Attorney General Schneiderman Announces $18 Million Medicaid Fraud Settlement With State’s Largest Residential Service Provider

Young Adult Institute Inflated Expenses to Justify Reimbursement of Excess Medicaid Dollars

Schneiderman: Anyone Who Tries to Defraud New York Taxpayers Will Face Zero Tolerance and Pay the Price

NEW YORK, NY - Attorney General Eric T. Schneiderman today announced a settlement with Young Adult Institute, Inc. (YAI), organization officials Philip H. Levy and Karen Wegmann, and former CEO Joel M. Levy, resolving allegations that they defrauded the Medicaid program. YAI, the state’s largest residential service provider, will pay $18 million in damages, and significantly reform their cost reporting practices.

“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," Attorney General Schneiderman said. "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.”

Each year, YAI submits requests to the New York State Office for People with Developmental Disabilities, seeking funding for losses incurred to operate its programs. The amount of such rate appeals, or whether YAI is eligible to receive any adjustment at all, is based on an annually submitted Consolidated Fiscal Report – a lengthy report detailing all of the organization’s expenses. As a result, over the past 10 years, YAI received more than $8 million in additional funding from Medicaid.

However, beginning in at least 1999, YAI artificially inflated the expenses on its annual Consolidated Fiscal Reports to the state in order to receive additional funding that it was not entitled to receive. Specifically, YAI allocated the expenses related to certain employees to programs and sites at which those employees never worked. The company also listed high level administrative staff as clinic social workers, and improperly categorized fundraising expenses – all to inflate YAI’s expenses and extract more money from the Medicaid program.

The investigation began after a whistleblower filed a complaint that YAI had improperly inflated its expense reports. Of the $18 million YAI will pay in damages, $10.8 million will be returned to the New York State Medicaid program. The investigation was conducted in cooperation with the U.S. Attorney for the Southern District of New York.

The case was handled by Special Assistant Attorney General Jacob Bergman for the New York State Medicaid Fraud Control Unit.

New Yorkers are urged to report cases of suspected fraud to the Attorney General’s toll-free Medicaid Fraud Hotline, at 1-866-NYS-FIGHT (697-3444).

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