State reaches false claims settlement with Preferred Family Healthcare

Preferred Family Healthcare, a Springfield, Mo.-based mental healthcare provider, will pay $6.5 million after reaching a settlement with the state, Arkansas Attorney General Leslie Rutledge said Thursday (Oct. 22). The settlement is connected to PFH’s violations of the state and federal False Claims Act.

How these claims will be processed was not discussed during a morning press conference.

The company was at the center of a bribery and corruption scandal involving Arkansas legislators including former Arkansas Sen. Jeremy Hutchinson, the nephew of Gov. Asa Hutchinson. Jeremy Hutchinson pleaded guilty in July 2019, to one count of conspiracy to commit federal program bribery.

Hutchinson was paid $350,000 and given a number of perks to push an agenda set by PFH administrators and lobbyists through the Arkansas Legislature.

A whistleblower in 2016 alerted authorities that PFH employees were conducting Medicaid fraud, and an investigation was opened, Rutledge said. Hundreds of people were interviewed and about 1 million documents were generated during the investigation, she said.

“These allegations involved the inappropriate billing of patients,” she said.

Therapists billed millions of dollars for services not rendered or billed for services not performed. Those services involved counseling for mentally ill patients. About a year after the initial complaint, it was learned the company improperly billed for an entire group, Qualified Medicaid Beneficiaries, within its system.

At least five employees have been charged with state crimes, and three have been convicted, she said. Rutledge said it was difficult investigating a company worth about $100 million, but investigators were able to learn the scope of the fraud involved. PFH no longer operates facilities in Arkansas.

The head of the Arkansas Medicaid Fraud Unit, attorney Lloyd Warford said investigating PFH was a daunting task. Millions of documents, including emails, texts messages, contracts and others had to be deciphered by his team of four attorneys. The unit had to unravel the layers of PFH’s internal systems and attorneys spent the better parts of each week since 2016 investigating this case, he said.

“It’s not something that has been done before,” he said.

Former lobbyist Milton Russell “Rusty” Cranford of Rogers was convicted for his role in a nearly $1 million bribery conspiracy involving PFH.

That indictment alleged Cranford and co-conspirator Eddie Wayne Cooper, a Democrat who served in the Arkansas General Assembly from 2006 through 2011, received $264,000 in secret kickback payments from co-conspirator Donald Andrew Jones of Willingboro, N.J., who was paid nearly $1 million by the Springfield nonprofit in a bribery scheme that lasted almost six years, from February 2011 until January 2017.

Cranford also was charged with eight counts of receiving a bribe by an agent of an organization that receives federal funds. At the time, Cranford was a lobbyist and an employee of PFH, formerly known as Alternative Opportunities Inc. He also served as an executive for the charity’s operations in Arkansas.

Cooper also pleaded guilty in federal court for his role in a conspiracy to embezzle more than $4 million from the Springfield healthcare group. Jones pleaded guilty before U.S. Magistrate Judge David Rush to charges he participated in the bribery scheme to steal federal funds from PFH.

Former Arkansas lawmaker Rep. Hank Wilkins of Pine Bluff also admitted to taking a $100,000 bribe from Cranford in a Feb. 22 statement to the FBI, the same day the Rogers lobbyist was arrested for his role in the alleged bribery scheme with PFH executives. Wilkins has since resigned from his position as Jefferson County Judge.

With the investigation complete, and a settlement reached, Rutledge said it’s time for her and the unit to move onto other cases.

“This is an exciting day to close this chapter,” she added.