FWA- U.S. Attorney Settles Fraud Lawsuit Against Non-Profit For Inflating Medicaid Reimbursements By Falsely Reporting Millions In Costs

MM Curator summary

[MM Curator Summary]: Henry Coley used his “non profit” for Medicaid I/DD members to funnel cash to family members and his other businesses.




Maranatha Human Services Agrees to Cease Operations and Will Pay $850,000

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 that the United States has settled civil fraud claims against Maranatha Human Services, Inc. (“MARANATHA”) for falsely claiming that millions of dollars expended to benefit for-profit ventures owned and controlled by MARANATHA and its founder HENRY ALFONSO COLEY (“COLEY”), as well as payments to cover COLEY’s personal expenses 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 last year. 

Specifically, the Government’s complaint, which was filed in November 2021, alleges that MARANATHA, with its board’s approval, 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 of 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.

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, excessive salaries and fees for Coley’s family members, and Coley’s personal expenses.  These expenses were not related to providing care or assistance to the individuals with developmental disabilities who Maranatha was meant to serve.  Now Coley and Maranatha have each agreed to pay damages, Coley has been barred from working for any entity that bills federal healthcare programs, and Maranatha will close its doors.”

HHS-OIG Special Agent in Charge Scott Lampert said:  “It is incumbent upon the recipient of Medicaid funds to ensure that costs reported for reimbursement are accurate and in accordance with the program’s regulations; this is a steadfast requirement of participating in the Medicaid program.  The use of federal dollars for unallowable expenses diverts much-needed resources meant to support health care services for vulnerable individuals.  Putting a stop to such activity, through collaboration with our law enforcement partners, is a prime objective of HHS-OIG.”

Under the settlement approved yesterday by U.S. District Judge Kenneth M. Karas, MARANATHA agrees to cease operations after transitioning the operation of its programs to other providers under the supervision of the governing state regulatory agency.  MARANATHA will also pay $340,000 to the United States and has admitted and accepted responsibility for conduct alleged by the Government in its complaint as further described below.  In addition, MARANATHA has agreed to pay $510,000 to the State of New York to resolve the State’s claims, for a total recovery of $850,000.  The settlement amount is based on the Office’s assessment of MARANATHA’s ability to pay based on the financial information it provided and its commitment to cease operations.  The United States previously resolved the claims against COLEY through a settlement approved by Judge Karas on November 17, 2021.  In addition to paying damages to the United States and the State of New York, COLEY was barred from working for any entity that bills federal healthcare programs; he also entered into a Voluntary Exclusion Agreement with HHS-OIG, which prohibits him from, among other things, billing Medicaid and other federal healthcare programs for 15 years.

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.

As part of the settlement, MARANATHA 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 [the] government while at the same time fulfilling its function” consistent with its mission.
  • MARANATHA knew of the requirement to distinguish “allowable costs” from “non-allowable costs” in its CFRs.
  • MARANATHA knew that the allowable costs reported in its CFRs are used by the New York State Department of Health, in part, to determine MARANTHA’s reimbursement rates for the provision of Medicaid services.
  • In each CFR that MARANATHA submitted from 2010 to 2019 (the “Covered Period”), MARANATHA’s CEO, COLEY, certified that (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.”
  • Throughout the Covered Period, MARANATHA submitted CFRs every year that reported as “allowable costs” amounts expended not for MARANTHA’s provision of Medicaid-funded 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 or MARANATHA that did not provide Medicaid-funded services (the “Non-Medicaid Ventures”).  
  • MARANATHA’s board, which approved MARANATHA funding these Non-Medicaid Ventures, was briefed on them by COLEY.
  • MARANATHA paid 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, MARANATHA reported her full compensation as an “allowable cost” in the CFRs.
  • Since 2010, MARANATHA paid COLEY more than $2 million in salary and benefits, and MARANTHA claimed the full amount of that compensation as “allowable costs” on its CFRs. However, COLEY devoted much of his time to working on the Non-Medicaid Ventures.
  • MARANATHA also paid for certain of COLEY’s personal expenses, including more than $34,000 spent on personal training sessions, as well as holiday gifts and jewelry.  MARANATHA reported these expenses as “allowable costs” in its CFRs.

This lawsuit originated as a whistleblower lawsuit filed under seal pursuant to the False Claims Act.

Mr. Williams praised the outstanding investigative work of 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.


Clipped from: https://www.justice.gov/usao-sdny/pr/us-attorney-settles-fraud-lawsuit-against-non-profit-inflating-medicaid-reimbursements