Church, 20 people charged in $60M Medicaid scam stealing from taxpayers and exploiting vulnerable

While hardworking Americans continue to pay into the Medicaid system, intended to help those in need, oversight failures have left it vulnerable to scammers.

On Tuesday, Arizona Attorney General Kris Mayes announced 22 new indictments relating to a sober living home fraud case.

'This invites fraudsters and criminals to take bigger and bigger chunks out of an ever-expanding pie.'

The AG’s investigation accused Happy House Behavioral Health LLC of receiving taxpayer funds for services it either never provided or only partially delivered. Additionally, the company allegedly billed for services for clients who were deceased and incarcerated.

According to the indictment, Happy House Behavioral Health received more than $60 million from the Arizona Health Care Cost Containment System. The company allegedly violated state law by using the funds to pay directly for sober living homes for clients.

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Arizona Attorney General Kris Mayes. Photo by Mario Tama/Getty Images

Happy House Behavioral Health faces multiple charges, including conspiracy, fraudulent schemes and artifices, client referral fraud, money laundering, theft, and forgery.

A church and 20 individuals are also facing felony charges related to the alleged scam.

In July 2023, Happy House Behavioral Health allegedly paid $5 million to Hope of Life International Church. The house of worship was accused of later wiring $2 million to an entity based in Rwanda.

The charges are part of a larger investigative effort to address a $2.8 billion fraud scheme that exploited the state’s Medicaid system as part of a broader “sober living crisis.” More than 100 individuals have been indicted in connection to the scam.

The Associated Press reported that the massive scam has disproportionately impacted Arizona's Native American population, resulting in an unknown number falling victim to fraudulent sober living homes and becoming homeless after funding was pulled from the unlicensed facilities.

Hayden Dublois, a data and analytics director with the Foundation for Government Accountability, told Blaze News, “Waste, fraud, and abuse are rampant in the Medicaid program, and this latest case is a classic example of the types of coordinated, criminal efforts to defraud states and federal taxpayers.”

Hope of Life International Church denied the accusations in a statement to the AP. It claimed that it accepted donations from a licensed sober living facility that was a tenant of the church. The AP reported that the church further contended that it did not control the facility’s operations, financial practices, or management decisions.

“The church’s only relationship was that of a landlord and, later, as a recipient of a donation — a donation accepted in good faith, consistent with its mission and longstanding practice,” the church stated.

Happy House Behavioral Health did not respond to a request for comment from the AP.

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Photo by: Lindsey Nicholson/UCG/Universal Images Group via Getty Images

Dublois told Blaze News, “This case is shocking enough, but the scale of the problem is even more alarming: The Medicaid program is on track to surpass $2 trillion in improper payments over the next decade.”

“This $2 trillion problem, much of which is fraud by design, encourages state and federal bureaucrats to check less, approve more, and grow the programs as fast as possible,” Dublois continued. “This invites fraudsters and criminals to take bigger and bigger chunks out of an ever-expanding pie. More frequent eligibility checks, work requirements, and repealing bad Biden-era policies would go a long way toward reducing the rampant fraud we know is still occurring.”

Dublois noted that Congress plans to address some of these issues in the one “big, beautiful bill.”

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