Man who made millions defrauding AZ's Medicaid in rehab scheme gets probation

A man who bragged that his businesses cleared $1 million a month as authorities said he was systemically defrauding the health care system for low-income Arizonans was sentenced to four years' probation on Friday, escaping the prison sentence prosecutors had asked for.

Johnwick Nathan, according to a self-published book, rose in three years from a $12 an hour employee at a behavioral health home to a life where he made $1 million a month.

Officials said Nathan, 30, made a portion of his money via fraudulent billing for behavioral health services for patients, most of whom were Native American.

The American Indian Health Program had less oversight than other health insurance programs, Arizona officials have said.

Fraudsters exposed those weaknesses in widespread fraud schemes against Arizona’s Medicaid program that totaled more than $2 billion.

Nathan, addressing the judge on Friday, said that he lost focus on aiding patients and became too consumed with the financial windfall. "Had I kept my heart clean throughout this process I would have — to be transparent with you — avoided all of this," Nathan said.

Maricopa County Superior Court Judge Tracey Westerhausen imposed a deferred sentence of incarceration. She said she would expect the probation office to give her an update on Wick in mid-December.

"If you're not displaying the character you're talking about here today," she said, "you won't be spending Christmas outside of jail."

Nathan was charged with fraud in June 2022, among the first cases brought by Arizona officials as part of the overall scheme.

Nathan’s health-related businesses were among the first 40 entities suspended from the state’s Medicaid program, the Arizona Health Care Cost Containment System. The state would eventually suspend more than 400 entities suspected of being involved in the fraud scheme, with more than 80% of those actions taking place in 2023.

During the time he was suspected of running the scheme, Nathan enjoyed the trappings of a life of luxury: a mansion in north Scottsdale and a dozen luxury cars, including a Rolls Royce, Ferrari, Bentley and McLaren.

In October 2021, health care officials took away his ability to bill the state’s health care system, cutting off the money flow. Later that month, investigators from the Arizona Attorney General’s Office raided his Scottsdale home.

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Nathan pleaded guilty Feb. 21 to two felony counts: illegal control of an enterprise and solicitation to commit money laundering.

The plea agreement said that any time behind bars on those charges would happen concurrently. He faced a presumptive sentence of 3.5 years, though, under the agreement, probation was an option for the judge to consider.

Nathan also agreed to pay restitution to Sade Collins, his ex-fiance. Collins, according to court documents, spoke with investigators in September 2021, one month before AHCCCS suspended Nathan’s business from receiving payments.

Nathan’s indictment accused him of bilking AHCCCS out of $196,000. But that number, according to details in the indictment, would only cover billings for four patients on a handful of days.

In court on Friday, an attorney for AHCCCS, Aaron Baumann, told Westerhausen that the total amount of the overbilling from Nathan's company was $18 million.

Officials said that Nathan’s fraud lasted nearly two years.

As part of his plea, Nathan agreed to pay the state $2 million, a sum that the Attorney General’s Office would share with AHCCCS and the Tribal National Community Outreach and Education Fund. That sum also suggests the wider scale of the fraud.

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A rags to riches story

Nathan held himself out as a serial entrepreneur. Records filed with the Arizona Corporation Commission show him involved in 25 businesses. Six were health care facilities, but others involved construction, entertainment and dining.

Nathan published his book, “12 Principles of Soulful Success: Achieving True Success by Benefiting Others,” in 2021. An ensuing public relations campaign resulted in  a spate of interviews, including a story on the Forbes website.

In his book and interviews, Nathan described a rags-to-riches story. His mother brought 3-year-old Nathan and five siblings from Haiti and settled in upstate New York. Nathan attended Indiana Bible College, but had to drop out, he told interviewers, because he couldn’t afford the tuition.

He moved to Arizona to attend a school for recording music, he said, and took a job at a behavioral health home.

Nathan said in his book that people were leaving the residential facility without achieving sobriety because they weren’t getting services they needed.

Nathan wrote that after getting feedback from clients, he “upped the services.” Instead of group therapy once a week, he wrote, it was every night, involving watching and discussing motivational videos. Alcoholics Anonymous meetings, he wrote, were scheduled six days a week, rather than two.

Nathan said clients were served by the extra therapy, and the home’s managers were “enjoying increased profits.”

Nathan said that at the time he was an employee making $12 an hour. He decided to strike out on his own.

Nathan, according to a court filing, started to open residential homes for patients needing behavioral health treatment in 2018. Each patient was enrolled in the American Indian Health Plan, the filing said.

In March 2020, Nathan said he opened an outpatient treatment clinic called Harbor Health Integrated Care.

By December 2020, according to the court filing, Nathan converted his residential facilities into what are known as sober living homes. Those facilities, which used to be called halfway houses, provide residents structure and oversight, but not medical treatment.

He then provided round-trip transportation for his patients to get treatment at his clinic.

Former employees told investigators, according to court filings, that the clinic had a familiar rhythm: Group therapy from 10 a.m. until lunchtime, then smaller sessions until about 3:15 p.m., when clients left.

But, prosecutors said, records showed that Nathan billed for hours well beyond that time frame.

Court records show he routinely billed for nine, 16 or 23 hours each day per patient.

At times, officials said, the patients he reported giving treatment to were, during those same days, in hospital emergency rooms.

An employee told investigators he offered to help Nathan with voluminous paperwork involved with billing, but that offer was rebuffed. Nathan was the only person in his operation charged with a crime.

Investigators had a task untangling the case. One court filing said there were over 1 million documents involved.

State didn't step in after warning signs in 2019

According to a filing by Nathan’s attorney, AHCCCS raised red flags about Nathan’s billing in July 2019. But officials in the Arizona Attorney General’s Office, then led by Republican Mark Brnovich, said the investigation would take “more resources than anticipated.” Federal officials reopened the investigation in 2021, the filing said.

A psychiatrist who made weekly visits to patients at Nathan’s clinic, Raul Sora, said that he saw a well-run clinic that was helping patients get better.

“I was seeing success,” Sora said. The staff working at the clinic “were serious people. They seemed to genuinely care.”

Sora was based in Tucson but said in a phone interview with The Arizona Republic in March, that he came up every Monday to see patients. In 2021, he received a call telling him the clinic was closing and not to make the drive up. He said at the time he didn’t understand why.

Months later, an investigator with the Arizona Attorney General’s Office called Sora to ask him about how the clinic operated. Sora said that’s when he heard that Nathan was accused of fraudulent billing practices, a part of the operation Sora said he never dealt with.

Sora said that was when he realized that the clinic, Safe Keepings Counseling, was part of what became known as the “sober living” scandal.

Though, he said, his experience with Nathan’s patients didn’t match up with what officials said during news conferences.

“There were rumors about things going on in these facilities,” Sora said, referencing tales of patients plied with alcohol and drugs to stay in apartments while the health care system was billed for non-existent treatments. “I never saw anything like that,” he said.

Sora said he’s since heard anecdotes about patients he had seen relapsing and becoming homeless following the clinic’s closure. He said it was unfortunate that their path to sobriety was closed off.

“Because it’s not just the business end of it,” he said, “It’s also taking care of these people.”

Reach the reporter at 602-444-8473 or richard.ruelas@arizonarepublic.com.

Republic reporter Elena Santa Cruz contributed to this report.

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This article originally appeared on Arizona Republic: Johnwick Nathan sentenced to probation for Medicaid fraud in Arizona