$14M Allegedly Diverted by Former Nonprofit CEO

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February 6, 2015; Healthcare Finance

On the morning of February 2nd, federal agents arrested the former CEO of a Birmingham, Alabama, nonprofit on 112 counts of fraud.

Jonathan Dunning is the former CEO of Central Alabama Comprehensive Health (CACH) and of Birmingham Health Care (BHC), the mission of which is to provide little or no-cost health services to the homeless and economically disadvantaged. He is charged with involvement in a seven-year plot that included money laundering, bank fraud, and conspiracy.

After his arrest, a 64-page document detailing the indictments was released. It alleges that after leaving his jobs at the BHC and CACH to run his for-profit businesses, he continued to remotely influence the two bodies and diverted $14 million from the two nonprofits—including federal funds.

The BHC was founded in 1985 as part of a nationwide pilot project funded with federal and private funds. It is one of around 1,300 community health centers across the country, which have often been labeled as the ‘backbone’ of the Affordable Care Act.

In a press release, U.S. Attorney Joyce Vance stated, “Criminals don’t get to live lavish lifestyles by stealing federal money meant to provide healthcare to the poor and homeless. My office will vigorously prosecute health care fraud; working to ensure that these funds go to the people they are intended to help, and to see that criminals go to jail.”

This is not the first time that members of the BHC and CACH have been linked to money laundering. Also indicted in earlier charges were former BHC CFO Terri Mollica, former bookkeeper Sheila Osborne Parker, and Parker’s son, James. These charges, along with the fact that Dunning was not was no longer working at either entity when the criminal activity was uncovered, implies that this is simply the tip of the iceberg for this case.

Healthcare fraud in its various forms costs the U.S. tens of billions of dollars a year. Indeed, this week has been a lively one for the Justice Department, which has put a stop to a number of different high-value healthcare scams. A doctor in New Jersey has admitted to accepting bribes in exchange for test referrals, while Ageless Men’s Health, LLC (AMH) will pay $1.6 million to the government to resolve allegations that it billed Medicare and Tricare for medically unnecessary evaluation and management services.

Dunning has pled “not guilty” and has been released on $50,000 bond.—Hannah Butler