Narconon is no stranger to insurance problems, specifically, insurance fraud.
Previously, there were charges made to insurance companies for exaggerated or non-existent services, followed by a raid on the premises conducted by police on the behalf of the Georgia Insurance Commissioner, Ralph Hudgens, and Gwinnett County District Attorney, Danny Porter. We believe this investigation may have grown legs and moved out beyond Georgia now, though, and well it should.
Then, there came a class action lawsuit filed against Narconon of Georgia, Narconon International, Association of Better Living and Education, Inc. (ABLE), and Religious Technology Center (RTC), which is just revving up and has the potential to cost a fortune in both legal fees and payouts.
Now, Evanston Insurance Company, Narconon’s (former?) insurance carrier, has filed a civil lawsuit in Federal Court to request a declaratory judgement that would render their policy with Narconon of Georgia, Narconon International, and ABLE void ab initio – lawyer-speak for “void from the beginning” – meaning that Evanston would not be required to cover any of the legal costs or judgments against any of the entities named as defendants in the class action case. Narconon will be required to either find another provider, or cover the costs themselves.
Apparently, Narconon had taken out this policy after their previous carrier, Western World Insurance Company, realized how deceitful Narconon can be and filed a similar lawsuit for declaratory judgement in the middle of the Patrick Desmond case and ended their coverage.
The background for this current situation is long and convoluted, but I’ll try to explain the pertinent history without overdoing it on the complexity. Readers who have been paying attention to Narconon of Georgia for any length of time know that Narconon of Georgia claimed to be an out-patient program when dealing with the state licensing agency, who only licensed them as such, while at the same time claiming to be in-patient to potential clients, and a drug court (or several).
In actuality, they were running the program as a residential in-patient program, with housing provided at a nearby apartment complex by a separate “corporate shell”. This was used as a way to get around licensing requirements involving what are termed as “supportive services” and a Georgia regulation that if a supportive service is under the control of a rehab, they must also be licensed by the state.
Narconon of Georgia’s sauna facility has been referred to in the past as Pur-O-Cleanse, due to a previous but eventually settled license revocation and an appeal in 2006/2007. Pur-O-Cleanse was originally set up as a similar arrangement to the illegal and unlicensed housing run by Narconon of Georgia, with the location being offsite yet nearby, and a “front” owner so it could claim to be independent, due to the agreement.
There had been a falling out between Martin Cohen, the “owner” of Pur-O-Cleanse, and Narconon of Georgia’s Executive Director and CEO, Mary Rieser, after which Mary R. and Narconon took over the operation, and acquired a license for an “Ambulatory Detoxification facility” to operate as a branch of Narconon of Georgia called “New Life Detoxification Program.” Pur-O-Cleanse, aka Narconon, had been inspected on May 29, 2012 by the Georgia Department of Community Health (DCH), as a result of a complaint. A number of deficiancies (violations) were found, including operating without a license for the services being provided. Additionally, DCH was apparently under the impression that the program was taking place at an existing business with other non-Narconon clients, as required by the licensing settlement, when in fact, Pur-O-Cleanse had been formed and set up as a front specifically for Narconon and the sauna.
Evanston Insurance Company’s lawsuit states that it provided insurance to Narconon, based on information provided by Narconon on its application for the insurance and a clarification provided by Narconon’s agent, AmWins, that Narconon of Georgia’s two locations were out-patient. Evanston has now discovered that the application contained at least two misrepresentations, one with regard to the residential status, and one regarding its compliance with other laws and regulations.
43. Upon information and belief, at this time, Narconon was operating a residential, rather than an out-patient, facility.
44. The Application also asked whether the facilities sought to be insured are “licensed in accordance with all applicable local, state and federal laws and regulations.”
45. Narconon answered “Yes.”
46. Upon information and belief, shortly prior to the application date, the Georgia Department of Human Resources conducted an inspection of the facilities and determined that “a review of the facility documents revealed that the facility did not have a Drug Abuse Treatment and Education license for this address.” It further concluded that the facility is “operating a full time detoxification program without a license.” A true and correct copy of Georgia Department of Human Resources Inspection Results is attached hereto as Exhibit E.
47. Moreover, Narconon was licensed as an “outpatient” facility such that its operation of a residential facility was unlicensed.
48. The Application contained at least two misrepresentations.
49. Evanston relied on those misrepresentations in providing coverage to Narconon.
The inspection cited in Paragraph 46 refers to the “Pur-O-Cleanse” facility. Evanston goes on to state in Paragraph 50 (bolding is ours) of the lawsuit:
Narconon made the misrepresentations with the actual intent to deceive, and those representations materially affected the acceptance of the risk and hazard assumed by Evanston.
The policy with Evanston was to end on June 25, 2013. It is doubtful that Evanston renewed, or else the renewed policy would likely be included in this case also. Has Narconon of Georgia found another insurance provider, or have they run the program without insurance since then? We don’t know.
Narconon’s already got big troubles, and they just keep getting bigger. I’m reminded of my elders telling me when I was young, “when someone tells a lie, they have to keep on telling more lies to cover up the first.” Misrepresenting oneself, i.e., lying, to an insurance company to obtain coverage is every bit as much fraud as is charging insurance companies for services not provided.
We hope Ralph Hudgens and any of his three-letter agency associates are aware of this new development.
Update: This story is covered as of today, September 3, 2013, on law360.com. Unfortunately, you have to register there to read it. Fortunately, they offer a free 7-day trial registration. Remember, folks, you read it here first!