Next to a smoke shop deep in the San Fernando Valley, employees at Able Family Support pull back the metal gates and open the doors to catch an unfettered flow of government money.
The clinic, reimbursed by taxpayers for each client it sees, offers in-person drug and alcohol counseling.
And Able Family is thriving, according to its billing records. In real life, on this hazy Southern California day, business moves at a slower pace.
No more than 30 people trickle into the rehab center until the doors are locked 10 hours later. Unbeknownst to clinic staff, reporters were stationed in parked cars counting the people who came and went on April 4.
The counting resumed a month later when the clinic submitted its bill to Los Angeles County seeking reimbursement -- not for 30 people, but for 179. The government promptly paid it -- $6,400 for clients Able Family reported it saw April 4.
In a rehab racket plagued by regulatory holes, paperwork trumps reality, a yearlong investigation by The Center for Investigative Reporting and CNN has found.
Thousands of pages of government records and dozens of interviews with counselors, patients and regulators reveal a widespread scheme to bilk the state's Medicaid system, the nation's largest. The populous Los Angeles region is one of the nation's top hot spots for health care fraud, and former state officials agree it is also ground zero for the rehab racket.
Drug Medi-Cal paid out $94 million in the past two fiscal years to 56 clinics in Southern California that have shown signs of deception or questionable billing practices, representing half of all public funding to the program, CIR and CNN found. Over the past six years, more than half a billion dollars have poured into the program statewide.
The simple stakeout on April 4 raises questions about the adequacy of government oversight of the program to help the poor and addicted, built on an honor system in which honor often is lacking. Oversight is marred by infrequent and cursory inspections and by a failure to act even when red flags appear.
Government officials who try to root out fraud clash with weak regulations, bureaucratic apathy and corruption in their own ranks. Once open, bad clinics rarely are shut down. CIR and CNN identified a dozen clinics caught cheating the system that not only remained in business, but also were rewarded with more public funds.
When told of the April 4 stakeout at Able Family, county regulators said they now have questions about whether the payments were legitimate. The findings merit a closer review but "look very incriminating," said a spokeswoman for Los Angeles County's substance abuse department. Able Family operates a small satellite clinic near downtown, the county noted -- but a security guard there said about 25 people came to that office each day.
The clinic's director, Alexander Ferdman, would not explain the discrepancy.
"I can't explain, because you will cut and paste and edit, and my answers will be to a totally different question," Ferdman said in a telephone interview, before hanging up.
CIR and CNN have exposed how clinics use coercion and forgery to defraud a taxpayer-funded program meant to help struggling addicts. The investigation also found that people ineligible to run Medi-Cal clinics did not just slip through the cracks -- they walked through doors regulators left wide open.
Some never should have been allowed in.
Felons are supposed to be blocked from running clinics. That didn't stop Ferdman. He entered the rehab racket two years after leaving a Texas prison, where he served time for orchestrating an organized crime scam. Over the course of a decade, he built his clinic into a $2 million-a-year operation -- all from taxpayer money.
Those on the Medicaid blacklist aren't allowed to bill for rehab funds. But George Ilouno did so repeatedly. Convicted of defrauding the student loan program, Ilouno was barred from collecting a single Medicaid dollar. Still, the state and county paid him more than a million.
Clients who went to GB Medical Services in Long Beach and counselors who worked there described years of graft. Ilouno and his staff bribed clients to show up, they claimed. Counselors fabricated therapy sessions that never took place.
One counselor told state investigators that such fraud was "rampant from Long Beach to Los Angeles," crediting the scammers' "success to the incompetence of the ... auditors," an arrest declaration says.
Federal Medicaid authorities place responsibility for safeguarding taxpayer dollars squarely with California's Department of Health Care Services. And a year after CIR filed its first public records request about Drug Medi-Cal fraud, the department moved earlier this month to temporarily cut funding to 16 rehab clinics.
But according to interviews with former state officials, the department has fielded concerns about rehab clinic fraud for at least five years yet has done almost nothing to combat it.
"Everyone talked the talk, everyone was zero tolerance for fraud and abuse, but no one would do anything about it," said Joy Jarfors, who retired in 2010 from a manager position at the Department of Alcohol and Drug Programs, which shared the job of clinic oversight until last July.
Responsibility for policing Drug Medi-Cal is split. The state certifies the clinics, but counties handle the money and shoulder the financial risk when mistakes are made. Both county and state analysts audit the clinics annually.
To many inside government and out, it has not been clear who's in charge. In that vacuum, fraud has thrived.
The alcohol and drug department this month merged with the Department of Health Care Services. Diana Dooley, secretary of the governor's Health and Human Services Agency, has overseen both departments since December 2010 but declined to give a sit-down interview about what went wrong.