Attorney General calls defendants ‘scammers’

OLYMPIA – Randal Hauff, a former superintendent of the Tonasket School District, has been named a co-defendant in a lawsuit claiming he defrauded Medicaid in order to benefit financially.

Washington State Attorney General Bob Ferguson says a Wenatchee-based school consultant company provided fraudulent Medicaid training to districts statewide. The Attorney General’s Medicaid Fraud Control Unit filed the lawsuit Dec. 4 allegedly JT Educational Consultants (JTEC) provided fraudulent training to dozens of school districts around the state, leading to tens of millions of dollars in false Medicaid claims.

The defendants are Thomas and Sheila Reese, their company, JT Educational Consultants (JTEC), and several employees and contract consultants including Hauff, Scott Adolf, Jack Hedgcock and Janine Welty.

“These scammers lined their pockets with millions of dollars meant to serve the healthcare needs of Washington children and families,” said Ferguson. “This fraud will not be tolerated. If you steal from the Medicaid system, my office will hold you accountable.”

Washington’s Medicaid program provides a critical safety net of healthcare services to low income residents. Through a reimbursement program known as the Medicaid Administrative Claiming program, participating school districts may receive Medicaid reimbursement for administrative costs they incur that directly support the provision of healthcare services to Medicaid eligible students.

This lawsuit targets a group of individuals, including former school administrators and employees, who built a grossly profitable consulting business by marketing a corrupted version of this program, according to the AG’s office.

JTEC was the consulting company for the Centralia School District, which settled related allegations for $372,000 in July.

Rather than helping school districts obtain reimbursement for legitimate costs incurred helping Medicaid eligible students obtain necessary health care services, the defendants gamed the system and received millions of dollars in “consulting” fees by causing the districts to file tens of millions of dollars of false claims between 2005 and 2014, alleges the Medicaid Fraud Control Unit.

“They did this by misrepresenting the rules of the program, including in training presentations, written training materials, and other communications with the districts, so that the districts would submit false claims for reimbursement and the defendants could take a percentage of the ill-gotten funds,” writes the AG’s office in a press release.

“When the agency responsible for administering Medicaid moved to implement a computer-based system that would have enabled districts to more easily and accurately identify costs truly reimbursable under the administrative claiming program, the defendants strenuously opposed the effort and fought hard to preserve the paper based system that was central to the survival of their unlawful enterprise.

In this lawsuit, the state will ask for the return of the ill-gotten Medicaid funds and substantial civil penalties for the false Medicaid claims.

Based upon information provided by the Reeses, MFCU investigators estimate that between 1998 and 2011 JTEC netted $12.6 million in consulting fees from school districts. In recent years, this company alone took between 6 and 8 percent of the total Medicaid Administrative Claiming reimbursement coming into the state.”

The release said neither the Reeses nor their employees or contractors have any special Medicaid training. Most are retired school district employees.

Local school superintendents talk about program

Current Tonasket School Superintendent Paul Turner and Oroville School Superintendent Steve Quick talked about the history of the JTEC program in the schools they have been associated with.

Back in the late 1990s, early 2000s, Medicaid had the idea that school districts were doing some of their referral work and felt the need to reimburse districts for that work. So school districts started jumping on this and getting reimbursement funds from Medicaid, according to Turner.

“In this case, JT Educational Consultants started up… they helped school districts work through the government paperwork to manage that. What we have now is the Attorney General’s office has just indicted JTEC for Medicaid fraud.

“JTEC has had or has over 90 school districts with which they were consulting. We have been one of them. Omak has also been one and I’m not sure who else int he valley. Last spring we were looking at how much money we were getting from Medicaid Match… basically we weren’t even making enough to pay for the consultant. So this fall before this came out, we’d already dropped JTEC and quit doing Medicaid Match. It wasn’t worth our time,” said Turner, who called the Attorney General’s office and asked about the ramifications.

“According to them, they are going after JTEC which allegedly took advantage of the school districts. What he told me was the indictment listed all the how and why of it. They are going after the company which over 10 or 12 years time made millions off of this,” said Turner, who added that the AG’s office saw the school districts as victims.

“He could not say what HCA – Health Care Authority – will do. But we are not their target. The Attorney General won’t be asking us for money – they don’t do that,” said Turner. “HCA could do that, that is still out there and we don’t know what that is. They did collect $300,000 and some back from Centralia and it sounds like they were pretty blatant on some of the claims they made. I am talking with other districts and as I receive more information I’ll let the board know where it is at. Tonasket is mentioned there several times.”

Oroville’s school superintendent said when he first got to Oroville the district was still in the program and had been in it when he was in Forks, Wash. as well.

“We were still getting money when I first got here, from 2005 to 2007 at least. But then the Medicaid Match regulations became so cumbersome we stopped doing it,” said Quick.

Any time the someone met with a student in the district regarding a social service, counselors and teachers, it could be claimed under the program, according to Quick.

“It seems like the high school was getting around $10,000 or more a year.” said Quick. “It was loose at the beginning… toward the end of the program it was tightened up and the claims became fewer and fewer and we just stopped using the program.”