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This spring, when staffers from the District’s child welfare agency toured Riverside Psychiatric Hospital, they were struck by the beauty of its MacArthur Boulevard campus. Quiet, safe, and far removed from the District’s violence- and drug-plagued neighborhoods, it looked like just the place for some of the city’s emotionally disturbed teenagers to get away from it all. To sweeten the pot, Riverside staffers promised that their residential treatment services would be tailor-made for African-American kids, who comprise the majority of the city’s foster children and juvenile delinquency cases.

To social workers at the Department of Human Services (DHS) with neglected and abandoned teens sleeping in their offices and no place to go, it didn’t much matter that Riverside was new and hadn’t quite gotten all its paperwork in order. Not even the city’s judges had qualms about sending kids there. But not long after DHS sent 15-year-old Tamika to Riverside this spring, she alleges that a counselor who was supposed to be healing her sexually assaulted her instead.

According to a police report, on June 13, Metropolitan Police Department officers arrested 39-year-old Christopher Adams for first-degree sexual abuse for allegedly assaulting three teenage patients at Riverside, including Tamika. According to the report, Tamika told police that Adams had once pulled her bra up over her breast and fondled her. On another occasion, the girl alleged in the report that Adams put his hands down her pants. Later, he allegedly rubbed his penis against her body and then threatened to kill her if she told anyone, Tamika told police.

Out of the 24 kids then at Riverside, eight had been sent by the foster care agency now headed by court-appointed receiver Jerome Miller. According to social workers at the city’s Family Services Administration and other private foster care placement–agency staff, the incident raised questions about Miller’s stewardship over the agency, because he was brought in partly to keep D.C. kids out of unaccredited institutions. But children’s advocates were troubled by another question the incident brought to light: What exactly is Riverside Hospital?

When it comes to psychiatric hospitals, the District has been a one-horse town for years, and until recently few private foster care agencies had ever heard of Riverside. It’s hard to imagine a new 150-bed facility designed for kids with a history of violence and drug addiction moving into anybody’s back yard unopposed—not in this town, anyway. But in December, Riverside quietly appeared at 4460 MacArthur Blvd. NW, without a peep from nearby Georgetown Day School or other residents who recently fought off a new pizza-delivery joint they thought would spoil their swanky neighborhood.

A review of incorporation papers, judicial decisions, and other city regulatory agency documents reveals that Riverside has a very checkered corporate history that goes well beyond the arrest of one of its staff members. The hospital’s origins are buried under a tangle of shell corporations, limited partnerships, management contracts, and the usual conduits of D.C. politics. But all of those threads eventually lead to two men: Riverside’s attending psychiatrist, Jacob Fishman, M.D., and his business partner, Merwin James Nabit. With the help of some of their children, Fishman and Nabit have created a multimillion-dollar health care empire extending from Louisiana to Maryland. In the process, they’ve left behind a string of dissolved companies, neglected kids, and mentally retarded folks—and according to the U.S. Department of Justice, one of the largest health care fraud schemes in U.S. history.

Nearly 20 years ago in Clinton, Md., Fishman was running Potomac Psychiatric Associates and practicing his trade at Southern Maryland Hospital Center, the only for-profit, doctor-owned hospital in Maryland. In the late 1970s, Fishman joined forces with Nabit, a hospital administrator who also owned some nursing homes in Virginia, and the pair started a company called Horizon Health Group. Through Horizon, Fishman and Nabit owned and operated a number of psychiatric treatment facilities in North Carolina, including a for-profit psychiatric hospital for adolescents in Fayetteville, N.C., called Cumberland Psychiatric Institute. Fishman was the hospital’s chief of staff and medical director, and Nabit was the chief administrator.

Showing amazing prescience in their entrepreneurship, Fishman and Nabit tapped into what would become one of the biggest health care boons ever. After the Reagan administration deregulated the health care industry and insurance companies were persuaded to cover in-patient mental-health and substance-abuse treatment, for-profit psychiatric hospitals proliferated across the country like mushrooms. As Wall Street Journal reporter Joe Sharkey explained in his 1994 book, Bedlam, adolescent care proved to be a particularly lucrative niche. Hospitals appealed to concerned middle-class parents, diagnosing their kids with such ailments as “attention deficit disorder” and other behavioral problems. These kids brought the hospitals a steady supply of insurance revenue and required little treatment, unlike those with schizophrenia and other chronic mental illnesses.

The boon came to an abrupt end in the early 1990s, when the U.S. Justice Department launched an investigation into multimillion-dollar fraud schemes run by National Medical Enterprises, Charter Medical, and other large chains of for-profit psychiatric hospitals and substance-abuse treatment centers. The chain hospitals had found big money in getting middle-class kids committed to psych wards, where they provided questionable treatment until the kids’ insurance coverage ran out. Nearly 10 years before the government got wise to the breadth of the scam, Cumberland Psychiatric Institute was setting its own records in the annals of health care fraud.

Fishman and Nabit had situated their Cumberland hospital near a military base in Fayetteville, which assured a steady supply of well-insured adolescent patients who not only had Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) coverage—the federal health insurance for retired military personnel and their dependents—but private insurance as well. But according to a Defense Criminal Investigative Service report, in 1982 the Air Force Special Investigations office discovered that Cumberland had been billing both CHAMPUS and patients’ private health insurance for the same treatment. Many of those charges, government investigators found, were for services the hospital never provided, and some of the claims bore forged signatures certifying the claim information.

The Air Force referred the charges to the Defense Criminal Investigative Service, which launched an investigation into Cumberland Psychiatric Institute and Fishman’s private practice, Cumberland Psychiatric Associates, for conspiracy to defraud the government, forgery, mail fraud, and violation of the false claims act. CHAMPUS and Blue Cross/Blue Shield officials also conducted a joint audit of Fishman’s private practice. Federal investigators later learned that prior to the audit Fishman had instructed staff members to remove patient records from the hospital’s records department. Those records were doctored, either by Fishman or at his direction, to justify longer commitments and bigger CHAMPUS payments, according to the investigators’ report.

Fishman became the focus of a grand jury investigation, as Department of Defense (DOD) investigators learned that Fishman’s practice was systematically billing CHAMPUS for therapy sessions that he never actually provided. According to the DOD report, one of Fishman’s former employees told federal investigators that Fishman had started the billing scheme at his Potomac Psychiatric Associates in Clinton, where staffers were shown how to trace a patient’s signature onto insurance claims. Another former employee from Fishman’s Maryland practice told investigators that Fishman had even asked him to write prescriptions for his patients when he was absent. The employee, who wasn’t a doctor, refused, according to the report.

Practices in both Maryland and North Carolina kept Fishman in the air regularly, jetting back and forth between the two states, according to the DOD report. As a result, former Cumberland patients told government investigators that they rarely saw Fishman, who was their psychiatrist, and indicated that they received only brief therapy sessions from other staff members—some of whom, investigators discovered, weren’t even certified to provide those services. When federal investigators got hold of his travel records, they discovered that between 1981 and 1982 Fishman had been billing CHAMPUS for five-day-a-week therapy services at Cumberland even though he was out of the state half that time. Cumberland hospital staffers told investigators that when Fishman was gone, they merely signed his name as the admitting physician.

Financial records uncovered by CHAMPUS, the U.S. Attorney’s Office for the Eastern District of North Carolina, and DOD investigators showed that Cumberland had overcharged CHAMPUS $1.06 million between January 1981 and October 1982 by using medically unnecessary treatment, and charging for prolonged hospital stays, double billings, and inflated hospital-room rates.

The Defense Criminal Investigative Service report indicates that the Cumberland County Department of Social Services and the North Carolina Department of Human Services had received complaints of overcrowding at the hospital. The report notes that the Medicaid fraud-control unit of the Maryland Attorney General’s office launched an investigation into Fishman’s practice in February 1983. Even the U.S. Department of Housing and Urban Development started an investigation, according to the report.

In 1984, Cumberland entered into a settlement agreement in which the hospital would pay the government $1.25 million—then the largest civil fraud case in the history of the CHAMPUS program, according to a 1984 press release issued by Samuel Currin, then U.S. Attorney for the Eastern District of North Carolina. The settlement forced Nabit and Fishman to sell all assets owned in North Carolina by the Horizon Health Group and barred them from doing business in the state.

Fishman was also ordered to pay almost $700,000 and was barred from treating CHAMPUS patients for 10 years. He also surrendered his North Carolina medical license. In exchange, the government would drop any criminal proceedings. Prosecutors said at the time that Fishman’s scheme represented the largest health-care benefits fraud by a doctor in U.S. history.

Fishman tells another story about what happened back in North Carolina. He says the blame for what he called “an unholy chapter” lies with a bookkeeper he employed. “She was the guilty party,” he says. “It was this woman who did the fraud. I participated in the settlement because of the bookkeeper.”

While he can’t remember the woman’s name, Fishman says the bookkeeper entered into a civil settlement with him as well. Fishman apparently made a similar argument to the D.C. Board of Medicine in 1985, when the board held hearings on whether to revoke Fishman’s medical license in the District. Fishman sued the bookkeeper in Prince George’s County in 1982 over the billing issue, according to the board’s decision allowing Fishman to keep his license.

Fishman says that the government never pursued any criminal charges against him because it could not prove that he intentionally defrauded the government. “It was quite a witch hunt,” he explains, adding that the prosecutor in the case was appointed by Sen. Jesse Helms (R-N.C.) and that at that time, racism and anti-Semitism were rampant in Fayetteville.

Not only was the prosecution biased, says Fishman, but “in fact, the Department of Defense people behaved very fraudulently.” He says one of the DOD investigators, who was married, attempted to seduce one of the bookkeepers at the Cumberland hospital and made promises of marriage to her in order to get information.

Fishman also says that he was never forced to surrender his medical license to the state of North Carolina. Instead, he says, “I left my medical license inactive at that time.” And selling off the assets of Horizon Health Group was not part of any settlement, he says, although he admits he and Nabit did sell the assets for business reasons.

He says he has an otherwise unblemished record of working in community mental health and anti-poverty programs, “My record is one of very high-quality service to patients,” says Fishman. Regardless, the fraud settlement didn’t put Fishman and Nabit out of the health care business. Not for long, anyway.

Charles Roby is an alcoholic, but thanks to Alcoholics Anonymous, he’s been sober for 38 years. In 1974, he got out of the insurance business and bought a little motel in Emmitsburg, Md., and converted it into Mountain Manor, a drug- and alcohol-abuse treatment center just below the shrine of Saint Elizabeth Seaton. “The motel was there to take people who’d run down the hill and throw up their crutches and say they were saved [after making a pilgrimage to the shrine],” says Roby. He got a good deal on the motel, he explains, because the place wasn’t doing so well because when people came down the mountain after being saved, they got back on the bus and went home instead.

Roby kept part of the motel open and used it to subsidize his fledgling substance-abuse treatment center in the rest of the building, which he ran on family labor and goodwill for 12 years. “Part of the AA message is that you’re supposed to pass it on,” says Roby. In 1986, Roby’s two partners decided to get out of the business, and Roby was forced to sell Mountain Manor. He sold it to Fishman. “They made us a pretty good offer, and I had to do it,” says Roby. “I ran Mountain Manor for years and we never made any money. The only condition I had on the sale was that they wouldn’t interfere with our programs.” Mountain Manor took a sizable number of free clients, and Fishman continued the practice. Roby stayed on with the company as a clinical consultant, and his daughter Mary kept a controlling interest in the company.

Charles Roby still works for the company and says, “I got no beef at all against Fishman. I think Fishman seemed highly motivated to help people. Fishman’s put up a lot of dough to keep these things going. I don’t know how they do it. If I still owned it, it’d be broke by now.”

When Fishman took control of tiny Mountain Manor, the rehab industry was booming, and he immediately moved to expand the operation. In 1987, Mountain Manor sought state approval for a huge 110-bed residential care facility for drug- and alcohol-abuse treatment in Baltimore. Two years earlier, Fishman applied to open a $5.8-million, 92-bed psychiatric and substance abuse treatment hospital in southern Maryland. However, according to John Brennan, general counsel for the Psychiatric Institute of Washington, the application was denied.

This time around, rather than apply in his own name, Fishman and Nabit tried a different approach, which is laid out in a 1991 decision by the Court of Special Appeals of Maryland. The decision shows that Fishman used a trust he created for his children to establish a series of corporations that ultimately owned a company called Maryland Treatment Center. Merwin Nabit’s son, Charles “Chuck” Nabit, was the company’s president and says he also has an ownership interest in the company. Maryland Treatment Center then owned Mountain Manor. Chuck and Merwin Nabit also owned an investment company that owned the real estate where Mountain Manor would be built. All told, there were six different financial entities that masked Fishman and Nabit’s connection to Mountain Manor. In 1989, the state health planning agency granted Mountain Manor’s application.

In an interview, Fishman says the unique corporate structure of Maryland Treatment Center and Mountain Manor was “developed purely for estate and family purposes and nothing else.” He vigorously denies any suggestion that the arrangement was intentionally designed to mask his and Nabit’s involvement in the companies. And he questions why the corporate structure is even relevant. “What does that have to do with the quality of services?” he asks.

One D.C. health care attorney familiar with this case explains that the Maryland state health planning commission is a citizen-operated commission that has never seen a local business it didn’t love. “Maryland is very parochial, but it’s not all that tough to bamboozle any [certificate of need] agency,” he adds.

Changing Point Inc., a competitor that had been denied a certificate of need for a similar project, appealed the decision, raising the issue of Fishman and Nabit’s involvement in Mountain Manor. In hearings before the state health planning commission, Mary Roby, Chuck Nabit, and Fishman all testified that Fishman and Merwin Nabit had no ownership or management interest in Mountain Manor. When confronted with evidence to the contrary from Changing Point attorneys during the hearings, Roby conceded that Fishman, whom she called her “mentor,” acted as a consultant and adviser on areas of accreditation and clinical issues.

Chuck Nabit also testified that his father and Fishman had acted on behalf of Maryland Treatment Center in negotiating the acquisition of stock in W.R. Management, a D.C.-based corporation that was applying to create a drug treatment program in the District. But Roby insisted that Fishman had no involvement in the billing practices of Mountain Manor. The hearing commissioner bought the story and granted the application, which was upheld by the Maryland Court of Special Appeals in 1991.

Mountain Manor never actually built the new facility, because by the time it got official approval, the bottom had dropped out of the market for drug treatment services. But Maryland Treatment Center (Mountain Manor’s parent company) did expand in the Baltimore area later, opening an adolescent drug treatment program on Frederick Avenue and a federally funded drug rehab program for pregnant women. The company also manages several facilities on behalf of other groups, according to Mary Roby.

Around the time Mountain Manor was seeking to open a new drug treatment facility, the same gang was proposing to build a $6-million, 80-bed psychiatric hospital for children in the District at 2105 Good Hope Road SE called Riverside Treatment Services. When Riverside first applied for a certificate of need, the city’s health planning office dropped Riverside from consideration because of alleged technical problems with its proposal, according to a Washington Post report.

Chuck Nabit says the group enlisted the law firm of politically connected Robert Washington to re-submit its application. “I don’t really know much about the Byzantine process in the District,” Nabit explains. “We’re just a bunch of pikers up here in Baltimore.” In 1989, Riverside succeeded in getting a certificate of need. However, the Psychiatric Institute of Washington and another company also interested in establishing adolescent psychiatric facilities blocked the approval in court, and Riverside was mothballed.

But at the end of 1994 the D.C. Council repealed the District’s certificate-of-need law and defunded the health planning office during the budget crisis. For about four months, the city had no legal requirements for a certificate of need, and therefore no public hearings on new health care facilities. The Fishman-Nabit machine jumped into action. On Dec. 16, 1994, Baltimore attorney Herbert Goldman, Fishman’s longtime attorney, incorporated the new Riverside Treatment Services Inc. Fishman’s son Marc and Mountain Manor’s Mary Roby and Barbara Groves became the new board members. Exempt from any serious regulation, Riverside altered its proposal a bit from the one it had offered six years earlier. No longer a small residential facility in Southeast, Riverside was transformed into a full-service, 150-bed acute-care psychiatric hospital on MacArthur Boulevard NW.

But over the summer of 1995, the city’s hospital industry lobbied the council to reinstate the certificate-of-need law. Faced with that threat, Riverside hired Mayor Marion Barry’s personal lawyer, lobbyist David Wilmot last July, to shepherd its application through the regulatory process. Wilmot also met with D.C. Councilmember Linda Cropp and others on Riverside’s behalf as the council drafted a new certificate-of-need law, according to one council staffer. When the final bill took effect in November 1995, it contained a little-noticed grandfather clause that would exempt from review any entity that had invested $100,000 in starting a new facility between Dec. 29, 1994—13 days before Riverside’s incorporation—and July 25, 1995.

While psychiatric hospitals usually conjure up images of straitjackets, Thorazine, and One Flew Over the Cuckoo’s Nest, Riverside was born of the for-profit psychiatric hospital revolution of the 1980s. While public mental hospitals are still the domain of the schizophrenic and other chronically mentally ill people, according to author Joe Sharkey, the new psychiatric hospitals focused instead on drug- and alcohol-abuse treatment, eating disorders, and other questionable “behavioral” disorders—especially those in adolescents.

Unlike the Psychiatric Institute of Washington, the District’s only private psychiatric hospital, Riverside was targeted at poor kids from District social service agencies and public schools. Riverside’s application, submitted to D.C.’s State Health Planning and Development Agency, hardly mentions medical care. Instead, Riverside promised an enticing array of programs for the city’s burgeoning population of juvenile delinquents. It would provide a “therapeutic milieu” with a heavy emphasis on the “psycho-cultural and ethnic needs of the African-American, Hispanic, and other underserved ‘minority’ populations of the District,” according to a letter to the city heath planning office.

On the surface, Riverside was a godsend. Despite court orders requiring the city to provide more residential treatment services for children in foster care and the juvenile justice system, the District has far more troubled kids than it can handle. Several hundred teenagers have been shipped to other states to get serv-ices they can’t get here. Yet Fishman, Roby, and others behind Riverside were proposing to open a full-service psychiatric hospital, not a residential treatment center.

According to several health care attorneys, the District has an oversupply of psychiatric beds. But thanks to the grandfather clause in the certificate-of-need law, Riverside did not have to prove a need for its services in the community nor did it have to prove that its operators had any experience providing psychiatric treatment.

According to Riverside’s incorporation papers, the people who would oversee Riverside’s programs were directors Elliott Bovelle, a social work professor at the University of the District of Columbia who has a family-counseling practice in Anacostia, and William Firschein and William Klein, two out-of-town investors who Riverside officials say are child psychologists—but for whom Riverside staff and consultants will not release phone numbers. Still, no one in city government raised an eyebrow about the lack of need for the facility. But D.C.’s hospital industry did.

Riverside’s main competitor, the Psychiatric Institute of Washington, challenged Riverside’s eligibility for the grandfather clause in the new certificate-of-need law. In letters to the city’s State Health and Planning Agency, the Psychiatric Institute argued that the grandfather clause required evidence that a company had spent $100,000 in planning expenses. Regina Knox Woods, director of the planning agency, responded that Riverside needed to show only that it had incurred $100,000 in expenses, not that it had spent that much.

To prove that it had incurred those expenses, Riverside submitted a stack of invoices to the state health planning agency. Those invoices show that most of Riverside’s expenses stem from a tangled knot of companies owned by Fishman and his relatives, and from at least one company that didn’t even exist until Riverside needed to show that it had spent some money.

The largest obligation Riverside claimed was $375,000 in planning and development costs owed to American Healthcare Management LLC starting June 1, 1995. The management company, which would eventually run the hospital, was not even founded until June 2, 1995. It was incorporated by Herbert Goldman, Riverside’s attorney, and its president is Jacob Fishman, according to the development agreement Riverside submitted to city officials. Mary Roby says the management company is not actually running Riverside yet and that it hasn’t actually been paid anything. Its fees, she says, are “being accrued.”

Then there is Zeitgeist Development, incorporated by Goldman in March 1995. Riverside told city officials it owed Zeitgeist $135,000 for painting, cleaning, and other maintenance serv-ices. Two weeks ago, a woman answering the phone for Zeitgeist could not say where its offices were located or what kind of company it was. She noted that Rebecca Fishman would return after Labor Day and could answer any questions about the firm.

Rebecca Fishman is Jacob Fishman’s 28-year-old daughter, and she is also listed in Riverside’s application as one of the primary funding sources for the hospital, through her company, Medical Leasing Group LLC. Rebecca Fishman did not return calls for this story, but the receptionist taking calls for Zeitgeist now says its offices are located at 4460 MacArthur Blvd.—the same address as Riverside Hospital.

Other invoices in the health planning agency’s file include $20,000 owed to Jacob Fishman and Chuck Nabit’s company, Maryland Treatment Centers Inc., for the salaries of Mary Roby and Groves. In an interview, both say they haven’t been paid for their work at Riverside. “Hopefully we’ll get paid down the road,” says Roby.

Andrew Kapit, Riverside’s chief financial officer, submitted invoices for nearly $60,000 in consulting fees and expenses—which included $244 to fix the radio in his Volkswagen Jetta. Kapit lives in New York City and is married to one of Fishman’s daughters.

The other major expense Riverside claimed was $367,000 in air-conditioning repairs for the hospital. However, Riverside is not even a signatory to the contract given to health planning officials to prove the expenditure. The repair contract with the Alexandria-based Twin Contracting Corp. was signed by John Katkish, president of First Management Group Inc.—Riverside’s landlord—who confirms that the building’s owners, not Riverside, paid the initial outlays for the repairs. He adds that the money may be recouped in the lease with Riverside over the next couple of years.

The air-conditioning point may be a moot one, however. According to city regulations, Riverside had to show that it had incurred $100,000 in planning expenditures. According to the regs, planning expenditures can include things like market share and project feasibility studies and some planning consulting fees. The regs say that bills and leases incurred to acquire property or equipment don’t count.

In total, Riverside claimed about $1.2 million in expenses toward opening the hospital. Yet John Brennan, general counsel for the Psychiatric Institute of Washington, believes many of those expenses—particularly those owed to Fishman entities—are not legitimate. But Woods, the director of the D.C. State Health Planning and Development Agency, insists that Riverside was given careful scrutiny. “We followed the regulations according to the law,” says Woods. “Riverside met the requirement of the law.”

Brennan disagrees, and he’s outraged at Riverside’s breezy sashay through the District’s health planning regulations. In 1993, he says, the Psychiatric Institute of Washington spent months and months undergoing regulatory review just to change ownership of its existing facility. “This was the same agency that was willing to give Riverside a pass on the grandfather clause,” says Brennan. He questioned Woods about Riverside’s bills and also provided her with evidence of the Cumberland fraud case in North Carolina, but she denied his request for a hearing on Riverside’s proposal.

“Those were issues that cried out for a public hearing. But [the city’s health planning office] accepted what we thought was rather flimsy evidence,” says Brennan. “No questions were asked. This was something that was going to happen. Had this project undergone public scrutiny, there would have been serious flaws revealed in their experience.”

Fishman says that he and others involved with Riverside are merely trying to provide quality services to the District, and that their good intentions have been sabotaged by other competitors, primarily the Psychiatric Institute of Washington, which, he points out, was part of the National Medical Enterprise chain of hospitals investigated by the Justice Department for massive fraud in the early 1990s. He says that the Psychiatric Institute is just attempting to block any other company from breaking into the market.

Riverside is in the business of working with kids for all the right reasons, according to Fishman and has the credentials to do it. “Riverside is accredited by the Joint Commission on Hospital Accreditation,” he says, adding that the agency has even given Riverside a commendation.

He is also quick to suggest that he has very little to do with Riverside’s day-to-day operation. While Roby says he’s the attending psychiatrist, he says he’s merely a part-time consultant. And the management company—of which he is president, he says—is only providing services to the hospital. “We’re not in charge of it or running it,” he explains.

Fishman thinks the attacks on Riverside are terribly misplaced.

“A lot of people have put a lot of money into Riverside and at a great loss,” says Fishman. “We’ve tried to do what we can to provide good services for the city.”

Once Riverside secured the certificate-of-need exemption, it set to work getting approved for Medicaid reimbursement. Unlike many private insurers, Medicaid still pays well for psychiatric services for kids under 21, and the rate is based on a provider’s costs. As a result, Riverside is asking for as much as $800 a day per child for its services, according to sources at DHS.

However, the Medicaid approval was not so easy to get. Last year, the D.C. Health Care Finance Commission (HCFC) was taken over by Paul Offner, formerly a close aide to U.S. Sen. Daniel Patrick Moynihan (D-N.Y.). Offner didn’t comply as easily with Riverside’s request as D.C.’s health care planning officials. In a March 1996 letter to Riverside President Elliott Bovelle, Offner wrote, “Riverside’s exemption from the [certificate of need] process does not extend to residential treatment services. Therefore…the District’s Medicaid program is precluded from reimbursing Riverside as a residential treatment facility.”

Offner explained that Medicaid can reimburse Riverside for psychiatric services provided to kids with a mental disease—something that Riverside’s promo material had given remarkably short shrift. Offner added that Medicaid will only pay for that type of medical care in a facility that meets state and federal licensing laws and regulations. At the time of Offner’s letter, Riverside was not fully accredited, and it still has not met the licensing requirements of the city’s Medicaid office, according to Terry Thompson, general counsel for HCFC.

With millions of dollars at stake, Riverside enlisted former DHS director David Rivers to lobby Medicaid officials, according to a source at the Health Care Finance Commission who is familiar with Riverside’s application. Many of those Medicaid office staffers used to work for Rivers before he was indicted (and acquitted) three times on federal conspiracy charges in the 1980s. According to former Riverside administrator Bettie Hill, the hospital’s management company also hired as a consultant Lloyd N. Moore Jr., a former partner at the politically connected law firm of Leftwich & Douglas. Moore was named as a co-conspirator in Marion Barry’s 1990 drug trial and was suspended from practicing law in 1993, according to the D.C. Office of Bar Counsel.

With the District’s political machine working its Medicaid application, Riverside staffers proceeded to secure some clients. Exploiting the crisis in the District’s child welfare system, Riverside lobbied juvenile-court judges who ordered kids into the program sight-unseen, sticking the city with the bills. Riverside staffers met with the director of Sasha Bruce Youthwork, the city’s largest service provider for runaway kids, and also made connections with lawyers who represented juvenile delinquents in D.C. Superior Court. And they managed to sell Jerome Miller, the court-appointed foster care receiver, on their serv-ices, in part because he was determined to bring back the hundreds of D.C. kids now in out-of-state residential facilities.

“Kids were really being put there by default,” says Tom Wells, executive director of the Consortium for Child Welfare. “These folks said we have space, dump kids here, and the city just started dumping kids. Of course, the judges did their part, too. They get desperate over there, and they don’t take time to check it out.”

Six months after it opened, Riverside had procured about 24 kids. At full capacity, Riverside could have been looking at up to $48 million in annual revenue once its Medicaid application was approved. The future looked bright, at least until Christopher Adams was arrested for sexually assaulting one of those kids.

One afternoon last month, sitting in an upscale MacArthur Boulevard restaurant, Barbara Groves and Mary Roby are having drinks and talking about how much they want to help kids.

The fortysomething Groves, a bubbly blond with a maternal figure, says she is a special education teacher. While she doesn’t say it, Groves has been working with Fishman since at least the early 1980s. She sat on the board of directors, with Chuck Nabit and Fishman’s son Marc, for a company called Rehabilitation Centers of America Inc., which was incorporated in Florida in 1984 but had offices on Pennsylvania Avenue. She has worked on other projects with Fishman in South Carolina and Florida, according to one of Fishman’s former business partners. She now works at Mountain Manor, which is owned by Fishman and Charles Nabit and run by Mary Roby.

An original board member of Riverside Treatment Services, Groves says she used to work at St. Elizabeths hospital before the federal government turned it over to the District. Groves says she and the others who decided to start Riverside did so because private mental health providers were ignoring Medicaid kids, and the District was forced to send hundreds of kids out of state for care. Back in 1989, Riverside was initially proposed as a small, low-cost residential facility with close ties to the community. “It was a great project,” says Groves. Watching the District’s mental health services deteriorate, she says, inspired her to push forward with Riverside despite serious opposition from the city’s hospital industry.

Mary Roby is more cynical about Riverside’s battles with the Psychiatric Institute and other competitors. “It’s been sabotaged,” she says. Sitting at the table with a cell phone and a formidable reputation among health care attorneys for schmoozing Maryland state officials, Roby has the messianic zeal of a temperance reformer. She says she’s seen what alcohol does to families after watching her father come home drunk every night as a kid. She says she’s not working for Riverside for the money—even though it is a for-profit hospital. “We’re in this because we really care about the kids,” she says.

Groves agrees, saying, “Mary and I have always treated the poor or the blue-collar worker.” She adds that they were greatly relieved when the District’s certificate-of-need law expired, because it allowed them to move forward without all the intervention from potential competitors. “It was a happy, blessed thing for us,” says Groves.

When questioned about the sexual assault charges pending against Adams, Roby says that two of the three girls who were allegedly molested have recanted their stories and left town.

“These are allegations made by some very sick girls,” she says, explaining that adolescents frequently make such allegations as attempts to get attention. Roby says that as soon as the Riverside staffers learned about the allegations they called the police. She doesn’t mention that foster care receiver Miller also sent city social workers to Riverside to spend the night with the kids, and then immediately began to move out all the kids placed there by his office. The move left the 150-bed facility with a mere 16 kids.

Roby and Groves duck questions about questionable Riverside representatives, the board members, and the real owners of Riverside. They won’t say where Riverside’s directors, William Klein and William Firschein, work or live, other than to say that Klein is out of the country and that neither man is a psychiatrist.

“When we get in full swing we’ll have two full-time child psychiatrists,” says Groves. “You don’t have to have 22 doctors running a place to have a good place. You need to have people who care about kids.”

When asked if Fishman and Nabit’s Maryland Treatment Center owns Riverside, Roby says, “It’s a totally separate entity. It has no relationship to Maryland Treatment Center.” Groves and Roby both initially insist that the Fishman and Nabit families have nothing to do with Riverside Hospital, but in a later interview, Roby acknowledges that Riverside’s attending psychiatrist is Jacob Fishman.

Roby also swears that David Rivers is not working for Riverside. But when confronted with stories about his calls to D.C. Medicaid officials on Riverside’s behalf, she admits that she met Rivers at a conference on empowerment zones in South Carolina about a year ago. She says he’s supportive of the project but that he is not affiliated with Riverside: “David Rivers is not on Riverside’s payroll.” She dodges questions about the management company that employs Lloyd Moore and is supposedly running Riverside.

“I don’t think Mary and I can help that people want to help us,” Groves says. She suggests that Rivers—the same man who told an undercover FBI agent how glad he was that he didn’t have to “worry about all those welfare fuckers anymore” shortly before leaving DHS in 1986, according to Harry Jaffe and Tom Sherwood’s book, Dream City—is somehow working for Riverside out of the goodness of his heart. (Rivers did not return calls for comment.)

Roby says she’s really sick of “all the political crap” she’s had to go through to do good things for poor kids. “When you cut through all the crap, the altruism is there,” says Roby. “At Mountain Manor, we are not in this business to make a profit.”

Looking sad, Groves laments, “If we had been open five or six years ago, we would have treated maybe 2,000 kids. I cannot account for people’s pasts. This was a clean project from day one, and I don’t want to see it dragged down. There are a couple hundred people supporting us in the community. We really don’t have any hidden agendas.”

In the end, you might ask, why not let these nice ladies help kids at Riverside? There’s no doubt that the District has a lot of kids who could use the help. And this city is the world headquarters of redemption: As Fishman is quick to point out, the Cumberland fraud settlement happened 12 years ago. Maryland officials don’t have any problems with Mountain Manor, which supplied some of the staff to Riverside. But a look at Fishman’s other local enterprise might make District officials think twice before turning on the Medicaid tap for Riverside Hospital.

Charles Dorsey was a Ward 7 constituent- services guy for D.C. Councilmember H.R. Crawford when the late U.S. District Court Judge John Pratt ordered the city to close Forest Haven, the District’s massive institution for profoundly mentally retarded people. Close to 30 patients had died from inadequate care over a three-year period, and the city was in a big rush to get the remaining people out by the September 1991 court deadline. According to his testimony in U.S Bankruptcy Court last year, Dorsey was sitting around with some friends watching TV one night when they decided to open a home for some of the Forest Haven patients. After doing some research, Dorsey decided that they really didn’t have the expertise to run such a facility, so he started shopping around for someone who did. That’s when he found Fishman—or rather, Fishman found him.

Dorsey says he met Fishman at Mountain Manor, Fishman’s adolescent drug treatment center in Baltimore, and Fishman introduced him to Lovell Jones. Jones was an investment banker and president and founder of the Atlanta-based Medical Services Corp. Inc. (MSC), an $86-million-a-year company that managed group homes for the mentally retarded. Jones encouraged Dorsey to think big, and what began as a one-home proposal turned into a $10-million construction project. Dorsey became executive director of a new nonprofit entity called We Care Projects Inc., and David Rivers later became its administrator.

Jones helped We Care secure tax-exempt bond financing for the construction of eight four-bedroom homes for the mentally retarded. Dorsey’s political ties ensured that We Care would get those patients. As a condition of the bond issue, We Care was required to retain MSC as the management company running its new homes. However, the ownership of MSC is unclear. Jones claims that he was only a minority shareholder in the company and that Fishman and Nabit owned 80 percent of the stock.

In 1990, according to a lawsuit filed against MSC by an unhappy nonprofit client, Fishman and Nabit booted Jones out and voted Nabit in as president of the board.

According to Jones, Fishman and Nabit improperly ousted him from the board of his own company and voted to sell MSC to their company, Developmental Disabilities Management Services (DDMS), for a dollar. Jones says he sued Nabit and Fishman for civil fraud in Fulton County, Ga., for failing to disclose their fraud settlement in North Carolina before investing in his firm. That case was settled, but Jones says he is barred from discussing the terms of the agreement.

Fishman claims, however, that he was only a minority shareholder in MSC, and that Jones was forced to leave the company after an IRS investigation into his failure to pay withholding taxes. Fishman also claims that he was merely a consultant to DDMS, not an owner. (He referred questions about the case to Chuck Nabit, the president of DDMS.)

In any event, after the MSC coup, DDMS took over the management of We Care and in 1991 began to move profoundly mentally retarded clients into the new homes even before they were fully licensed by city regulators, according to bankruptcy records. As usual, the District was in a jam, so no one appears to have protested. But in We Care’s first year, according to bankruptcy records, a DHS quality assurance coordinator cited hundreds of deficiencies in its operation, including staff failing to properly bathe and clothe patients. According to bankruptcy filings, We Care was paying DDMS between $26,000 and $28,000 a month to oversee these criticized services—a fee that was ultimately passed on to Medicaid.

On April 3, 1992, a concerned Dorsey sent a fax to Fishman complaining about the deficiencies cited by DHS inspectors. According to records in U.S. Bankruptcy Court, he told Fishman, “We have these same problems in all of our homes. [DDMS’s on-site managers] have been lying to us.” Eventually, We Care managed to get DDMS employees out of the day-to-day operations of the nonprofit and We Care’s services improved, but DDMS remained as a financial consultant.

DDMS’s financial services for We Care’s were apparently just as shoddy as its patient care, according to testimony in U.S Bankruptcy Court. We Care had massive financial problems from its very inception. The initial tax-exempt bond financing was a short-term arrangement. The $10 million in construction bonds—which We Care had dipped into for operating costs—needed to be paid back after two years. In 1993, the D.C. Council approved legislation authorizing the city to issue another $27 million in tax-exempt bonds for We Care’s long-term financing. But when We Care tried to broker the bond deal, someone tipped off the underwriter that Rivers was on the payroll, and the deal fell through at the last minute, according to Dorsey’s testimony in bankruptcy court.

We Care’s financial situation grew more precarious by the day. We Care secured another financing package, but Dorsey and Rivers were sued by several of their staff members for sexual harassment, and the deal collapsed. Throughout the negotiations, lenders somehow always insisted that DDMS be kept on as management company as a condition of long-term financing, a condition that We Care’s lawyers say they found somewhat suspicious. According to bankruptcy-court records, 80 percent of We Care’s bonds were held by West Suburban Bank in Chicago, which had done several similar deals for Fishman and Nabit.

In the end, We Care gave up and filed bankruptcy last year, claiming that the District government had stiffed it on hundreds of thousands of dollars in Medicaid fees. The We Care bondholders, frantic that their bonds would become worthless, hired David Wilmot to represent them in the bankruptcy proceedings, and he became the court-appointed receiver in the case. Wilmot was, of course, the same lawyer who represented Riverside Hospital. The first plan to reorganize We Care would have left Fishman and Nabit’s management company in charge while dumping Dorsey and the rest of the board.

Ironically, though, Fishman and Nabit may have been trumped by the same porous D.C. political machine they attempted to exploit. After protests from We Care’s lawyers, Wilmot and the bondholders finally dumped DDMS. But today, the We Care board of directors consists solely of Wilmot and Fred Cooke—lawyers who represent Marion Barry in his many legal battles for free—and attorney Scott Bolden, who has also represented Barry. The city has just authorized the new We Care— and its three politically connected lawyers with no expertise in mental retardation—to receive the proceeds of the sale of $13 million in D.C. tax-exempt bonds to refinance the company.

On the surface, there’s nothing about the current Fishman-Nabit empire that appears to violate the law, but their convoluted corporate structure seems designed to obscure their history. And the management contracts that Fishman and Nabit have arranged to extract profits off otherwise legitimate nonprofits raise serious questions about their concern for the poor and disabled. But in the end, they may just be very successful, albeit cutthroat, entrepreneurs, with a tainted past that required creative measures to allow them to stay in business.

Ultimately, though, the question facing the District is whether Fishman and Nabit can be trusted with 150 vulnerable, neglected, and abused kids at Riverside Hospital and the millions of tax dollars that come with them. City officials might want to check with the hundreds of poor, adolescent, and mentally impaired former clients of We Care and Cumberland Psychiatric Institute to get their answer.CP

Art accompanying story in the printed newspaper is not available in this archive: Darrow Montgomery.