Kirsten Wallace stole the identities of suffering and scared addicts to bill health insurers more than $175 million of inflated claims without the addicts’ consent. Adding to their misery, some were sexually abused.

Lonely addicts came to Community Recovery Los Angeles, looking for hope and a clean life. In return, the Southern California woman helped foist one of the largest health-insurance scams in California history. Wallace co-owned the lucrative string of about 20 rehab facilities and sober homes for drug and alcohol addicts. Most were in the Los Angeles area.

Addiction treatment is a large and thriving industry in Southern California. The region is a national hub of drug recovery, sometimes called Rehab Riviera. The firm bought in clients with online ads, from the streets and even from out of state.

Ran firm’s fraud machinery

Wallace ran Community Recovery’s fraud machinery. She made sure client identities were stolen, bogus insurance claims were made and paid, and that insurance checks came back into the firm’s bank accounts. Some patients were given drugs while trying to break out of addiction to keep false rehab billings coming in.

Community Recovery set a trap: The firm had the medical and personal profiles of its addicted clients. That was plenty enough to keep buying extra health-insurance polices in their names, and behind their backs.

The operation churned out large and inflated treatment claims like an assembly line. They often billed multiple health insurers for each addict, and for more services than they received. Addicts’ signatures were forged on insurance reimbursement checks issued to clients for recovery treatment.

If an insurer grew suspicious and stopped paying, Community Recovery just bought policies from other health insurers to keep the money flowing in. The firm kept clients onboard after finishing rehab as interns or low-level staff. It was a dodge to keep over-billing insurers using their stolen identities. Community Recovery lied to insurers that they still were in rehab, and kept up the frenetic billing using their stolen identities.

Female clients sexually abused

Anthem Blue Cross Blue Shield received at least 164 applications from people seeking insurance. All using Community Recovery mailing addresses.  Wallace’s co-owner sexually abused young female clients. He used his position as an addiction counselor, and their addiction, to prey on their vulnerability at a vulnerable point in their fragile lives. He was convicted.

Wallace gave up her legal fight and pled guilty, receiving 11 years in state prison. The investigation was led by the California Insurance Department, with the conviction earned by the Los Angeles County District Attorney’s Office.



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