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Attorney General James secures $850,000 from disability services not-for-profit that defrauded Medicaid

  • / Updated:
  • Concetta Durso 

New York Attorney General Letitia James today announced a settlement with Maranatha Human Services, Inc. (Maranatha), a not-for-profit organization that provides Medicaid services to people with developmental disabilities in New York. The agreement resolves claims brought by the state and federal government in a qui tam action initiated by a former employee against Maranatha and Henry A. Coley, the organization’s former chief executive officer. Maranatha committed Medicaid fraud, violating the New York False Claims Act by knowingly submitting false reports of its costs to the New York State Department of Health (DOH), falsely claiming reimbursement for millions of dollars Maranatha spent on salaries and contractor fees. These funds were used to enrich Coley, his family and friends, and to support side businesses he controlled — not for the provision of Medicaid services.

“As a charitable organization and Medicaid Provider, Maranatha was entrusted with public funds to serve a particularly vulnerable population,” said Attorney General James. “Instead, Maranatha diverted these critical funds to benefit its chief executive officer, his family and friends. Self-dealing will not go unchecked in New York. My office is committed to holding Medicaid providers accountable, ensuring the welfare and well-being of all New Yorkers, and protecting the integrity of this critical program.”

As part of the settlement, Maranatha has agreed to cooperate with the New York State Office for People with Developmental Disabilities (OPWDD) and take all necessary steps to transition the operations of its Medicaid-funded programs to one or more other providers to ensure continuity of services. Maranatha has agreed not to submit new claims for payment to state-funded health care programs on or after June 30, 2023. Within 60 days of the submission of the final claim to state or federal health care programs, Maranatha will submit its petition for dissolution under the New York Not-for-Profit Law to the Office of the Attorney General’s (OAG) Charities Bureau.

The federal government has also entered into an agreement with Maranatha to resolve its fraud claims stemming from the same misconduct. Maranatha will pay $510,000 to New York state and $340,000 to the federal government, for a total recovery of $850,000.

The state intervened in the whistleblower suit against Coley and Maranatha in February 2021. In its complaint-in-intervention filed against the defendants in April 2022, the state alleged that Maranatha paid excessive salaries and consulting fees to Coley and his family and friends, often in exchange for little or no work. The state also found that Maranatha paid independent contractors and Maranatha’s employees to work on side projects that had nothing to do with Maranatha’s provision of Medicaid services. Maranatha claimed such expenses as allowable costs in its Consolidated Fiscal Reports (CFRs) — costs that are reasonable and necessary for the provision of Medicaid services — when they were not. Because the state reimburses Maranatha at provider-specific rates set based on the legitimate Medicaid expenses reported in Maranatha’s CFRs, the state paid Maranatha at artificially inflated rates for each unit of service for which Maranatha billed the state. As a result, the state paid Maranatha millions above what it deserved from 2010 to 2019. 

In the settlement agreement, Maranatha admitted, acknowledged, and accepted responsibility for the following conduct:

  • Maranatha knew that it was required to distinguish “allowable costs” from “non-allowable costs” in its CFRs.
  • Maranatha knew that the allowable costs Maranatha reports in its CFRs are used by DOH, in part, to determine Maranatha’s reimbursement rates for the provision of Medicaid-funded services.
  • In each CFR that Maranatha submitted since 2010, Coley certified that Maranatha’s CFRs were true and correct, Maranatha accurately reported all expenditures made for services performed in accordance with the Mental Hygiene Law, and, since 2018, that Maranatha reported and adjusted out all non-allowable expenses on its CFRs.
  • From 2010 to 2019, Maranatha submitted annual CFRs that reported as “allowable costs” amounts expended not for Maranatha’s provision of Medicaid-funded services but instead to pursue certain for-profit business ventures, including a home goods business operated by Coley (non-Medicaid ventures).
  • Coley briefed Maranatha’s board of directors, which approved of Maranatha funding these non-Medicaid ventures.
  • Coley made a presentation to Maranatha’s board of directors acknowledging that it “was always the plan for Maranatha to use government funds as a launching pad to create private enterprise…”
  • Maranatha paid contractors to perform work related to the non-Medicaid ventures, including, since 2010, more than $300,000 to Coley’s daughter. Though much of her time was spent on work related to these 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 Maranatha claimed the full amount of that compensation as “allowable” costs on its CFRs. However, Coley devoted much of his time to working on non-Medicaid ventures.

The state previously resolved its fraud claims against Coley in a settlement that was approved by U.S. District Judge Kenneth M. Karas on November 9, 2021. Coley agreed to pay the State $132,000 and the federal government $88,000, representing the maximum restitution that he could afford to pay, and admitted and accepted responsibility for conduct alleged by the State and federal government in their complaints. Coley resigned from Maranatha during the state’s investigation in July 2021. As a result of his misconduct, Coley is barred from working or volunteering for any entity that receives funds from Medicaid. Additionally, Coley is permanently barred from serving as an officer, director, or trustee of any not-for-profit corporation in New York, and is similarly barred from serving in any capacity that permits him discretionary authority over charitable assets. 

The investigation was conducted by Attorney General James’s Medicaid Fraud Control Unit (MFCU) in consultation with the Charities Bureau. It was commenced after a whistleblower filed a complaint under the qui tam provisions of the New York False Claims Act, as well as the federal False Claims Act, in the United States District Court for the Southern District of New York. The New York False Claims Act allows individuals to file actions on behalf of the government and share in any recovery.

New York MFCU’s total funding for federal fiscal year (FY) 2022 is $59,918,216. Of that total, 75 percent, or $44,938,664, is awarded under a grant from the U.S. Department of Health and Human Services. The remaining 25 percent, totaling $14,979,552 for FY 2022, is funded by New York state. Through MFCU’s recoveries in law enforcement actions, it regularly returns more to the state than it receives in state funding.

Attorney General James thanks the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of New York for its collaboration in the investigation, litigation, and resolution of this matter. 

The matter was handled by Principal Auditor-Investigator Theresa A. White, Auditor-Investigator Khristian Diaz, and Special Assistant Attorney General Ting Ting Tam of MFCU’s Civil Enforcement Division, which is led by Chief Alee N. Scott. Stacey Millis is the Chief Auditor of the Civil Enforcement Division. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney, and is a part of the Division for Criminal Justice. The Division for Criminal Justice is led by Chief Deputy Attorney General José Maldonado, and is overseen by First Deputy Attorney General Jennifer Levy.

Reporting Medicaid Provider Fraud: MFCU defends the public by addressing Medicaid provider fraud and protecting nursing home residents from abuse and neglect. If an individual believes they have information about Medicaid provider fraud or about an incident of abuse or neglect of a nursing home resident, they can file a confidential complaint online or call the MFCU hotline at (800) 771-7755. If the situation is an emergency, please call 911.