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AG reaches $18 million settlement

Attorney General Eric T. Schneiderman has reached a settlement with Young Adult Institute Inc. organization officials Philip H. Levy and Karen Wegmann, and former CEO Joel M. Levy, resolving allegations that they defrauded the Medicaid program.

YAI, the state’s largest residential service provider, will pay $18 million in damages and significantly reform their cost-reporting practices.

YAI annually submits requests to the New York State Office for People with Developmental Disabilities, seeking funding for losses incurred to operate its programs. The amount of such rate appeals, or whether YAI is eligible to receive any adjustment at all, is based on an annually submitted Consolidated Fiscal Report — a lengthy report detailing all of the organization’s expenses. As a result, over the past 10 years, YAI received more than $8 million in additional funding from Medicaid.

However, beginning in at least 1999, YAI artificially inflated the expenses on its annual Consolidated Fiscal Reports to the state in order to receive additional funding that it was not entitled to receive, according to a release from the attorney general’s office.

It is further alleged YAI allocated the expenses related to certain employees to programs and sites where the employees never worked. The company, according to Schneiderman’s office, also listed high level administrative staff as clinic social workers, and improperly categorized fundraising expenses — all to inflate YAI’s expenses and get more money from the Medicaid program.

The investigation began after a whistleblower filed a complaint that YAI had improperly inflated its expense reports. Of the $18 million YAI will pay in damages, $10.8 million will be returned to the New York State Medicaid program.