Bronx Jury Found John Cornachio Guilty of Grand Larceny in the Second Degree for “No-Show” Job at Substance Abuse Treatment Provider through Which He Stole Over $800,000

Attorney General Eric T. Schneiderman recently announced that a Bronx County jury found John Cornachio, 63, of Oyster Bay, NY, guilty of Grand Larceny in the Second Degree, a class C felony, for holding “no-show” job in order to steal from Narco Freedom Inc., a former Bronx-based, Medicaid-funded, not-for-profit corporation that was founded to provide substance abuse services throughout New York City. Cornachio faces up to 15 years in state prison when he is sentenced on March 2, 2018. Cornachio was remanded to jail pending sentencing.

“The defendant crafted an elaborate scheme in order to hide a no-show job and steal from New York taxpayers – exploiting a Medicaid-funded program that was intended to help those suffering from substance abuse,” said Attorney General Eric T. Schneiderman. “We will continue to aggressively pursue those who perpetuate these fraudulent schemes and bring scammers to justice.”

During the jury trial before Hon. Jeanette Rodriguez-Morick in Bronx County Supreme Court, the Attorney General presented evidence that Cornachio colluded with Narco Freedom’s corrupt management to have a “no-show” job at Narco Freedom. For over five years, Cornachio collected over $500,000 in salary and benefits paid by Narco Freedom. As part of his “no-show job,” Narco provided Cornachio with health insurance 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 that submitted fake invoices to Narco Freedom for services it never provided to the not-for-profit. Some of the payments were made in the names of John Cornachio’s minor children, who were supposedly rendering substance abuse counseling.

In 2015, the Attorney General’s Medicaid Fraud Control Unit (“MFCU”) indicted Cornachio, Narco Freedom Inc., its CEO, Alan Brand, and 12 other individuals and corporations for defrauding the state Medicaid program. All defendants indicted 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 by the Attorney General put an end to Narco Freedom’s illegal activity 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 Office of the New York State Attorney General’s Charities Bureau, in efforts to deceive and defraud these agencies. Narco Freedom filed for bankruptcy in January 2016. 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 governments; the precise amount to be recovered in the bankruptcy proceeding is yet to be determined.

In 2016, as part of the Attorney General’s investigation into fraudulent substance abuse providers and their exploitation of individuals living in substance abuse transitional housing, also known as “three-quarter houses,” MFCU also indicted Yuri Baumblit, Rimma Baumblit, Canarsie A.W.A.R.E. Inc., NRI Group, Inc., and Anthony Cornachio, John Cornachio’s brother and the owner of Canarsie A.W.A.R.E. Inc. and NRI Group, Inc., for defrauding Medicaid. Yuri Baumblit, Rimma Baumblit, and their companies have been convicted for that scheme. Criminal charges remain pending against Canarsie A.W.A.R.E. Inc. and Anthony Cornachio. The charges against those remaining defendants are merely accusations and those defendants are presumed innocent unless and until proven guilty in a court of law.

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 MFCU Senior Counsel Erin Kelsh and Assistant Attorney General Haley Campbell, with assistance from NYC Regional Director Christopher M. Shaw. Assistant Attorney General Karin Kunstler Goldman and the Attorney General’s Charities Bureau provided expert analysis of 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 Investigator Patricia Iemma, with the assistance of Senior Auditor-Investigator Nicholas Thottam, Auditor-Investigators Jillian White and Megan Scott, and NYC Regional Chief Auditor Thomasina Smith. Investigative support was provided by Supervising Legal Assistant Wendy Dorival and Confidential Legal Analyst Kelvin Caraballo.

The civil case against John 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 Assistant Attorneys General Megan Friedland and Erin Kelsh.

Thomas O’Hanlon is MFCU’s Chief of Criminal Investigations–Downstate. MFCU 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.