Federal prosecutors allege $1.6 billion insurance fraud by SoCal rehab owners

Federal prosecutors allege that Nathan Young and his son David Young billed more than $1.6 billion in health insurance claims between 2020 and 2026. The pair owned drug and sober care facilities in Southern California, including Rodeo Recovery in Beverly Hills. Prosecutors say the Youngs were paid more than $210 million of those claims. The funds came from major health insurers for services described as non-existent or woefully inadequate.

The charges were part of a wider healthcare fraud crackdown by the Trump administration. This operation resulted in more than a dozen arrests across multiple states. Authorities took eight people into custody on Thursday. Prosecutors charged 15 defendants in total, a group that includes six medical professionals. The Youngs have not yet entered pleas. They are currently in federal custody.

Reuven Cohen, attorney for Nathan Young, stated that his client denies the allegations. He said the family looks forward to challenging the government's case in court. The Youngs each posted $4 million in bail. They agreed to home detention and surrendered their passports. A hearing is scheduled for Nov. 5.

Prosecutors allege the Youngs directed body brokers across the country to target vulnerable populations. These groups included people who were unhoused, in poverty, or attending substance abuse support groups. The brokers sent these individuals to the Youngs' facilities. The pair allegedly sought out patients with insurance policies that provided the most generous reimbursements. They often fraudulently enrolled these individuals in new insurance policies for which they were not eligible.

Prospective patients were lured to Southern California with free flights, money, apartments, and cars. They also received hotel stays, gift cards, marijuana, cigarettes, and prescription medications. Once in California, most patients found the promises false. Premium patients with high-reimbursing insurance received luxury stays in hotels and private apartments. Non-premium patients lived in cramped, unsanitary, and crowded housing described as trap houses.

The Youngs are accused of recycling patients through their facilities to continue billing insurance companies. They did this regardless of whether treatment was medically necessary. To keep patients cycling through the facilities, the Youngs allegedly directed that patients be drugged to knock the client out if they tried to leave. The conspirators also changed people's insurance coverage to keep the scheme going. Patients were cut off from communication with family members.

An FBI agent affidavit noted that Nathan Young made medical decisions based on insurance payouts. When a broker proposed putting a United Healthcare insured patient in Rodeo Recovery's high-end detox program, Young wrote that the United girl has decided to come in. He responded, Ok, I think it's a bad policy but sure. He added that an Alaska policy would be 20 times better. About a week later, a client with better Alaska-type insurance arrived. United was moved back to sober living.

Assistant Atty. Gen. Colin M. McDonald said the Justice Department is coming for those who steal healthcare dollars. He noted that data will lead investigators to wherever they are. First Assistant U.S. Atty. Bill Essayli said every dollar drained from health insurance systems is one less dollar available to those who need it. Patrick Grandy, assistant director of the FBI's Los Angeles field office, said healthcare fraud cheats American taxpayers out of billions of dollars.

Attorneys for the defendants said David Young, 71, was taken into custody on Oct. 13 at 6 a.m. They stated that more than a dozen agents pounded on the door of David's home, repeatedly screaming his name and saying they had a warrant. The attorneys wrote that the government induced Nathan Young's surrender by telling his counsel that agents were waiting in the lobby of his apartment building. They claimed this implied an arrest authority that did not exist.