Categorized | Government

Phoenix Houses in New York Under Investigation

Posted on 01 May 2013

Phoenix Houses of New York, Inc. provided inappropriate perks to its executives exceeding $223,000 while under contract with the Office of Alcoholism and Substance Abuse Services (OASAS), according to a report released last week by State Comptroller Thomas P. DiNapoli.

DiNapoli referred the findings to U.S. Attorney Preet Bharara’s office for review.

Among its several branches nationwide, Phoenix House has one of the few substance abuse treatment centers on the South Fork, located in East Hampton.

“This was money intended to treat people struggling with substance and gambling addiction, not to subsidize unwarranted perks for high-salaried executives,” DiNapoli said. “OASAS has to improve its oversight of service providers to ensure they are not enriching their executives at the expense of New York taxpayers. My office will work closely with U.S. Attorney Bharara’s office to ensure that those abusing the public trust are held accountable.”

DiNapoli’s report found that Phoenix Houses, which provides chemical dependency and gambling treatment at various locations around New York City and Long Island, paid $91,050 for executive bonuses, $40,447 for fringe benefits and $35,996 for vehicle leases from July 2009 to June 2010. Phoenix Houses claimed more than $75,000 for these and other excessive administrative costs and was reimbursed by OASAS. The provider also paid a departing director $40,400 plus a car valued at $15,586 as part of separation agreement, in possible violation of law.

In addition, Phoenix Houses officials failed to report $290,000 in Medicaid revenue to OASAS, which would have reduced OASAS payments to Phoenix Houses.

During the period under review, OASAS paid Phoenix Houses $8.5 million for gambling and chemical dependency treatment services.

Auditors and investigators also uncovered nearly $4,000 in improper purchases of Wal-Mart gift cards by a Phoenix Houses employee, who used the cards to buy alcohol, cigarettes and other items, and then attempted to conceal the purchases by submitting invalid receipts.

DiNapoli recommended that OASAS strengthen controls to monitor and evaluate Phoenix Houses contract compliance; recover OASAS funds used for improper Wal-Mart purchases, fringe benefits and inappropriate administrative costs; and determine if bonuses paid were justified and if the leased vehicles were used for program activities.

In response to the audit, OASAS noted that it has instituted additional controls and hired new auditors to ensure compliance and will conduct a follow-up audit to explore the findings in the comptroller’s report. A copy of the report can be viewed at

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