Maranatha Human Services tricked Medicaid into illegally paying the CEO
and family members for work that was not eligible for Medicaid
NEW YORK – New York Attorney General Letitia James today announced a settlement with Maranatha Human Services, Inc. (Maranatha), a nonprofit organization that provides Medicaid services to people with developmental disabilities in New York. York. The agreement resolves claims brought by the state and federal government in a who tam action initiated by a former employee against Maranatha and Henry A. Coley, former general manager of the organization. Maranatha committed Medicaid fraud, violating the New York False Claims Act by knowingly submitting false reports of his costs to the New York State Department of Health (DOH), falsely claiming reimbursement of millions of dollars that Maranatha spent on wages and contractor fees. These funds were used to enrich Coley, his family and friends, and to support the side businesses he controlled — not for the provision of Medicaid services.
“As a charitable organization and Medicaid provider, Maranatha has been entrusted with public funds to serve a particularly vulnerable population,” said Attorney General James. “Instead, Maranatha diverted these essential funds for the benefit of its CEO, family and friends. Personal transactions will not go unchecked in New York. My Office is committed to holding Medicaid providers accountable, to ensuring the well-being and well-being of all New Yorkers, and to protecting the integrity of this essential program.
As part of the settlement, Maranatha agreed to cooperate with the New York State Office for People with Developmental Disabilities (OPWDD) and take all necessary steps to transfer operations of its Medicaid-funded programs to one or more other suppliers to ensure the continuity of services. Maranatha has agreed not to submit new claims to publicly funded health care programs beginning June 30, 2023. Within 60 days of submitting the final claim to state-funded health care programs State or Federal, Maranatha will submit its request for dissolution under New York’s nonprofit law to the Office of Charities of the Office of the Attorney General (OAG).
The federal government also reached an agreement with Maranatha to resolve its fraud claims arising from the same wrongdoing. Maranatha will pay $510,000 to New York State and $340,000 to the federal government, for a total recovery of $850,000.
The state intervened in the whistleblower lawsuit against Coley and Maranatha in February 2021. In its intervention complaint filed against the defendants in April 2022, the state alleged that Maranatha paid salaries and consulting fees excessive payments to Coley and his family and friends, often in exchange for little or no work. The state also found that Maranatha paid independent contractors and Maranatha employees to work on side projects that had nothing to do with Maranatha’s provision of Medicaid services. Maranatha claimed these expenses as allowable costs in its Consolidated Financial Reports (CFRs) — reasonable and necessary costs to provide Medicaid services — when they were not. Because the state reimburses Maranatha at provider-specific rates set on the basis of legitimate Medicaid expenditures reported in Maranatha’s CFRs, the state has paid Maranatha at artificially inflated rates for each unit of service for which Maranatha has charged to the state. As a result, the state paid Maranatha millions more than it deserved from 2010 to 2019.
In the Settlement Agreement, Maranatha admitted, acknowledged and accepted responsibility for the following conduct:
- Maranatha knew that it was required to distinguish between “eligible costs” and “ineligible costs” in its CFRs.
- Maranatha knew that eligible costs reported by Maranatha in its CFRs are used by the DOH, in part, to determine Maranatha’s reimbursement rates for providing Medicaid-funded services.
- In every CFR Maranatha has submitted since 2010, Coley has certified that Maranatha’s CFRs are true and correct, Maranatha has accurately reported all expenses incurred for services rendered under the Mental Hygiene Act, and since 2018, that Maranatha has reported and adjusted all non-allowable expenses on its CFRs.
- From 2010 through 2019, Maranatha submitted annual CFRs showing as “eligible costs” amounts expended not on Maranatha’s provision of Medicaid-funded services, but rather on pursuing certain for-profit commercial ventures, including a household items operated by Coley (non-Medicaid companies).
- Coley notified Maranatha’s Board of Directors, which approved Maranatha’s funding of these non-Medicaid businesses.
- Coley made a presentation to the Maranatha Board of Directors acknowledging that “it has always been the plan for Maranatha to use government funds as a launch pad to build a private company…”
- Maranatha has paid contractors to do non-Medicaid business-related work, including, since 2010, more than $300,000 to Coley’s daughter. Although much of his time was spent on work related to these non-Medicaid companies, Maranatha reported his full compensation as an “eligible cost” in the CFRs.
- Since 2010, Maranatha has paid Coley more than $2 million in salary and benefits, and Maranatha has claimed the full amount of that compensation as “eligible” costs on its CFRs. However, Coley has spent much of her time working on non-Medicaid ventures.
The state previously resolved its fraud claims against Coley in a settlement that was approved by U.S. District Judge Kenneth M. Karas on November 9, 2021. Coley agreed to pay the state $132,000 and the federal government $88,000, which was the maximum restitution he could afford. to pay, and acknowledged and accepted responsibility for the conduct alleged by the State and the Federal Government in their complaints. Coley resigned from Maranatha during the state’s inquest in July 2021. Due to his misconduct, Coley is prohibited from working or volunteering for any entity that receives Medicaid funds. Additionally, Coley is permanently barred from serving as an officer, director, or trustee of any nonprofit corporation in New York City, and is also barred from serving in any capacity that allows him discretionary authority over charitable assets.
The investigation was led by Attorney General James’ Medicaid Fraud Control Unit (MFCU) in consultation with the Office of Charities. It was launched after a whistleblower filed a complaint under the who tam provisions of the New York False Claims Act, as well as the federal False Claims Act, in the United States District Court for the Southern District of New York. The New York False Claims Act allows individuals to file actions on behalf of the government and participate in any recovery.
MTCU New York’s total funding for Federal Fiscal Year (FY) 2022 is $59,918,216. Of this total, 75%, or $44,938,664, is awarded through a grant from the US Department of Health and Human Services. The remaining 25%, totaling $14,979,552 for fiscal year 2022, is funded by New York State. Through MTCU recoveries in enforcement actions, it routinely returns more to the state than it receives in public funding.
Attorney General James thanks the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of New York for their cooperation in the investigation, litigation, and resolution of this case.
The case was handled by Senior Auditor-Investigator Theresa A. White, Auditor-Investigator Khristian Diaz and Special Assistant Attorney General Ting Ting Tam of MTCU’s Civil Law Enforcement Division, which is headed by the Chief Alee N. Scott. Stacey Millis is the lead auditor for the Civil Law Enforcement Division. MTCU is headed by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney, and is part of the Criminal Justice Division. The Criminal Justice Division is headed by Chief Deputy Attorney General José Maldonado and overseen by Senior Deputy Attorney General Jennifer Levy.
Report fraud to the Medicaid provider: MFCU stands up for the public by tackling Medicaid provider fraud and protecting nursing home residents from abuse and neglect. If a person thinks they have information about fraud by a Medicaid provider or an incident of abuse or neglect by a resident of a nursing home, they can file a confidential complaint online or call the MTCU at (800) 771-7755. If the situation is an emergency, please dial 911.