AHF Files Whistleblower Lawsuit against L.A. County, Supervisors Yaroslavsky and Molina

LOS ANGELES–(BUSINESS WIRE)–AIDS Healthcare Foundation (AHF) filed a federal lawsuit in California earlier today against the County of Los Angeles and its Department of Public Health as well as several key County departments and County officials including Jonathan E. Fielding, M.D., Director of Public Health and Health Officer for the County, and County Supervisors Zev Yaroslavsky and Gloria Molina, and Mario Perez, the Director of the County of Los Angeles Department of Public Health, Division of HIV and STD Programs, seeking damages and declaratory and injunctive relief based on, “…retaliatory conduct, violations of the federal false claims act, violations of constitutional rights and defamation…” against AHF over the AIDS group’s years-long advocacy and criticism of the County, its Public Health Department and several key health and elected officials.

The lawsuit was filed in United States District Court, Central District of California, Western Division (Case number cv 12-10400-PA-AGR).

“The incompetence and improper and illegal governmental activity by Los Angeles County officials laid out in this lawsuit are simply breathtaking”

Retaliation for AHF Activism Around the County’s Violation of Health and Safety Laws: Condoms in Porn

Included among the many claims of retaliation in AHF’s lawsuit are allegations that its recent activism as the primary backer of Ballot Measure B, The County of Los Angeles Safer Sex in the Adult Film Industry Act (which was voted into law on November 6th) generated considerable opposition to and animus toward AHF simply because the County does not want to enforce the law.

AHF asserts this animus likely came about after AHF sued the Department of Public Health in July 2009 seeking a writ of mandate to force the County to comply with its own Health and Safety Codes related to condom use and worker safety in the adult film industry. Measure B officially goes into effect this month.

In its broader legal complaint, AHF also asserts that, “Rather than using its substantial funding to accomplish the goals in which it is tasked, Los Angeles County, Los Angeles County Department of Public Health, and various of their divisions and leaders, have indulged in the gross misuse of resources, waste of public funds, favoritism, professional back-scratching, and retaliation against those that hold them accountable for doing their jobs.

“AHF is committed to treating hundreds of thousands of patients in Los Angeles County and around the globe, and is also dedicated to advocating for government and healthcare systems to be accountable, transparent and devoted to serving the public’s health.

In doing so, AHF has uncovered, reported, and publicly criticized the Defendants’ for their ineffectiveness and improprieties.

“In return, Defendants have initiated a retaliatory campaign against AHF, including their conspiracy to fabricate an audit, demand millions of dollars from AHF, and then flaunt these false audit findings in front of other providers and the public at large in an effort to intimidate providers into submission.

Defendants’ actions have injured AHF and its mission, and in turn, the public at large.”

“The incompetence and improper and illegal governmental activity by Los Angeles County officials laid out in this lawsuit are simply breathtaking,” said Michael Weinstein, AIDS Healthcare Foundation President.

“These include the misuse of County funds, including misrepresentations made to HRSA and other authorities in order to obtain AIDS funds; the failure to follow statutory guidelines in administering County business and allocating AIDS funds; irregularities and illegalities in the bidding, awarding and implementation of contracts for AIDS funds in L.A.County; outright creation of bogus audit reports and the flaunting the baseless audit findings to the public, including to other health providers in an effort to threaten and intimidate all of the County’s contractors, including AHF; the failure to abide by Health and Safety Codes by refusing to regulate the adult film industry; the cancellation of RFPs for services determined to be essential for the public health of the community solely because the County refused to award the contract to AHF; the favoritism shown to certain providers who do not publicly criticize the County;

and widespread and ongoing retaliatory conduct by County officials as punishment for AHF’s outspoken criticisms and complaints. After years of such punitive and retaliatory actions by the County, we have had it and filed this lawsuit to address and resolve this behavior once and for all.”

Background on L.A. County’s AIDS Funding Allocations and AHF’s Lawsuit

The United States federal government provides monies under the Ryan White Comprehensive AIDS Resource Emergency Act, or the CARE Act, to local governments, including the County of Los Angeles, to deliver emergency HIV/AIDS services.

The Health Resource Services Administration (HRSA) administers the program on behalf of the federal government and distributes funds to so-called Eligible Metropolitan Areas (EMAs) nationwide through various public agency grantees.

In turn, local government bodies such as L.A. County disburse such funds to local HIV/AIDS provider grantees like AHF through requests for proposals (RFPs) and other bidding procedures.

However, the County must provide its AIDS funds in accordance with ‘maintenance of effort’ requirements that are set forth in the CARE Act and as dictated by the other funding sources, and they must also periodically report back to HRSA about the allocation of the funds once awarded.

Claims in AHF’s lawsuit include:

Misuse of Ryan White CARE Act Fund Awards

AHF asserts in its lawsuit that Los Angeles County and its officials have continually made false statements and claims to HRSA related to the funds they request from HRSA, and their allocation of the funds. Among AHF’s assertions:

L.A. County officials failed to spend all of the Ryan White CARE funds awarded in a timely and effective fashion, and then toward the end of each contract year scramble to spend it, resulting in funds not being spent to maximize benefits to the HIV/AIDS patient population;

County officials failed to provide AIDS funds in accordance with the ‘maintenance of effort’ requirements;

County officials misrepresented to HRSA where certain funds were to be allocated and how they would spend the funds that are awarded. Specifically, the County grossly understates the amount it spends on administrative costs.

County officials also spent AIDS funds on building a lavish media center in their administrative offices that is not used in the care and prevention of HIV/AIDS.

AHF repeatedly and publicly reported the deficiencies, misrepresentations, and false claims that Los Angeles County has made over the years to obtain such federal funds—both to the County itself—as well as to state and federal government authorities.

Violation of Competitive Billing Laws: the Ramsell Sole-source Contract

In November 2010, in anticipation of implementation of the federal Affordable Care Act (ACA) and to ease the transition to any related health coverage changes, the California Department of Health Services implemented a new state Medicaid program, known as the ‘California Bridge to Reform.’

In particular, a Los Angeles County Bridge to Reform initiative called for the creation of a pharmacy network that would expand pharmacy access to patients with HIV/AIDS.

Fifteen months after the Bridge to Reform was initiated, in February 2012, the County’s Department of Health Services recommended in writing that the Board delegate DHS the authority to award the pharmacy administrator service contract on a non-competitive basis to Ramsell, a private company that provides pharmacy benefits management services—a $75 million annual contract arrangement between the County and a private party which was pushed through for County approval in just one day.

Since County officials refused to follow the legally required competitive bidding rules, AHF officials were forced to file suit in state court seeking a writ of mandate.

In April 2012, Plaintiffs sued the County, Board, DHS, and the individual Board Supervisors, arguing that their award of the contract to Ramsell extended from a non-competitive bidding process that was procedurally and substantively flawed and, therefore, legally invalid under applicable law governing the award of county contracts to private entities.

In June 2012, the Superior Court of Los Angeles County agreed, issuing a ruling that the County had abused its discretion. The court granted AHF’s request for writ of mandate, compelling the County to void the contract with Ramsell and comply with the law in any further contracting for pharmacy administrator services.

Retaliation Against AHF for its Public Activism, Audits

As part of an ongoing campaign by the County to harass, intimidate, and defame AHF, AHF asserts that County officials pursued a phony audit, manufactured findings based on inaccurate information, and are now threatening to withhold over $1.7 million in payments to AHF for health services rendered.

Sometime in 2010, the County of Los Angeles Department of Public Health, Division of HIV and STD Programs (DHSP), an administrative unit of the Department of Public Health, whose mission is “to respond to the HIV/AIDS epidemic in Los Angeles County by preventing its spread, maximizing health and social outcomes, and coordinating effective and efficient targeted services for those at risk for, living with, or affected by HIV,” contacted the County Auditor Controller and asked it to conduct an audit on AHF based on the knowingly false assertion that AHF had not filed an allocation plan with DHSP.

Typically, it is common practice for the Auditor Controller to use the allocation plan submitted by a provider such as AHF, and accepted by DPH and DHSP, as the standard to audit against.

However, since DHSP told the Auditor Controller that AHF had no allocation plan, the Auditor Controller merely interpreted the AHF-Los Angeles County contract as they chose and applied an allocation plan they created. In September 2010, the Auditor Controller issued its draft report, claiming, according to its own calculations, that AHF had overbilled the County $1,752,439.00. The report did not cite to any document or authority that it used to support its findings. In fact, there was—and remains—no authority for the findings in the audit.

More than twenty months passed, until May 2012 (a month after AHF sued the County Defendants over the Ramsell contract, and when the condoms in porn campaign was gearing up), when the Auditor Controller issued another identical report claiming that AHF owes the County over $1.7 million.

The Auditor Controller also refused to back off of the September 2010 audit findings, despite learning that the audit was based on false information.

In September 2012, AHF President Michael Weinstein met with three representatives of the Auditor Controller as well as a representative from one of the Board of Supervisors’ offices.

Weinstein produced the final acceptance report of AHF’s expenditures and methodologies for the year of the audit. This report included the allocation plan AHF had actually submitted to the County, and the one that would have been audited against had DHSP not misrepresented that AHF lacked an allocation plan.

AHF’s Weinstein urged the Auditor Controller to withdraw the audit in light of this information. The Auditor Controller refused, claiming that it was out of its hands. Weinstein then urged the Auditor Controller to suspend the $1.7 million demand until the dispute was sorted out. Again, the Auditor Controller said that it could not help, and that the issue was to be determined by DHSP, who had demanded this audit in the first place.

The County continued to demand this money, and Plaintiffs continued to refute their accusations and demands. On October 11, 2012, the County sent out another letter, again demanding that $1,752,439.00 be paid to the County in two weeks time. Defendants also threatened to suspend payments owed to AHF for its care of HIV/AIDS patients in Los Angeles County.

Through its lawsuit, AHF asserts this audit was only one more tactic in a long line of retaliatory conduct County officials have undertaken against AHF to halt its continuing criticism of the County.

Using Falsified AHF 2010 Audit to Injure AHF’s Reputation and Intimidate Providers

Since the flawed 2010 audit by the Auditor Controller was first made public, County health and elected officials have repeatedly brandished the falsified audit to punish and provoke hostility toward their critics, like AHF, and, in the end, divert AIDS funds to their favored providers and campaign contributors without providing any corresponding public benefit to the residents of Los Angeles County.

County health officials including Mario Perez, the Director of the County of Los Angeles Department of Public Health, Division of HIV and STD Programs—whose department first falsely stated that AHF had not submitted an allocation plan—and elected Supervisors Zev Yaroslavsky and Gloria Molina have all criticized AHF raised the bogus audit in public forums such as the November 20, 2012 weekly Board of Supervisors’ meeting and other County health and community meetings open to the public in an effort to damage AHF’s reputation and silence and intimidate other providers and peers of AHF.

Naming AHF and only AHF to all of the other County AIDS service providers and others at the meetings and using an inflammatory number of $1.7 million owed without any explanation of how that number was calculated—or that fact that it has been vigorously disputed by AHF for two years—can only be viewed as a purposeful retaliatory act by the County.

Reduction in Services and Favoritism at the Expense of Patients

AHF’s lawsuit also asserts that the County displays a pattern of improper government contracting, favoring those providers that contribute campaign cash and abstain from criticizing the County, and punishing those like AHF, that hold County officials accountable to do their jobs in a manner that best serves the public. A prime example is the County’s reallocation of resources in the Antelope Valley of California. Until recently, the County allocated funding to AHF and other health providers in Antelope Valley. However, in 2009, the County Defendants pulled all funding from AHF.

Instead, County officials voted to allocate all funding in this area (approximately $1.2 million) solely to the Tarzana Treatment Center, which had less experience than AHF and other providers in the area at treating HIV/AIDS. However, Tarzana is a significant campaign contributor to Supervisor Zev Yaroslavsky.

By cutting 100% of its funding to AHF in Antelope Valley, the County caused AHF a significant monetary loss, but it was also done at the expense of vulnerable HIV/AIDS patients, demonstrating the County’s ill will toward AHF. Those interests directly conflict with the County’s statutory obligations to allocate AIDS funds most effectively and with absolute undivided loyalty to the interests of the populations they serve.

True to its mission, AHF still serves its patient population in the Antelope Valley; however, without any funding from the County, AHF serves these patients at a substantial financial loss.

Cutting Services to HIV/AIDS Patients in Order to Punish AHF

In another instance, the County sent out a Request for Proposal pertaining to Ryan White Program Client Benefits Administrative Services, wherein entities, including AHF, were able to submit proposals by a stated deadline.

The County determined that there was an essential need for benefits specialty services to facilitate patient access to disability benefits and programs to ensure that people living with HIV are receiving all of the aid for which they are eligible and entitled. Los Angeles County officials sought a contractor to implement and manage the benefit specialty program. AHF responded to this RFP and, in fact, was the only organization to respond to this RFP. However, rather than award AHF the contract, the County, through Mario Perez, notified AHF that they had decided not to offer the benefit specialty service to patients anymore.

The end result was that AHF lost out on a $3 million contract, and the patient services that the County had identified as vital to the community were not provided. As a result, the needs of the most vulnerable County residents were not served, and AHF once again was punished for its criticism of the County’s ongoing mismanagement and ineptitude.

“AHF addressed all of these matters to the various Los Angeles County offices and officials, yet received little or no response,” said Tom Myers, General Counsel for AIDS Healthcare Foundation.

“Our correspondence to each of these bodies outlined their claims and damages as set forth in our lawsuit, including complaints about their false claims, mismanagement and lack of oversight, favoritism and DHSP’s bias against AHF in the allocation of AIDS funds, and believe the retaliatory conduct the County continues to show toward AHF described here constitutes continuing violations of our rights.”

“The punitive measures laid out in our lawsuit were undertaken by the County of Los Angeles and County officials with the specific intent to chill AHF’s speech in order to disrupt our nonprofit activities,” said Samantha Azulay, Assistant General Counsel for AIDS Healthcare Foundation.

“The County’s retaliation against AHF and Mr. Weinstein for bold advocacy and honest criticism for exposing government improprieties is a violation of our constitutional rights, and through this lawsuit we intend to hold the County fully accountable.”

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