NOTE: An earlier version of this story mischaracterized Eastmont School District's past relationship with JTEC, and attributed the information to the wrong person. This version has been corrected.
WENATCHEE — A Wenatchee-based consulting firm amassed big profits from school districts statewide by teaching them to defraud a Medicaid program, a lawsuit from the state Attorney General claims.
The suit, filed Thursday after an investigation by the Medicaid Fraud Control Unit, says JT Educational Consultants took in an estimated $12.6 million in Medicaid dollars over 13 years by improperly instructing school districts on how maximize reimbursements under the Medicaid Administrative Claiming program. Owners John Thomas “Tom” Reese and Sheila Joy Reese, both 67-year-old former educators who launched the business in their Apollo Place home in 1998, are named as key defendants.
JTEC’s misleading instructions on reimbursement — peddled by Tom Reese as well as several junior consultants — caused the schools who hired them to file “tens of millions of dollars” in false Medicaid claims, the lawsuit charges.
Attorney General’s Senior Counsel Steve Dietrich wrote that JTEC also fought against the state’s efforts to computerize districts’ Medicaid reporting, having profited by gaming the paper-driven system.
“It was a shock to our system, I’ll tell you that,” Tom Reese said of the suit when contacted this morning at JTEC’s downtown Wenatchee office.
Reese, a former superintendent of Chelan and Orondo schools, declined to comment further beyond a written statement that said, in part, “I do not agree with any of these allegations. I intend to fight the complaint.”
Others named in the suit include:
◼ Scott Alan Adolf, 50, of Wenatchee, JTEC’s general manager and a seven-year employee.
◼ Theresa Rae Adolf, 56, wife of Scott Adolf, who joined JTEC in 2009 as a claims processor.
◼ Janine M. Welty, 62, of East Wenatchee, a former Wenatchee School District employee turned JTEC consultant.
◼ Randall D. Hauff, 68, of Lynden, a JTEC consultant from 2006 to 2012.
Hauff was superintendent of the Tonasket School District from 1999 to 2009 and of Cashmere schools from 1983 to 1990. JTEC became a contract consultant for the Tonasket district in 2002, and Hauff joined the firm while still employed as superintendent. In that capacity he promoted JTEC training materials to the Omak School District and many others, according to the suit. He left the company in 2012.
The suit accuses the firm and its individual players of Medicaid fraud, unjust enrichment and civil conspiracy. Under state Medicaid law, if found liable JTEC and its individual defendants could be forced to refund any excess payments received, plus interest and civil penalties.
The lawsuit accuses JTEC of making misleading claims about how much money school districts could legally gain through Medicaid, and fashioning systems by which the districts could extract more than their deserved reimbursement.
This created an incentive for schools to inflate their reporting numbers — as in the Centralia School District, where a middle school principal wrongfully listed an investigation into drug activity on campus as “medical referral” activity, according to the suit. The district paid $372,000 last July to settle allegations of Medicaid fraud.
JTEC stood to benefit, with its own fees written in as Medicaid-reimbursible expenses, the lawsuit states. In 2013 alone, JTEC collected about $1.25 million in consulting fees — about 7 percent of total Medicaid matching payouts to state schools.
One consultant also named as a defendant, 68-year-old Jack D. Hedgcock of Kingston, was paid $882,000 from 2006 to 2013, the suit claims. His revenue ramped up by tens of thousands of dollars each year: Hedgcock’s reported earnings in 2013 were 20 times the size of his 2006 pay.
Omak and Tonasket school districts are identified in the lawsuit as having used JTEC consultants over the years. The Wenatchee World has requested a list of the firm’s client districts from the Attorney General’s office.
Administrators at the Wenatchee School District said they contract with a cooperative for help with Medicare forms, but have never used JTEC. Eastmont School District finance administrator Cindy Ulrich said Eastmont contracted with JTEC more than 10 years ago, but then joined a co-op to steer its Medicaid matching program until 2010, when it withdrew from MAC.
Rick Bonner, administrative service director for North Central Educational Service District, said NCESD has never used JTEC’s services. The ESD doesn’t have information whether individual school districts within its boundaries have contracted with the company, he said.
Tom Reese was Chelan schools superintendent in 1998 when the Chelan County treasurer’s office warned of a four-month deficit that wasn’t noted in financial reports to the school board. The shortage forced a nearly $1 million budget cut the following school year. The board suspended Reese with pay, and he resigned a month later. He’d spent five years at Chelan after a five-year stint as superintendent of the Orondo School District.
World staff writer Rick Steigmeyer contributed to this report.
Jefferson Robbins: 664-7123