Sobering conditions at Narco Freedom’s three-quarter houses

Nonprofit bosses accused of bilking Medicaid to fund lavish lifestyle; residents cite leaky, moldy, neglected buildings

Clients outside Narco Freedom’s methadone clinic at 250 Grand Concourse in the Bronx in New York, Oct. 25, 2014. This and other properties were frozen by a civil court order Wednesday after Narco Freedom CEO Alan Brand and his son were indicted on charges of fraud.
Rosalind Adams

Six mornings a week, Fred Henderson, 56, heads to 138th Street and Grand Concourse in the Bronx in New York for methadone maintenance therapy. His wheelchair has only a right footrest, so he pushes off with his left foot to gain momentum. Black gloves cover his hands as he presses the wheels forward.

Henderson, a Harlem native who frequently wears a Yankees cap, arrives at the clinic by 8 a.m., where a single, faded blue sign by to the door reads, “NF We care.” It is one of 10 outpatient drug treatment centers in New York City run by the nonprofit Narco Freedom, which serves 6,000 people a year. Tax records show Narco Freedom received approximately $44 million in revenue in 2012, 83 percent of it from Medicaid.

Henderson lives in a three-quarter house — so called because it is a step between a halfway house and full independence — that’s also owned by Narco Freedom. The larger rooms house 12 men, divided among rows of bunk beds. Rent is $215 a month — standard among three-quarter houses in New York, since that’s what the city’s welfare agency, the Human Resources Administration, pays in temporary shelter assistance to landlords. (While Narco Freedom often applies directly to the HRA on behalf of tenants, Henderson says he pays the rent from his monthly $805 Social Security check.)

Fred Henderson has struggled to find housing because of drug use related to his chronic pain. He has been living in a Narco Freedom three-quarter house since December 2013.
Rosalind Adams

All his housemates are also enrolled in one of Narco Freedom’s drug or alcohol treatment programs, creating a dual revenue stream. According to documents received under New York’s Freedom of Information Law, the company said it houses more than 500 people who are also in its programs. Medicaid reimburses Narco Freedom $159.17 a week, or $8,276.84 a year, per person for methadone treatment.

This influx of public funds has turned Narco Freedom into a booming business. The company has steadily expanded its operations in part through a network of three-quarter houses across the city. But it may be in trouble after Wednesday, when New York Attorney General Eric Schneiderman indicted Narco Freedom CEO Alan Brand and his son Jason Brand on charges of fraud and grand larceny. Alan Brand is also accused of soliciting and receiving a $13,000 monthly kickback from a real estate developer who has rented numerous properties to the nonprofit since 2009. The Brands’ bank accounts, properties and investments were frozen by a civil court order, including Alan Brand’s $1.8 million Long Island home and a pair of condos in Florida. Investigators seized six cars allegedly purchased with funds allocated to the organization.

In addition to the allegations made by Schneiderman, a 2012 filing reveals the company is the subject of federal investigation. The U.S. attorney’s office did not confirm or deny if this is ongoing.

Prior to the arrests, Al Jazeera had been looking into the business practices of the father and son team, the subject of numerous formal complaints and now of a state investigation led by the attorney general’s Medicaid Fraud Control Unit that began last year.

Al Jazeera found that maintenance on the properties rented by Narco Freedom is performed by the for-profit company NF Maintenance and Repair, where Alan Brand is also CEO.

Tax records show that Narco Freedom spent $5.5 million on repair and maintenance in 2012 — more than 10 percent of the company’s $50 million in expenses. That’s up from spending $1.2 million (3.3 percent) of $36 million in expenses in 2005. Despite that increase in spending, residents — many of whom live in the houses for only a short time — reported poor conditions in the three-quarter houses, verified by photos taken from inside.

‘I like the not-for-profit world. It’s much easier than having multiple tenants ... It’s a good model for a landlord.’

Jay Deutchman

building owner

Henderson spent three and a half years in a men’s shelter on Wards Island when he was released from prison in September 2009 after serving 10 years for robbery. He found it difficult to secure housing because of narcotic use. At the time he was taking Percocet to manage the chronic pain from a hip replacement in 2004. Medical records show Henderson has a history of drug and heavy prescription opioid use that later compelled him to seek methadone therapy.

Methadone, a synthetic opioid, remains a popular way to treat heroin addiction. There are more than 50 licensed clinics in New York City. It works by blocking the euphoric effects of opiates in the brain while easing the physical feeling of withdrawal, or dope sickness. Around the neighborhood, it’s called simply “juice.” Henderson takes a high daily dose of 90 mg. (The starting dose is 30 mg.)

After he watched a man overdose, Henderson left Wards Island against the terms of his release. “I had to get out of there. I didn’t want to die in there too,” he said, describing the shelter as a place where drugs were rampant. He spent the next six months sleeping in the waiting areas of emergency rooms and on the subway. When a parole officer picked him up in April last year, he landed in front of a judge at Riker’s Island who promised to get him out of the shelter system. The court order dropped him into a Narco Freedom three-quarter house in December 2013.

Henderson was first sent to Freedom House 3 at 413 East 152nd Street. The nonprofit leases this property, along with numerous others, from owner Jay Deutchman, who told Al Jazeera he leases his buildings primarily to nonprofits.

“I like the not-for-profit world. It’s much easier than having multiple tenants,” he said. “It’s a good model for a landlord.”

In response to questions about alleged building code violations, Deutchman said he rents the buildings under triple net lease terms, which means the tenant pays all real estate taxes, building insurance and maintenance costs. A copy of the 10-year lease obtained by Al Jazeera confirmed this and showed Narco Freedom pays Deutchman $45,000 a month, or $540,000 or year.

In 2011, Deutchman pleaded guilty to charges filed by the U.S. attorney for not paying FICA taxes for a business he owned, Framework Interior. City permit records show he hired his own company to do construction work on his property at 152nd Street.

Deutchman has a long relationship with the Brand family: At another nearby Narco Freedom three-quarter house he owns, he hired the DASO Development Corp. to gut and renovate the interior, according to building records. DASO Development, as well as DASO Cleaning and Restoration, is owned by Jason Brand. Deutchman confirmed he and Jason Brand also owned a company called East Coast Cleaning and Restoration together, which folded in 2009.

DASO is closely tied to Narco Freedom as well. According to city permit records the company was hired for construction work in September 2009 at 217 Court Street in Brooklyn, a former Narco Freedom clinic. In charges filed by the attorney general both Alan and Jason Brand were accused of filing a false $3.5 million insurance claim at that location.

While the indictment characterizes Jason Brand as a top Narco Freedom executive, he is listed as an administrative assistant on Narco Freedom company tax filings and drew a $108,825 salary from the company in 2008. (All subsequent filings also listed him in this position but failed to report his salary). Numerous phone calls to Jason Brand’s private companies requesting comment were not returned. Narco Freedom employees who answered the main phone line before the indictment could not locate a Jason Brand.

In owning several private, closely held maintenance and repair companies that support Narco Freedom, the Brand family has created a closed-circuit operation with little oversight. While the HRA pays shelter assistance, it does not perform inspections, and the New York State Office of Alcoholism and Substance Abuse Services (OASAS), which certified Narco Freedom’s outpatient facilities, does not certify sober homes.

Narco Freedom’s outreach director Donna DeCicco, who works in the office next to House 12, where residents pay rent, did not respond to questions about the company’s three-quarter houses. “You’re asking questions that are, frankly, none of your business,” she said in a phone call.

Map: Narco Freedom facilities in NYC

Today Henderson lives in a small, windowless room on the third floor of House 12 at 2640 Third Ave. Plastic storage carts are stuffed under his bed, his mattress is tied down to the frame with thick black straps, and a rack along the wall is bursting with his clothes. Henderson suspects the room is a converted walk-in closet and sent a letter to Narco Freedom in September requesting reasonable accommodation. After negotiations,  to make room for his wheelchair, the company moved out the second twin bed that had been squeezed into the room.

New York City Department of Buildings (DOB) records show several complaints at House 12 since 2012, for insufficient handicap access, lacking a secondary exit in case of fire and the illegal conversion of a commercial building. Most of these complaints were closed after inspectors failed to gain entry to inspect the property.

The DOB did not respond to specific questions about properties that are affiliated with Narco Freedom or verify if the department was still attempting to gain access after those complaints were closed. “Issues with the three-quarter houses have been brought to the DOB’s attention, and we are working with HRA to resolve any problems,” said a department representative. There are 11 active violations against the property.

Despite the conditions, activists who work with three-quarter residents say they are more concerned with having their clients have a place to sleep. 

“The best option is, of course, affordable housing for very low-income residents. But until that type of housing exists, where are people supposed to go?” asked Amy Blumsack of the Three-Quarter House Tenant Organizing Project in Brooklyn.

Henderson said he has not been able to access the food preparation area on the mezzanine level of his building because the elevator doesn’t stop there without a key, which he does not have. Living on $194 a month in food stamps, he said over a plate of baked chicken and macaroni and cheese at the 116th Street food pantry, makes planning meals difficult. The upper Manhattan pantry is one way he supplements his meals.

Henderson said he tries to spend most of his time away from the house, where it’s easy to buy drugs and clean urine to pass drug tests, and violence sometimes breaks out. Inside the backpack slung behind his wheelchair, he carries paperwork related to a case against a former roommate in House 12 who, Henderson alleged, assaulted him in August.

Many living in the three-quarter houses are recently released from prison, interviews with residents confirmed. The mentality of the institution stays with a lot of them when they get out, said Henderson, and the house can feel like a continuation of that life.

“But even in prison there wasn’t bunk beds,” he said. “You lose all semblance of privacy here.”

Narco Freedom has been working with referrals from the parole board since 1990 and in 2012 signed a five-year, $866,250 contract with the Department of Corrections for 20 beds in a house on East Tremont Avenue that is also owned by Deutchman. A 2012 letter, offered as proof of extermination services at this address, names Jason Brand’s DASO Cleaning as a party. Communications within the Department of Corrections obtained under the Freedom of Information Law reveals the nonprofit won the bid in part because of a shortage of proposals. The original bid was denied for failing to include specific financial information.

Near House 12, Britney (who requested her last name not be used for privacy) lives in the all-female Narco Freedom house on Alexander Avenue. Dressed in a tank top and cuffed jean shorts, the self-described farm girl from upstate New York had her dark brown hair pulled back into a loose ponytail. She stood outside Boom! Health on 144th Street, a health center that Narco Freedom clients and others in the neighborhood frequent for supplemental services like a needle exchange program.

“Rarely is this population dealing with just one problem,” said Maria Caban, director of program evaluation at Boom. “We try to meet people where they’re at, because recovery looks different for everyone.”

Britney landed in the women’s house in May after applying for methadone treatment and housing at one of Narco Freedom’s clinics. She’s still on the starting dose of methadone, 30 mg, but doesn’t want to be on it longer than a year. In the interim, she said, it’s helping her beat her addiction.

“It definitely helps. If I were to do heroin right now, I’d need so much to even feel anything,” she said. “I don’t even have that kind of money.”

Henderson too said that he doesn’t want to be on methadone forever. But because of his history of opioid dependence and hip problems that necessitate strong pain medication, he considers it the best option for now. “It’s like a never-ending merry-go-round,” he said.

Despite Narco Freedom's $5 million in annual maintenance expenses, residents say facilities are leaky, moldy and neglected.
Courtesy of Narco Freedom resident

The house where Britney lives on Alexander Avenue isn’t any better than the men’s house. A resident notes that the walls of the bathroom leak so badly that the floors are covered in newspaper to stop the moisture. The ceiling in one room “exploded” due to leaking water, she said, and a rotten mold smell is so pervasive on the first floor that the maintenance woman wears a mask around the house. In a phone call to the property, a woman who identified herself as Joan said only, “I’m sorry I can’t tell you anything,” before hanging up.

Some residents were hesitant to talk because they were fearful the house might get shut down, leaving them with nowhere to go. Others interviewed for this story said they sought treatment from Narco Freedom that they didn’t need in order to qualify for housing and get off the street.

But records show that patients may not be receiving every service that Medicaid is billed for. A May 2014 audit by the New York State Medicaid inspector general revealed 10 percent of the 150 cases audited were billed improperly. The audit revealed Narco Freedom may owe as much as $1.3 million in overbilled Medicaid dollars and has been ordered to pay $787,121. In some cases the clients received no treatment at all.

Despite the nonprofit being under federal investigation for Medicaid fraud as of January 2013, May 2014 letter to Narco Freedom from OASAS did not mention any investigation and said it expected to renew its five-year $5.5 million contract for drug and alcohol treatment services.

The three-quarter houses remain in operation, despite the indictment. For residents who have no other housing options, the threat of eviction remains a concern. A manager of Freedom House 3 sent Henderson a letter in February saying he was required to attend a meeting for not paying rent or face eviction from the facility. Using receipts of payment, he avoided being turned out. And Britney described a culture of intimidation in the women’s house, with supervisors frequently saying “We’ll give you a shelter referral” for any perceived wrongdoing.

In 2012 a Bronx County judge ruled that three-quarter house residents have the same tenant rights as any other New York resident. By law, if you are living somewhere for 30 days, the landlord has no authority to remove you without a ruling from housing court.

Matthew Main of MFY Legal Services, who argued the 2012 case, said much of his group’s advocacy is focused on the issue of eviction. It’s precisely at this moment when they’re evicted after finishing a treatment program, for example, that clients need the most stability, he said.

In mid-October, Britney was back on the street and waiting for a money order from her dad so she could get a storage unit for her belongings. She did not discuss why she wasn’t living in the house anymore and said only that she was planning to go to the Franklin women’s shelter in a couple of days.

Henderson was recently transferred from House 3 to House 12 and now keeps a letter that outlines his tenant rights in his backpack. This struggle for all three-quarter residents is relentless: to hold on to what they have while climbing out from addiction and securing more stable living conditions.

In reaction to the charges against the Brands on Wednesday, Henderson said that while the clinic likely started out with a good idea, after living in the houses, he thought the charges were a long time coming.

“I think they lost their humanity a long time ago,” he said. “Maybe this will be a win for the little guy.”

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