Owner of California Substance Abuse Treatment Facilities Charged in Scheme to Defraud ACA Programs

U.S. Attorney John H. Durham of the District of Connecticut, Special Agent in Charge Phillip Coyne of the Boston Regional Office of the Office of the Inspector General of the Department of Health and Human Services, Special Agent in Charge Brian C. Turner of the FBI’s New Haven Division, and Special Agent in Charge Kristina O’Connell of IRS Criminal Investigation in New England, today announced that a federal grand jury in Connecticut has returned an indictment charging R. JEFFREY YATES, 52, of Santa Ana, California, with conspiracy and fraud offenses related to a scheme to defraud several state Affordable Care Act programs of millions of dollars.

The indictment was returned under seal on October 31, 2019, and Yates was arrested on November 6 in California.  The indictment was unsealed in the District of Connecticut on November 13.  Yates is released on bond pending his arraignment in Connecticut, which is not yet scheduled.

As alleged in the indictment, Yates owned and operated Morningside Recovery, a business that operated substance abuse treatment facilities in California.  Yates conspired with others, including Jeffrey White and his son, Nicholas White, to defraud health care plans operating under the Affordable Care Act (“ACA,” commonly referred to as “Obamacare”) in Connecticut and other states by fraudulently enrolling individuals in ACA plans in states where the individuals did not live.  In order to maximize their proceeds from the fraud scheme, the Whites would enroll the individuals in ACA plans in states that paid the highest amount for substance abuse treatment, even though the individuals did not live in those states.  The Whites and Yates then arranged to have the individuals admitted to Morningside Recovery facilities for treatment.  Morningside Recovery then billed ACA plans in Connecticut and elsewhere for thousands of dollars for treatment services.  Yates and Morningside Recovery then paid the Whites for each patient that had been placed in a Morningside facility.

The indictment charges Yates with one count of conspiracy to commit health care fraud and mail fraud, seven counts of health care fraud, and five counts of mail fraud.  If convicted, Yates faces a maximum term of imprisonment of 20 years on each of the conspiracy and mail fraud counts, and a maximum term of imprisonment of 10 years on each health care fraud count.

On October 12, 2018, Jeffrey White and Nicholas White each pleaded guilty to one count of conspiracy to commit health care fraud and admitted that their scheme resulted in more than $27 million in losses to ACA plans across the country, including ACA plans in Connecticut, Arizona, California, Delaware, Indiana, Kentucky, New Jersey, Ohio, Oregon, Pennsylvania, Tennessee and Texas.  They await sentencing.

U.S. Attorney Durham noted that this case is believed to be the first of its kind involving fraudulent enrollment of individuals in ACA plans on a national scale.

This investigation is being conducted by the Office of the Inspector General of the U.S. Department of Health Human Services, the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation Division, and the U.S. Postal Inspection Service.

U.S. Attorney Durham thanked the Connecticut Affordable Care Act exchange, known as Access Health CT, and the U.S. Attorney’s Office for the Central District of California for their assistance with the investigation.

The case is being prosecuted by Assistant U.S. Attorney David J. Sheldon.