September 18, 2018; Talk Business & Politics, KCUR, and the Northwest Arkansas Democrat-Gazette
“If you see something, say something.” Because, if what you are seeing is fraud and felony in a nonprofit, your silence will get you in trouble, too. You’ll be in even bigger trouble if you profit from your silence. And then there’s the mess to clean up afterwards.
The ongoing case of fiscal malfeasance at a mental and behavioral healthcare nonprofit has been a long, twisting road. The investigation of the organization, which served Missouri, Kansas, Arkansas, Oklahoma, and Illinois, has revealed executives who allegedly took money meant for Medicaid services, bribed politicians, and raised funds for political campaigns. The head count so far has been a former lobbyist and an Arkansas state legislator who pled guilty. One state legislator was found guilty by a jury, and another has been indicted. Now, Preferred Family’s former chief clinical officer has pled guilty to knowing what was going on.
Keith Noble, a psychologist, pled guilty to concealing knowledge of a felony in federal court. He had been with Preferred Family for 23 years, and according to the court papers, knew about the fraud for twelve of those years. The plea bargain does not name the three top former company executives; they are listed only by number and by title in testimony—CFO, COO, and CEO. Noble and the three executives were on what was named the Resource Team. They have not been charged at this time.
The court agreed that Noble was not a decision-maker in the schemes, but he made $4.3 million, which he must pay back in restitution according to the plea deal.
[Noble’s] 28-page plea admits that he knew between 2005 through June 2017 that the company’s top three former executives and Arkansas lobbyist Rusty Cranford “embezzled, stole, obtained by fraud” and misapplied and converted to their use money and property from the nonprofit.
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The list of fiscal mismanagement and outright fraud is long. Some of the schemes covered in the inquiry include:
- Causing the nonprofit to pay unneeded, excessive management fees to another company the conspirators owned that generated more than $17.6 million in income for the Resource Team.
- Embezzling $566,250 from the company to pay David Hayes, the company’s internal auditor, for illegal financial transactions. Hayes pled guilty to a $3 million fraud scheme in June 2017 and died of an apparent suicide in November.
- Paying excessive amounts for leased vehicles to a company owned by top Alternative Opportunities executives. The arrangement generated an overpayment to them of $18,700 per month.
- Causing the charity to lend money at zero interest to for-profit companies owned by the executives. That arrangement benefited Alternative Opportunities executives by about $4.75 million, Noble’s plea agreement said.
There were also rents the nonprofit paid for luxury homes (owned by a for-profit company the executives owned), pet travel, charter flights, and premium sports tickets on the list. A great deal of money can be misdirected in a dozen years.
Now, as the cleanup goes into high gear, the rebuilding begins, as others must step in to serve Preferred Family’s clients. Quapaw House, Inc. (QHI), which received their 501c3 in 1981 to treat drug abuse and addiction, announced they are completing an agreement to obtain the Arkansas assets of Preferred Family—more than 50 clinics in both cities and rural locations. QHI has grown from $2 million in 2002 to a $5 million organization in 2016, but Preferred Family had more than $28 million in Arkansas state contracts for fiscal 2018.
QHI expects to scale up more than five times their present size and they are hoping to begin operating in less than a month. Chief Executive Casey Bright says they intend to use many of Preferred Family’s employees:
We desire to retain as many PFH staff members as possible and will immediately begin to extend offers. QHI will continue operations in the same manner as PFH is now doing and as it has been doing in the past until an integration plan is developed. We are working to reach a final agreement that will allow QHI to purchase PFH assets. By doing so, we hope to continue providing quality services to the current PFH clientele, and for the dedicated PFH staff to join the QHI team.
The hope is that they will not continue all operations in the same manner as Preferred Family, at least not at the executive level.—Marian Conway
