly abysmal. [See: PLN, May 2014, p.1].
On March 18, 2015, New York Attorney General Eric Schneiderman issued a superseding indictment that expanded on the initial charges and widened the number of indictments to include Narco Freedom’s then-CEO, Gerald Bethea, and controller, Richard Gross.
Alan and Jason Brand were also charged with a wide array of new offenses – including grand larceny, enterprise corruption, insurance fraud, commercial bribe receiving, violations of kickback law, conspiracy and money laundering.
Both Narco Freedom and DASO Development (a construction company owned by Jason Brand) were charged under the superseding indictment; charges leveled against the two entities included grand larceny, enterprise corruption, insurance fraud and conspiracy.
Another of Alan Brand’s sons, Jonathan Brand, as well as John Cornachio, described in a press release as being the brother of one of Alan Brand’s business partners, were charged with larceny in a separate indictment.
The March 2015 indictments essentially alleged that Narco Freedom was an organized crime ring and that the organization, its officers and certain associates were engaged in a scheme whereby the non-profit was used as a vehicle to defraud Medicaid to the tune of $27 million, and channel Narco Freedom’s revenue to those involved in the scheme.
According to materials released by the New York Attorney General’s Office, Narco Freedom violated patients’ rights, forced residents in three-quarter houses to engage in excessive and restrictive treatment, and provided substandard housing. The AG’s office was authorized by a state court to freeze $33 million in assets belonging to the defendants.
Aside from the Medicaid fraud charges, or those arising from the central alleged scheme, the indicted defendants were also accused of using the companies in money laundering schemes; accepting payments for no-show jobs; and taking kickbacks from real estate developers in exchange for placing Narco Freedom facilities on the developers’ properties.
In October 2014, the U.S. Attorney for the Southern District of New York, working in concert with the U.S. Department of Health and Human Services’ Office of the Inspector General, filed a civil complaint against Alan Brand, Gerald Bethea, Narco Freedom, Joining Hands Management, Inc., Bernard Rorie and Devorah Haigler. See: United States v. Narco Freedom, U.S.D.C. (S.D. NY), Case No. 1:14-cv-08593-JGK.
One particularly troubling allegation in the complaint was that Narco Freedom and Joining Hands Management (a company owned by Rorie and Haigler) had engaged in a scheme whereby Narco paid kickbacks to Joining Hands in exchange for referrals to its three-quarter houses, and forced Joining Hands’ residents to attend Narco’s outpatient treatment programs. Narco received taxpayer-funded payments for each person who lived in its houses and attended its programs.
The civil complaint also alleged that Narco Freedom, Alan Brand and Bethea engaged in a kickback scheme in which they induced, through the provision of “below-cost housing,” residents of their own three-quarter houses to enroll in Narco Freedom programs. Further, the complaint claimed that Narco Freedom had falsified and backdated medical records in order to defraud Medicaid.
“People motivated solely by personal greed have no business administering to the serious health needs of other New Yorkers,” Schneiderman said after the Brands’ October 2014 arrest.
According to the charges initially filed by the Attorney General’s office, including insurance fraud, money laundering, bribery and grand larceny, the Brands collected a $3.5 million insurance payout to restore and renovate a Narco Freedom office in Brooklyn that was supposedly damaged during a 2009 storm. Alan Brand, however, failed to divulge in his insurance claim that Jason’s construction company, DASO Development, made the repairs.
The DASO transactions were also incorporated into the March 2015 superseding indictment, which alleged that the Narco Freedom-contracted DASO renovation defrauded Arch Insurance, the company insuring the renovation work. According to a statement issued by the Attorney General’s office, Jason Brand had represented to Arch that the renovation work would be conducted by unionized workers, but his company then performed the work using non-union day laborers.
Additionally, as stated in the initial indictment, the Brands allegedly took $600,000 in kickbacks from various developers throughout the city who rented buildings to Narco Freedom, though none of the developers were charged.
At the time of their initial indictment and arrest, the AG’s office seized six of the Brands’ vehicles, including an electric yellow 1969 Corvette, a 2002 Jaguar X and an $80,000 Tesla, as well as several properties, including two mansions on Melville, Long Island and condos in Boynton Beach and Boca Raton, Florida. Their bank accounts were frozen, too.
“The people’s investigation has only just started,” Assistant AG Anne Conklin wrote in court filings in response to the Brands’ request for bail.
The methadone clinics and three-quarter houses run by Narco Freedom brought in about $38 million annually from Medicaid and another $6.3 million a year in state contracts. Yet according to A1 Jazeera America, which had started investigating the Brands’ business practices before their arrests, the properties rented by Narco Freedom have been the subject of numerous complaints by residents due to poor living conditions.
Records from New York’s Department of Buildings (DOB) show multiple complaints since 2012 at Narco Freedom’s House 12 in Brooklyn, including complaints about insufficient handicap access, the lack of a secondary exit in case of fire and the illegal conversion of a commercial building. Most of the complaints were reportedly closed because DOB inspectors were not granted access to conduct an inspection.
At another Narco Freedom property near House 12, residents complained of “exploded” ceilings due to water leaks and a rotten mold smell that forced the building’s maintenance woman to wear a face mask at the house.
Meanwhile, a May 2014 audit by the New York State Office of the Medicaid Inspector General revealed that Narco Freedom owed as much as $1.3 million in overbillings and had already been ordered to pay over $787,000.
Alan Brand was released from jail after posting a $225,000 bond, while Jason was released on $178,000 bail. They each face up to 25 years in prison and the criminal charges against them remain pending.
In response to the civil action filed by the U.S. Attorney’s Office, a federal judge appointed a Temporary Receiver and granted the government’s motion for a preliminary injunction that enjoined Narco Freedom from conditioning residence in its houses upon attendance at Narco Freedom treatment programs. The district court also approved a plan in September 2015 to close all 18 of Narco Freedom’s houses and transfer residents to facilities operated by two other treatment providers.
“Narco Freedom defrauded the government and profited from the exploitation of people most in need of their help,” said Manhattan U.S. Attorney Preet Bharara. “Enjoining Narco Freedom from continuing to engage in the kickback scheme and transitioning its clinics and houses to other providers will provide this vulnerable population with the continuity of care and housing they sorely need.”
The U.S. Attorney’s civil case was dismissed in May 2016; during the litigation, the court ordered the payment of more than $1.23 million in attorney fees and fees for the Temporary Receiver, plus costs, from Narco Freedom’s assets.
On May 3, 2016, Bharara’s office announced that federal officials had filed suit against Alan Brand, Narco Freedom, Joining Hands Management, Gerald Bethea, Bernard Rorie and Devorah Haigler, alleging fraudulent Medicaid billing schemes “premised upon illegal kickbacks, or that were based on false and fraudulent medical records.”
“Having already disrupted Narco Freedom’s fraud and taken steps to protect hundreds whose housing was put at risk by kickbacks, we now bring this follow-on action to recover the funds fraudulently taken from federal healthcare programs and to hold alleged wrongdoers accountable,” Bharara said in a statement.
Sources: New York Post, New York Daily News, www.america.aljazeera.com, www.justice.gov, www.ag.ny.gov
As a digital subscriber to Prison Legal News, you can access full text and downloads for this and other premium content.
Already a subscriber? Login
Related legal case
United States v. Narco Freedom
|U.S.D.C. (S.D. NY), Case No. 1:14-cv-08593-JGK