Fake rehab clinics fleeced 'hundreds of millions,' victimized tribal members, Arizona officials say

  Criminals masquerading as health providers defrauded Arizona taxpayers out of hundreds of millions of dollars and victimized Indigenous people, state officials announced Tuesday.

In what Arizona Attorney General Kris Mayes called a "stunning failure of government," the criminals billed the state for mental health treatment and addiction rehabilitation that never was provided. The money was paid out by the Arizona Health Care Cost Containment System, Arizona's Medicaid program.

In some cases, the treatment was reportedly provided to people who were dead, in jail or who were children. Mayes cited instances where bills were submitted to AHCCCS for services "impossible to render" such as alcohol rehabilitation to a 4-year-old who was not in one of the facilities and did not need treatment.

The criminals operating the fake treatment centers targeted vulnerable Indigenous Arizonans, aggressively recruiting them at places like gas stations, grocery store parking lots and bus stops outside Indian Health Service clinics and taken to fraudulent facilities, tribal and state officials said.

In some cases, the Indigenous people who were targeted had to jump out windows and climb over walls to escape the facilities, which typically were located in the Phoenix area, state officials said.

Mayes, Arizona Gov. Katie Hobbs and representatives of 13 Arizona tribes announced the fraud at a news conference Tuesday morning. The investigation, which involved the FBI and the U.S. Attorney's Office, has resulted in at least 45 indictments by Mayes' office. Mayes said $75 million has been seized or recovered related to the schemes.

"I don't think it is too much to say that this is one of the biggest scandals in the history of the state of Arizona when it comes to our government," Mayes told reporters.

"The human impact of this fraud is the most heartbreaking of all. While these scammers are using random IDs to bill for millions of dollars of services, thousands of Arizonans are in real need. Some have been living in these facilities or homes while not being provided the services they need."

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Advocates: Some missing Indigenous people are victims of phony clinics

Some advocates believe the sham treatment programs are contributing to a growing number of missing Indigenous people, they testified at a legislative Ad Hoc Committee for Missing and Murdered Indigenous Peoples heard testimony last year.

State Sen. Theresa Hatathlie, D-Coal Mine Canyon, introduced Senate Bill 1661 in this legislative session as an attempt to strengthen the admission policies into behavioral health residential facilities and outline more precise guidelines throughout the process.

In testimony to the state Senate Health and Human Services Committee on Feb. 14, she said many of the facilities are "predatory" and "fraudulent."

She told a story about an elderly Navajo man who went into a gas station and begged for help to escape from recruiters who were trying to take him to a treatment center in Phoenix. Such stories are typical, she said, adding that in this case, the situation had a good ending ― employees at the gas station provided help and the man's daughter was able to pick him up. But other individuals have not been as fortunate, the committee heard.

"Overall, there's a huge operation that's going on," Hatathlie testified. "It's very sophisticated, to say the least ... Many of the victims are afraid to come forward."

Navajo Nation first lady Jasmine Blackwater-Nygren told the committee some tribal members are finding themselves in facilities where they are given alcohol and drugs to prevent them from leaving so that the owners of the facilities can rake in government money.

Among other measures in the bill, behavioral health facilities would be required to notify family members of patients admitted for an initial evaluation. Hatathlie's bill would also prohibit behavioral health facilities from transporting a patient unless the patient is sober or has been referred to treatment by an approved provider of a tribal health care program.

Hatathlie testified that one person can bring $7,000 or more per month in government money to the group homes. In some cases, individuals are dying in so-called rehab homes and buried in paupers' graves without their families ever knowing what happened to their loved ones.

"This practice has been going on for years," she said. "It's just now finally coming to light."

FBI warned of 'organizers' targeting Native Americans

Since at least January, the FBI has had an online callout form that seeks "victims who may have been recruited to live in and receive services in group homes (Behavioral Health Residential Facilities) located in Phoenix," between January 2020 and the present.

The FBI callout form says "organizers" are targeting Native Americans to live in group homes under the guise of getting treatment for mental illness and substance abuse, but that often no therapy services are provided, even though the group homes are receiving government funding.

"Organizers frequent community gathering locations such as flea markets, trading posts, and medical centers to pick up clients," and they are finding clients from the Navajo Nation as well as other tribal communities in Arizona, New Mexico, and South Dakota, the callout form says.

Arizona set up a hotline for victims of the fraud. The Navajo Nation is also setting up a command center for families, Ethel Branch, the tribe's attorney general, told reporters on Tuesday.

"We are going to have an on-site emergency operations center here in the Valley," Branch said. "We anticipate large numbers of impacted individuals are Navajo tribal members. So we will be here to receive our relatives and make sure that they are smoothly transitioned into licensed facilities where they will actually receive the services that they believed they would be receiving."

Mayes said her office is prepared to prosecute the perpetrators "to the fullest extent of the law." If there's evidence that operators of the behavioral health facilities were negligent, and in cases where patients died or were raped, "that will also be investigated by the proper law enforcement officials."

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