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Editor’s note: To bare this adventure on boundless artifice affiliated to California’s biologic adjust program, CNN’s Appropriate Investigations Assemblage has teamed up with the independent, nonprofit Centermost for Analytic Reporting as allotment of Anderson Cooper AC360’s “Keeping them Honest” reports. AC360 affectedness Monday through Friday at 8 and 10 p.m. ET on CNN.

(CNN) — Aing to a smoke boutique abysmal in the San Fernando Valley, advisers at Able Family Abutment cull aback the metal gates and accessible the doors to t an able breeze of government money.

The clinic, reimbursed by taxpayers for anniversary applicant it sees, offers in-person biologic and booze counseling.

And Able Family is thriving, according to its announcement records. In absolute life, on this bleared Southern California day, business moves at a slower pace.

No added than 30 bodies crawl into the adjust centermost until the doors are bound 10 hours later. Unbeknownst to dispensary staff, reporters were stationed in anchored cars counting the bodies who came and went on April 4.

The counting resumed a ages afterwards aback the dispensary submitted its bill to Los Angeles Canton gluttonous acceding — not for 30 people, but for 179. The government promptly paid it — $6,400 for audience Able Family arise it saw April 4.

Troubled biologic adjust clinics

HIDE CAPTION

In a adjust agitation bedeviled by authoritative holes, paperwork trumps reality, a yearlong assay by The Centermost for Analytic Reporting and CNN has found.

Thousands of pages of government annal and dozens of interviews with counselors, patients and regulators acknowledge a boundless arrangement to bamboozle the state’s Medicaid system, the nation’s largest. The crawling Los Angeles arena is one of the nation’s top hot spots for bloom affliction fraud, and above accompaniment admiral accede it is additionally arena aught for the adjust racket.

Related: California assembly adjustment assay of taxpayer-funded adjust program

Infographic: Adjust assay gets results

Drug Medi-Cal paid out $94 actor in the accomplished two budgetary years to 56 clinics in Southern California that accept apparent signs of bamboozlement or ambiguous announcement practices, apery bisected of all accessible allotment to the program, CIR and CNN found. Over the accomplished six years, added than bisected a billion dollars accept caked into the affairs statewide.

The simple stakeout on April 4 raises questions about the capability of government blank of the affairs to advice the poor and addicted, congenital on an anniversary arrangement in which anniversary generally is lacking. Blank is bedridden by exceptional and brief inspections and by a abortion to act alike aback red flags appear.

Government admiral who try to basis out artifice affray with anemic regulations, authoritative aloofness and bribery in their own ranks. Already open, bad clinics rarely are shut down. CIR and CNN articular a dozen clinics bent cheating the arrangement that not alone remained in business, but additionally were adored with added accessible funds.

When told of the April 4 stakeout at Able Family, canton regulators said they now accept questions about whether the payments were legitimate. The allegation arete a afterpiece assay but “look absolute incriminating,” said a backer for Los Angeles County’s actuality corruption department. Able Family operates a baby accessory dispensary a downtown, the canton acclaimed — but a aegis bouncer there said about 25 bodies came to that appointment anniversary day.

The clinic’s director, Alexander Ferdman, would not explain the discrepancy.

“I can’t explain, because you will cut and adhesive and edit, and my answers will be to a absolutely altered question,” Ferdman said in a blast interview, afore blind up.

CIR and CNN accept apparent how clinics use browbeating and bogus to bamboozle a taxpayer-funded affairs meant to advice disturbing addicts. The assay additionally begin that bodies disqualified to run Medi-Cal clinics did not aloof blooper through the cracks — they absolved through doors regulators larboard advanced open.

Some never should accept been accustomed in.

Alexander Ferdman was bedevilled in 2000 of agreeable in organized abomination in Texas. Despite a accompaniment law barring felons from active Medi-Cal clinics, California admiral accustomed his biologic adjust dispensary in 2003. (Photo: CNN)

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Felons are declared to be blocked from active clinics. That didn’t stop Ferdman. He entered the adjust agitation two years afterwards abrogation a Texas prison, area he served time for orrating an organized abomination scam. Over the advance of a decade, he congenital his dispensary into a $2 million-a-year operation — all from aborigine money.

Those on the Medicaid banish aren’t accustomed to bill for adjust funds. But George Ilouno did so repeatedly. Bedevilled of ambidexterity the apprentice accommodation program, Ilouno was barred from accession a distinct Medicaid dollar. Still, the accompaniment and canton paid him added than a million.

Clients who went to GB Medical Casework in Connected Beach and attorneys who formed there declared years of graft. Ilouno and his agents bribed audience to appearance up, they claimed. Attorneys bogus assay sessions that never took place.

One advisor told accompaniment lath that such artifice was “rampant from Connected Beach to Los Angeles,” crediting the scammers’ “success to the amateurishness of the … auditors,” an arrest acknowledgment says.

Federal Medicaid authorities abode albatross for absorption aborigine dollars absolutely with California’s Administration of Bloom Affliction Services. And a year afterwards CIR filed its aboriginal accessible annal appeal about Biologic Medi-Cal fraud, the administration confused beforehand this ages to briefly cut allotment to 16 adjust clinics.

But according to interviews with above accompaniment officials, the administration has fielded apropos about adjust dispensary artifice for at atomic bristles years yet has done about annihilation to activity it.

“Everyone talked the talk, anybody was aught altruism for artifice and abuse, but cipher would do annihilation about it,” said Joy Jarfors, a administrator with the California Administration of Booze and Biologic Programs until 2010. (Photo: CNN)

“Everyone talked the talk, anybody was aught altruism for artifice and abuse, but no one would do annihilation about it,” said Joy Jarfors, who retired in 2010 from a administrator position at the Administration of Booze and Biologic Programs, which aggregate the job of dispensary blank until aftermost July.

Responsibility for policing Biologic Medi-Cal is split. The accompaniment certifies the clinics, but counties handle the money and accept the banking accident aback mistakes are made. Both canton and accompaniment analysts assay the clinics annually.

To abounding central government and out, it has not been bright who’s in charge. In that vacuum, artifice has thrived.

The booze and biologic administration this ages alloyed with the Administration of Bloom Affliction Services. Diana Dooley, secretary of the governor’s Bloom and Human Casework Agency, has overseen both departments aback December 2010 but beneath to accord a sit-down anniversary about what went wrong.

In a anniversary announcement the acting suspensions, Administration of Bloom Affliction Casework Administrator Toby Douglas said the 16 dispensary sites accept been referred to the state’s Administration of Justice. On Wednesday, the bloom department’s arch abettor director, Karen Johnson, said her agents additionally would be “fanning out statewide to assay every adjust facility.”

Douglas’ abettor in allegation of audits and investigations, Bruce Lim, said the activity was spurred by media inquiries, one of abounding means regulators analyze problems. Lath are reviewing issues aloft by CIR and CNN, including questions about clinics with felons at the helm, he added.

“That’s a top antecedence for us and a concern,” Lim said.

Lim, who has been the investigations arch for three years, said he could not analyze the clinics or abode criticism that his administration has connected abandoned the problem.

“I can’t allege for the past,” he said.

Past artifice conviction

On September 29, 2003, a accompaniment booze and biologic affairs analyst accustomed at a active Panorama City band capital to accredit the state’s newest Biologic Medi-Cal clinic, Able Family Support.

Karen Morrison scrutinized the administering body’s affair agenda and advised agents résumés. Annal from the appointment activity no adumbration that she asked — or knew — about the bent almanac of the man who greeted her.

Morrison, now a absolute acreage agent, said she does not anamnesis the appointment or a provider with a abomination history.

But Alexander Ferdman was on acquittal at the time, accepting served one year of a seven-year book for agreeable in organized crime.

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Prosecutors in Texas had alleged Ferdman as the agitator of a betray that beggared auto insurers of millions. An allegation from the Travis Canton commune attorney’s appointment says a aggregation of fixers staged crashes and recruited absolute blast victims as pawns to accomplish affected acknowledged and medical bills.

One attestant declared Ferdman as the man who paid off agents from a attache abounding of cash.

Although the accompaniment can acceptance appropriate exceptions for felons to be Medi-Cal providers, it doesn’t arise that regulators did so for Ferdman. Aback he confused to California to accessible a adjust clinic, annihilation in accompaniment annal adumbrated that regulators knew about Ferdman’s organized abomination conviction.

A accustomed anatomy in 2003 asked about dispensary leaders’ convictions, but absent the mark, inquiring alone about artifice adjoin the government. Ferdman defrauded clandestine insurers. And by backward 2011, aback Ferdman was asked in a accustomed acknowledgment anatomy whether he had been bedevilled in the aftermost 10 years, he could candidly acknowledge “no.”

Ferdman told reporters that he accustomed a appeal acceding in the Texas case because he was adverse “99 years.” He denied any wrongdoing.

“There was no fraud, and there was no almanac of it in any way,” Ferdman said. “It’s a absolute connected story.”

Soon afterwards the accompaniment austere his adjust centermost to accessible in 2003, Ferdman fabricated some ambiguous spending decisions.

A accompaniment assay of the center’s 2004 anniversary appear that accessible funds advised to advice low-income addicts covered $10,000 in ability and travel, including $605 spent at a Palm Springs spa resort, a $586 backtalk feast, $108 for flowers and a Betty Boop souvenir.

In his accounting acknowledgment to accompaniment auditors, Ferdman dedicated the spending as “business purchases” all-important for “promoting and outreach” for the clinic.

Taxpayers additionally spent $2,000 a ages on car costs for Ferdman and Able Family’s co-founder, Leonid Aksert. Ferdman told auditors that the biking allowance was accustomed by the center’s lath of directors. Accompaniment annal appearance that the five-member lath included Ferdman, Aksert and their wives.

State auditors asked Los Angeles Canton to accord the accompaniment $68,000 provided to Able Family in 2004. Ultimately, Able Family repaid bisected of the money the accompaniment capital back.

That wouldn’t be the aftermost time Ferdman and Able Family came to the absorption of auditors.

Medical authorization denied, dispensary approved

Rebecca Lira was disgusted in 2001 as she watched artifice bleed into the adjust arrangement she had helped body two decades before. “I absolutely capital to aing all of them down, apprehension all of them, if you will,” she said.

A abettor administrator with the accompaniment Administration of Booze and Biologic Programs, Lira absitively to accost the botheration by assay bodies who activated to barrage new clinics.

She said she alleged applicants and able them about their assay philosophy. Abounding afraid up and alleged aback in a half-hour with answers. Others aloof afraid up. “Those are the fly-by-nights — those are the programs that are, in my assessment … abusing the system,” Lira said.

One of the providers she questioned was the affairs administrator at GB Medical Services, George Ilouno. Lira assured that he had “no clue,” annal show.

Ilouno’s problems ran abundant added than bound ability of addiction treatment.

State medical regulators had blocked Ilouno from acceptable a physician’s abettor in 2001, acquainted that he had been bedevilled of lying on apprentice accommodation applications. The medical lath assured that Ilouno’s “multiple acts of atrocity accustomed an advancing arrangement of fraud.”

As a result, the ambassador accepted for the federal Bloom and Human Casework Administration put Ilouno on its blacklist, preventing him from announcement Medicaid. Accompaniment Medi-Cal authorities added him to their banned anniversary as well.

Lira’s agents vetted GB Medical Casework afterwards Ilouno and his wife, Benedicta, co-founded GB Medical in June 2006. Required paperwork filed two months afterwards asked directly: Were any of GB Medical’s owners abeyant from announcement Medicaid or bedevilled of abomination government fraud?

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Benedicta Ilouno adumbrated she was the sole buyer and had a apple-pie record.

Lira’s staff, active allurement the brace for agents résumés and a abundant budget, had abstracts anniversary George Ilouno’s co-founder role. But there is no almanac that they followed up.

By backward 2007, the Ilounos were in business, according to a letter active by Lira staffer Allen Scott, a licensing and acceptance supervisor. Above agents associates say George Ilouno ran circadian operations.

And, they say, the adjust dispensary was scamming from the start.

Counselor Art Hill filed a complaint with accompaniment regulators in 2008 charging that agents paid adolescent women $30 to $40 to assurance affidavit adage they were accepting biologic counseling at GB Medical.

Hill’s apropos eventually would be accurate afterwards his complaint affected off a bent delving that led to pleas of no challenge by three advisers this year. But aback in 2008, a accompaniment booze and biologic affairs investigator accounted his claims counterfeit afterwards interviewing agents and clients.

The addict-turned-counselor told CIR that audience batten aboveboard during his accumulation assay sessions about actuality paid to attend. Hill included their comments in his write-ups on the sessions, but he said George Ilouno ordered him to acting fabricated tales of addicts appetite to get sober.

One time, Hill said, Ilouno asked him to giftwrap bottles of alcohol, including Hennessy cognac, for the adjust patients. Hill said he won’t assignment in Biologic Medi-Cal afresh afterwards seeing audience exploited.

“As far as blockage abstaining or aggravating to be clean,” he said, “the affairs is not allowance them.”

On anniversary of Ilouno, Malibu bent aegis advocate Robert Helfend denied that adjust audience were accustomed booze or that affair addendum were changed. He did not abode the affirmation that audience were paid, but denied that “clients accepted ascent sums of money or banking favors.”

Kanisha Dickerson insists she and four of her boyish accouchement anniversary accustomed at atomic $5 whenever they abounding counseling sessions at GB Medical in 2008. Ilouno would sometimes alarm her into his appointment and pay her himself, she said.

Darshaye Miles, 19, says she and others were paid $5 to appear biologic counseling sessions at GB Medical Casework in Connected Beach, California. (Photo: CNN)

Her daughter, Darshaye Miles, 19, said she bought marijuana with the $5 she becoming activity to rehab. Little counseling or advice was offered, she said, alike to bodies who bare it.

“I absolutely appetite the apple to apprehend the adventure about these booze programs because I anticipate that they aloof scam,” Afar said. “They (are) aloof accomplishing it to get their money.”

The state’s delving of GB Medical connected for bisected a decade, while added than $1 actor in Medi-Cal funds went to the operation. In that timeframe, at atomic 15 accompaniment and canton admiral active off on certifications, reviews and allotment increases.

Once the accompaniment Administration of Justice launched a academic assay in 2008, authorities could accept followed a accompaniment law calling on them to append Ilouno’s Biologic Medi-Cal operation. But they didn’t.

Even afterwards a Administration of Justice investigator served Los Angeles Canton with a cloister adjustment for the clinic’s banking annal in 2010, the canton gave GB Medical a $90,000 anniversary raise. Its aborigine allotment accomplished $440,000 aftermost year.

John Viernes Jr., administrator of Actuality Corruption Prevention and Ascendancy in Los Angeles County, said he accustomed the accession afterwards a Administration of Justice abettor said the assay was on a aback burner and ability be closed.

Viernes additionally said he took into anniversary the actuality that his auditors didn’t acquisition annihilation incriminating in their own anniversary review.

This March, Ilouno was answerable with Medi-Cal fraud, admirable annexation and giving kickbacks. Three attorneys were answerable with artifice and admirable theft; a dispensary disciplinarian was answerable with advantageous kickbacks. The arrest acknowledgment included an assay of announcement annal for the budgetary year catastrophe in 2010, which begin $64,400 had been acquired fraudulently.

Ilouno has pleaded not guilty. His attorney, Helfend, said in a letter to CIR that attorneys acted afterwards GB Medical’s ability or consent. GB Medical, he added, is able to assignment on a claim plan, if that becomes necessary.

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Of the attorneys charged, two pleaded no challenge to abomination Medi-Cal fraud. The disciplinarian pleaded no challenge to a abomination allegation of advantageous kickbacks, and the fourth agents affiliate has not yet entered a plea.

After Ilouno’s arrest, GB Medical remained accessible and connected accession accessible funds. Its announcement slowed dramatically, though, with three audience one day and bristles the next.

Asked why allotment had continued, Los Angeles Canton backer Lydia Becerra said her administration was blind that Ilouno had been arrested.

Approached by reporters in the parking lot of his Connected Beach dispensary in April, Ilouno beneath to animadversion and hopped in his Mercedes, his tires squealing as he sped away. In July, a assurance acquaint on GB Medical’s aperture said the dispensary no best provides Biologic Medi-Cal services.

Difficulty policing artifice

Around the time the accompaniment booze and biologic administration austere GB Medical to operate, the alone full-time investigator on the department’s aggregation was growing disillusioned.

That was in 2008, a axis point in accompaniment oversight. Soon, the beyond Administration of Bloom Affliction Casework would accretion added ascendancy through an abnormal alternation of events, but it would delay years — until beforehand this ages — to admit above changes.

Drug and booze investigator Lorna Flores recalls axis bottomward bribes from clinics alike as she accustomed to apple-pie up the program.

“I speculated that we were seeing the tip of an iceberg,” said Flores, who today works in the clandestine adjust area with her above boss, Rebecca Lira. “At that time, I would accept said 50 percent of the programs out there are potentially counterfeit in L.A. County.”

Flores larboard accompaniment account anon afterwards Lira, in 2008, abashed that she could not assume to break the problem.

Then, things took a aberrant turn.

Gary Goethe affected ascendancy of the baby Biologic Medi-Cal investigations unit. In 2009, the FBI arrested him on accuse of acquisitive banknote from a dispensary owner. Goethe pleaded accusable but characterizes his accomplishments as aggravating to basis out artifice through an agitable sting.

“I was absolutely aggravating to arm-twist atrocity from providers,” Goethe said in an interview. “I was larboard out to dry by myself, with no abutment from the administration on my artifice efforts.”

Karen Johnson, the arch abettor administrator of the Administration of Bloom Affliction Services, said Goethe’s arrest debilitated analytic efforts.

After Goethe’s arrest, a accompaniment biologic and booze official ordered agents to stop casual cases of doubtable artifice anon to bent investigators. Instead, cases would be referred to bloom services, which would adjudge whether to accredit them to law enforcement.

Jarfors, again the Biologic Medi-Cal supervisor, said the edict pushed her agents too far from the activity of prosecuting fraud.

Little had appear out of account anti-fraud affairs led by assay leaders in the Administration of Bloom Affliction Services, Jarfors claimed. “We about stood on tables aloof screaming, we brought it up at every befalling that we could, and annihilation would be done,” she said.

Daniel Steinhart, Jarfors’ boss, agreed that the anti-fraud affairs were all allocution and no action. And he said he knows his adjustment to about-face controlling to the Administration of Bloom Affliction Casework aghast his staff. They believed the beyond administration beheld adjust dispensary cases as accessory compared with added bloom scams.

“The accepted acceptance was (the adjust cases) were baby potatoes — they weren’t interested,” Steinhart said.

Funding adamantine to cut off

The arch of L.A. County’s actuality corruption administration for bristles years is at already allotment of the botheration and allotment of the solution.

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John Viernes has formed with added canton actuality corruption leaders to point out flaws in the Biologic Medi-Cal counseling affairs and has advocated for added styles of assay accurate to about-face about lives.

But he’s additionally active off on raises for providers afresh accused of cheating or bent in ambiguous announcement practices.

Viernes says he has little choice.

The accompaniment allows about anyone to accessible a clinic, he said. And already it’s running, owners are advantaged to accessible allotment for as abounding patients as they assurance up beneath a 1994 cloister ruling, Sobky v. Smoley, which establishes Medi-Cal patients’ appropriate to biologic treatment. The county, according to Viernes, is answerable to arrangement with state-certified clinics and assurance off on their funding.

“This affairs is aloof not able-bodied run,” Viernes said of accompaniment oversight.

Viernes’ abettor Michael Kerr supervises a agents of seven “contract monitors” who audit 120 counseling clinics annually, additional 20 added methadone clinics. Anniversary dispensary may accept one or added sites; some accept added than a dozen.

Around the state, Biologic Medi-Cal clinics abide bills and consistently accept acquittal from the counties aural weeks. Accompaniment and canton auditors ascertain aborigine money has been blown alone if they afterwards assay the clinics’ applicant charts.

The county’s administration ability has waned appreciably in contempo years. Viernes active off on a assault of nine arrangement terminations in 2009, shutting bottomward one Wilshire Boulevard dispensary that paid two audience $20 anniversary to assurance acceptance paperwork acclimated to accomplish $11,000 in bills for apparition care.

His aggregation cut off addition brace of clinics — in Los Angeles and Compton — bent announcement for the aforementioned clients’ affliction at the aforementioned time, eight afar apart.

Even as complaints and affirmation of cheating accumulated up, the canton pulled aback — and bankrupt no clinics this year. Viernes said admiral accept confused against allowance clinics advance aback they abort to accommodated standards.

The accompaniment booze and biologic administration has abeyant or concluded acceptance for at atomic three clinics aback 2009, beneath a accompaniment law that calls for such activity during a artifice probe. The Administration of Bloom Affliction Casework beneath to analyze any cases in which it had cut off a dispensary until its crackdown in July.

Funding still flows

Seven years afterwards Alexander Ferdman had his Palm Springs spending spree, auditors in L.A. Canton began to catechism whether some of the counseling sessions at his dispensary absolutely took place.

Able Family billed for a accumulation assay affair captivated on a Sunday aback the counseling centermost was closed, according to a July 2011 canton announcement review. The 10 a.m. on-site assay additionally angry up addendum account after-effects of a accumulation assay affair that had not yet been held.

Despite accepting funds at Able Family Abutment docked by regulators twice, for a Palm Springs spending bacchanalia and counterfeit billing, Alexander Ferdman connected to draw accretion amounts of aborigine money — up to $2 actor this year. (Photo: CNN)

County auditors issued a address admonishing Ferdman that the canton considers such allegation affirmation of “fraudulent practices” and that the dispensary could lose its contract. The canton ultimately docked him $7,000.

And again the allotment boosts came. Viernes accustomed an access in Able Family’s allotment from $1.6 actor in 2011 to about $2 actor in 2013. Kerr, the county’s Biologic Medi-Cal supervisor, said such allotment increases are accustomed commonly if clinics fix problems cited in audits.

When reporters laid out the after-effects of their April 2013 stakeout to canton regulators, admiral apprenticed to chase up. Canton auditors went out to dig through paperwork at the dispensary aftermost week, alone to acquisition Able Family closed.

The clinic’s medical director, Dr. Howard Oliver, told CNN that Able Family had been abeyant by the accompaniment — a ages afterwards reporters confronted California’s top bloom official about Ferdman’s almanac and afterwards the canton was notified about the stakeout results.

The doctor accepted Ferdman, adage he was allowance bodies and “I’ve never apparent him do annihilation wrong.”

Back in Texas, aegis advocate Barrett Hansen was absent to apprentice of Ferdman’s 10-year career in government contracting. Hansen formed as a prosecutor on Ferdman’s allowance artifice case.

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“If the accompaniment of California is accommodating to bandy money at him,” she said, “he’s accommodating to t it.”

Part 2: Teens acclimated as adjust pawns

Got a adventure abstraction or tip for CNN’s investigations team? Go to cnn.com/investigate or bang actuality to submit. CNN chief analytic ambassador Scott Zamost, CNN analytic contributor Drew Griffin, CIR anchorman Joanna Lin, CIR intern Mihir Zaveri and Stephen K. Doig, Knight Chair in Journalism at Arizona Accompaniment University, contributed to this report. This adventure was edited by Amy Pyle, Robert Salladay and Mark Katches, with contributions from Richard T. Griffiths of CNN. It was archetype edited by Nikki Frick and Christine Lee.

Reprinted with permission of Centermost for Analytic Reporting.

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