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Families are suing Arizona for allowing sober living homes scandal, which cost billions

Two years ago, Carson Leslie died on the way to get treatment for alcoholism. 

His daughter, Carletta Leslie, had spent weeks searching for him across the state, making trips to Page and Flagstaff when he stopped answering her calls. Unable to find him, Carson was eventually picked in Flagstaff, and died en route to a home in the Valley. His body was left on a street in west Phoenix.

Carletta says the people transporting her father were not a part of a real rehab program, but wanted to use him to defraud the state’s Medicaid system, and never intended to provide treatment.

“I feel like he had a long life to live. He had a granddaughter to meet and he never got to meet, and, I think it's unfair. I believe it's unfair. He was kind and sweet. He was happy,” she said.

Carletta Leslie is part of the group of families suing the fraudulent facilities, fake drug and alcohol rehabilitation centers that lured in patients — mainly Native Americans — then allegedly mistreated them, and allowed some people to die without care.

The defendants in those cases either declined or did not respond to requests for comment.

But Carletta Leslie and other families are also suing the state of Arizona for allowing the alleged fraud to take place. One filing accuses the state of “recklessness, ineptitude, gross negligence and indifference.”

'A very reactive approach'

Doug Ducey
Doug Ducey in 2021.

The families’ attorney, Dane Wood, says former Republican Gov. Doug Ducey’s administration allowed fraudulent businesses to take advantage of Arizonans with little oversight. He also says he’s not impressed with efforts by the new administration, led by Democratic Gov. Katie Hobbs, to stop the fraud.

“It's a very small, very incomplete kind of approach. And it's a very reactive approach, whereas government administrators are tasked with the idea of protecting, you see the public from this kind of thing from happening in the first place,” Wood said.

Ducey did not respond to a request for comment.

According to the lawsuit filed in March, the alleged scheme targeted Native Americans, who are eligible to receive health care through the American Indian Health Plan, which is part of Medicaid.

Victims like Vanessa Tortice say fraudsters lured her with money or drugs.

“One time I was drinking at the bus stop and there was this guy who, he offered me $20 just for my name and date of birth to see if I qualified under their home and then he offered to pay me,” she said. “I got targeted a lot.”

Tortice also says the father of her child died from an overdose in one of the treatment homes.

The scam intensified during the pandemic, when federal and state governments loosened requirements on treatment providers. In Arizona, that meant fewer site visits and other checks, which led to more opportunities for abuse, neglect and fraud.

'It just makes you mad'

Democratic Attorney General Kris Mayes estimates $2.8 billion was paid out to fake providers. Her administration has only recovered a fraction of the money.

“In some cases the state and the taxpayers were defrauded of millions of dollars by a single person and when you see that, it just makes you mad,” she said.

When they took office in 2022, Mayes and Hobbs slammed the former Republican administration for not addressing the crisis. They also implemented new policies aimed at mitigating fraud. The state’s Medicaid provider, AHCCCS, suspended payments to over 300 behavioral health treatment facilities in the state.

In a statement, former Republican Attorney General Mark Brnovich said that any suggestion his administration allowed fraud to go unchecked was “an insult and defamatory.” 

He says he prosecuted a record number of health-care fraud cases.

“The bottom line is the Medicaid Fraud Control Unit during my term as AG was consistently ranked as one of the best in the nation,” Brnovich said in an email.

But Mayes says the previous attorney general and governor didn’t go far enough.

“We began the painful process of shutting off the spigot to these fraudsters. And that is the ultimate source of the problem,” Mayes said.

Senator: Bills don't address 'the ones that did the crime'

Democratic state Sen. Theresa Hatathlie (D-Coal Mine Mesa) is Native American and has proposed a bill that would require more oversight of the addiction treatment industry.

“Whenever you have crime, you have fraud this extensive, there's people in these departments who have been scratching other people’s backs,” she said.

Hatathlie’s bill would have increased penalties for fraud and required behavioral health facilities to implement background checks and fingerprint employees. But it stalled in the Legislature amid heavy opposition from medical groups who argued it would be impossible to implement and unintentionally penalize legitimate rehabilitation centers.

Other efforts are still advancing. But Hatathlie says they aren’t extensive enough. She also accuses the sponsors of those bills of stealing some of her work without giving her credit.

“These two bills over here do not address behavioral health entities. They're the ones that did the crime,” she said.

Members of the Native American community in Arizona say people are still being recruited into fake treatment homes.

Hobbs says she wants lawmakers to pass a solution during this year’s legislative session, which will likely end in the next two months. 

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Camryn Sanchez is a field correspondent at KJZZ covering everything to do with state politics.