Autism treatment firm lands $8-million state grant, spends big on governor's race

Detroit Free Press - 2/25/2018

Feb. 25--Centria Healthcare, the autism therapy provider under investigation for Medicaid fraud, has been among the most generous political donors to Lt. Gov. Brian Calley, who backed the company's successful bid for an $8-million state grant.

Calley, a longtime advocate for autism therapy and the father of an autistic daughter, publicly urged the Michigan Economic Development Corporation to approve Centria's grant request to expand in Michigan. Five weeks later, a key investor and board member of the company hosted a party at his Orchard Lake mansion that formally launched Calley's gubernatorial campaign, the Free Press has learned.

About 200 people attended, sipping wine and cocktails and enjoying strolling appetizers from Andiamo's. Guests contributed $106,400 to Calley, campaign financial reports show.

The host, Mark Mitchell, was entangled in his own medical fraud case that lasted years, according to federal court records. In 2009, Visiting Physicians Association, a company he owned and ran, agreed to repay the federal government $9.5 million to settle claims of overbilling.

In a recent interview with the Free Press, Calley insists he didn't know about Mitchell's history with Visiting Physicians and said his advocacy for Centria's$8-million grant stemmed from his desire to expand access to autism services in Michigan.

"The company didn't ask me to look into it, to check into it, to weigh in on it," Calley told the Free Press when asked about whether he saw a conflict between the grant and the launch party.

"When I saw it on the agenda, I decided that it was because we are so short on autism providers that the idea of using economic development dollars to not just make sure that a big and growing company has their headquarters here, but also that more kids with autism would get services. ... I think it's a great use of economic dollars meeting a huge social need at the same time as doing economic development."

Mitchell hosted the party, which cost more than $21,000, according to campaign finance reports. A statement to the Free Press said the allegations made by former Centria employees "lack any credibility." The allegations include fraud and forgery. The statement went on to say the settlement in the Visiting Physicians case included "no admission of liability or wrongdoing of any kind."

Four whistle-blowers who alerted the government to that case, received about $1.7 million, the U.S. Justice Department said in a news release, regarding the civil case.

"This settlement illustrates the government's commitment to pursuing those who defraud Medicare and other important programs and drive up the costs of health care," then-U.S. assistant attorney general Tony West said in a statement at the time.

Mitchell declined interview requests and the statement failed to address specific written questions about Visiting Physicians or about his relationship with Calley.

An ethics expert said candidates must be mindful of perceptions.

"It's always problematic when policy and politics, in this case, fund-raising, coincide because it raises the appearance of impropriety," said Hana Callaghan, director of government ethics at the Markkula Center for Applied Ethics at Santa Clara University in California. Callaghan said there's no indication laws were broken, but: "Public officials also have a duty to preserve a trust in government."

Craig Mauger, executive director of the Michigan Campaign Finance Network, a watchdog group, cautioned against drawing conclusions because the public is not privy to all that went into making the decisions, including all the conversations. Still, voters should always be mindful who is contributing, he said.

"This an example of a situation where you have a large donor, a large group of donors, and you have a public action that the state is taking that they could benefit from," Mauger said.

Spreading the wealth

Accusations against Centria have prompted an investigation by the office of Michigan Attorney General Bill Schuette, Calley's chief rival for the Republican nomination for governor.

Centria executives were generous to Schuette as well.

Eight days after Calley's party, they hosted a fund-raiser for Schuette at a Birmingham bistro, raising $34,500. About $20,000 of that came from Centria employees, according to campaign statements.

In total, Centria executives, employees, family members and others associated with the company have contributed more than $62,876 to Calley, about three-quarters of their political donations toward the gubernatorial race, records show.

Company CEO Scott Barry and President Chris Wilcox each have contributed $6,800, the maximum allowed, to both Calley and Schuette.

"They were two of a handful of people who had given max contributions to multiple candidates for governor," said Mauger of the Michigan Campaign Finance Network.

Centria-affiliated contributors gave $5,000 to the leading Democratic candidate for governor, Gretchen Whitmer, records show. Schuette told his campaign to return the roughly $20,000 in Centria contributions earlier this month, spokeswoman Andrea Bitely said.

"Upon the public disclosure by the Detroit Free Press of the open investigation by the department, the campaign notified me that they had returned the dollars contributed by Centria employees," Bitely said Thursday.

She said the campaign notified the department the money had been returned as of Feb. 13.

Barry said that Centria is politically active, noting company officials also have met with Whitmer.

Whitmer toured Centria's office Dec. 11 and spoke to staffers, a spokeswoman said, adding Whitmer has met with a variety of organizations across the state during the campaign.

"We have given time and attention to all three candidates because regardless of who becomes the next governor, Centria will still be serving children with autism in the state of Michigan and creating jobs in the state of Michigan," Barry said. "And autism is a nonpartisan issue."

Centria accused

Centria is now at the center of a legal battle with former employees who accuse the company of Medicaid fraud, forgery, violating patient privacy and employing unqualified staffers, according to court records.

The company denies the accusations and has sued the former employees, including its ex-chief compliance officer Vanessa Pawlak, for defamation. The allegations first became public when Centria included them in pleadings filed in Oakland County.

Pawlak has sued Centria, claiming wrongful termination and former senior sales executive Curtis Moore has sued under the Whistleblower Protection Act. Moore also is accused of perjury for his testimony in a separate Centria case. He's accused of lying under oath about whether he signed a noncompete agreement when he joined the company.

The Free Press has been investigating Centria since November, when it began interviewing former executives and other former employees concerning allegations of improper billing and other business practices of the company. The newspaper has examined thousands of internal and public documents related to Centria and also has spoken to former employees not connected with those involved in lawsuits.

Centria has denied any wrongdoing, claiming the allegations are deliberately false. In a statement to the Free Press, Mitchell said the allegations are from "disgruntled former employees, lacking any concrete evidence of wrongdoing on Centria's part."

Formed in 2009, Centria has grown into Michigan's largest provider of autism therapy services. Last year, it served more than 3,500 clients in nine states.

The market for autism therapy boomed in 2012 when Michigan passed a law requiring health insurers to pay for it. Calley signed the bill into law, with the approval of Gov. Rick Snyder, who was out of the state at the time.

Calley commended the company for the work it has done.

"They have made a very, very big difference in the lives of so many people with autism," he said.

He also said the Centria allegations are being taken seriously.

"There's a process for this and I expect the process will be very, very vigorous and very, very thorough and I will have no connection in any way, shape or form whatsoever to it," Calley said.

$8-million state grant

In October, the Michigan Strategic Fund, an economic development arm of the state, awarded Centria an $8-million state grant, contingent on creating 1,200 new jobs over five years. The company is moving its headquarters from Novi to Farmington Hills.

"I had never seen ... the economic development agency support autism services before, and I just think there's so much growth that is needed in our state so that kids get services that it's something I really wanted to support," Calley told the Free Press earlier this month after a town hall meeting in Troy.

The state has not paid the grant money yet and a contract to formalize it remains unsigned.

"At this time, the contract signing process is on hold pending the results of an ongoing investigation by the Attorney General's Office," Michigan Economic Development Corporation (MEDC) spokesman Otie McKinley told the Free Press.

Calley and his office were told of the project just days before the vote on the grant was scheduled, Jeff Mason, CEO of the MEDC, said in an e-mail.

MEDC communication staffers invited Calley to speak at its October meeting: "Not only due to the magnitude of the project, but also due to his personal passion toward the diagnosis and treatment of autism."

Mason said he is not aware of any communications between Calley and any of the grant decision makers, beyond Calley's public comments at the board meeting.

Centria went through the MEDC vetting process for the grant, but neither Mitchell nor his venture capital firm, Lorient Capital, were examined during that initial review, officials said.

That vetting process -- which remains ongoing -- found the whistle-blower lawsuit involving Moore in Oakland County, according to records obtained by the Free Press. An attorney for Centria provided the MEDC with an explanation, saying "Centria believes these allegations are meritless" and were filed in retaliation for two lawsuits filed against him by Centria.

Centria Subsidiary Holdings was identified as the sole member entity of Centria Healthcare during the vetting process, McKinley said.

Lorient Capital of Birmingham, a private investment firm focused on health care, lists on its website Centria Autism Services as part of its investment portfolio.

Barry told the Free Press that Mitchell is a board member of Centria and part of an investment group.

Mitchell wouldn't answer questions about his role at Centria or his stake in the company. Records show he contributed $6,800 to Calley's campaign, the maximum amount. The statement released by his spokesman Michael Layne said Mitchell doesn't discuss his investments "which are confidential and nonpublic."

But public documents, including his divorce filing, show his investments made him wealthy enough to own multiple homes, a yacht, luxury vehicles including a Ferrari, and flights on a private jet. Mitchell sold his majority interest in U.S. Medical Management, a management company for Visiting Physicians, for $200 million in 2013, court records show.

Red flags

Pawlak was hired as Centria's chief compliance officer in November 2016 and said she saw red flags with the company almost immediately. E-mails reviewed by the Free Press show her alerting Barry and other top officials to her concerns.

She was fired two months after joining the company and recently sued for wrongful termination. Barry said she was terminated for improperly sending sensitive company information to her personal e-mail account.

Pawlak said she suspected her days at Centria were numbered when work e-mails began disappearing from her inbox. Two days later, she was asked to meet with Mitchell, not at the company headquarters in Novi, but at his Lorient Capital office in downtown Birmingham.

When Pawlak walked into a conference room there, she saw Mitchell sitting with Centria's lawyer, Michelle Carter Pierce.

"He said 'I think you know why you're here,' " Pawlak recalled. "We're prepared to offer you a sum of money if we can be friendly on the street."

Pawlak said she was asked to sign a separation agreement but refused.

Mitchell is not active in day-to-day management of the company, but he, along with counsel, fired Pawlak at Barry's request, the CEO said.

"He did not make the determination that she should be fired or that she should be hired," Barry said. "He merely assisted in the conversation after the decision was made for a policy violation."

Centria contributions

As the legal cases play out in court, and the Attorney General's Office continues its investigation, the candidates for governor prepare for the Aug. 7 primary election.

While Schuette said he has returned contributions from Centria employees, Whitmer and Calley don't share the same level of concern about contributions they've received.

Campaign spokeswoman Annie Ellison said Whitmer has "built support from a large, broad, in-state coalition of people ... it's not surprising that people who work for major employers across Michigan are part of that broad, in-state coalition."

Calley hasn't returned any contributions from people connected to Centria, campaign spokesman Mike Schrimpf said. Calley has no role in the company's audits or investigations and the company faces allegations, not findings, he said.

"I don't think it's right to just assume an allegation equals guilty," Calley said. "And I also don't want to discount the profound impact that (autism therapy) services have had on the lives of thousands of people that didn't have access to it before."

Contact John Wisely: 313-222-6825 or jwisely@freepress.com. On Twitter: @jwisely

Contact Elisha Anderson: 313-222-5144 or eanderson@freepress.com On Twitter: @elishaanderson

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