Orange County — once notorious for boiler rooms, investment cheats, Charles Keating Jr. and the savings and loan scandal — grabbed a more modern and dubious distinction in 2021, when it was crowned “Ground Zero for addiction treatment fraud in America” by the feds.
Alcoholics Anonymous sobriety coin (FILE PHOTO BY, BRUCE CHAMBERS, ORANGE COUNTY REGISTER/SCNG)
The U.S. Department of Justice promised a crackdown, dubbed it “The Sober Home Initiative,” and focused intensely on shenanigans in Southern California. The wheels of justice grind slowly, but grind they do: On Saturday, April 27, Newport Beach resident Scott Raffa became the latest to be ensnared.
Raffa, 57, was arrested at LAX and was charged with a dozen counts of “illegal remunerations for referrals to clinical treatment facilities” — or, in plainer language, of paying kickbacks to “body brokers” to deliver patients with good insurance — to the tune of some $175,000.
He owned and operated Orange County-based Sober Partners Waterfront Recovery Center, Sober Partners Reef House and Sober Partners Beach House, according to the indictment. The facilities enrolled private-pay patients with health insurance through Anthem Blue Cross, Aetna, Cigna Health, United Health Group and others, the feds said.
Raffa pleaded not guilty on Monday, April 29, and trial was set for June 25 before U.S. District Judge Fred W. Slaughter in Santa Ana.
Raffa’s attorney, Harry Nelson of Nelson Hardiman LLP in Los Angeles, was disappointed with the DOJ’s action.
“Our firm represents Scott Raffa and we have worked with him for several years on compliance,” Nelson said by email. “In that time, Scott has cooperated with the government in its investigations to try to address the countless individuals and organizations who unfortunately do not share his personal commitments, and who continue to engage in illegal practices. It is a shame that the government brought these allegations against one of the good guys.
A mentally ill homeless man in Los Angeles in 2022. (AP Photo/Jae C. Hong)
“Without addressing the specifics of allegations from three and four years ago, I can personally attest that Scott is a high integrity and decent person devoted to delivering addiction treatment and recovery services the right way, in strict compliance with the law. I am confident that Scott’s integrity and commitment to following the law will serve him in good stead in responding to the charges here.”
Nelson added that, in light of the tens of millions of dollars being actively poured into patient brokering in Southern California every month, the number alleged here — “nearly $175,000” in 2020-2021 — is not exactly newsworthy. “In my view, the government should be focusing on real threats rather than focusing on someone who has spent the last several years trying to combat this very problem,” Nelson said.
Sober Partners Reef House is a state-licensed residential detox in three Huntington Beach homes with 18 total beds, according to state data, while state-certified Sober Partners Waterfront Recovery Center is in Costa Mesa.
Indictment
A federal grand jury returned an indictment against Raffa on April 10. It alleges he paid thousands of dollars per patient in illegal kickbacks to body brokers who referred patients to his facilities.
To get around laws prohibiting payments based on the volume or value of patient referrals, Raffa and the brokers entered into sham contracts to conceal the nature of the illicit payments, the feds allege.
They met in person, or communicated via encrypted messaging services, to calculate and haggle over the kickback amounts Raffa owed based on the insurance revenues he expected to receive for the brokered patients, the indictment alleges.
Raffa refused to pay unless patients stayed for at least 21 days at one of his treatment facilities, the indictment says. That ensures juicier insurance reimbursements.
If convicted of all charges, Raffa would face a maximum sentence of 10 years in federal prison for each count, the DOJ said.
The DOJ’s Sober Home Initiative began in 2021, after O.C. overtook South Florida as the national epicenter for addiction industry fraud. Historically, the Miami area had that dubious distinction, but crackdowns in Florida pushed the problems westward, Assistant U.S. Attorney Benjamin Barron, chief of the Santa Ana Branch Office, said at the time.
Myriad arrests and guilty pleas have resulted from the Sober Home Initiative. Most recently, Kevin M. Dickau, 35, of Tustin, pleaded guilty to conspiracy to commit health care fraud on April 23 and was sentenced to 15 months in prison and three years of supervised release.
It doesn’t appear that the DOJ is done just yet. Raffa’s indictment mentions mysterious unnamed body brokers, and when we asked if there’d be more indictments coming, spokesperson Ciaran McEvoy said, “We have no comment.”
The vast majority of addiction treatment facilities in the state are here in Southern California. The fraud is lucrative. It sure would be swell if the state swung into action here as well; there’s certainly enough work to go around.
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