Drug-treatment center operator amassed fortune amid allegations of fraud, prostitution, feds say

Dec. 23--The man accused of abusing drug addicts who sought help in Broward and Palm Beach counties has amassed a fortune while ripping off health insurance and forcing vulnerable women to prostitute themselves, prosecutors told a judge Thursday.

Investigators said in court they have evidence that Kenneth Chatman, 44, of Boynton Beach, was receiving bags of cash, containing as much as $150,000 in kickbacks from related health care businesses, on a monthly basis.

Chatman's unexplained wealth, his overseas travel to places where he could hide money, witnesses' fear of retaliation from him, his alleged propensity for violence and his ability to get people to withdraw their allegations were among the evidence federal prosecutors asked a judge to consider Thursday at a bond hearing for him.

Chatman will remain jailed without bond while health care fraud charges are pending, U.S. Magistrate Judge William Matthewman ruled after an hourslong court hearing in federal court in West Palm Beach.

"The conduct that is alleged is really reprehensible, if it is true," the judge said, ruling that Chatman is a potential danger and poses a significant risk of fleeing if he were released.

Chatman told authorities he has $250,000 in cash in a bank account; has $500,000 in equity in the $1 million home where he lives with his wife and four children; and owns another $400,000 home outright that he used for patients, according to court testimony.

Some female patients told investigators they were offered a terrible choice: pay rent or work as a prostitute.

One woman, identified only by her initials in court, told federal agents last month that she attended treatment sessions in Margate and that Chatman moved her to a female-only house in Mangonia Park. She and other women there were not allowed to leave the building because the doors were locked from the outside and the windows had been nailed or screwed down, prosecutor A. Marie Villafana told the judge.

The woman told investigators that Chatman said she didn't have to pay rent, participate in drug treatment or undergo drug testing as long as she engaged in prostitution and let him bill her insurance, authorities said.

One woman who reported Chatman to law enforcement said she was later "forced into a van" and driven to a notary's office, where she was forced to sign an affidavit retracting her allegations, Villafana said.

She said the woman was told: "You have to sign this or Kenny [Chatman] is going to kill you."

Agents said they found similar affidavits when they searched Chatman's home and offices.

They said they also found high-end cars and thousands of dollars worth of expensive jewelry when they searched his home and arrested him about 6 a.m. Wednesday. They also found evidence his wife was interested in purchasing a $700,000 property in the Bahamas, they said.

Authorities told the judge they seized more than 140 boxes of potential evidence and records during the searches.

Chatman was secretly captured on audio recordings talking about kickback payments, they said.

Investigators said Chatman paid kickbacks to patients and sober homes so he would get clients referred to his treatment centers. They said he provided patients in recovery with illegal drugs and withheld prescription drugs they needed.

Authorities also said Chatman was receiving enormous amounts of kickbacks from employees of drug-testing labs, who paid him for lucrative business. Testing urine samples for multiple drugs is billed at an expensive rate to insurance companies, according to court testimony.

Chatman, his wife and four other people were arrested Wednesday on federal charges that sober homes in South Florida lured residents with promises of free rent and then referred them to drug-treatment centers that Chatman actually owned but that were titled and licensed by the state under Chatman's wife Laura's name, investigators said. The other five suspects were released on bond and are due back in court next month.

The treatment centers were Reflections Treatment Center in Margate and Journey to Recovery LLC in Lake Worth.

Chatman previously served a short time in federal prison for a credit card theft related conviction, according to court records. He was not eligible to run a drug treatment center because of his criminal record, authorities said.

Prosecutors said a number of Chatman's former clients died of drug overdoses or suffered non-fatal overdoses while they were at other sober homes, treatment facilities or other locations. Chatman, who has an 11th-grade education, overruled medical professionals' recommendations for his clients, prosecutors said.

Authorities said that while they have no evidence that Chatman provided the drugs that led to overdose, they are trying to figure out if they can find evidence to charge Chatman with playing a role in those deaths. If he were charged and convicted of health care fraud that results in death, he could face up to life in federal prison, they said. For now, he faces a maximum of close to 20 years in prison, if convicted, they said.

Chatman's foreign travel was suspicious, prosecutors told the judge, and included one 36-hour trip to Panama, several short cruises to the Bahamas and a trip to Mexico. They said they suspected he may have been moving, or trying to move, cash overseas.

Chatman's lawyer Saam Zangeneh told the judge that his client is only facing white-collar economic crimes so far and that prosecutors were trying to insinuate that Chatman was involved in more serious offenses, but not providing sufficient evidence to back up their claims.

The defense said Chatman denies ever traveling to Panama and that his travel to the Bahamas and Mexico was for innocent, family events. Chatman said he bought his $1 million home, which has a $500,000 mortgage, prior to operating the businesses linked to his arrest, the lawyer said.

Zangeneh also questioned the credibility of some of the potential witnesses against Chatman, saying many of them appear to be addicts in various stages of recovery. Other witnesses are employees of sober homes and related businesses, many of whom are also recovering addicts, he told the judge. The defense also said agents found no large amounts of cash during their searches and have no evidence Chatman moved any money overseas.

Chatman did not flee though he has been aware of at least some of the allegations against him and the possibility he could be arrested for a long time, after prior searches of his business and media reports about him, Zangeneh said.

Just days after investigators searched another business that Kenneth Chatman controlled in 2013, authorities said he closed down a related center, Stay'n Alive, and transferred other businesses into his wife's name.

Chatman has lived in South Florida for about nine years, he told investigators.

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