Operator of defunct California chain of drug rehab centers indicted for fraud

The owner of Morningside Recovery, a now-defunct chain of addiction treatment centers in Orange County, has been indicted by a federal grand jury on charges of attempting to bilk millions of dollars from Affordable Care Act programs in several states, the U.S. Department of Justice announced Friday.

Raymond Jeffrey Yates, 52, of Santa Ana, worked with others to fraudulently enroll clients in Obamacare health insurance plans to maximize his own profits, according to the indictment.

Yates and two men — Jeffrey White and his son Nicholas White of Twin Peaks — used fake addresses to get insurance for clients in Connecticut and other states whose health care exchanges offered the most generous reimbursements for addiction treatment. Then the men arranged to have those clients admitted to Morningside Recovery for addiction treatment in a scheme to commit conspiracy, health care fraud and mail fraud, the U.S. Department of Justice said.

Morningside then paid the Whites for each patient admitted, the indictment said.

Yates’ attorney, Joseph Martini, said he had no comment on the indictment Friday.

Last year, Jeffrey White and Nicholas White pleaded guilty to conspiracy to commit health care fraud and admitted that their scheme resulted in more than $27 million in losses to Obamacare plans across the country. That includes Connecticut, Arizona, California, Delaware, Indiana, Kentucky, New Jersey, Ohio, Oregon, Pennsylvania, Tennessee and Texas.

The new indictment charges Yates with seven counts of health care fraud, one count of conspiracy to commit health care fraud and five counts of mail fraud. If convicted, he faces a maximum of 20 years on each conspiracy and mail fraud count, and a maximum of 10 years on each health care fraud count, the DOJ said.

The indictment was unsealed Nov. 13 and comes from the U.S. Attorney’s office in the District of Connecticut. Yates was released on bond pending his arraignment in Connecticut, which is not yet scheduled, the DOJ said. The Whites await sentencing.

The scheme outlined in the indictment was detailed by the Southern California News Group more than two years ago as part of its probe into the world of more than 1,000 drug and alcohol rehab centers in Southern California, a cluster so vast that the region is known in the industry as “Rehab Riviera.”

Morningside had a controversial run. In 2015, it was found partially liable for the death of Brandon Jacques, who had been admitted to Morningside’s Newport Beach center for treatment. Jacques developed dangerously low electrolyte levels, and was transferred to First House detox center in Costa Mesa without his parents’ knowledge, according to documents. Jacques went into cardiac arrest at First House and later died at Hoag Hospital.

A jury assigned 20 percent of the blame for Jacques’ death to Morningside and 80 percent to First House LLC. Morningside settled with the family for $3.7 million, according to the family’s lawyers.

The state revoked operating licenses for three Morningside Recovery LLC locations in Costa Mesa in 2012. About a year ago, all of them closed, about 10 homes.

Morningside’s web site is still functional, but it now belongs to a rehab group called Lighthouse, said a man who answered the phone on its referral line. Yates has no affiliation with the group, he said.

Court records show that Yates has had previous run-ins with law enforcement. In 1996, Yates pleaded guilty to felony drunk driving, driving on a suspended or revoked license and evading arrest. He was given 360 days in jail.

Yates was back in court in 2018 to face more DUI charges, pleading not guilty. His trial is pending. In November 2012, police came to his Santa Ana home on a call of domestic violence. Yates was given 30-days community service.