Timmons, O’Malley Indicted, Hacienda To Pay $11 Million, Jeffries, Loftus Vindicated

AZ DES

PHOENIX – Former Hacienda Healthcare officers William Timmons and Joseph O’Malley have been indicted for an elaborate alleged white collar fraud scheme that bilked Arizona taxpayers out of millions of dollars, according to Attorney General Mark Brnovich. The indictments come as vindication for Tim Jeffries, former Arizona Department of Economic Security and his staff.

“I am pleased that Hacienda management has finally been indicted for the malfeasance that my DES (Arizona Department of Economic Security) Team and I were sure existed four years ago,” Jeffries told the Arizona Daily Independent. “I am immensely grateful for the AG’s office finally lowering the boom on those who failed some of the most vulnerable and treasured Arizonans in our State. I hope and pray Justice is now swift and unrelenting.”

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The Attorney General’s Office (AGO) reached a financial settlement with Hacienda Healthcare Inc. (Hacienda), where it will pay the State more than $11 million to resolve its case.

“These indictments reflect four years of hard work by public servants who have sworn to protect Arizona and its most defenseless citizens. I applaud the Arizona Attorney General’s Office, Attorney General Mark Brnovich, and the members of the State Grand Jury, the first phase of justice has begun,” said Charles Loftus, who served in the DES Office of Inspector General’s Office during Jeffries’ tenure. “This was a difficult case to pursue due to political corruption, and I hope it will serve as a warning to future predators preying on our most vulnerable citizens as well as those defrauding Arizona taxpayers.”

In early January 2019, the AGO launched a criminal investigation into allegations of financial improprieties by former Hacienda executives. The former officers were charged with the following crimes:

William Timmons

  • Fraudulent Schemes and Artifices, a Class 2 Felony
  • Illegally Conducting an Enterprise, a Class 3 Felony
  • Fraudulent Schemes and Artifices, a Class 2 Felony
  • Fraudulent Schemes and Artifices, a Class 2 Felony

Joseph O’Malley

  • Fraudulent Schemes and Artifices, a Class 2 Felony
  • Illegally Conducting an Enterprise, a Class 3 Felony

The Arizona Department of Economic Security’s Division of Developmental Disabilities (DES/DDD) contracted with Hacienda to provide care and operate an Intermediate Care Facility (ICF) for individuals that have developmental disabilities. Starting in 2013, Hacienda and DDD entered into a cost-settlement reconciliation contract in which Hacienda would be given a certain amount of money per day per patient ($1,100 per day). The contract stated if Hacienda received an overpayment, Hacienda would reimburse DDD.

William Timmons was the Chief Executive Officer of Hacienda from July 1989 to January 2019. Joseph O’Malley was the Chief Financial Officer from 2013-2019. The indictment alleges that from 2013 until Timmons resigned in 2019, Timmons and O’Malley intentionally misallocated funds from DES/DDD and the Arizona Heath Care Cost Containment System (AHCCCS) by manipulating costs to avoid repayments of state funds in favor of inflated salaries and bonuses. The DES/DDD contract was with Hacienda’s ICF only. However, investigators purport Timmons and O’Malley used the money to pay for a large portion of costs at Hacienda’s other facilities and did not reimburse the State as required by the contract. This resulted in millions of dollars of overpayment by the State.

South Mountain Health Supply operated under the umbrella of Hacienda. The indictment alleges between July 1, 2013 and June 2018, South Mountain purchased medical supplies from third-party vendors, and then re-sold the supplies to Hacienda at a 12.5% markup. Timmons purportedly directed the payment of the inflated prices, including a delivery fee (even though the two entities were located at the same address), with public monies.

The indictment also alleges between July 1, 2013 and January 23, 2019, Timmons directed the fraudulent billing of health insurance companies for multiple uses of a Synagis vaccine. Timmons purportedly told staff not to discard Synagis vials after a single-use, but rather administer all remaining medication to patients. Health insurance companies were still billed for the entire cost of a vial.

Timmons and O’Malley were served their indictments and not arrested.

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