Crime & Justice

8 indicted in alleged $50 million student substance abuse counseling scam

The Justice Department building in Washington, D.C. on Thursday, Aug. 27, 2015.
The Justice Department building in Washington, D.C. on Thursday, Aug. 27, 2015.
Susan Walsh/AP

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Eight people were indicted in an ongoing $50 million fraud investigation connected to a Long Beach drug and alcohol rehabilitation program, the U.S. Attorney’s Office in Los Angeles announced Wednesday.

Those indicted worked for the now-defunct Atlantic Recovery Services. The company provided alcohol and drug counseling for teenagers at schools in Montebello, Bell Gardens, Lakewood, and Long Beach, among other locations.

According to federal investigators, the employees helped the company bill the state Medi-Cal program over $50 million in false charges. They did it by billing for counseling that never happened or by labeling teens without problems as having substance abuse issues. 

“The harm here is really to that program, but it’s also to these students who received these diagnoses that potentially could follow them their future plans,” said Assistant U.S. Attorney Cathy Ostiller.

The defendants named in the indictment are:

Federal agents arrested all on Wednesday, except for Galaz and Micklo, who are set to surrender to authorities in the coming weeks, the U.S. Attorney’s Office said. The six arrested were arraigned and pleaded not guilty to the charges. 

Miller’s lawyer said she could not comment on the indictment. The lawyer for St. Julian said he hadn’t yet talked to his client. The lawyers for the others did not reply to a request for comment.

The investigation raises questions about what checks and balances were in place for drug and alcohol counseling services for the schools.

The Soledad Enrichment Action schools, where many of the accused worked, said they are cooperating with investigators.

The Long Beach Unified School District said it stopped using Atlantic Recovery Services two years ago. The counselors worked at Lakewood High School and Wilson High School within the district.

“Our school district received notice in May of 2013 from a contract program auditor at the County of Los Angeles Public Health Department to stop immediately referring any student to Atlantic Recovery Services. We immediately complied with that request and provided information to our schools so that they could refer students to alternate services with the help of the county health department,” a spokesperson said.

Counselors also allegedly created fraudulent counseling sessions at Montebello High School and Bell Gardens High School.

A spokeswoman for Montebello Unified said in a statement: “The agency in question has not provided services to any school site within our District since April 2012,” but did not say what the school district has done to investigate the matter.

Twelve former Atlantic Recovery Services employees have already pleaded guilty in the case.

This story has been updated.