California rehab operators accused of $1.6 billion insurance fraud scheme

A California rehab mogul allegedly kept the insurance cash rolling by supplying recovering addicts with illegal drugs and coaching them to fake addictions, federal prosecutors say in a sprawling $1.6 billion fraud case that has already drawn scrutiny from insurers including Aetna.

Nathan Young, 39, known to clients as Pablo, and his father, David Young, 71, were arrested last week after investigators accused them of orchestrating one of the largest alleged sober-home fraud schemes in US history.

Facilities associated with the pair submitted more than $1.6 billion in claims to major health insurers between 2020 and 2026, collecting more than $210 million, according to a recently filed criminal complaint. The billings allegedly included “non-existent and woefully inadequate ‘therapy’ sessions.”

The case adds a disturbing new chapter to California’s troubled addiction-treatment industry, where prosecutors say operators preyed on vulnerable people, often bringing homeless addicts from across the country to Southern California facilities to cash in on their private insurance policies.

According to an FBI affidavit, the Youngs allegedly directed employees and so-called “body brokers” to recruit patients with offers of cash, drugs, free airline tickets and accommodations.

Incoming clients were allegedly coached to exaggerate or fabricate substance addictions to qualify for detox services and remain in treatment longer, generating more billable claims.

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In one 2023 message exchange cited by federal authorities, an unnamed cooperating witness allegedly asked Nathan Young how to bill an insurer for someone who was clean.

“Either research chemicals or mental health,” Young allegedly replied. Investigators said the person’s insurance was being billed for substance-abuse treatment at the time.

The allegations echo a previous civil battle with Aetna according to the Wall Street Journal, which accused Young and others of defrauding the insurer of at least $40 million through fabricated addiction treatment at roughly a dozen facilities it described as “drug dens.”

Young’s attorneys denied those allegations, and the lawsuit was settled earlier this year.

The criminal case also follows a Wall Street Journal investigation last year that detailed allegations of widespread abuse in the booming California rehab industry. Young responded at the time: “everyone, regardless of their past, deserves a chance at a healthy life, and despite a relentless series of baseless attacks on me and my work, I will do whatever I can to offer them a path to be productive members of their communities.”

The Journal profiled former clients Penny Lamb and Jeffery Lichtenberg, an Oklahoma couple who said they were shuffled between Southern California properties where illicit drugs were common and treatment could amount to logging onto crowded video calls. They relapsed repeatedly and eventually became homeless.

Lichtenberg, who said he is now sober, living in a home and working in North Carolina with Lamb, had little sympathy for Young after the arrests.

“It sucks for him but you can’t treat people like he did and not expect karma in return to be good to him,” Lichtenberg said.

The Youngs were charged with health care fraud and violating an anti-kickback statute. Their lawyers did not respond to requests for comment.