'Pimping out' drug addicts for cash

Each day, through the streets of Kensington, Frankford, and North Philadelphia, hundreds of opioid addicts are forced to make a little-noticed commute.

More like cargo than passengers, junk-muddled men and women journey in vans from their boarding houses to drug-treatment centers for a form of group therapy whose efficacy is unknown.

Stripped of basic rights, the addicts are told by the people who run their boarding houses — called recovery houses — what facility to attend, when to go, and for how long. If the addicts don't take the van rides, house operators threaten them with eviction. People suffering from substance abuse must then fend for themselves on the streets, or in the heroin encampment in Fairhill.

In exchange for herding people into centers, recovery-house operators pocket illegal, under-the-table payments – ranging from $100 to $400 per person monthly – that keep them in business.

The centers, in turn, bill the government for a piece of the $680 million in Medicaid and state money disbursed in 2016 by a nonprofit contracted by the city to combat addiction and mental-health issues.

This predatory process is known on the street as "pimping out."

"You're selling God's children for money," said Joseph DiGiovani, 36, a Kensington auto-repair worker and former drug addict. For months, he said, the North Philadelphia recovery house where he lived – unlicensed and unregulated by the city, like 90 percent of such places — pimped him out to a treatment center. "You're getting paid off people's sickness. Money comes into play, motives start to get twisted. That's sick, man."

Interviews with more than 140 people connected to drug addiction and treatment illustrate an enterprise that exploits the addicted as an invaluable raw material in a citywide gray market.

Often the goal of treatment centers isn't to cure substance abusers, but to simply seat the same people in therapy week after week in a perpetual churn that generates dollars.

"This is a pay-to-play system of kickbacks," said Cecil Hankins, a former program analyst who worked 25 years in drug and mental-health programs for the city. Hankins ran a drug-treatment center that he said made a policy of never offering payments to recovery houses.

City officials "play into it," he said, and allow it to happen. "It's just the way it is. People who are addicts are sold to the highest bidder."

While the city acknowledges that "pimping out" occurs,  David Jones, the acting commissioner of the Department of Behavioral Health and Intellectual disAbility Services, minimized the practice, saying just "a small sliver" of government money is misused.

Hankins was unmoved by official explanations.

"This is an abuse of taxpayer dollars," he said. "And it's a form of slavery."

•

Renee Payton sat at her desk in the storefront office of Women Walking in Victory & Empowered Men, the North Philadelphia agency she founded.

On the wall behind her was a blackboard that lists the 12 recovery houses, home to more than 100 residents, that she operates through her agency.

Payton, 54, said she used to be a drug addict and a prostitute. But she tired of that life and got into running recovery houses because "it was a calling."

She listed her qualifications for the recovery houses this way: "I'm trained to do it from loving people."

Residents at her houses overcome addictions and find jobs, Payton said. "People's lives are being changed here."

As many as 4,000 addicts, along with former convicts and other disadvantaged individuals, live in about 200 recovery houses in Kensington, Frankford, and North Philadelphia.

Almost all of the homes, including Payton's, are unlicensed and unregulated. The city monitors what goes on in only one in 10 — those few that accept money from the government.

Many recovery-house operators, unqualified to oversee people sickened with substance-abuse disorders, preside over dangerously crowded, bedbug-infested flophouses, social workers say.

Quite a few recovery-house operators are ministers connected to the pipeline known as Air Bridge that sends heroin addicts from Puerto Rico into Philadelphia recovery houses.

To be sure, many recovery-house operators — as well as treatment center employees — are viewed by advocates as dedicated and caring individuals who battle heroin demons that endlessly plague their clients. Recovery houses are a necessity, advocates say, because such places help not only addicts, but people newly released from prison. If the houses shut down tomorrow, thousands of ex-convicts and people suffering from substance abuse would flood the streets.

To survive in impoverished neighborhoods rife with narcotics, the recovery houses partner with treatment centers in an essential quid pro quo:

Recovery houses seek treatment centers to prop them up financially, with even the smallest places receiving as much as $4,000 a month in illegal payments, according to urban studies scholar Robert Fairbanks, author of How It Works: Recovering Citizens in Post-Welfare Philadelphia, a book about local recovery houses.

The centers depend on the houses to feed them drug addicts.

There are about 215 licensed treatment centers throughout the city. They serve around 120,000 people with mental-health and drug problems, said Joan Erney, the CEO of Community Behavioral Health, a nonprofit that contracts with the city to disburse federal Medicaid and state money to the centers.

In treatment centers, say people familiar with the process, clients are seated in chairs — sometimes 60 to a room — for a kind of group therapy called an intensive outpatient program, or IOP. The IOPs run three days a week, for a total of nine hours. People talk about their weekends, how they've hurt others with their drug use, what foods they've eaten.

Attendance is taken, and the centers can then bill for anyone who has an address.

And they all do, thanks to recovery houses.

People who have worked in treatment centers say the facilities can be reimbursed as much as $400 for a client's first visit. Thereafter, treatment centers can receive $75 a person per session.

Each person in an IOP is worth roughly $800 per month in reimbursements for group and individual therapies to a center, a former treatment center official said.

On the other end, a recovery-house operator can get paid $100 a month or more for placing an addicted person in an IOP, said people familiar with the "pimping out" process.

Payton said she'd never even heard of the practice.

"Is it legal?" she asked.

It isn't. If a treatment center pays a recovery house for clients, both the center and the house are in violation of federal statutes that say it's a crime to receive or solicit money in exchange for referring anyone for services reimbursable by Medicaid. A violator faces prison, fines, or both.

Also, it's a violation of Medicaid rules for recovery houses to decide which treatment centers its residents must attend without offering them a choice, said Joseph Trautwein, a former assistant U.S. Attorney in Philadelphia with expertise in health-care fraud who is now a whistle-blower lawyer in private practice.

Despite her denials, Payton has been engaged in pimping out addicts — also called "patient brokering" — for years, say three people who have lived in Payton's houses.

They contend that Payton has received money from two drug-treatment centers — Southwest Nu Stop Inc. at 1609 Poplar St. and Sobriety Through Out Patient Inc. (STOP) at 2534 N. Broad St. — in exchange for sending residents of her recovery houses to the centers.

Payton denies it. Officials who run the centers did not respond to letters or repeated phone calls for comment.

Payton treats residents of her houses as "billable commodities," said a middle-aged heroin addict who lived in a Payton house for more than a year. The woman — who graduated from Lower Merion High School, then attended a local college — asked not to be named because she feared physical retribution.

The woman said Payton had credit problems and would make various residents put utilities in their names. She showed the Inquirer and Daily News a copy of a utility bill for thousands of dollars in her name at one of Payton's houses.

Another former addict, a 45-year-old woman who stayed in Payton houses for nine months and now lives in Harleysville, Montgomery County, said Payton told her that when she completed therapy she'd have to feign relapse so that treatment — and Payton's payments — would begin again. After the woman refused, she said, Payton told her, "If I don't get paid, there's the door." The woman moved out.

A third woman, Meredith Stahl, 45, said she endured similar experiences when she lived in Payton houses from May 2014 until last January.

Stahl wasn't a drug addict. Yet, she said, Payton forced her to go to treatment.

"Renee needed kickbacks to pay for my rent," Stahl said. "She was getting money off our backs."

For 15 years, Stahl had been the owner of a Queen Village preschool and nursery. Then came a divorce, the loss of her assets, and an arrest for aggravated assault in a domestic-abuse case. She was acquitted after the incident was shown to be a matter of self-defense, court records show.

Stahl fell into depression. Facing homelessness, she found Women Walking in Victory, which Stahl believed was a better option than a women's shelter.

Payton's houses were cramped, Stahl said. Records from the Department of Licenses and Inspections show the agency received complaints about overcrowding at two of the houses.

Payton would remove beds from an overcrowded house when she knew L&I inspectors were coming to make it seem as if fewer people lived there, Stahl said. An L&I official who asked for anonymity because he is not designated to speak with the media agreed with Stahl's assessment. "It seemed they pulled out beds to avoid L&I prosecution by reverting back to a single-family dwelling just long enough to comply with the violations," the official said.

Stahl said that Payton forced her to go to Southwest Nu Stop. The center, which had 2,246 clients in 2016, was allotted $5,913,349 in Medicaid and state funding in 2016, public records show.

Hearing addicts talk about trading sex for drugs in unneeded group therapy made Stahl feel hopeless, she said.

Stahl said that after a time, Payton decided to send all her residents to STOP on North Broad Street. That treatment center received $4,947,631 in Medicaid and state money to serve 1,845 clients in 2016, records show.

"Renee said more than once that she was getting commissions for us from STOP," Stahl said.

Stahl and two other women interviewed added that when they were sent to group therapy, they were transported from their Payton recovery houses to the treatment centers in vans supplied by STOP and Southwest Nu Stop. The vans would always bypass closer treatment centers along the way, the women said.

Stahl and the two other women said they were never given a choice of which treatment centers to go to. An administrator who works at STOP said Payton "made them come here."

After she found her footing, Stahl left Payton.

In interviews about Women Walking in Victory, Payton said she didn't know its operating budget.

She added that she never charges rent.

Asked how she pays her bills — in North Philadelphia, monthly rent and utility payments can range from around $650 to $1,000 — Payton said her costs are covered by the Holy Ghost Headquarters Revival Center at the Met in North Philadelphia.

That came as news to the church's pastor, the Rev. Mark Hatcher:

"Oh, no, no, no. She said I pay?" he said. "We may give her a donation here and there, but we don't pay for the houses. I don't know why she would say that."

Regarding allegations of kickbacks and mistreatment of residents, Payton said anyone who speaks against her is unreliable.

"People leave my house and are bitter," she said. "You have people struggling with mental health or drug addictions telling you things that aren't true."

Further, Payton said she doesn't compel her residents to put utilities in their names.

And Payton said she had never forced anyone to attend any one treatment center over another.

Payton added that none of her residents travel by vans supplied by centers. She said she herself drives people from her 12 houses in a van that she owns, taking scores of residents to sessions scheduled both in the morning and the afternoon.

But Stahl and others say Payton's van is broken and cannot run. Recently, a reporter observed several people from one of Payton's houses boarding a Southwest Nu Stop van. A resident said it was a scheduled trip to the treatment center.

Although Stahl didn't need therapy, experts believe it's vital for addicts. But it's not clear that group therapy always works.

"It's difficult, if not impossible, to monitor those interventions," said Casey O'Donnell, a psychologist and CEO of Impact Services, a Kensington community development agency. "Most people don't know … what happens to clients in those treatment rooms. There isn't enough oversight."

Some believe that getting people off drugs isn't always the goal.

Chris Marshall, who operates Last Stop Recovery, a Kensington recovery house that doesn't pimp out its residents, said the representative of a large treatment program imparted a trade secret. "He told me: 'We get people well enough not to get high, but not well enough to move on. We keep them here as long as we can,' " Marshall said.

"And all the while, they bill Medicaid." Marshall said. "That's blood money right there."

Marshall said he charges people around $100 a week for rent. Other recovery houses sometimes ask for rent as well, with residents drawing on resources such as Social Security disability payments. In many cases, recovery houses can defray costs by using residents' food stamps to feed them.

Marshall said he'd been asked by a major treatment center to send 53 people from his recovery house, but he refused because, as a former addict, "I did enough dirt and I want to get to heaven."

He said the center offered him $5,000 a week.

" 'No one has to know,' the guy told me," Marshall said. "They market with a smile."

He added: "There's a lot of darkness in Kensington."

•

Valentin Sierra and Sandra Quiroz ran one of the city's biggest single recovery houses, Casa de Amor, on the second floor of a 20,000-square-foot warehouse at 2080 Castor Ave.

The husband-and-wife team, Protestant evangelical ministers from Puerto Rico, initially impressed local leaders desperate for allies to help the area's staggering legions of heroin-addled people.

But soon enough, stories of pimping out began circulating among the 69 residents of Casa de Amor.

"I'm disappointed," said Asteria Vives, director of Home Quarters and Friends, a nonprofit community group. "Pastor Valentin has surprised and hurt me."

Eric Pagan, a former resident of Casa de Amor described by his attorney, Tobias Brown, as a non-addict, was ordered to attend drug therapy at New Journeys in Recovery at 166 W. Lehigh Ave. If he didn't go, he was told, he'd be evicted.

Pagan, 37, lived at the recovery house for several months. He was convicted of burglary after taking pipes from an abandoned house in Kensington. Sentenced to probation, the Puerto Rico native found refuge in Casa de Amor.

In February, Pagan said he'd missed several drug-treatment sessions because of court dates in his case. Sierra was furious and demanded the $150 he said he didn't get because of Pagan's absence, Pagan said.

Charito Morales, a registered nurse and community activist who rescues addicts from abusive recovery houses, witnessed the confrontation. "Pastor was screaming, 'Therapy isn't gonna pay me now!' " Morales said. " 'You owe me money.' "

Sierra "told me New Journeys pays him," Pagan said. "He gets paid by check. I saw it."

Two heroin addicts from Puerto Rico — Ernesto Rodriguez, 30, and Jonathan Rivera, 33 — said they saw Sierra wave checks from two treatment centers, New Journeys in Recovery and NorthEast Treatment Centers (NET).

"Valentin said to me, 'How do I make a profit if you don't go to New Journeys?' " Rodriguez said.

New Journeys served 307 clients and received $713,558 in Medicaid and state money in 2016, records show. Lawrence Gallagher, the director of New Journeys, did not respond to written and phone requests for an interview.

NET received $21,555,770 in Medicaid and state funding for serving 4,885 people in 2015, the latest available figures show.

Standing in the lobby of Casa de Amor, Sierra said through a translator: "My role as a pastor is to save homeless people from the street." He then called his wife, who speaks English, and handed the phone to a reporter.

Asked whether the ministers receive money in exchange for sending people to drug treatment, Sandra Quiroz said: "I'm not going to answer you or anybody. It's our business."

On Feb. 15, L&I officials ordered Casa de Amor shuttered for "many life-threatening conditions," said agency spokeswoman Karen Guss. The fire-alarm system didn't work, and propane tanks were stored in the kitchen.

City officials tried to find alternative housing for the residents, but many wound up homeless or in the heroin encampment in Fairhill, Morales said. One of them died of a drug overdose on March 6, city health officials said.

Sierra tried to start another recovery house on Palethorp Street, but L&I shut it down as well, Guss said: "The pastors jammed 18 bunk beds into a single-family house."

The ministers tried twice more to open houses – one on Germantown Avenue, the other on East Ontario Street. Both were shut down by L&I for overcrowding and fire-code violations.

It all saddened Vives, who cried as she spoke.

"You look for people you can trust," she said. "But greed can make a person evil."

•

In 2012, when Pennsylvania Gov. Tom Corbett ended General Assistance — a cash welfare program that gave around $200 a month to disabled, unemployed, and addicted people — he inadvertently boosted pimping out.

That's because people with substance-abuse disorders would hand their assistance money to recovery-house operators, keeping them afloat. When Corbett removed the cash, experts say, operators began hunting other streams of income.

Since then, said Joseph Trautwein, the former federal prosecutor, "it's [been] just crazy, the amount of fraud that happens. The problem is so horrible, the city needs help."

As prevalent as patient brokering is, it's difficult to prove, Trautwein said, partly because people are afraid to speak out.

In 2015, he said, he was working on a private-practice case with the help of two treatment center employees who, in a single night, delivered envelopes of cash containing $50 to $100 per head to recovery houses for each patient delivered for therapy. In exchange, he said, 20 to 50 people would be sent to the center.

Trautwein declined to name the center and recovery houses involved. He said he couldn't pursue the case because his two whistle-blowers got scared and disappeared. Their fears, Trautwein added, were justified.

"We've been told stories about intimidation by treatment center employees — physical retaliation for anyone speaking out," he said.

Joan Erney, the CEO of CBH, said "there is concern" about patient brokering. But, she added, CBH is limited because it lacks the authority to enter recovery houses to determine whether pimping out occurs. Legally, they're private homes, she said.

Pennsylvania legislators want to rein in unregulated houses by proposing bills that would force treatment centers to deal only with regulated, certified houses. But pimping out isn't being addressed.

Ultimately, said author Robert Fairbanks, it's difficult to blame many of the people involved in pimping out. Kickbacks, Fairbanks argues, are strategies developed by people stuck in a hard place, trying to survive.

He thinks of the treatment center-recovery house matrix as a "meat market and a messy poverty management system in one."

In the end, Fairbanks added, "nobody in the city cares."

"So this all stays in Kensington."