LOS ANGELES — A father and son are among four people charged in what the Justice Department calls the largest addiction treatment fraud scheme in U.S. history. Prosecutors allege the group billed private insurance companies more than $1.6 billion for sham substance use treatment after luring vulnerable people to California and other locations.
Nathan Young, 39, also known as “Pablo,” and his father, David Young, 71, also known as “Sancho Lopez,” are accused of controlling dozens of purported substance use treatment companies in the Los Angeles area and across the country. Honey Phipps, 42, and Cody Phipps, 36, both of Greenville, Texas, are also charged in the alleged years-long scheme.
According to the indictment, the defendants targeted vulnerable people, including those experiencing homelessness, living in poverty or attending substance abuse support groups. They allegedly recruited people from across the country and offered free flights, money, apartments, hotel stays, cars, gift cards, marijuana, cigarettes and drugs to get them into treatment facilities.
Prosecutors say the defendants specifically sought people with insurance policies that offered the highest reimbursements. In some cases, they allegedly enrolled people in insurance plans fraudulently to maximize payments.
Once in California, patients were allegedly treated differently based on how much money their insurance policies could generate. Those considered “premium” patients received luxury accommodations, hotel stays and other perks. Others were housed in crowded, unsanitary and often rundown properties described as “trap houses.”
The indictment alleges the Youngs repeatedly moved patients through their facilities to keep billing insurance companies, regardless of whether treatment was medically necessary or even provided.
Prosecutors also allege patients were drugged to prevent them from leaving, cut off from family members and kept from accessing their belongings. In some cases, employees were instructed to physically prevent patients from leaving so the companies could continue billing their insurance.
The defendants allegedly instructed employees to coach patients to fabricate symptoms to qualify for detox services. In some instances, patients were encouraged to use drugs or alcohol to become eligible for treatment.
Once patients were out of detox, prosecutors say the Youngs provided substance abuse “therapy” that consisted of large Zoom sessions with more than 100 participants. Patients were not required to participate beyond turning on their cameras. According to prosecutors, some were told they could spend time at the beach instead of participating in therapy sessions that were billed to insurance companies.
“Healthcare fraud is not a victimless crime,” said Darren Lian, special agent in charge of the IRS Criminal Investigation Los Angeles Field Office. “It harms patients, drives up healthcare costs, and diverts critical resources away from those who genuinely need care.”
All four defendants are charged with conspiracy to commit health care fraud and wire fraud, conspiracy to violate the Eliminating Kickbacks in Recovery Act, three counts of health care fraud and two counts of violating the act.
Nathan and David Young face additional charges, including five more counts of health care fraud and four additional counts of violating the Eliminating Kickbacks in Recovery Act.
“By diverting critical funding from a vulnerable community, the accused stripped away a vital lifeline for those seeking addiction recovery support,” said David Olesky, special agent in charge of the Drug Enforcement Administration’s Los Angeles Field Division.
