John Cornachio Used “No-Show” Job to Steal More Than $800,000 from Bronx County Substance Abuse Treatment Provider Narco Freedom.
Oyster Bay, NY - March 23, 2018 - Attorney General Eric T. Schneiderman today announced a state prison sentence of 2 to 6 years for John Cornachio, 63, of Oyster Bay, NY. Cornachio was convicted after trial of Grand Larceny in the Second Degree, a class C felony, for using a “no-show” job to steal from Narco Freedom Inc., a former Medicaid-funded, not-for-profit corporation based in the Bronx that was founded to provide substance abuse services throughout New York City. In addition to being sentenced to time in jail, Cornachio was ordered to pay $840,000 in restitution to the New York State Medicaid Fraud Restitution Fund.
“Stealing from Medicaid harms both our most vulnerable residents and New York taxpayers," said Attorney General Schneiderman. "No matter how sophisticated the scheme, my office will continue to prosecute Medicaid fraud and bring crooks to justice."
During the jury trial before Hon. Jeanette Rodriguez-Morick, the Attorney General’s office presented evidence that Cornachio colluded with Narco Freedom’s corrupt management and held a “no-show” job within the organization. Over a five year period, Cornachio collected over $500,000 in salary and benefits paid by Narco Freedom. As part of his “no-show” job, Narco Freedom provided Cornachio with health insurance, retirement benefits, and a generous car allowance that he used to lease a Land Rover, among other benefits. The evidence also showed that Cornachio obtained over $300,000 from Narco Freedom through B&C Management, a shell company with no actual business, which submitted fake invoices to Narco Freedom for services it never provided to the not-for-profit.
In 2015, the Attorney General’s Medicaid Fraud Control Unit (“MFCU”) indicted Narco Freedom Inc., CEO Alan Brand, Jason Brand, and other individuals and corporations for defrauding the state Medicaid program along with Cornachio. All defendants indicted by Attorney General Schneiderman in connection with Narco Freedom have now been convicted of various crimes, including Enterprise Corruption, Grand Larceny, and filing false information with government offices.
As part of the Narco Freedom investigation, the Attorney General also filed a civil action against Narco Freedom Inc. seeking asset forfeiture and other remedies, including treble damages and penalties under the New York State False Claims Act. The arrests and civil action stopped the illegal activity of Narco Freedom that exploited the Medicaid program and the vulnerability of thousands of Medicaid recipients, resulting in many millions of dollars in savings to Medicaid. As part of its plea and civil agreements, Narco Freedom acknowledged that it stole from Medicaid and admitted to filing false statements with various state agencies, including the New York State Department of Health and the Attorney General’s Charities Bureau, in efforts to deceive and defraud these agencies. In January 2016, Narco Freedom filed for bankruptcy. A bankruptcy court approved a $118 million settlement to settle Narco Freedom’s outstanding government claims, including those of New York State and the federal government; the precise amount to be recovered in the bankruptcy proceeding is yet to be determined.
The Attorney General would like to thank the New York State Office of Alcoholism and Substance Abuse Services, the Office of the New York State Medicaid Inspector General, the New York State Department of Health, the Human Resources Administration of the City of New York, and the Civil Division of the United States Attorney’s Office for the Southern District of New York.
The trial was conducted by Medicaid Fraud Control Unit (MFCU) Special Counsel Erin Kelsh and Assistant Attorney General Hayley Campbell with assistance from NYC Regional Director Christopher M. Shaw. Deputy Bureau Chief Karin Kunstler Goldman and the Attorney General’s Charities Bureau provided expert analysis and testimony on the responsibilities of non-profit organizations for the trial.
The investigation was led by Senior Investigator Albert Maiorano and Investigator David Ryan with the assistance of Supervising Investigators Dominick DiGennaro and Michael Casado and Deputy Chief Investigator Kenneth Morgan. The financial analysis was led by Principal Auditor-Investigator Patricia Iemma, Auditor-Investigator Jillian White, and NYC Regional Chief Auditor Thomasina Smith. Investigative support was provided by Supervising Legal Assistant Wendy Dorival and Confidential Legal Analyst Kelvin Caraballo and Victoria Sepe.
The civil case against Cornachio and Narco Freedom is being handled by Special Assistant Attorney General Alee N. Scott with the assistance of MFCU Civil Enforcement Division Chief Carolyn Ellis.
The criminal investigation of Narco Freedom and its related enterprises was handled by Special Counsel Erin Kelsh and Special Assistant Attorneys General Megan Friedland with the assistance of MFCU NYC Regional Director Christopher M. Shaw.
Thomas O’Hanlon is MFCU’s Chief of Criminal Investigations–Downstate. The Medicaid Fraud Control Unit is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. The Criminal Justice Division is led by Executive Deputy Attorney General Margaret Garnett.