Flophouses don’t have a great reputation as they are usually places where drug abusers live or hang out while continuing their illicit behavior. A New York City couple, who ran multiple flophouses under the guise of being a three-quarter house, took advantage of their residents and kicked them to the curb when they didn’t comply with the rules associated with their Medicaid fraud scheme.
What’s a three-quarter house you ask? Three-quarter houses provide a home where people who struggle with addiction and mental illness can work on transitioning back into the real world with less supervision than traditional halfway houses. (These types of homes are not typically regulated, so in some cities, they are associated with corruption, like in today’s case.)
The owner of several three-quarter single-family homes in Brooklyn, Queens and the Bronx housed dozens of men in tiny rooms crammed with bunk beds that blocked fire exits. (The homes were reportedly filled with vermin, mold and continued drug abuse – the very thing they were trying to escape.)
The owner and his wife kept their homes filled with residents so they could profit from a kickback scheme involving Medicaid-funded treatments. (The couple got paid monthly for providing a steady stream of clients to three drug rehab and mental health providers.) The landlords required that the residents attend programs at the substance abuse treatment centers (whether they needed it or not) or they literally got kicked to the curb if they refused to go.
Over five years, the couple received more than $1.5 million in illegal kickbacks by forcing their residents to attend programs at the outpatient facilities. (The kickbacks funneled through five corporations controlled by the man and his wife.) Medicaid paid more than $2 million to the three drug treatment providers.
The couple struck a plea deal and both pleaded guilty to Medicaid fraud. They agreed to forfeit assets including a 5,000-square foot house and an apartment in Brooklyn, plus more than 200 designer handbags, 21 fur coats, jewelry and watches. (The sale of these items is expected to generate up to $2.5 million in restitution to the New York State Medicaid program.)
The 67-year-old man also pleaded guilty to scheming to defraud tenants by illegally evicting them in addition to Medicaid fraud. He is facing up to three years in prison, which will run concurrently with the sentence he receives for Medicaid fraud. His 61-year-old wife is expected to receive up to four years in prison for her part. (Which seems to have been spending the illicit funds they received.)
These two New Yorkers prioritized profits over their residents’ well-being. Isn’t it ironic that they are getting back exactly what they gave? (Now it’s their turn to get evicted and kicked to the curb for taking advantage of those in need of help.)
Today’s “Fraud of the Day” is based on an article entitled, “Operator of Notorious Flophouses Pleads Guilty to Medicaid Fraud,” published by The New York Times on February 15, 2018.
A man who ran flophouses that preyed on poor addicts and the mentally ill faces up to five years in prison after pleading guilty to Medicaid fraud and illegally removing tenants from their homes, law enforcement officials said on Thursday.
Yury Baumblit, 67, was part of a 2015 New York Times investigation into so-called “three-quarter houses,” unregulated residences in a gray area between regulated halfway houses and permanent homes. Three-quarter houses cater to people who struggle with addiction and mental illness, and to poor people who cannot afford to live in the city.