Eric Schneiderman for Attorney General

New Charges for 2 Flophouse Operators Accused in Medicaid Fraud Scheme

November 14, 2016

As published by the New York Times on November 10, 2016.

The New York State attorney general filed Medicaid fraud and money laundering charges on Thursday against a lawyer who runs two outpatient substance-abuse programs in New York City and a couple who ran flophouses that forced residents to seek help from those programs. Their arrangement was detailed in an investigation by The New York Times last year.

Anthony Cornachio, who runs the NRI Group in Midtown Manhattan and Canarsie Aware in Brooklyn, and Yury Baumblit, 66, and his wife, Rimma, 60, who ran the flophouses, face up to 25 years in prison if convicted of the new charges, filed in Kings County Criminal Court in Brooklyn. The Baumblits were also charged this year in a similar arrangement with other outpatient providers. They remain jailed pending trial on that indictment.

Mr. Cornachio, 74, who is also the lawyer for the Village of Island Park on Long Island and a trustee at Nassau Community College, was arrested on Wednesday, the attorney general’s office said. The NRI Group and Canarsie Aware were also charged with grand larceny and money laundering.

“We allege that the defendants engaged in a deliberate scheme to exploit those struggling with substance abuse in order to line their own pockets with millions,” the attorney general, Eric T. Schneiderman, said. “Medicaid cannot serve as a personal piggy bank for criminals and fraudsters who have little regard for the well-being of their fellow New Yorkers.”

Officials from the NRI Group and Canarsie Aware did not return calls for comment. Mr. Cornachio’s lawyer did not return calls for comment, and the Baumblits’ lawyer could not be reached.

A spokeswoman for the New York State Office of Alcoholism and Substance Abuse Services said the office was aware of the arrest of Mr. Cornachio and was “monitoring his programs to ensure that the clients are receiving the services they need.”

The Times in May 2015 detailed the underground industry of so-called three-quarter houses, seen as somewhere between regulated halfway houses and actual homes. It had flourished for years, largely because residents could not afford to stay anywhere else on the $215 monthly housing stipend for poor people in New York City or on their disability checks. Although no one knows how many of the homes exist, because they are unregulated, tenant advocates estimate there are hundreds.

After the article was published, the city formed a task force and began relocating residents from homes that could be tracked and that violated the law.

Like other operators of three-quarter houses, the Baumblits and their company, the Back on Track Group, catered to addicts, poor and mentally ill people, and those released from jail or prison. Residents said that up to six men slept in bunk beds in a single room, fire exits were blocked, and bedbugs and rodents often infested the buildings.

People could stay there if they handed over their monthly housing stipend. But in return, they had to go to a treatment support group and counseling at a certain outpatient program, often five times a week, even if they were not addicts or wanted to seek help elsewhere. Such a requirement violates federal law.

As recently as the spring, the Baumblits required their tenants to go to groups at NRI Group and Canarsie Aware.

Former employees and tenants told The Times that the Baumblits were paid an illegal kickback for every visit, an allegation backed up by the attorney general’s investigation. From September 2013 to the end of February this year, the Back on Track Group was paid more than $938,000 in kickbacks: $708,500 from NRI, and $230,350 from Canarsie, the felony complaint said.

Prosecutors also alleged that Mr. Cornachio, through NRI and Canarsie, submitted and caused to be submitted more than $1.8 million in false claims for reimbursement to Medicaid. Prosecutors said the claims were fraudulent because they stemmed from the scheme and were often medically unnecessary.

The attorney general’s office is also seeking more than $5 million in damages, plus penalties, from the defendants.