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Post date: October 22 2014

A.G. Schneiderman Announces Arrest And Indictment Of Nonprofit Executives Charged In Kickback And Insurance Fraud Schemes

Father-Son Duo Allegedly Abused Nonprofit To Fund Their Own Extravagant Lifestyle, Including Long Island Mansions, Florida Condos and Luxury Cars

Schneiderman: People Motivated Solely By Personal Greed Have No Business Administering To The Serious Health Needs Of New Yorkers

NEW YORK – Attorney General Eric T. Schneiderman today announced the arrest and indictment of the top two executives of Narco Freedom, a nonprofit organization that provides treatment for substance abuse to tens of thousands of New York City residents at ten locations in Brooklyn, Queens and the Bronx. The organization’s director, Alan Brand, allegedly received personal kickbacks for housing some of Narco Freedom’s facilities in the buildings of a particular real estate developer. He then used the proceeds of these illegal dealings to fund a lavish lifestyle, according to today’s indictment. Alan Brand has been charged with bribery, grand larceny and money laundering for this part of the alleged scheme; if convicted, he faces a maximum of 15 years in prison. 

Brand’s son, Jason, was also indicted this morning and, along with his father, accused of falsely filing a $3.5 million insurance claim for the restoration of a Narco Freedom treatment facility in Brooklyn. Like his father, Jason Brand is accused of spending the organization’s funds for his personal use. If convicted of this part of the alleged scheme, Jason and Alan Brand each face a maximum of 25 years in prison.

“People motivated solely by personal greed have no business administering to the serious health needs of other New Yorkers,” said Attorney General Schneiderman. “New York has the greatest nonprofit sector in the nation, but a case like this reminds us of the need to remain vigilant and strengthen our oversight of the industry.”

In addition to the criminal indictment, the Attorney General obtained a civil court order freezing the bank accounts, property and possessions of both Alan Brand and Jason Brand and corporations they control. In accordance with the court order, four properties have been frozen: 23 Barrington Place, Melville (Jason Brand’s N.Y. home), 18 Phaetons Drive, Melville (Alan Brand’s N.Y. home), 8140 Santalo Cove Court, Boynton Beach (Florida property belonging to Jason Brand) and 99 SE Mizner Blvd, Boca Raton (Florida property belonging to Alan Brand). The order also freezes the Bronx headquarters of both Narco Freedom (250 Grand Concourse) and Jason Brand’s construction company, DASO Development (1735 West Farms Road). Additionally, investigators seized six cars today belonging to Alan and Jason Brand, including a 2013 Tesla Model S, a 1969 Chevy Corvette and a 2002 Jaguar X.

Narco Freedom is a New York State Medicaid provider; it receives nearly $40 million annually in taxpayer-funded state Medicaid reimbursements and additional money from the New York State Office of Alcoholism and Substance Abuse Services. In addition to treatment facilities, the organization provides medical, mental health and other support programs to tens of thousands of people across New York City. 

The investigation into the Brands’ criminal conduct, which was spearheaded by the Attorney General’s Medicaid Fraud Control Unit (MFCU), began in 2013. Between 2009 and 2014, Alan Brand allegedly solicited and received a monthly kickback of $13,000 from a real estate developer who rented buildings to Narco Freedom. In exchange for the monthly payments, Brand agreed to house many of the nonprofit’s facilities in the developer’s buildings, using taxpayer dollars to pay the rent, according to documents made public today. Through this arrangement, Brand was profiting personally, pocketing money rightly due to his charitable organization.

Narco Freedom is registered as a tax-exempt, not-for-profit corporation; Alan Brand is the Director  and was, until recently, its Chief Executive Officer. Under State law, leaders of not-for-profit charitable organizations owe their organizations a duty of loyalty, a duty of care and a duty of obedience which mandates that they place their organization’s interests above their own, that they abide by all rules and regulations applicable to that organization and that they operate the organization in furtherance of its core mission.  Prosecutors allege that Alan Brand violated all three of these duties by entering into the aforementioned kickback scheme and by concealing the scheme from various individuals and regulatory agencies. 

In addition to the kickback scheme, today’s indictment alleges that Alan Brand, while C.E.O. of Narco Freedom, along with Jason Brand, while a high-ranking manager there and the owner of the DASO Development Corporation, defrauded Arch Insurance Company by filing a false insurance claim in connection with the restoration of 217 Court Street in Brooklyn, the location of a former treatment facility operated by Narco Freedom.  

The Brooklyn facility suffered substantial damage from a 2009 storm and, as the insured party, Narco Freedom received a $3.5 million payment with Arch to restore the location. During settlement negotiations, Jason Brand, negotiating on behalf of Narco Freedom, allegedly represented that restoration work would be completed by union employees; instead, day laborers were hired in an apparent effort to lower the cost of the project. The Brands also failed to disclose that Jason Brand owned the company hired to restore the facility, DASO Development Corporation, according to prosecutors. According to the indictment, Narco Freedom’s intentional misrepresentations and material omissions resulted in a significant loss to Arch, as the insurance company agreed to an unnecessarily large settlement.

As a result of today’s indictment, Alan Brand has been charged with Commercial Bribe Receiving in the First Degree, Grand Larceny in the Second Degree and Money Laundering in the Second Degree.  Alan and Jason Brand, as well as Narco Freedom and DASO Development Corporation as separate entities, have been charged with Insurance Fraud in the First Degree and Grand Larceny in the Second Degree.

The Attorney General’s investigation into the operation of Narco Freedom continues and additional charges are anticipated.

Throughout this investigation, the Attorney General’s office has worked closely with those state agencies that regulate Narco Freedom’s treatment programs. The goal of this coordinated effort is to ensure the continuity of care for all patients that use Narco Freedom’s services. In particular, the Attorney General would like to thank the Office of Alcoholism and Substance Abuse Services, the Office of the Medicaid Inspector General and the New York State Department of Health. 

The criminal case is being prosecuted by Assistant Attorneys General Kristen Conklin and Jihee Suh. The civil case is being handled by attorneys Carolyn Ellis, Alee Scott and Dave Abrams. The investigation was led by Deputy Chief Kenneth Morgan, Senior Investigator Albert Maiorano, Supervising Investigator Michael Casado and Investigators Dominic DiGennaro, Steven Broomer, Dave Ryan, Julie Clancy and Valerie Patrick. Audit support was provided by Special Audit Investigators Patricia Iemma and Giovanni Liotine. Christopher M. Shaw is MFCU’s New York City Regional Director, Thomas O’Hanlon is its Chief of Criminal Investigations – Downstate and Thomasina Smith is its Chief Auditor. Amy Held is the Acting Director of MFCU. The Criminal Justice Division is led by Executive Deputy Attorney General Kelly Donovan.

The charges filed in this case are accusations. The defendants are presumed innocent until proven guilty in a court of law.

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