BY ROGER SMITH
MOUNTAIN CITIZEN
ASHLAND — Addiction Recovery Care announced Thursday that it had settled U.S. Department of Justice civil claims involving historical Medicaid billing practices and agreed to a proposed $3.94 million judgment in a separate dispute over Employee Retention Credit proceeds.
The company did not disclose how much it agreed to pay the U.S. Department of Justice or provide a copy of the settlement. The Justice Department had not publicly announced or confirmed the agreement as of Thursday evening.
Court filings earlier this year in separate creditor litigation previously revealed a DOJ draft settlement under which ARC would pay approximately $27.7 million to resolve the federal civil claims. It was unclear Thursday whether that amount remained in the final agreement.
“Reaching a resolution with the Department of Justice represents an important milestone for ARC,” ARC President and Chief Executive Officer Cassandra Webb said in a statement. “We approached this process transparently, cooperatively and worked diligently to identify and resolve the billing issues involved.”
Webb said the resolution gives the company greater certainty and allows it to focus on compliance, accountability and treatment services.
ARC described the matter as a settlement of “all civil claims” related to historical Medicaid billing. The settlement does not resolve a continuing federal criminal investigation of the company, according to the FBI.
An FBI spokesperson told the Lexington Herald-Leader on Thursday that the criminal investigation remained ongoing. The FBI publicly confirmed in August 2024 that it was investigating potential Medicaid billing fraud involving ARC.
The earlier draft of the civil settlement alleged that ARC submitted improper Medicaid claims between 2018 and 2021. The allegations included billing for peer-support services that did not comply with Medicaid requirements, services that were not medically necessary, duplicate claims and services funded through other sources.
ARC previously denied knowingly or fraudulently billing Medicaid or directing employees to falsify records.
“Resolving legacy disputes allows management to concentrate on strengthening the company, supporting our employees, and continuing to provide critical addiction treatment and recovery services in communities across Kentucky,” Webb said.
ARC also announced what it called a mutual resolution with Clear Cove Capital concerning the financing of federal Employee Retention Credits. The company said the specific terms were confidential.
However, a proposed stipulated judgment filed July 13 in U.S. District Court for the Southern District of New York publicly identifies the principal amount and several financial terms.
Under the proposed judgment, ARC and company founder Tim Robinson consented to a judgment of $3,940,470.02 for breach of contract in favor of Clear Cove Opportunities Fund I LLC.
The amount consists of a $3,319,220.80 Employee Retention Credit refund, $298,617.35 representing half the interest paid by the Internal Revenue Service and $322,631.87 in default interest calculated at 15% annually from Dec. 2 through July 10.
The proposal also calls for interest to continue accumulating at 15% annually until the judgment is paid. Clear Cove would receive recoverable attorneys’ fees and court costs and could begin enforcement immediately after the judgment is entered.
The proposed judgment makes ARC and Robinson jointly and severally liable, meaning Clear Cove could seek the full amount from either defendant or from both. That document has not been signed by U.S. District Judge Mary Kay Vyskocil. ARC and Robinson have therefore agreed to the judgment, but the document awaits judicial action.
The agreement would dismiss Clear Cove’s unjust-enrichment claim against ARC and Robinson with prejudice and resolve all of Clear Cove’s claims against those two defendants.
It would not end a claim by Angelica Capital Trust, another lender claiming an interest in ARC’s Employee Retention Credit proceeds.
Angelica filed an objection July 15 to language characterizing the judgment as consisting of a particular Employee Retention Credit refund.
Angelica contends that the ownership and priority of competing interests in ARC’s tax refunds remain central issues in Clear Cove’s claim against the trust. It asked the judge to state only the total judgment amount, without language that could affect Angelica’s rights in continuing litigation.
ARC’s statement that the Clear Cove dispute has been concluded therefore applies to the claims involving ARC and Robinson. Angelica’s dispute remains unresolved.
The tax-credit litigation is also connected to a pending federal criminal case against Robinson.
A federal grand jury indicted Robinson, 50, on June 4 on one count of wire fraud and two counts of money laundering.
Federal prosecutors allege Robinson caused ARC to sell or assign rights to anticipated Employee Retention Credits to one buyer and later sold the same assets to a second buyer. The second buyer paid ARC a $4.7 million advance, according to the indictment.
Prosecutors allege Robinson directed ARC not to repay either buyer after the IRS issued the credits in December. Robinson has pleaded not guilty. An indictment is an accusation, and he is presumed innocent unless proven guilty.
ARC said it has spent the past two years increasing financial and management oversight, strengthening internal controls and improving its billing and compliance processes.
“Every day, individuals and families across Kentucky place their trust in ARC during some of the most difficult moments of their lives,” Webb said. “We understand the responsibility that comes with that trust.”
ARC, based in Louisa, operates addiction treatment centers across Kentucky, including White Oak Hill in Inez.