Another creditor lays claim to foundering addiction treatment provider’s $8 million loan

Wielding ceremonial scissors, Gov. Andy Beshear helps cut the ribbon at the Yellow Banks Recovery Center in Owensboro. Beshear is flanked by Tim Robinson, founder and CEO of Addiction Recovery Care, third from left in photo, and Rocky Adkins, Beshear’s senior advisor, Aug. 3, 2023. The center was ARC’s first in Western Kentucky. (Photo courtesy of ARC)

A federal lawsuit accusing Addiction Recovery Care, or ARC, Kentucky’s largest treatment provider, of failing to repay an $8 million loan is taking a new turn.

Only two and a half weeks after Angelica Capital Trust sued the struggling supplieraccusing ARC of refusing to repay the $8 million, a second company is seeking to join the case, arguing that it has a priority claim to the money because it was the first to lend ARC a similar amount.

In both cases, the loans were secured by about $8 million in federal income tax credits that CRA was due to receive last year, says the court filing Jan. 28 in U.S. District Court in New York. Clear Cove Opportunity Fund.

ARC sold the “same” tax credits to the two financial companies, which purchase such credits from businesses that “need immediate liquidity,” Clear Cove’s filing says. In turn, the companies reimburse the companies with interest when they receive the money from the Internal Revenue Service.

ARC sold the same credits to Clear Cove in July and again to Angelica in November, Clear Cove’s filing shows. She is seeking to intervene in the lawsuit to protect her claims, she said.

“ARC has now been revealed to have committed fraud by attempting to sell the Clear Cove property (the tax credits) to another investor,” the filing by Chicago-based Clear Cove states.

ARC received $8 million in tax credits in December but did not reimburse either company, according to court filings. Both are asking the federal judge to freeze the funds to prevent the CRA from squandering what remains of the $8 million.

ARC spokesperson Vanessa Keeton provided a brief response in an email after the Kentucky Lantern requested comment.

“A trial only represents one party’s point of view,” ARC spokesperson Vanessa Keeton told the Kentucky Lantern. “We will not plead our case in the media and we will not comment on pending litigation.”

This litigation appears to be another blow to the Louisa, Ky.-based company, which is already the subject of ongoing legal proceedings. FBI investigation about possible health care fraud and dealing with it growing financial problems which forced it to close facilities and lay off staff.

The Clear Cove company’s filing comes as Angelica asks U.S. District Judge George B. Daniels to detain ARC and its owners, Tim Robinson and his wife, Lelia, contempt of court for the assets spent, Angelica says it’s due.

The court had scheduled a hearing on the case for today, but the online docket indicates the hearing is now scheduled for Feb. 11. Meanwhile, the judge issued an order Thursday requiring the CRA to place $4.7 million in an escrow account and report the account balance to the court daily to “ensure the funds have not been dissipated.”

Bahamas-based Angelica claimed ARC was “on the brink of insolvency” and threatened to file for bankruptcy if forced to repay the funds.

“ARC explicitly threatened to go bankrupt absent a desired sale of assets to a third party, which does not appear at all likely,” its lawsuit states.

ARC had claimed it was negotiating to sell the company and needed Angelica’s $8 million advance to “close the deal and survive,” Angelica’s court filing states. But the proposed sale, announced by the ARC in October, fell through last month, the company announced.

It’s part of a series of setbacks for ARC, once Kentucky’s fastest-growing drug and alcohol treatment provider.

ARC was founded in his native Eastern Kentucky by Tim Robinsonlawyer and recovering alcoholic. The for-profit company has grown rapidly in recent years, fueled by rising Medicaid payments for such treatments, and Robinson and his company have become major players. prolific political donors.

But the CRA has foundered in recent months amid allegations of fraud and reduction in reimbursements insurers that pay Medicaid claims and have questioned what they described as aggressive billing practices.

Angelica, in a court filing, said ARC engaged in “massive fraud” by submitting millions of dollars in false claims to Medicaid and Medicare, two government health plans.

The CRA, in an attempt to resolve an ongoing federal investigation, negotiated a proposed settlement with the U.S. Department of Justice to pay the government $27.7 million, including $16 million in restitution.

According to the proposed settlement, which Angelica filed in court, the federal investigation began after some people filed a “qui tam,” or whistleblower lawsuit, alleging fraudulent practices by the CRA. Such cases are usually sealed while the government investigates.

The allegations under investigation include that ARC and its affiliates falsified medical records, billed for services already paid for by other programs, provided and billed for “medically unnecessary services” and illegally distributed certain drugs used to treat addiction.

“This settlement agreement constitutes neither an admission of liability on the part of the ARC entities nor a concession by the United States that its claims are without merit,” it said.