$3.2 Million Sober Living Home Fraud Scheme Shut Down
News: 2020 Press Release
SANTA ANA, Calif. — A joint effort by the Orange County District Attorney’s Office and the California Department of Insurance has shut down an alleged $3.2 million health care fraud ring which preyed on vulnerable substance abuse patients in order to bilk an insurance company out of millions.
Steven Lomonaco, 61, of Laguna Beach, Mahyar “Christian” Mohases, 37, of Santa Ana, Robert Williams, 41, of Murrieta, Nicholas Reeves, 42, of Aliso Viejo, and James Frageau, 29, of Temecula have been charged with multiple felony counts including insurance fraud and money laundering in connection with the scheme.
Mohases, Williams, Reeves, and Frageau have each been charged with two counts of committing medical insurance fraud, one count of fraudulent written claim to an insurance company, two counts of money laundering in excess of $150,000, four counts of money laundering, and one enhancement for aggravated white collar crime over $200,000. They each face a maximum sentence of 14 years if convicted on all charges.
Lomonaco has been charged with two counts of committing medical insurance fraud, one count of fraudulent written claim to an insurance company, one count of medical insurance fraud, and one enhancement for aggravated white collar crime over $200,000. He faces a maximum sentence of 8 years 4 months if convicted on all charges.
“The heartless nature of these alleged crimes are appalling,” said Insurance Commissioner Ricardo Lara. “These suspects trafficked vulnerable substance abuse patients to California just to make a quick buck from the insurance company, with no regard for their lives, health or recovery. Thanks to the efforts of Department of Insurance investigators, and our close work with District Attorney Todd Spitzer's office, there is one less fraud ring preying on unsuspecting patients."
Mohases, Frageau, Williams and Reeves are accused of finding patients across the country who were seeking help for substance use recovery and flying them to California to enter treatment at Casa Bella International Inc., which was owned and operated by Lomonaco. In order to obtain payment from the insurance company for these patients, Mohases, Frageau, Williams and Reeves directed employees to fill out policies for the patients using false information.
They are accused of lying on the insurance applications, stating that patients lived in California, when in actuality the addresses were for employees or businesses related to the co-conspirators. Lomonaco paid the other co-conspirators upwards of $10,000 per patient who stayed enrolled in treatment for more than 30 days.
“Sober living homes are valuable resources designed to facilitate recovery and healing for patients battling potentially life-threatening addiction issues,” said Orange County District Attorney Todd Spitzer. “Instead of helping these patients, these individuals preyed on extremely susceptible people and exploited their addictions for profit. Working closely with the California Department of Insurance, we are cracking down on these criminals and their predatory operations in order to protect substance abuse patients from unknowingly being trafficked, as well as protect their loved ones and insurance companies from these unscrupulous operators.”
In order to pay the insurance premiums, the defendants are accused of developing a massive money laundering scheme in which they filtered money through non-profit, StopB4UStart, by providing “donations” from Mohases, Frageau, Williams and Reeves under their corporation, Nationwide Recovery. These “donations” would be cashed out, and the owner of StopB4UStart would receive cashier’s checks in specified amounts based on the information he received from one of the other co-conspirators. More than 800 checks in total were used to pay the insurance premiums on the fraudulent policies.
Mohases was arrested on January 13, 2020 and arraigned on January 14, 2020, he has pleaded not guilty. He is out on $250,000 bail and is scheduled for a pre-trial on February 5, 2020 in Department C-57.
Reeves was arrested on January 14, 2020 and arraigned on January 15, 2020, he has pleaded not guilty. He is out on $100,000 bail and is scheduled for a pre-trial on January 22, 2020 in Department C-55. A preliminary hearing for this suspect is scheduled for February 13, 2020 in Department C-55.
Frageau appeared in Court on warrant on January 15, 2020, he was arraigned on January 15, 2020. He is out on $250,000 bail and is scheduled for a continued arraignment on February 7, 2020.
Williams turned himself into Huntington Beach Police Department on January 15, 2020. No arraignment date has been scheduled for him yet.
Lomonaco was arrested on January 16, 2020. He is scheduled to be arraigned January 17, 2020.
Deputy District Attorney James Bilek of the Insurance Fraud Unit at the Orange County District Attorney’s Office is prosecuting this case.
Media Notes:
- Bilek DA contact - Kimberly OC: 714-347-8405 / 714-504-1917 cell
- Case # 20CF0070, 20CF0069, 20CF0068, 20CF0067, 20CD0066
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Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
