Addiction Recovery Care under FBI probe for health care fraud. Lawsuits show a troubled past.

Kentucky’s largest addiction recovery group is being investigated by the FBI for alleged health care fraud, federal officials say.

Since 2008, Addiction Recovery Care (ARC) has been praised by Republicans and Democrats in Frankfort —including Gov. Andy Beshear — for its mission, success and performance in reversing the ever-plaguing addiction crisis in Kentucky.

In his 2024 state of the commonwealth speech, Beshear said Tim Robinson, ARC’s founder, is an “essential partner” in the state’s battle to fight addiction.

With more than 40 treatment centers across the state, ARC is the highest contributor to Kentucky’s distinction of having the most residential treatment beds per capita in the country.

Contacted Tuesday, FBI officials said they could not elaborate on its inquiry.

“As the investigation is ongoing, we are unable to provide additional details. Anyone who believes they have relevant information about Addiction Recovery Care should review and complete the questionnaire at https://forms.fbi.gov/arctips ,” said Katie Anderson.

As the FBI launches its inquiry, the Herald-Leader has found more than a dozen lawsuits filed in federal and state courts with allegations that run counter to ARC’s highly celebrated “crisis to career” model.

No criminal charges have been brought against ARC at this time.

In early August, the FBI put out a questionnaire for former employees and patients as part of its early investigation into the system. The feds said they’re looking for anyone who’s been “victimized by ARC.”

The form asks if the person filling it out was a patient or employee of ARC between 2019 and the present. It also asks if they believe any services provided by ARC were not medically necessary, not adequately rendered or not billed appropriately.

Across Kentucky, and as far away as Florida, former employees and outside businesses have already accused ARC of fraud, negligence, wage theft, tax evasion, and breach of contract, according to court documents analyzed by the Herald-Leader.

Several of these cases have been quietly resolved in court, and some include settlement agreements legally gagging the people involved.

Just as secretive are the inner workings of ARC. One feature requires employees to sign a very restrictive non-disclosure agreement that prohibits them from working at other treatment centers within 60 miles of another — and from talking about their experience.

ARC went as far as to enforce one such agreement in a counter suit against two former employees who accused the company of wage theft.

ARC, with its headquarters in Louisa, is cooperating fully with the FBI’s investigation and continues to serve some of Kentucky’s most vulnerable populations, said Kyle Collier, the group’s communications director.

“We have recently learned that there is a federal investigation into ARC,” he said in an emailed statement.

“As we all know, healthcare is one of the most highly regulated fields in the country, and addiction treatment is among the most highly scrutinized healthcare services. ARC is a trailblazer in the field of addiction services. We are confident in our program and in the services we offer. We, and our legal counsel, are cooperating fully in the investigation.”

Lawsuits tie ARC to negligence, companies guilty of medicaid fraud

A Lexington man filed a civil lawsuit in Fayette County against ARC and other drug-testing companies in 2016, claiming they fraudulently billed his health insurance for over $300,000 in services he never received.

Former ARC patient Steve Baker accused several companies of fraud, negligence and other offenses, alleging his therapy sessions were shorter than promised and not conducted by licensed professionals, according to court documents.

Despite stopping attendance in January 2016, Baker continued to be billed until August that year, he alleged. Court documents said he took his concerns to ARC representatives, but they went ignored.

In tandem with the direct allegations against ARC are the other defendants listed in the suit that work alongside ARC, most of whom have been found guilty in fraudulent billing schemes.

Ronald Coburn, CEO of LabTox, one of the defendants listed in the suit, pleaded guilty to healthcare fraud in 2023, admitting to fraudulent billing practices. Other companies involved in Baker’s suit, like Ameritox and Compliance Advantage, have also faced legal action for similar misconduct.

LabTox allegedly billed Baker $146,161 for their services, according to court documents. The company performed urine drug testing services and billed them to Medicare and Kentucky Medicaid.

Coburn allegedly received $1,864,429 between June 2019 and March 2021 in fraudulent medicaid payments for services that were not medically necessary.

Coburn also admitted to receiving income of more than $1.5 million per year from LabTox between 2017 and 2021, and to concealing this income and his ownership of LabTox by placing the business in the name of his partner.

He was sentenced to 10 months in prison in December 2023.

Two other drug testing companies — Ameritox and Compliance (CAL) Laboratories — were listed as defendants and found in separate cases to have settled for fraudulently billing medicaid and medicare.

Ameritox was once labeled as the country’s largest drug-monitoring company that closed in 2018 — the same year they settled with Baker. Long before their lawsuit with Baker, the company was the center of a major civil settlement in the amount of $16.3 million, to address that it paid kickbacks to providers in order to induce them to refer to the Medicare business.

The third drug toxicology lab listed as a defendant is Compliance Advantage, located in Nicholasville.

In August 2019, the company agreed to pay more than $2.5 million for violating the False Claims Act for knowingly failing to return to federal health insurance programs over payments it received for specimen validity testing — which is not coverage by Medicare or state Medicaid.

The charges against CAL Labs were a part of a larger investigation, according to the FBI and Office of the Attorney General.

Claims were dismissed with prejudice against all defendants, some of whom agreed to settle with Baker, according to court documents. Todd Burris, Baker’s attorney, did not respond to multiple requests for comment made by the Herald-Leader.

Collier said ARC did not settle with Baker, and the case against ARC was dismissed with prejudice after Baker failed to provide evidence of his claims.

Tax evasion of $500,000

The state department of revenue also took aim at Addiction Recovery Care in March 2018, when Commissioner Daniel Bork filed a civil action against the business in Franklin Circuit Court for withholding taxes in the amount of $50,000.

According to court documents, the business owed taxes, penalties and interest in the amount of $566,088.15.

An injunction was filed against the business or “alter ego” of the business until the payments were met.

An injunction is a judicial order that restrains a person from beginning or continuing an action threatening or invading the legal right of another, or that compels a person to carry out a certain act, e.g., to make restitution to an injured party.

The department of revenue’s collections procedure first includes a set of phone calls and letters regarding the owed taxes. Other actions, in addition to an injunction include:

• Sending a certified Final Notice Before Seizure Letter
• Filing a tax lien against your property in the county where the property resides. A tax lien is the public notice of debt that attaches to your property and your rights to property. Once filed, it is public record and could harm your credit rating.
• Levying your wages, bank account or other contractual payments. Certain income, such as Social Security or disability payment, is protected from levying.
• Offsetting of your state or federal income tax refund may occur.
• Offsetting of your state or federal vendor payment may occur.
• Requesting an injunction from the courts preventing your business from operating.

An agreed settlement was reached two weeks later in the amount of $468,644.20, according to court documents.

The order of satisfaction was issued in May 2020. Frank Dempsey, the department’s attorney, referred the Herald-Leader to the department’s communications liaison, who then referred the Herald-Leader to the department’s website.

Federal lawsuits led to enforcement of NDA, settlement

A federal lawsuit from February 2023 filed by two former employees is among the more recent cases challenging ARC’s business practices.

Filed in Kentucky Eastern District Court, Leanna Murphy and Samantha Carroll alleged that while employed at ARC, the company violated the Fair Labor and Standards Act and Kentucky Wage and Hour Act and participated in unjust enrichment.

Murphy and Carroll previously worked as ARC community liaisons, which required them to work with courts, hospitals, homeless shelters, treatment centers, jail and mental health facilities to identify people in need of recovery services.

They wrote in a court filing they were required to work well over 40 hours a week, but were never compensated for overtime, because the positions were “misclassified” as salaried, even though the jobs required no special skills, training or expertise.

The women also were required to work at community events and outreach programs on weekends and were not paid for the time related to those job duties, they said.

They were forced to answer calls and communications from ARC’s clients all hours of the day, including weekends, for which they were not compensated, they alleged.

ARC denied the allegations.

The organization then counter-sued the women, claiming that by filing the lawsuit with details of their employment and leaving ARC to get jobs with other addiction treatment providers, they were in direct violation of a non-compete and non-disclosure agreements both women signed at the start of their employment.

The broad non-compete agreement prohibits former employees from “directly or indirectly engaging in, owning, managing, operating, joining, controlling, lending money or other assistance to, or participating in or being connected with any individual, corporation, partnership firm, other company, business organization, activity or entity that is engaged in a competitive business in the restricted area for a period of two years” following the last date of their employment.

More specifically, the non-compete agreement defines a restricted area as the geographic area extending 60 area miles in all directions from any ARC treatment center in existence, or any future ARC facility.

According to an ARC locations map, the organization owns 49 locations from Western to Eastern Kentucky, Ohio and Virginia. Those facilities include residential treatment centers, transitional learning centers, outpatient centers, a psychiatric hospital and opportunity centers.

Christopher Miller, an attorney for Carroll and Murphy, said neither he, nor his clients could speak to the Herald-Leader as part of an agreed settlement. A joint dismissal was signed and effective in December 2023 — just months after the initial filing.

Matt Brown, ARC’s chief administration officer and ARC president said of their 1,250 current employees, approximately 35% are graduates of the ARC program. An internal survey Brown provided to the Herald-Leader said of 280 ARC graduates, 70% are working in addition treatment.

Arron Rhodes, an ARC graduate and now human resources director said the former clients of ARC’s program have a lower turnover rate than employees who did not graduate ARC’s programming.

He attributed this to the “dedication and understanding” they have for ARC’s mission.