Despite being fraud central, we’ve never seen California do anything like this. Wow, Delaware.

“SCAM ALERT!” screams Delaware’s social media post. “The Division of Substance Abuse and Mental Health’s Overdose Response Center is warning of a scam in our area involving individuals claiming to be part of residential rehabilitation programs in California, such as Santa Monica Rehab of California.

“The claims of residential treatment services and ongoing treatment in California are likely FALSE CLAIMS,” Delaware’s Department of Health and Social Services continues. “Beware of body brokering, cash offers, kickbacks, and insurance fraud. For addiction treatment resources you can trust, visit the Treatment Connection website at www.treatmentconnection.com …. The facilities on this site have been reviewed and validated by the state government where they are located.”

Santa Monica Rehab is linked to Nate Young, according to business documents filed with the California Secretary of State.

Young, it turns out, was sued by Beverly Hills in 2020 for operating an “illegal drug rehab facility” that was “a haven for drug abuse and other criminal conduct,” according to the city’s suit. One resident described it as “a place to crash and smoke fentanyl,” where Young provided drugs such as black tar heroin and methamphetamines to residents at “significantly reduced prices,” the suit said.

Young was also sued by insurance giant Aetna last year for being the ringleader in a $40 million fraud scheme targeting “vulnerable Aetna members who suffer from alcohol and/or substance dependency issues as part of a concerted effort to profit at their expense,” according to that lawsuit. Young and his alleged cohorts “used the patients for health benefit payments under the lie of helping them, while doing the exact opposite.”

Young’s attorneys called that “fiction” and “inflammatory speculation” so Aetna can avoid paying millions in outstanding claims. Aetna’s “outrageous allegations” are causing immense damage to business and should be thrown out, they argue in court documents.

While Santa Monica Rehab LLC is not listed as a state-licensed addiction treatment facility in California, Santa Monica Detox LLC is, according to data from the California Department of Health Care Services. Young has been listed as manager and/or CEO for both, according to documents filed with the Secretary of State.

We asked DHCS about Delaware issuing scam alerts for California facilities. Officials are working on a response, they told us, but didn’t make our deadline.

Marc Williams, one of Young’s attorneys, said Delaware’s announcement “has to be viewed in the context of ongoing litigation brought by Aetna against affiliates of Santa Monica Rehab and Santa Monica Detox. We have recently filed a detailed Motion to Dismiss in that matter and it contains a number of important points that demonstrate major flaws with Aetna’s lawsuit.

“My client has been denigrated for too long and greatly looks forward to his day in court and having the opportunity to restore his reputation by showing how he has helped more than a thousand individuals get clean, sober and back into the workforce,” Williams said by email.

Aetna’s battle

First, the cast of characters in the Aetna suit:

In addition to Young, also known as Pablo Lopez, Aetna alleges the scheme included his brother, David Young, also known as Sancho Lopez; Jose Ricardo Toscano Maldonado; Ali Beheshti; Marc Adler; Ani Mirzayan; Zealie LLC; Helping Hands Rehabilitation Clinic, Inc.; Joser Forever LLC; Get Real Recovery LLC; Revive Premier Treatment Center, Inc.; Healing Path Detox LLC; Ocean Valley Behavioral Health, LLC; Rodeo Recovery LLC; Sunset Rehab LLC; Natural Rest House, Inc.; 55 Silver, LLC; and 9 Silver, LLC, according to the suit.

Aetna maintains that they “lured patients into their programs by offering them kickbacks in the form of … free or low-cost living arrangements in ‘sober living homes’ located in highly desirable locations throughout California. In reality, the sober living homes were little more than drug dens, used to ensure patients remained in Defendants’ treatment ‘programs’ for as long as possible,” the suit says.

To continue growing, they hired some patients as “body brokers” to find other addicts to cycle through their facilities; enrolled people in good insurance plans in order to ensure good insurance reimbursements; created multiple entities with multiple tax identification numbers to avoid fraud detection, the suit said. It accused Young of trolling Alcoholics Anonymous and/or other drug counseling meetings for “recently sober individuals,” who were offered jobs or housing in his “‘sober living homes’ that were rife with drugs if they would allow him to use their insurance companies to bill for treatment,”  the suit said. “Such temptations for recently sober individuals are extremely dangerous and naturally can result in relapse.”

In the rare instance where a patient progressed through treatment while still retaining some benefits, Young et al “encouraged ‘relapse’ so a patient’s programs and benefit payments could start anew,” the suit said.

Aetna seeks compensatory and punitive damages, attorneys’ fees “and any other relief the Court deems appropriate” for alleged fraud, negligent misrepresentation, unjust enrichment, and violations of the Racketeer Influenced and Corrupt Organizations Act, among other things.

‘Fiction’

Many motions to dismiss Aetna’s case have been filed by the defendants. They objected to its original filing as woefully lacking in specifics. Aetna filed an amended complaint. They maintain it’s still not enough.

“Lawsuits that seek to forward a fiction must fail,” said Young’s motion to dismiss. “If Aetna had more facts, it would have alleged them … But Aetna did no such thing. Rather, Aetna has only attempted to spin a contrived theory. That theory – that the Young Defendants have been operating a fraudulent scheme, as opposed to legitimate addiction and substance use disorder treatment facilities – is based on inflammatory speculation and a desire to avoid paying the Young Defendants millions of dollars in pending, unpaid insurance claims.”

Aetna’s core accusations are based on allegations from totally unrelated court cases, they argue. The Beverly Hills suit was a civil nuisance case involving “only one of the facilities,” and it settled before the facility served Aetna members. Criminal body brokering cases happened before the defendants came on the scene, and before Aetna members were served, they argue.

“There are no facts because the Young Defendants do not tolerate such conduct,” the motion says.

Aetna counters that the granular detail Young seeks does not come in a complaint; it comes later, through the process of discovery. A complaint needs only to give fair notice of what the claim is and the grounds upon which it rests, a standard “easily met here,” it told the court. 

Young’s arguments are echoed in separate dismissal motions filed by other defendants.

“Aetna’s suit is devoid of allegations directed at Revive, instead incorrectly lumping all defendants together,” its motion said. “Aetna’s allegations against Revive Defendants are entirely void of the who, what, when, where, and how required for fraud-based claims. Aetna’s efforts to evade its pleading obligations through misstatements and mischaracterizations are unavailing and unpersuasive.”

Zealie is just a third-party billing vendor, its motion argued, yet, “Aetna smears Mr. Beheshti with criminality based on allegations in an unrelated indictment in an unrelated case, in which he is not named, and that involves an unrelated entity and someone else’s purported criminality.”

No ruling on motions to dismiss yet; these things tend to take a while. We’ll keep an eye on it. We suspect Delaware will, too.

California? Hello?

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