Saturday, August 8, 2009

California State ADP Employee Who Inspected Rehab Clinics Indicted on Charges for Allegedly Taking Cash Bribes

The California Department of Alcohol and Drug Programs (ADP) is responsible for administering prevention, treatment, and recovery services for alcohol and drug abuse and problem gambling. The ADP has the sole authority in state government to license adult alcoholism or drug abuse recovery or treatment facilities. ADP also receives federal funding and certain programs bill Medi-Cal.

An ADP employee, Gary Eugene Goethe of Sacramento, was indicted in United States District Court in Los Angeles on August 4, 2009 with four counts of “honest services” wire fraud, four counts of extortion and two counts of bribery charges for allegedly demanding more than $100,000 in bribes from the owners of two rehabilitation clinics that were seeking state certifications.

The indictment followed Mr. Goethe’s arrest on July 9 by special agents with the Federal Bureau of Investigation as he was leaving a meeting where he allegedly accepted a $3,500 cash payment that was part of a $10,000 bribe he had negotiated. Mr. Goethe was initially charged in a criminal complaint, a charging document that is now superseded by the grand jury indictment.

Mr. Goethe worked for ADP as a “drug Medi-Cal monitoring supervisor” who traveled to alcohol and drug treatment clinics throughout California to inspect records and documentation related to Medi-Cal billings. The indictment alleges that Mr. Goethe solicited and accepted bribes from rehabilitation facility owners in exchange for his promise of approvals and other benefits.

The indictment alleges that in one case Mr. Goethe told a clinic owner that he could help the owner obtain certifications that would allow the owner to expand service offerings to include mental health treatment. Mr. Goethe allegedly promised that, in exchange for cash bribery payments, he could “guarantee” that the clinics would be certified to provide mental health treatment services. Mr. Goethe allegedly demanded $92,000 in bribery payments from the owner.

In relation to another facility, Mr. Goethe is accused of revealing to the owner that the facility was being investigated by the California Department of Justice (DOJ), but that, in exchange for cash bribe, Mr. Goethe could “help” the clinic owner by providing confidential information about the subjects and progress of the investigation, as well as steering DOJ away from the clinic. Mr. Goethe allegedly demanded $10,000 in bribe payments from the owner of this facility.

After being arrested last month, Mr. Goethe was freed on a $50,000 bond. He is scheduled to be arraigned on the indictment August 10. The charge of “honest services” wire fraud carries a statutory maximum penalty of 20 years in federal prison. The charge of interference with commerce by extortion under color of official right also carries a maximum penalty of 20 years in prison. The charge of bribery concerning programs receiving federal funds carries a maximum penalty of 10 years in prison. An indictment contains allegations that Mr. Goethe has committed a crime. Every defendant, including Mr. Goethe, is presumed innocent until and unless proven guilty.

Attorney Commentary:

One issue we have seen in our practice is that it has been very difficult to obtain licenses and/or certification from the ADP in a timely manner. We have clients that opt to operate nonresidential recovery programs since they realize it can take one or two years to become licensed. Further, the power of Cal DOJ and the fear of audits can make ADP owners willing to take dangerous risks in order to preserve their business. There are individuals and businesses committed to recovery but face significant government bureaucracy and red tape in order to operate.

Generally, any residential facility providing detoxification; group, individual or educational sessions; and/or recovery or treatment planning to adults must be licensed. See California Code of Regulations (CCR), Title 9, Section 10501 et seq. Nonresidential programs are not required to be licensed. In addition to licensure, ADP provides a voluntary certification process to identify programs which exceed a minimal level of service quality and are in substantial compliance with the Department’s standards. Certification is available to both residential and nonresidential programs. Obtaining certification is considered advantageous in gaining the confidence of both potential residents and third party payers.

For providers and those wanting to operate residential facilities, seeking experienced legal counsel or consultants to help streamline the process of becoming licensed or responding to audits and investigations is an excellent idea. Attempting to short-cut the process through "old-fashioned handshakes" will cause more problems than it will solve. We have represented several people accused of bribing government officials in order to get Medicare or Medi-Cal provider numbers or to speed up the process. We would prefer to help individuals and businesses avoid any adverse legal exposure.

Any questions or comments should be directed to: at 213-233-2260. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings. They have represented a number of alcohol and drug rehabilitation programs (residential and non-residential). The firm's website is at:


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