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YAI to Pay $18 Million in “False Claims” Settlement PDF Print E-mail
Wednesday, 19 January 2011 04:21


Federal and State authorities announced yesterday that Young Adult Institute (YAI) has agreed to pay $18 million in civil damages to settle claims that it had submitted false claims for Medicaid reimbursement.    The government complaint alleged that during a period from FY1999-2000 through FY2008-2009, YAI improperly shifted and miscategorized its cost reports to the state in order to receive Medicaid funding to which it was not entitled.  Also named in the complaint are CEO Philip H. Levy, former CEO Joel M. Levy, and CFO Karen Wegmann.  The investigation reportedly began after a whistleblower – former YAI Budget Director Richard Faden -- filed a complaint that YAI had improperly inflated its expense reports.

YAI does not admit to the allegations in the complaint.  “Under this settlement, YAI disclaims that it committed any wrongdoing with respect to these allegations,” the agency said in a formal statement. “YAI believes that there was no intention by YAI management to seek funding to which the organization was not entitled.”   The agency stated that it had entered into the settlement because it believed that it would be “less costly -- and less disruptive to the continuation and quality of vital services that YAI provides to thousands of persons with disabilities – than engaging in prolonged litigation.”

The Government complaint alleges that over a ten-year period, YAI “knowingly” miscategorized personnel expenses on its annual Consolidated Fiscal Reports (CFRs) in order to increase the level of expenses for which it could submit appeals for reimbursement. These miscategorizations allegedly fell into three areas.  According to the complaint:

  • “YAI falsely reported and/or falsely allocated certain employees’ personal services expenses by allocating these expenses to facilities where the employees did not work, or among facilities where these employees did work but not correctly reflecting the proportion of their time where they worked at each facility:”
  • “YAI falsely reported the personal services expenses of certain supervisory employees who were properly classified as ‘program administration’ as falling under ‘clinical care’; and
  • “YAI falsely reported the personal services expenses of its employees who were involved in fund-raising as ‘agency administration’ instead of in a separate column designated for non-reimburseable costs.”


Of the $18 million YAI will pay in damages, $10.8 million will be returned to the New York State Medicaid program and $7.2 million to the federal government.    A total of $5 million will be paid immediately.  The $13 million balance will be paid in monthly installments through December 2015.

In his role as “relator” under the Federal False Claims Act, former YAI Budget Director Richard Faden is entitled to share in a portion of the $18 million settlement.  While court papers do not disclose the amount of Faden’s share, “relators” typically receive between 15-25% of the settlement amount.

In addition to the $18 million payment, YAI also has agreed to hire an independent monitor and take numerous steps to ensure that its submissions to OPWDD are accurate in the future.

YAI is one of the largest nonprofit human service providers in the NYC metropolitan area.  The U.S. Attorney described it as “the largest operator of residential facilities and other programs for developmentally disabled individuals in New York State.”  For FY2008-2009, YAI reported revenues of $173.8 million.   Its net assets and fund balances as of June 30, 2009 totaled $17.884 million, not quite the amount now owed to the federal and state governments under the settlement agreement.

"Medicaid has long been a lifeline for people with developmental disabilities, and every penny in that program must be put to its best and proper use,” said U.S. Attorney Preet Bharara. “As federal and state budgets continue to shrink, it is more important than ever that we vigilantly police the Medicaid program against overbilling and improper diversion of precious dollars.”

“Restoring New Yorkers' faith in their government and cracking down on those who try to defraud the taxpayers will be two of our top priorities in this office," said NYS Attorney General Eric Schneiderman. "Today’s announcement should send a clear message that we will leave no stone unturned in the fight against Medicaid fraud, waste and abuse in New York State.”

“The government has never quarreled with the fact -- well recognized in the community -- that YAI furnishes the highest standard of care to its clients, and has never suggested that YAI diverted any of the challenged reimbursements from its mission of serving consumers with developmental disabilities,” the agency said in its statement.  “YAI prides itself on having the highest ethical standards and is committed to making sure that YAI complies with all applicable rules and regulations.  As part of the settlement, YAI is repaying all amounts that it is alleged to have received in error, as well as additional amounts as a fine for the allegedly improper filings.” 

Click here to view copies of the original complaint and settlement agreements with the State and Federal governments.

Comments

avatar Michelle
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The state should take over YAI, It;s a shame!!!! using the hard working tax payer money like that. has a agency Albany should re-name and take over the hold agency what make you think that they all was in it.
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avatar Edward
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YAI is easily the finest agency in the state (I've worked all over the northeast in the field, and ten years for YAI); but the credit doesn't go to the CEO's, it goes to the employees. Joel Levy was a lobbyist for change and made all the right political connections to make things happen in Albany (now there's a place that needs more thorough investigations into financial misappropriatio ns), but he was not the one who conceived of the insightful programs for the individuals YAI served. Those workers in the trenches, day in and day out, who are continuously optimistic over the potential of individuals they serve, are the people whose insight empowers programatic change. These folks who receive paltry salaries and yet remain vocationally committed may now become demoralized by this scandal because their "not-for-profit" is reflecting the same greed that has permeated all corporate levels--where the administrators overvalue their influence and therefore compensation and view employees as mere cogs in comparison to themselves. YAI didn't rise to the top because of its "executive pay attracting talent"--the BS excuse for most corporate salaries--it rose to the top because of a culture conceived and perpetuated by all the employees and families which united under the philosophy that all individuals have self-worth and deserve self-determinat ion. What they did with tax dollars for their children's excessive needs and their own personal luxuries was uncalled for, and if Freeman is wise he'll slash his salary and other executives to be more in line with salaries across the field. I'm glad someone finally noticed such extravagance.
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avatar Celine S.
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My comments relates solely to executive compensation in the non-profit sector in which I worked for more years than I'd like to admit. As a fundraiser I have never had a problem with donors asking for our financial reports and specifically about our overhead expenses. Most of the not-for-profits I worked had a true overhead (salaries and administration) of less than 10%, most were below that. The salaries of our executive staff were well within the range of what was believed to be executive compensation commensurate to skills and experience and the size (i.e. budget) of the organization. That was always the case until I stared working with an organization based in Brooklyn (that organization closed in 2003 after more than 170 years of existence!). In the case of that organization, the combined salary of the top three executives (executive director, deputy director for programs and deputy director for administration) WAS MORE than the ENTIRE budget of ONE ENTIRE program (salaries, administration, etc.). I thought that was, to put it mildly, sickening...The so-called governing board didn't seem to give much thought and reflection as to why some donors questioned why, after reading the 990 reports which I was required by law to share with them, would then decline our request for funds. Both, I and the director for finances would commiserate as we saw our funding and our endowment fund dwindling by the day. He had also never worked in an organization in which the disparity between the lowest paid employee and the pay of the executive staff was so huge. I no longer work in the "not-for-profit" sector, but do value and admire the work of most, if not all, such organizations. There have to be better monitoring of the ethics and, simply common sense, regarding executive compensation and its impact on fundraising, the morale of the rest of the staff, and laws and rules governing non-profits. I, for one, applaud your attempt to look at compensation levels at local non-profits.
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avatar Dara
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I don’t know what cool-aid you guys have been drinking but financial services is run by the shadiest group if individuals that I’ve ever had the displeasure of knowing. I would never say anything bad against the direct services departments, the employees work very hard and provide invaluable services. While these departments may genuinely care about the consumer, I assure you that the snakes of financial services do not. The executives always turned a blind eye to the employee mistreatment in fiscal, and they have to pay for it. They finally screwed the wrong person and he blew the whistle. Good for you Richard, enjoy your retirement!
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avatar Lauren
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I work for YAI and they are the most trusted and humane agency. So trusted that every employee that has a child with a disability has them enrolled in a YAI program. There are soooo many codes, rules, and regulations at the federal and state levels that it is IMPOSSIBLE to not make mistakes. The country is is a financial crisis so they come in all the time and look for the tinest mistakes to take money back. Add in the significant budget cuts and its is has a huge impact on the people we serve and the quality of service that YAI is known for. AND Dr. Levy deserves every single penny as he built this amazing empire from the ground up and afforded thousands of individuals with developmental disabilities a life that they deserve. Shame on the government, the whistle blower, and the haters!
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avatar Samantha
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I'm disgusted at this situation. Not at YAI who have been accused and constantly audited by Medicaid because the damn government can't think of a better way to close their budget gaps, but at the Medicaid and the Office of the Inspector General. Medicaid goes into YAI and similar agencies looking for anything they determine as fraudulent. But Fraudulent changes from day to day according to Medicaid. Rules, regulations and codes are not consistent. Medicaid and the Office of the Inspector General are hostile entities that are not fully aware of how settlements like this can ultimately effect the services that are given to people with disabilities. You know why? They don't care what happens to these people. YAI was at the forefront of creating group homes and individualizing care for people with disabilities. Ever here of Willowbrook? Awful Institution that herded these same people in hospital settings, where they were abused and neglected? If Medicaid continues to get away with their unethical auditing process, this is exactly where developmentally disable people will wind up again. Medicaid will make it possible to run groups homes that take the time to give every person QUALITY OF LIFE! OMIG needs to wake up and realize that organizations like YAI are not the enemy. And I'm positive that no one in the OMIG has ever experienced first hand what it is like to care for someone with a disability. Because then, maybe they would have some sense and get the hell out of their UNETHICAL, DEMORALIZING jobs. Please, do some reflection and realize that Schneiderman is not a hero for being in office when this settlement occured, but rather another catalyst in this dishonorable process.
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avatar Jane Krabbeler
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Wow! I worked for YAI for seven years. I am shocked that you believe that Phil and Joel deserve every penny. What about those of us who actually worked with the individuals who receive services from YAI.
We are the backbone of the agency. I didnt see my daughter receive college tuition or money to live in a fancy apartment. A crime was committed. Money was stolen. When I first began working with YAI: I found the agency to be kind and caring; It ruly refelected how I felt about my consumer's. I could do anything and everything to see that their needs were met. In the later years of my tenure at YAI, there was a definite decline in this philosophy. The feeling that profit was the bottom line permeated the air. I definetly knew that something wasn't right.
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avatar Paul W.
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Medicaid is killing the human service agencies! Shame on them!! They should look inside their own home before they go after the innocent.
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avatar Taina
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How convenient...the whistleblower gets compensated (several million) and OH, GET THIS, he's the Budget Director who likely prepared the reports! This smells like a disgruntled employee setting up his own pay day. A perfect example of why the whistleblower rules need to change.
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avatar Susan
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It just sounds so mind-boggling to think that OK, I'm signing off on this, and then I can blow the whistle and head to Tahiti? How is this possible? I'm with you Taina -- the whistleblower rules need to change and examine if there is any accountability on the part of that individual.
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avatar Megan
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Sorry dear that whistleblower tryed to tell them what they were doing was wrong. They retaliated against him. Who can fight the powerful and mighty Levy brothers. They train you to do the right thing but then punish you when they want to break the rules. Justice served.
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avatar btubycarlsjr
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2009, Dr. Phil Levy's Compensation from form 990:

Base Compensation: 576,678
Bonus and Incentive Compensation: 169,276
Other Compensation: 1,203,835
Deferred Compensation: 124,007
Non-Taxable Benefits: 33,109

Total: 2,106,905


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avatar Dis Appointed
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This is extremely disappointing and a shock.
YAI is a wonderful agency,and does great work.
I never trusted those Levy brothers though!
How much did THEY get paid? They should be giving it ALL back.
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avatar Mr. G
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Really? Steal a slice of pizza and you go to jail, get caught taking millions - get to settle and still claim innocence. It's been one non-profit theft story after another. Has our culture of swindle gone that far?
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