U.S. Attorney Files Civil Fraud Lawsuit Against Non-Profit And Settles Fraud Claims Against Its Founder For Inflating Medicaid Reimbursements By Falsely Reporting Millions In Costs

Press Release U.S. Attorney Files Civil Fraud Lawsuit Against Non-Profit And Settles Fraud Claims Against Its Founder For Inflating Medicaid Reimbursements By Falsely Reporting Millions In Costs Wednesday, November 24, 2021 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Founder Will Pay $220,000 and Admits That for a Decade He and Non-Profit Reported as “Allowable” Costs Amounts Expended to Pursue For-Profit Business Ventures Damian Williams, the United States Attorney for the Southern District of New York, and Scott Lampert, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today that the United States has filed a civil fraud lawsuit against Maranatha Human Services, Inc. (“MARANATHA”) and HENRY ALFONSO COLEY (“COLEY”) for falsely claiming that millions of dollars expended to benefit for-profit ventures owned and controlled by COLEY and MARANATHA, as well as payments to cover COLEY’s personal costs and excessive payments to COLEY’s family members, were reasonable and necessary costs in connection with MARANATHA’s provision of Medicaid-funded services to individuals with developmental disabilities. MARANATHA is a non-profit organization based in Poughkeepsie, New York; COLEY founded MARANATHA in 1988 and served as its chief executive officer until earlier this year. Specifically, the Government’s complaint alleges that, with its board’s approval, MARANATHA funded for-profit companies operated by COLEY; paid excessive salaries and consulting fees to COLEY’s family members, often in exchange for little to no work; and paid for tens of thousands of dollars of COLEY’s personal expenses. The Government further alleges that, from 2010 to 2019, COLEY and MARANATHA submitted to the State of New York cost reports that falsely claimed millions of dollars in these expenses as “allowable” costs, which fraudulently inflated MARANATHA’s Medicaid reimbursement rates and resulted in MARANATHA receiving millions of dollars in Medicaid funds to which it was not entitled. Simultaneous with the filing of the lawsuit, the United States has resolved its claims against COLEY through a settlement approved by U.S. District Judge Kenneth M. Karas. Pursuant to the settlement, COLEY will pay $88,000 to the United States and has admitted and accepted responsibility for conduct alleged by the Government in its complaint as further described below. COLEY has also agreed to pay $132,000 to the State of New York to resolve the State’s claims, for a total recovery of $220,000. The settlement amount is based on the Office’s assessment of COLEY’s ability to pay based on the financial information he provided. COLEY also agreed never to work for or accept payments from any entity that receives funds from a federal healthcare program. In addition, COLEY entered into a Voluntary Exclusion Agreement with HHS-OIG, which prohibits him from participating in Medicaid and other federal healthcare programs for 15 years. U.S. Attorney Damian Williams said: “For a decade, Henry Alfonso Coley and Maranatha defrauded Medicaid by submitting reports that fraudulently claimed as allowable expenses millions of dollars spent on for-profit companies owned by them, on excessive salaries and fees for Coley’s family members, and on Coley’s personal expenses. These expenses were not related to providing care or assistance to the individuals with developmental disabilities Maranatha was meant to serve. This Office will continue to hold entities and their executives accountable when they abuse our federal healthcare programs.” HHS-OIG Special Agent in Charge Scott Lampert said: “Any threat to the financial health of Medicaid is a threat to the vulnerable people who depend upon it for critical services. We will continue to hold those who steal from federal health care programs accountable for their actions.” According to the Government’s complaint, from 2010 through 2019: MARANATHA was required to submit cost reports, called Consolidated Financial Reports (“CFRs”), to the State of New York each year, specifying the reasonable and necessary costs MARANATHA incurred in providing services for its Medicaid-funded programs. These costs were to be reported as “allowable” costs. MARANATHA was required separately to report its other, “non-allowable” costs; “non-allowable” costs include costs unrelated to its Medicaid-funded programs, as well as any unreasonable or unnecessary costs. With its board’s approval, MARANATHA funded for-profit companies operated by COLEY and owned by COLEY or MARANATHA, as well as various unincorporated pet projects started by COLEY. One of the chief purposes of these ventures was to serve as vehicles to funnel money to COLEY’s daughter, as well as others associated with COLEY, whom MARANATHA paid for work they purportedly did to support these ventures and projects. Over the course of a decade, not one of these ventures ever launched a product or service or earned a single dollar in revenue. COLEY and MARANATHA hired COLEY’s family members as employees and consultants, some in connection with these for-profit ventures, and others in connection with MARANATHA’s Medicaid-funded services. COLEY and MARANATHA paid excessive salaries and consulting fees to COLEY’s family members, often in return for little to no work. MARANATHA also paid for tens of thousands of dollars of COLEY’s personal expenses, including more than $34,000 for personal training sessions at a gym. COLEY and MARANATHA knowingly submitted CFRs annually to the State of New York fraudulently reporting these expenses – totaling millions of dollars – as “allowable” costs. On each CFR, COLEY falsely certified to the completeness and accuracy of the report. COLEY and MARANATHA knew that the State of New York relied on providers’ CFRs when setting provider-specific reimbursement rates for certain Medicaid-funded programs, including MARANATHA’s largest Medicaid-funded program. As a result of COLEY’s and MARANATHA’s falsely inflated cost reports, the State of New York awarded MARANATHA a higher reimbursement rate and MARANATHA received millions of dollars in Medicaid funds to which it was not entitled. COLEY has settled the claims against him in the Government’s complaint. As part of the settlement, COLEY admits, acknowledges, and accepts responsibility for the following conduct: COLEY made a presentation to MARANATHA’s board of directors acknowledging that “[i]t was always the plan for Maranatha to use government funds as a launching pad to create private enterprise that would enable it to not be dependent on government while at the same time fulfilling its function” consistent with its mission. COLEY was familiar with the requirement that MARANATHA distinguish “allowable costs” from “non-allowable costs” in its CFRs. COLEY knew that the CFRs are used by the New York State Department of Health to determine MARANTHA’s reimbursement rates for the provision of Medicaid services. In each CFR that MARANATHA submitted since 2010, COLEY certified that the (i) the “information furnished in this report . . . is in accordance with the instructions and is true and correct to the best of my knowledge”; and (ii) the statement attached to the CFR “fully and accurately represents all reportable income and expenditures made for services performed in accordance with the provision of the Mental Hygiene Law and approved budgets.” COLEY signed the certifications set out above in CFRs that reported as “allowable costs” amounts expended not for MARANTHA’s provision of Medicaid services but instead to pursue certain for-profit business ventures. In particular, MARANATHA submitted CFRs reporting as “allowable costs” costs expended to benefit certain entities owned and/or operated by COLEY and/or MARANATHA that did not provide Medicaid-funded services (the “Non-Medicaid Ventures”). MARANATHA paid certain employees and contractors, including COLEY’s family members, to perform work related to the Non-Medicaid Ventures. For example, since 2010, MARANATHA paid COLEY’s daughter more than $300,000. Though much of her time was spent on work related to the Non-Medicaid Ventures, COLEY and MARANATHA reported her full compensation as an “allowable cost” in the CFRs. Since 2010, COLEY received more than $2 million from MARANATHA in salary and benefits, and MARANTHA claimed the full amount of his compensation as “allowable costs” on its CFRs. However, COLEY devoted much of his to time to working on the Non-Medicaid Ventures. In connection with the filing of the lawsuit and settlement, the United States joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act. Mr. Williams praised the outstanding investigative work of the HHS-OIG, and he thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation. The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jacob Lillywhite is in charge of the case. Contact [email protected] [email protected] (212) 637-2600 Updated November 24, 2021 Topic Healthcare Fraud Component USAO - New York, Southern Press Release Number: 21-337

Press Release U.S. Attorney Files Civil Fraud Lawsuit Against Non-Profit And Settles Fraud Claims Against Its Founder For Inflating Medicaid Reimbursements By Falsely Reporting Millions In Costs Wednesday, November 24, 2021 Share FacebookLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. XLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. LinkedInLinks to other government and non-government sites will typically appear with the “external link” icon to indicate that you are leaving the Department of Justice website when you click the link. Email For Immediate Release U.S. Attorney's Office, Southern District of New York Founder Will Pay $220,000 and Admits That for a Decade He and Non-Profit Reported as “Allowable” Costs Amounts Expended to Pursue For-Profit Business Ventures Damian Williams, the United States Attorney for the Southern District of New York, and Scott Lampert, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today that the United States has filed a civil fraud lawsuit against Maranatha Human Services, Inc. (“MARANATHA”) and HENRY ALFONSO COLEY (“COLEY”) for falsely claiming that millions of dollars expended to benefit for-profit ventures owned and controlled by COLEY and MARANATHA, as well as payments to cover COLEY’s personal costs and excessive payments to COLEY’s family members, were reasonable and necessary costs in connection with MARANATHA’s provision of Medicaid-funded services to individuals with developmental disabilities. MARANATHA is a non-profit organization based in Poughkeepsie, New York; COLEY founded MARANATHA in 1988 and served as its chief executive officer until earlier this year. Specifically, the Government’s complaint alleges that, with its board’s approval, MARANATHA funded for-profit companies operated by COLEY; paid excessive salaries and consulting fees to COLEY’s family members, often in exchange for little to no work; and paid for tens of thousands of dollars of COLEY’s personal expenses. The Government further alleges that, from 2010 to 2019, COLEY and MARANATHA submitted to the State of New York cost reports that falsely claimed millions of dollars in these expenses as “allowable” costs, which fraudulently inflated MARANATHA’s Medicaid reimbursement rates and resulted in MARANATHA receiving millions of dollars in Medicaid funds to which it was not entitled. Simultaneous with the filing of the lawsuit, the United States has resolved its claims against COLEY through a settlement approved by U.S. District Judge Kenneth M. Karas. Pursuant to the settlement, COLEY will pay $88,000 to the United States and has admitted and accepted responsibility for conduct alleged by the Government in its complaint as further described below. COLEY has also agreed to pay $132,000 to the State of New York to resolve the State’s claims, for a total recovery of $220,000. The settlement amount is based on the Office’s assessment of COLEY’s ability to pay based on the financial information he provided. COLEY also agreed never to work for or accept payments from any entity that receives funds from a federal healthcare program. In addition, COLEY entered into a Voluntary Exclusion Agreement with HHS-OIG, which prohibits him from participating in Medicaid and other federal healthcare programs for 15 years. U.S. Attorney Damian Williams said: “For a decade, Henry Alfonso Coley and Maranatha defrauded Medicaid by submitting reports that fraudulently claimed as allowable expenses millions of dollars spent on for-profit companies owned by them, on excessive salaries and fees for Coley’s family members, and on Coley’s personal expenses. These expenses were not related to providing care or assistance to the individuals with developmental disabilities Maranatha was meant to serve. This Office will continue to hold entities and their executives accountable when they abuse our federal healthcare programs.” HHS-OIG Special Agent in Charge Scott Lampert said: “Any threat to the financial health of Medicaid is a threat to the vulnerable people who depend upon it for critical services. We will continue to hold those who steal from federal health care programs accountable for their actions.” According to the Government’s complaint, from 2010 through 2019: MARANATHA was required to submit cost reports, called Consolidated Financial Reports (“CFRs”), to the State of New York each year, specifying the reasonable and necessary costs MARANATHA incurred in providing services for its Medicaid-funded programs. These costs were to be reported as “allowable” costs. MARANATHA was required separately to report its other, “non-allowable” costs; “non-allowable” costs include costs unrelated to its Medicaid-funded programs, as well as any unreasonable or unnecessary costs. With its board’s approval, MARANATHA funded for-profit companies operated by COLEY and owned by COLEY or MARANATHA, as well as various unincorporated pet projects started by COLEY. One of the chief purposes of these ventures was to serve as vehicles to funnel money to COLEY’s daughter, as well as others associated with COLEY, whom MARANATHA paid for work they purportedly did to support these ventures and projects. Over the course of a decade, not one of these ventures ever launched a product or service or earned a single dollar in revenue. COLEY and MARANATHA hired COLEY’s family members as employees and consultants, some in connection with these for-profit ventures, and others in connection with MARANATHA’s Medicaid-funded services. COLEY and MARANATHA paid excessive salaries and consulting fees to COLEY’s family members, often in return for little to no work. MARANATHA also paid for tens of thousands of dollars of COLEY’s personal expenses, including more than $34,000 for personal training sessions at a gym. COLEY and MARANATHA knowingly submitted CFRs annually to the State of New York fraudulently reporting these expenses – totaling millions of dollars – as “allowable” costs. On each CFR, COLEY falsely certified to the completeness and accuracy of the report. COLEY and MARANATHA knew that the State of New York relied on providers’ CFRs when setting provider-specific reimbursement rates for certain Medicaid-funded programs, including MARANATHA’s largest Medicaid-funded program. As a result of COLEY’s and MARANATHA’s falsely inflated cost reports, the State of New York awarded MARANATHA a higher reimbursement rate and MARANATHA received millions of dollars in Medicaid funds to which it was not entitled. COLEY has settled the claims against him in the Government’s complaint. As part of the settlement, COLEY admits, acknowledges, and accepts responsibility for the following conduct: COLEY made a presentation to MARANATHA’s board of directors acknowledging that “[i]t was always the plan for Maranatha to use government funds as a launching pad to create private enterprise that would enable it to not be dependent on government while at the same time fulfilling its function” consistent with its mission. COLEY was familiar with the requirement that MARANATHA distinguish “allowable costs” from “non-allowable costs” in its CFRs. COLEY knew that the CFRs are used by the New York State Department of Health to determine MARANTHA’s reimbursement rates for the provision of Medicaid services. In each CFR that MARANATHA submitted since 2010, COLEY certified that the (i) the “information furnished in this report . . . is in accordance with the instructions and is true and correct to the best of my knowledge”; and (ii) the statement attached to the CFR “fully and accurately represents all reportable income and expenditures made for services performed in accordance with the provision of the Mental Hygiene Law and approved budgets.” COLEY signed the certifications set out above in CFRs that reported as “allowable costs” amounts expended not for MARANTHA’s provision of Medicaid services but instead to pursue certain for-profit business ventures. In particular, MARANATHA submitted CFRs reporting as “allowable costs” costs expended to benefit certain entities owned and/or operated by COLEY and/or MARANATHA that did not provide Medicaid-funded services (the “Non-Medicaid Ventures”). MARANATHA paid certain employees and contractors, including COLEY’s family members, to perform work related to the Non-Medicaid Ventures. For example, since 2010, MARANATHA paid COLEY’s daughter more than $300,000. Though much of her time was spent on work related to the Non-Medicaid Ventures, COLEY and MARANATHA reported her full compensation as an “allowable cost” in the CFRs. Since 2010, COLEY received more than $2 million from MARANATHA in salary and benefits, and MARANTHA claimed the full amount of his compensation as “allowable costs” on its CFRs. However, COLEY devoted much of his to time to working on the Non-Medicaid Ventures. In connection with the filing of the lawsuit and settlement, the United States joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act. Mr. Williams praised the outstanding investigative work of the HHS-OIG, and he thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation. The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jacob Lillywhite is in charge of the case. Contact [email protected] [email protected] (212) 637-2600 Updated November 24, 2021 Topic Healthcare Fraud Component USAO - New York, Southern Press Release Number: 21-337