Reports by the New York Controller regarding Phoenix House’s misuse of State funding date back to 1970, when New York City Controller Abraham Beanie sent a 165-page report to the NY State Attorney’s Office stating that there was not a clear separation between the City of New York and the Phoenix House entity, and that Phoenix House often had City employees working in their facilities and that many of their supplies and bills were paid by the City directly. There was also questioning along the way in this and other media reporting of why Phoenix House seemed to focus largely on recruitment from other states
and the fact that both the in-state and out-of-state residents would be required to apply for welfare and food stamp benefits. Today, we refer to this practice as a criminal activity called “body brokering” in the recovery and treatment industry.
In 2013, New York State Controller Thomas DiNapoli announced that it was discovered that Phoenix Houses of New York misappropriated $223,00 in state funds. The findings in DiNapoli’s report to the State Attorney’s office included that from 2009 to 2010, the not-for-profit substance use treatment program spent $91,000 on executive bonuses and $40,000 in fringe benefits such as leases on personal vehicles, and when former Executive Director, Finn Kavanaugh left the organization, State funds were used to provide him with a $40,000 “separation agreement”. One of Phoenix House’s non-executive employees
used nearly $4,000 to purchase store gift cards with which he purchased cigarettes and alcohol.
In 2019, DiNapoli, again, reported that in an audit of their financial activity between 2013 and 2016, Phoenix House of New York received almost $4 million in state funds that were acquired through processing of invalid claims. From NY Controller DiNapoli’s official press release on January 14, 2019:
In addition, PHNY received reimbursement from OASAS for expenses deemed to be ineligible under the contract.
Equipment and property depreciation of about $700,000; Unsupported employee salaries and raises totaling about $500,000; Fundraising costs of about $400,000; More than $200,000 paid to the foundation’s public policy office and outside lobbyists; and Entertainment and party expenses of about $12,700.
When I came across all of this information, I didn’t understand how a business that so clearly has been in violation and under investigation for abuse and financial embezzlement, among other things has stayed in business so long until I did some research and found that quite often, leading executives and directors of Phoenix House such as have served on governmental bodies, particularly on task forces and boards of
New York City and State. What was even more disheartening was discovering that both Beyonce and Derek Jeter have contributed large amounts of money to Phoenix House although they have been under investigation for years for major abuse allegations and financial fraud.
Phoenix House was one of the first the first treatment programs to become a sentencing alternative to prison incarceration, which has led to a slew of cases by prisoners of violation of their civil rights for various reasons.