Attorney General James Announces Conviction Of “Three-Quarter House” Director Charged With Defrauding Medicaid Through A Kickback Scheme

NEW YORK, NY —Attorney General Letitia James announced the conviction of Robert H. Corrado, 57 and Interline Employee Assistance Program, Inc. (Interline) for engaging in a systematic kickback scheme and violating patients’ rights.  In 2017, the Attorney General’s Medicaid Fraud Control Unit (“MFCU”) secured an indictment and filed several civil causes of action against Robert Corrado, Kristina Corrado, and Interline seeking to recover monies improperly obtained as a result of their criminal conduct. Since 2015, MFCU’s “three-quarter house” investigations have brought down three groups of fraudulent housing and treatment providers, including Narco Freedom, the Baumblit Group, and Interline.

“The defendants exploited individuals struggling with homelessness and substance abuse in order pad their bottom line,” said Attorney General Letitia James. “This series of investigations disrupted a dismal culture where housing was used as bait for the most vulnerable New Yorkers just to have an excuse to bill Medicaid. We will never tolerate this type of behavior that defrauds both our state and our communities. ”

The indictment alleged that the Corrados and Interline engaged in an illegal kickback scheme. Robert Corrado, Executive Director of Interline, an outpatient substance abuse treatment program, and owner of several “three-quarter houses” located in Queens and Brooklyn, provided housing at below market rent to homeless clients on the condition that the clients attend treatment at Interline and nowhere else.  “Three-quarter” reflects that many of the clients had been released from incarceration but had not yet secured housing. Robert Corrado and Interline, in turn, received payment from Medicaid for substance abuse treatment claims predicated on this kickback arrangement. 

By his plea on January 8, 2019, Corrado and Interline admitted to the facts underlying the crimes charged. The Honorable Judge John Latella, Justice of the Supreme Court, Queens County accepted the guilty pleas. At a future date, Corrado will be sentenced to a jail term and enter into a civil settlement agreement to pay $2.4 million restitution to the State Medicaid program.  Kristina Corrado, 34, previously pleaded guilty to the felony crime of Medical Assistance Provider: Prohibited Practice on November, 26, 2018 and paid $25,000 in restitution.

Interline’s three-quarter homes were located throughout Queens and in Brooklyn and were called “Care Houses”.  Kristina Corrado, Robert Corrado’s daughter, managed the housing from Interline’s offices where she monitored the attendance of Care House residents at Interline’s outpatient program, and residents who were not compliant with Interline’s mandatory treatment were evicted from the Care Houses.  The overlap in staff and operations between Interline’s outpatient treatment program and its Care Houses created an unlicensed residential treatment program. Under New York Mental Hygiene law, it is a crime to operate an unlicensed residential treatment program.  The requirement that Care House residents only received treatment at Interline deprived them of their fundamental freedom of choice in medical care in violation of numerous State laws, including the Patient’s Bill of Rights.  

As a result, Robert Corrado and Interline received over $2 million from fraudulent claims to Medicaid. 

Robert Corrado and Interline were charged with Grand Larceny in the First Degree, a class B felony.  Robert Corrado and Interline along with Kristina Corrado were further charged with violating the Social Services Law prohibiting the payment of kickbacks related to the provision of services under the State’s Medicaid program, a class E felony.  Interline was also charged with three counts of Offering a False Instrument for Filing in the First Degree, a class E felony, and violating the State’s Mental Hygiene Law prohibiting the operation of a residential treatment program without the proper operating certificate, a class A misdemeanor.

At the time of the plea, the Attorney General also reached an agreement to settle a civil complaint against Interline, Robert Corrado and his wife Kim Corrado for violations of New York’s False Claims Act, Section 145-b of New York’s Social Services Law and other causes of action to recover the substantial financial benefits from the fraud. As a result, real property and other assets owned by Robert Corrado will be forfeited and sold, and the proceeds returned to New York Medicaid.

Since 2015, MFCU brought four cases against owners or managers of substance abuse treatment programs as well as several treatment programs themselves, charging violations of patient rights and defrauding Medicaid.   Each prosecution resulted in the conviction of all defendants for felonies, as well as the recovery of $16.56 million dollars in restitution for the New York Medicaid program.  The prosecution and settlement of the civil action against Interline and the Corrados is expected to result in the recovery of an additional $2.4 million for New York’s Medicaid program.

Throughout these investigations, the Attorney General’s office has worked closely with the various city and state agencies.  The Attorney General thanks the New York City Human Resources Administration and the New York State Office of Alcoholism and Substance Abuse Services for their cooperation, partnership and valuable assistance. In addition, the Attorney General thanks the Office of the Medicaid Inspector General Dennis Rosen.

The Interline investigation was led by Investigator Shavaun Clawson, under the supervision of Supervising Investigator James Briscoe and Deputy Chief Investigator Kenneth Morgan.  Financial analysis was provided by Auditor-Investigators Nicholas Thottam and Megan Scott under the supervision of MFCU’s NYC Regional Chief Auditor Thomasina Smith.  

The criminal case against Interline was brought to trial by Special Assistant Attorneys General David Arias and Konrad Payne with the assistance of NYC Regional Director Christopher M. Shaw.  Thomas O’Hanlon is MFCU’s Chief of Criminal Investigations–Downstate.  The civil case was handled by AAG Payne with the assistance of MFCU Civil Chief Carolyn Ellis. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney.  The Criminal Justice Division is led by Chief Deputy José Maldonado.