By Brian Witte
The Associated Press
Source: http://www.armytimes.com/article/20130731/NEWS/307310005
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By David Sheppard and Lauren Tara LaCapra
NEW YORK (Reuters) - Goldman Sachs responded to mounting political pressure and regulatory scrutiny of its Metro International metals business on Wednesday, by offering customers immediate access to aluminum stored in its warehouses.
In a statement outlining the bank's proposals to cut waiting times at all London Metal Exchange (LME) warehouses, Goldman said it would let major consumers swap aluminum held in its warehouses for metal the bank has acquired, without the need to pay a steep cash premium.
Customers and U.S. lawmakers have accused Goldman Sachs and other warehouse owners of artificially inflating wait times and lines to boost rents for warehouse owners and cause metal prices to rise. One major customer estimated the delays have cost consumers more than $3 billion.
"We feel horrible for consumers if they can't get metal. We don't believe that to be the fact," Chief Operating Officer Gary Cohn, said on CNBC. Cohn, who started his career in Goldman's commodity business, said the bank had secured metal from producers over the past week, but had yet to find a single customer ready to take it up on the offer to swap metal.
Still, it marks the bank's first effort to address years of complaints over the long waits, an issue that finally erupted last week as U.S. senators questioned why banks should be involved in owning warehousing and chartering oil tankers.
The bank's move came as a surprise to traders and end-users, many of whom had been bracing for a drawn-out investigation.
It also highlights a sharp divide in how Wall Street's biggest banks are responding to scrutiny of their physical commodity businesses.
Goldman, whose J. Aron trading unit is one of the most renowned in the business, vowed to hold onto Metro, despite having considered a sale earlier this year.
"We will end up selling Metro at an appropriate time," Cohn said. Goldman Sachs bought Metro under as a private equity exemption, he said, which allows the firm to keep it as an investment for up to 10 years. "We are staying in the commodity hedging business."
But rival JPMorgan Chase & Co. said on Friday that it was quitting the business due in part to regulatory pressures, selling or spinning off the group that includes metals warehousing firm Henry Bath & Sons, the fourth-largest storage business in the LME system.
Pressure is expected to shift to traders like Glencore and Trafigura, which also bought warehouse operators following Goldman's purchase of Metro International Trade Services for some $550 million in early 2010.
Metro's flagship facility in Detroit stores more than 1.4 million metric tons of aluminum, a quarter of the LME's stockpile. Over 60 percent of that is waiting to be delivered out.
NO TAKERS YET
The news met with some positive reaction in Washington.
"That's great news and any pricing manifestations due to warehousing issues will hopefully resolve going forward," said CFTC commissioner Bart Chilton, a frequent critic of the role of banks and other financial firms in commodity markets.
Regulators including the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission have begun preliminary investigations into Wall Street banks and other large commodity traders which own metal warehouses.
On Wednesday sources said Britain's regulator was also considering a deeper investigation.
"Goldman Sachs is contacting end users to offer to swap any aluminum currently in the queue for immediately available aluminum so that they have access to the metal they need to make or package their products," the bank said. A Goldman source said the metal would be swapped out at the LME price, allowing end-users to avoid paying a cash market premium. (For a link to the Goldman statement: http://r.reuters.com/cyv99t)
Goldman said its offer applies only to large metal consumers like carmakers and soft drink producers, not to financial traders like hedge funds, or rival merchant commodity traders like Glencore Xstrata or Trafigura.
The warehouse owners and outgoing LME CEO Martin Abbott have said the complaints over long lines are unjustified, arguing there is no shortage of metal.
Instead, they said the long lines have been created by traders trying to move metal to rival warehouses that are offering financial incentives in a bid to boost their own rental income.
Goldman didn't address questions about offering financial incentives for companies to store their metal at Metro sheds, which some say contributed to the backlog of aluminum.
"It sounds to me like they're offering ice in the winter," said U.S. anti-trust lawyer Robert Bernstein, a partner at New York-based Eaton & Van Winkle LLP, who works on behalf of U.S. copper fabricators.
"The problem is the queues have jacked up the premiums."
The U.S. Senate Banking Committee held its first hearing on the warehousing issue last week, when aluminum users represented by brewer MillerCoors LLC said high physical prices have cost consumers an extra $3 billion a year in expenses.
The warehouses and the LME, which oversees the storage outlets in its network, say the big stockpiles and high physical prices are the result of low interest rates and a market structure known as contango, which makes it profitable to sell metal forward and store it for months or years at a time.
It is also the byproduct of LME rules, which require warehousing companies to deliver a minimum amount of tonnages of metal each day. According to current rules, facilities with 900,000 metric tons or more metal have to load out 3,500 metric tons of metal.
The LME has proposed an overhaul of its warehousing policy that would come into effect in April.
(Additional reporting by Josephine Mason in New York and Susan Thomas in London; Editing by Jonathan Leff, Lisa Von Ahn and Leslie Gevirtz)
Source: http://news.yahoo.com/under-fire-goldman-offers-way-round-warehouse-lines-180830825.html
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Source: http://www.lansingstatejournal.com/article/20130730/NEWS08/307300068/1002/NEWS01
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2 hours ago
Stocks opened sharply higher on Thursday, with the S&P 500 topping the 1,700-point mark, as Wall Street cheered upbeat economic data from China and Europe and a better-than-expected jobless claims report.
The Dow Jones Industrial Average was 118 points higher in early morning trading.
The S&P 500?rose 15 points to move through the 1700 barrier and the Nasdaq also rallied at the open. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.
Major averages closed out their best July since 2010 on Wednesday. For the year, the Dow and S&P 500 have spiked more than 18 percent for the year, while the Nasdaq has surged nearly 20 percent.
On the economic front, weekly jobless claims tumbled 19,000 to a seasonally adjusted 326,000, dropping to a 5-1/2 year low, according to the Labor Department. Economists surveyed by Reuters expected a reading of 345,000, compared with 343,000 in the prior week.
Also, the number of planned layoffs at U.S. firms declined modestly in July, with employers announcing 37,701 cuts last month, down 4.2 percent from 39,372 in June, according to the report from consultants Challenger, Gray & Christmas.
Meanwhile, the pace of growth in the U.S. manufacturing sector accelerated in July to the highest level in two years as new orders surged, according to a report by the Institute for Supply Management. The data supported the view the economy will pick up in the second half of the year.
The ISM said its index of national factory activity rose to 55.4 from 50.9 in June, topping expectations for 52. It was the highest since June 2011. New orders also racked up their best level in more than two years, jumping to 58.3 from 51.9.
The reports came ahead of Friday's widely-watched government jobs report. Analysts polled by Reuters expect to see a gain of 184,000 in July, after a 195,000 uptick in the previous month.
(Read more:July jobs report key to Fed action)
Stocks ended flat on Wednesday after the Federal Reserve did not signal when it would start tapering its bond-buying program. However, it did raise concerns about rising mortgage rates and flagged the risks of inflation falling too far below its target. In addition, the central bank slightly downgraded its outlook for economic growth.
(Read more:Best S&P valuestocks to get through August)
Asian stocks rallied on Thursday after China's official PMI (purchasing manager's index) data showed the country's manufacturing sector continued to expand in July, defying forecasts of a contraction. But the picture was mixed, with a private gauge of factory activity by HSBC showing an 11-month low of 47.7 in July. Japan's Nikkei rallied to a one-month peak on the news, the Shanghai Composite hit a one-week high and South Korea's Kospi touched a seven-week high.
"Official PMI is more skewed to larger companies, and the HSBC figure reflects the smaller companies and that is where you get this divergence," said Frederic Neumann, co-head of Asian economics research at HSBC.
(Read more: Will China PMI mark the end of negative data surprises?)
In Europe, the European Central Bank kept its main interest rate unchanged at a record low of 0.5 percent, and reiterated that rates would remain at present or lower levels for an extended period of time.
"Labor market conditions remain weak. Looking ahead to the remainder of the year and 2014, euro area growth should benefit from a gradual recovery in global demand," said ECB president Mario Draghi in a press conference following the announcement. "Our monetary policy stance remains accommodative for as long as necessary. We have unanimously confirmed the forward guidance we gave last time."
Euro zone manufacturing activity grew for the first time in two years in July, with the purchasing manager's index (PMI) climbing to 50.3 in July. A reading above 50 indicates an expansion.
And the Bank of England left its interest rates unchanged at 0.5 percent, as expected, under its new governor, Mark Carney.
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Source: http://www.nbcnews.com/video/cnbc/52624859/
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DENVER (AP) ? For a limited time, a Denver hotel is offering a package with a one-night stay in a pop-up, inflatable room that rises 22 feet in the air, thanks to a scissor lift on top of the van on which it sits.
The cost: $50,000.
There is a weight limit. No smoking is allowed.
Architect Alex Schweder created the 5-foot-by-7-foot, see-through room atop a van for the Biennial of the Americas festival of arts, culture and ideas in Denver. It has a chemical toilet, shower, sink, inflatable bed and couch, and curtains. It is being driven to parking lots around town through Aug. 23.
"It's a very small room but a very special room," Schweder said. "You're always on the top floor."
Now the Curtis hotel, which sponsored the piece, is offering the curious a chance to stay in the aluminum and inflated vinyl structure called "the hotel rehearsal."
Much of Schweder's work centers on the performance of architecture, focusing not so much on a structure but the actions within it. After Schweder learned developers want to turn several Denver parking lots into hotels, he created "the hotel rehearsal" as a foreshadowing of how the space could change. One early draft involved suspending the room from a crane. Schweder was encouraged to keep it more grounded.
For $50,000, a guest would get one weekend night in the puffy space, plus lots of extras including a diamond pendant and earrings, two iPod Nanos and a dance party for 100 people in a ballroom of the Curtis. The inflatable room holds 450 pounds. No alcohol is allowed inside, in hopes of discouraging people from using it as a bouncy castle.
At least one person has inquired about the room, said Kate Thompson, sales director at the Curtis. Schweder said much of the $50,000 will go toward insurance, but customers also will be supporting the future of the Biennial of the Americas.
Schweder, who is based in New York and the United Kingdom, spent two nights in the room. While it has curtains, Schweder left the roof uncovered during his stay so he could peer up at the sky.
After one night, he tweaked the design to mitigate sound from the fans that bring in fresh air and keep the room inflated.
Schweder tells potential guests, "The thing you shouldn't forget in your suitcase is your imagination."
___
Follow Catherine Tsai on Twitter at http://www.twitter.com/ctsai_denver
Source: http://news.yahoo.com/denver-hotel-offers-pop-inflatable-room-072741467.html
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STORY HIGHLIGHTS
Editor's note: To uncover this story on widespread fraud linked to California's drug rehab program, CNN's Special Investigations Unit has teamed up with the independent, nonprofit Center for Investigative Reporting. Join CNN's Anderson Cooper on AC360 for more on this yearlong investigation Tuesday and Wednesday at 8 and 10 p.m. ET on CNN.
(CNN) -- Victoria Byers did not drink alcohol. She did not abuse drugs. But when she was a teenager in foster care, several times a month, she would board a van at her group home and go to rehab.
Byers couldn't figure out why she had to take drug tests and sit in group therapy sessions on addiction at So Cal Health Services, a clinic tucked in an office park in Riverside, California.
"And I told them, you know, 'Why should I be here? I have no drug issue,' " said Byers, now a slow-to-smile 22-year-old.
The director of Byers' group home confirmed Byers was clean but said she sent all six girls under her care to the clinic because she didn't have enough staff to separate those with substance abuse problems.
Troubled drug rehab clinics
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Troubled drug rehab clinics
HIDE CAPTION
The arrangement was strange. It was also a scam.
So Cal Health Services was ripping off taxpayers, part of a pattern of fraud by rehabilitation clinics that collect government funding to help the poor and addicted, a yearlong investigation by The Center for Investigative Reporting and CNN has found. The investigation, which included undercover surveillance and stakeouts, uncovered a rehab racket that continues to this day.
Thousands of pages of government records and dozens of interviews with counselors, patients and regulators reveal a widespread scheme to bilk the state's Medicaid system, the nation's largest. Witnesses to the fraud laid out its inner workings in minute detail, some speaking of it publicly for the first time.
In the underbelly of the Drug Medi-Cal program, clinics pad client rolls by diagnosing people like Byers with addictions they don't have. They round up mentally ill residents from board-and-care homes to sit in therapy sessions they can't follow. They lure patients in from the street by handing out cash, cigarettes and snacks. They have patients sign in for days they aren't there.
One Inglewood clinic fabricated notes and billed for "ghost clients" who never came in. They couldn't show up, a counselor discovered: Some were behind bars; one was dead.
Even caught red-handed, operators have polished techniques to ward off official scrutiny and keep the money flowing. One Los Angeles County clinic director lodged a complaint against a government auditor, and another called on a local lawmaker for help. In both cases, it worked.
The populous Los Angeles region is one of the nation's top hot spots for health care fraud, and former state officials agree it is also ground zero for the rehab racket.
Drug Medi-Cal paid out $94 million in the past two fiscal years to 56 clinics in Southern California that have shown signs of deception or questionable billing practices, representing half of all public funding to the program, CIR and CNN found. Over the past six years, more than half a billion dollars have poured into the program statewide.
Victoria Byers said that as a teenager, her group home took her to So Cal Health Services in Riverside, California, for rehab even though she didn't drink or do drugs. (Photo: CNN)
Following a year of public records requests and questions from CIR and CNN, state regulators announced a crackdown in mid-July. The action came two and a half weeks after reporters submitted a final list of their findings.
The state Department of Health Care Services temporarily suspended 16 clinics suspected of flouting the law and pledged to tighten oversight and on Tuesday announced it had suspended 13 more. Officials would not identify the targeted clinics, saying the information would compromise the investigation.
But veteran operators have become adept at sidestepping trouble.
Among them was Tim Ejindu, who ran the clinic where Byers was sent.
Nearly one-third of the foster children who showed up at Ejindu's clinics in Riverside and Pomona had no drug or alcohol problem, estimated TaMara Shearer, a former addict who worked as a supervisor.
"Any loopholes, he knows how to find them. I've watched him do it," Shearer said. "He thinks Americans are dumb."
Under pressure to diagnose teenagers with fake addictions, counselors at the clinics reverted to racial stereotypes, according to Shearer. They labeled white teens as alcohol drinkers and black or Latino teens as marijuana smokers, she said.
TaMara Shearer, who worked at So Cal Health Services and the Pomona Alcohol and Drug Recovery Center, says the clinics billed for services that didn't happen and diagnosed teenagers with fake addictions. (Photo: CNN)
Ejindu did not respond to an interview request or a letter outlining allegations against him. When contacted by reporters at his clinic, he declined to answer questions, closing the clinic door and refusing to reopen it.
Joy Jarfors, a manager with the state Department of Alcohol and Drug Programs until she retired in 2010, said "fraud and abuse (are) rampant" in the system.
"I'm not the employee anymore that has to look at this every day, but I'm a taxpayer that knows that this is going on," Jarfors said. "It angers me. And there's story after story after story about Medicaid dollars being cut from people who need the services."
The cost of failing to treat addicts is high. Drug overdose and excessive alcohol consumption are among the top causes of premature death in Los Angeles County, killing two people nearly every day. Statewide, the Legislative Analyst's Office has found taxpayers spend more than $1 billion a year on hospital stays related to substance abuse for those on Medi-Cal.
"Everyone talked the talk, everyone was zero tolerance for fraud and abuse, but nobody would do anything about it," said Joy Jarfors, a manager with the California Department of Alcohol and Drug Programs until 2010. (Photo: CNN)
The rehab centers promise a chance to start over in their very names, which include phrases like "new hope," "new beginning," "renew" and "U-turn." But they don't always deliver.
Vredette Hawkins was one woman who could have used some help. The South Los Angeles mother of four smoked marijuana and was under scrutiny from child welfare officials, she said, after someone accused her of using methamphetamine.
She went to a nearby Drug Medi-Cal clinic a year ago to get counseling for depression. She encountered a chaotic free-for-all, a clinic filled with people who came only because they wanted money.
At Basen Inc., clients received $5 each time they showed up, she said. Hawkins said counselors often abandoned group therapy sessions after 15 minutes, leaving clients to chat about sexual exploits and getting high. Two former Basen employees also told CIR that the clinic paid clients, although one said that the practice stopped amid worries about getting caught.
A county investigation last year found "extremely serious violations," such as falsified paperwork, but couldn't substantiate allegations that Basen was paying clients.
"The only one that's basically benefiting from all this," Hawkins said, "is ... the person that's running the program."
Bassey Enun-Abara, the counseling center's executive director, said he does not pay clients and disputed Hawkins' description of the clinic. "I can't believe a client would tell you that," he said.
As director of the state Department of Health Care Services, Toby Douglas has primary responsibility for Medi-Cal, including the rehab system. Douglas, appointed by Gov. Jerry Brown in 2011, declined repeated interview requests.
Douglas' boss, Secretary Diana Dooley of California's Health and Human Services Agency, also declined interview requests. Approached by CNN in June outside a public meeting in Sacramento, Dooley headed for a restroom, which was locked.
She then said: "The state of California takes fraud very seriously, and there are many investigations that are underway. The allegations -- all allegations are given full and fair consideration."
Dooley added that her agency's fraud and investigation unit is "one of the best in the country." She ended the brief conversation with, "That's all I have to say."
Asked again whether Douglas would sit down for an interview, as she stepped into an elevator, Dooley put her hand over CNN's camera and called for security. Later, her spokesman offered a sit-down interview with Douglas if CNN discarded the footage of Dooley. CNN and CIR would not agree to that condition.
A month later, Douglas announced his crackdown.
The agency's chief deputy director, Karen Johnson, declined to discuss accusations about specific clinics and acknowledged that the state does not yet "know the expanse of the problem."
Related: Rehab racket includes frauds, felons and fakes
Unreachable clients
Addiction counselor Tamara Askew discovered something wrong soon after she started working at Pride Health Services in Inglewood, southwest of downtown L.A., in 2009.
Askew grabbed a stack of files and began contacting patients to introduce herself. That was harder than she had figured.
Some were in jail, Askew said. Several never showed up. One man she reached out to was dead.
"After that, it was like, 'Are you kidding me?' " Askew said in an interview. "God rest his soul but, I'm like, 'How are you billing (for him)?' "
When it came time to bill Drug Medi-Cal for services rendered, Askew said her boss, Godfrey Nwogene, wanted her to submit paperwork showing that all of those clients, living and dead, had been attending counseling sessions.
The more clients Pride Health Services reported treating, the more money it could charge the government.
"He basically said, 'How do you think you're going to get paid?' " Askew said.
When Askew would not sign off on billing for clients she hadn't seen, her boss unplugged her computer, she said, and told her to leave.
Askew sued Pride, claiming she was fired for refusing to falsify records. Pride Health Services contended in court filings that Askew was laid off because there wasn't enough work. Askew and Pride eventually settled, and a judge ordered the clinic to pay her $15,500.
The clinic kept reaping more than $800,000 annually in government funding, despite persistent allegations of fraud and serious violations documented by auditors.
This year, a whistle-blower told Los Angeles County officials that Nwogene still was billing for "ghost clients." When confronted by county regulators, Nwogene and his staff denied wrongdoing.
Without hard evidence, auditors couldn't substantiate the allegations. They might have had more luck if they had visited Pride on a Wednesday.
Inside Pride's Inglewood clinic, between a dairy mart and a gas station on busy Crenshaw Boulevard, a small lobby was empty April 3, save for artificial plants and a 1990s-era anti-alcohol poster.
A receptionist told reporters there were no counseling sessions that day.
The office offered no group therapy on Wednesdays, she specified, in an exchange caught on a video camera hidden in a watch.
Yet billing records obtained by CIR and CNN show that Pride Health Services charged taxpayers for counseling 60 people at the clinic that day, at a cost of about $1,600. The clinic was reimbursed for 62 patients the following Wednesday as well.
Nwogene, whose salary has reached as high as $120,000 a year, did not respond to requests for an interview or to a letter seeking responses to specific allegations. When reporters asked for him at Pride's Inglewood clinic, a staffer denied wrongdoing. Workers then called police and closed the office mid-day.
Fake diagnoses among foster children
In California's public drug rehab program, clients equal cash. State and federal taxpayer money flows to the local privately run clinics based on the number of people they serve. The counseling is free to those on Medi-Cal.
California spent nearly $186 million on the program in the past two fiscal years, according to figures from the Department of Health Care Services. That doesn't include methadone clinics for heroin addicts, a separate wing of Drug Medi-Cal.
The state has the nation's largest population of people who qualify for the benefit, a pool poised to grow sharply under the Affordable Care Act. But recent history suggests that expansion might shovel more funding to clinics that game the system.
A specialty of So Cal Health Services, the Riverside clinic to which Victoria Byers was sent, was diagnosing foster children with fabricated drug and alcohol problems and billing taxpayers for the unneeded services, according to former employees and whistle-blower complaints.
The clinic billed Riverside County between $31 and $75 for each counseling session a child attended, documents show.
"You'd have to make up a summary of them trying this drug and make up scenarios of how they tried it, how they got it," said Nadine Cornelius, a former counselor. "It was all lies."
Cornelius tried making her group therapy sessions educational, she said during an interview at a diner near her San Bernardino County home. But eventually, she gave up. Instead, she said she let the teenagers play bingo and watch movies.
An anonymous whistle-blower told county officials that So Cal was paying group homes for "access" to the foster children. Byers' group home director, Angelina Farmer, told CIR that wasn't the case.
Riverside County cut So Cal Health Services' contract in 2010 because so many of its clients had dropped out. That failure was easier to prove than the fake diagnoses of teenagers, according to Karen Kane, the county's substance abuse program administrator.
Kane said her agency was especially concerned that a false addiction diagnosis could negatively affect the foster children later in life.
"Our goal was to stop them from harming people and get them out of the business -- and that's what we did," Kane said.
By then, the county already had paid So Cal $1 million, dating back to mid-2007.
After the closure, clinic director Tim Ejindu moved some staff members from Riverside to his other clinic in eastern Los Angeles County. There, under the red-tiled roof of the Pomona Alcohol and Drug Recovery Center, problems persisted.
Shearer, the Pomona center's assistant program manager before she left last year, said the overriding goal of the operation was to "get money." Staff billed for therapy that didn't happen, she said. They billed for clients who didn't show up. They billed for pizza parties and basketball games as if they were counseling sessions.
Ejindu was authoritarian and intimidating, said Shearer, who worked for him for six years. Inexperienced counselors making $9 an hour were under constant stress, she said, caught between doing something unethical and losing their jobs if they refused.
"And he made it very clear that your job depended on what you do and what you don't do," Shearer said.
When a government auditor showed up for an annual review, she said Ejindu would have his staff sneak files into his office so he could examine them. Then, Shearer said, he would send the files back to the counselor to change before the auditor saw them.
"Mind you, there's no way to ... go back and correct," she said. "There's only forgery."
Ejindu, who tax records show makes $150,000 a year running the clinic, branched out last year to provide addiction counseling at seven middle and high schools in the Pomona Unified School District.
Tim Ejindu, who runs the Pomona Alcohol and Drug Recovery Center, called his clinic a "pillar in our community." (Photo: CNN)
A school district spokesman, Ryan Hightower, said there have been complaints about the program but would not elaborate except to say, "Whenever something is brought up, we deal with it."
Fighting audits
As business boomed at the Pomona clinic, Mary Brantley couldn't keep up.
Brantley started as a counselor at Ejindu's Riverside clinic. After it closed, she moved on to the Pomona clinic. She said under Ejindu's watch, she was expected to produce paperwork and signatures for rehab counseling that never took place.
"When he had the schools in on it, I left because I couldn't do that much forging," Brantley said.
Ejindu's strategies for handling regulators became clear after Shearer took her story to county authorities in September.
As an auditor investigated Shearer's accusations of fraud, Ejindu offered the investigator a job, according to a county email. The auditor turned him down.
The 2012 investigation determined that the Pomona clinic had billed for 230 counseling sessions at times when the counselors were off work or at lunch. The inspector discovered that Ejindu himself had filled out, signed and dated patient records for a future date.
Six treatment plans and medical waivers lacked the required doctor's signature when the auditor first examined them. Weeks later, physician signatures appeared on the same documents, along with dates indicating they had been signed before the audit, according to the investigation report.
The tricks used to fudge paperwork had become so prevalent in the Drug Medi-Cal program that John Viernes Jr., Los Angeles County's Substance Abuse Prevention and Control director, warned all rehab providers in a 2010 memo that the practices were fraudulent and "will result in immediate contract termination." Viernes also warned that any offer of a bribe to a county staffer would be grounds for termination.
Over and over again, however, that threat fizzled.
Ejindu fought back. He filed a complaint against the county auditor, citing "illegal pilfering of documents." The allegations against his clinic, Ejindu wrote, came from disgruntled ex-employees who had been fired for not meeting standards.
"This agency has been around for 15 years for a very good reason," he wrote. "We are a pillar in our community and well respected."
Ejindu met with Viernes, who asked another county division to investigate the complaint of auditor misconduct. The inquiry determined that the auditor didn't have permission to take papers off the desks of clinic staff, Viernes said. As a result, he said, the findings of serious violations were "set aside."
Meanwhile, the Pomona clinic continued to rake in cash as part of its $800,000 annual contract. Vans still dropped off teenagers for rehab, and Shearer has grown cynical about the value of blowing the whistle.
"The funny thing is that it has been reported, many times, and nothing has ever been done," she said. "He's always found a way to circumvent that."
Looking back, Victoria Byers is upset, too. It bothers her that somewhere in official patient records, someone labeled her with an addiction she didn't have.
"Maybe if I wanted to get a job and that comes up, maybe I can't get that job because of drugs," she said. "I didn't do drugs, and that's kind of messed up."
'Ghost clients'
At Pride Health Services, addictions weren't the only things that Stephanie Jackson Parnell made up.
The former employee said the clinic operator, Godfrey Nwogene, would ask her to bill Drug Medi-Cal for clients she'd never seen.
"I just had to come up with stories," she said. "Using your imagination. Like as if it's someone standing right there."
Pride staffers would go through files of old clients to check whether their Medi-Cal numbers remained active, Parnell said. Each active number would become a Pride client again.
Parnell, who left and filed a whistle-blower complaint with the state in 2009, said she invented life stories for her fake clients. She still can rattle off vignettes of rehab fiction: "Client stated that she went to a party and relapsed. ... Client is saying she doesn't want to go out with those same friends."
Or sometimes, Parnell just copied and pasted notes from one file to another.
"It got so raggedy ... I would put one floppy disk in there and do 15 charts with everybody saying the same thing," she recalled.
When people did come in, Parnell would take down their information, and Pride would bill for them even if they never came back, she said. When the fake clients were due to complete their rehab program, Pride employees created diplomas to put in their files, she said.
"I was getting freaked out about it, but the money was good," said Parnell, who made $13 an hour.
Whistle-blower emails sent to a Los Angeles County auditor in 2011 accuse Nwogene of leaning hard on his workers to carry out the scheme.
"I refuse to do any ghost writing because that is illegal," one of the emails said. "The owner of Pride Health (Godfrey) had an emergency meeting last week and stated that if we didn't want to do the paper work the Pride Health way, then we should resign."
Nwogene seemed unstoppable. A Pride employee wrote in another email to an investigator, "One thing im (sic) kinda scared of is that he has told us that no one has been able and will never be able to take him down."
Nwogene's skill at avoiding a crackdown played out in full force in 2011, as he faced heat from both state and county authorities.
An auditor sat in on a group therapy session -- but no one showed up. The auditor reported that Pride "appear(s) to have developed fraudulent documentation to support their billing claims," according to a county memo.
"A serious problem has come up with this agency," one county regulator wrote in an email obtained under the California Public Records Act. "ALL ROSTERS SIGNED IN THE SAME HANDWRITING by, it appears ... the same person and all billing for this program will be disallowed."
The county froze funding and conducted a follow-up investigation that found "extremely grave violations" and "deficiencies that warrant the termination" of Pride's contract. Los Angeles County drafted letters notifying state officials and Nwogene that it was cutting off funding.
The state Department of Alcohol and Drug Programs drafted a letter to temporarily suspend Pride from the Drug Medi-Cal program because of "severe deficiencies" from 2005 to 2011.
Neither of the letters, according to county and state representatives, ever was sent.
Political intervention
Nwogene had been asking for help from the office of Mark Ridley-Thomas, one of five county supervisors. Now chairman of the county board, the former state senator represents the district where Pride operates.
The politician's aide, Salya Mohamedy, inquired, and Viernes, the county substance abuse prevention director, detailed the clinic's violations and allegations of fraud. Still, Mohamedy asked Viernes to set up a meeting "so that we can resolve this matter once and for all."
Internal emails show that this was not an unusual request: During the second half of 2011, Ridley-Thomas' aide contacted Viernes on behalf of half a dozen other rehab providers facing problems with regulators.
Nwogene met with Viernes on August 10, 2011. In a thank-you letter to Ridley-Thomas' aide, Nwogene called the meeting successful.
"Your intervention opened the door to dialogue," Nwogene wrote. "That dialogue led to a resolution."
While Pride may have had flaws, Nwogene wrote, "reckless and mean spirited" county staff treated the organization unfairly.
In the end, Pride Health Services' contract wouldn't be terminated. The funding spigot was on again.
In an interview, Viernes expressed frustration that supervisors urged him to meet with clinic owners even when they knew about the serious problems found by auditors.
"I get emails from the supervisors, (saying), 'When are these people gonna get paid!'" Viernes said.
Ridley-Thomas' top health deputy, Yolanda Vera, denied pressuring Viernes. The lawmaker's office got involved, she said, to "make sure that these agencies at least are getting some access and having their concerns addressed."
Asked about the CIR/CNN findings regarding Pride's billing, Vera expressed concern. "If true," she said, "I would ask the question as to why are we contracting with this agency."
But Viernes said the message is pretty clear: Help the clinics improve instead of cutting them off.
"There's so much political pressure on us about giving them a second chance," he added. "After all, we're a rehab agency, we believe in giving second chances."
And, as CIR and CNN found, government regulators will dole out second and third chances to just about anyone.
Got a story idea or tip for CNN's investigations team? Go to cnn.com/investigate or click here to submit. CNN senior investigative producer Scott Zamost, CNN investigative correspondent Drew Griffin and CIR intern Mihir Zaveri contributed to this report. This story was edited by Amy Pyle, Robert Salladay and Mark Katches, with contributions from Richard T. Griffiths of CNN. It was copy edited by Nikki Frick and Christine Lee.
Reprinted with permission of Center for Investigative Reporting.
Source: http://rss.cnn.com/~r/rss/cnn_latest/~3/LVvDFzzLovg/index.html
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Given its CEO's stance on the importance of mobile, it's only natural for Pinterest to keep polishing its apps. The newest iPhone version, for instance, brings with it an animated shortcut for repinning, liking and sending pins to pals when you press on an entry. Though similar in function to Tumblr's sharing tools, the menu boasts fancier graphics that fit the social networks' aesthetic. As a nice bonus, Pinterest's also adding an Edit Home Feed button for speedier housekeeping on the iPhone and the ability to send pins to your friends from the iPad. Assuming you're willing to wade through a deluge of recipes, inspirational quotes and bridal photos, you can check out the app via the links below.
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