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    Dewitt Stith
The now-bankrupt 360 Club was one of the businesses owned by Carl Peterson, who also received millions from the District to care for the mentally retarded. The books from his group home company vanished before they could be audited.
(Carol Guzy – The Washington Post)
Page Two
Swollen Into a Moon

In the red-light district around Fifth and K streets NW, a neon martini glass marks the gilt-trimmed doorway of the 360 Club. At this nightclub, or upstairs with the exotic dancers at a club called The Rogue, one could frequently find the caretaker of some of the neediest men and women who had been released from Forest Haven. Charismatic Carl Peterson, owner of the 360 Club and four group homes for the retarded, embodied two sad realities of the District's post-asylum age: the kind of entrepreneurs attracted by the city's generosity toward the retarded and the incapacity of the city to deal with them.

Peterson came to Washington in the early '90s with a PhD in physics, a dissertation on a technical aspect of quantum chemistry called "valence bond calculation" and a wandering entrepreneurial eye. It fell on the former residents of Forest Haven.

Peterson already ran a few group homes for the retarded in Ohio. And as Forest Haven closed, the District was paying some of the country's highest rates for caring for the retarded, as much as $500 a day. Care for the city's 700 or so medically needy retarded brought in the most money: federal Medicaid funds for day treatment and residential care. The 400 healthy retarded received lower-cost, city-financed housing and treatment. Peterson chose the sick, adding a string of D.C. homes to his holdings.

He entered the District's system at a time when the role of for-profit operators was exploding. From 1985 to 1998, the number of private group homes in the District grew from a few dozen to about 150 -- 80 percent of them run by for-profit companies. Some of those companies ran only a home or two; some ran more than a dozen. Peterson soon had four.

The rates that providers like Peterson receive are set by negotiation with the local Medicaid office and are theoretically based on the cost of client care. Shortly after Peterson opened his D.C. homes, Medicaid memos indicate, he requested and obtained additional money to address his clients' expensive needs. It was a tactic he had used in Ohio, whose attorney general later found that one reason his costs were high was that he was skimming off hundreds of thousands of dollars for his personal use.

By 1997, Peterson's company, Brice-Warren, was receiving $2.5 million a year in federal funds to care for 24 D.C. clients. Meanwhile, city records show, money was disappearing regularly from his clients' private accounts -- usually tiny Social Security checks that Peterson and his staff were entrusted to manage. Medicaid officials would make Peterson's company put the money back. Then the money would disappear again. (A 1998 Department of Human Services audit of client accounts in group homes across the city noted that deductions had frequently been made from such accounts without the requisite documentation.) Meanwhile, in another corner of the city bureaucracy, health inspectors charged with surveying the homes and investigating complaints were compiling report after report of abuse and neglect in the Brice-Warren homes.

In the summer of 1996, a resident of a Peterson home on 11th Street NW arrived at her day treatment program aching, her face swollen into a moon. Beneath her clothes, 36-year-old Irene was a map of contusions. The day program staff members called the health inspectors, who went to 11th Street to look more closely at the lives of the six men and women who lived there. What they found was startling. In the same week as Irene's beating, according to their subsequent report, a neighbor reported seeing a staff member hit a woman after she declined to take a bath. Another staff member was seen chasing a retarded man down the street, threatening him with a stick and warning him of punishment with a belt. Sticks and belts weren't the only implements of discipline in the house, an employee later told investigators: One staff member preferred to give clients a blast in the face from a "chemical spray."

A week after Irene's injuries, another resident began to suffer seizures. City records say that the staff didn't dial 911 until eight hours after the first convulsion.

Health inspection records note that a year before Irene was hurt, a different neighbor of the home called the Department of Human Services to complain that clients were being abused. The agency can locate no record of an investigation. But even when agencies do earnestly investigate abuse allegations in group homes, they often don't get very far, records show. Homes often attribute wounds -- the cigarette burns on one man's back, the bruises on many arms, legs and pelvises -- to accident or self-mutilation. Sometimes those explanations may be truthful. And when they aren't, the clients competent enough to explain what actually happened may decline to criticize the group home staff that may be the closest thing to family they have.

Nor could the inhabitants of Peterson's homes count on the court-appointed personal advocate the District's generous protection laws mandate: a trained volunteer, assigned to each retarded ward, who visits the client's home and day program and fights to get what he or she needs. The program to recruit and train such volunteers, which is run out of D.C. Superior Court, has foundered: There are currently 148 certified advocates for nearly 1,000 wards.

The retarded did have, when Irene was hurt, diligent health inspectors on their side. Those inspectors eventually documented that four of 11th Street's six residents had been beaten or otherwise abused by their caretakers, who had also failed to report many serious incidents and injuries in the home. But all the inspectors could do was ask Peterson for "corrective action," as they routinely ask providers when they find problems. Only when providers fail repeatedly to undertake corrections can the city revoke Medicaid funding, something that hasn't happened to a group home for the retarded in years. Nor could inspectors slap a fine on Peterson's company, like the $100,000 penalties that can be levied on nursing homes that neglect their patients. That's because the District -- whose laws permit strong monetary sanctions on facilities that maltreat the retarded -- has never promulgated a schedule of fines that would allow the penalties on the books to be imposed.

Because Peterson's funding came from the federal Medicaid program, the District's Medicaid office also was charged with monitoring his finances and program quality. But it had only two fraud detectors to monitor a budget that is bigger than that of the D.C. public schools -- $840 million today. As for the Department of Human Services, many of the caseworkers assigned to protect the well-being of group home residents were haphazardly retrained Forest Haven staff members, who were further demoralized by mass department layoffs.

There was no broad inquiry into Peterson's operations in the wake of the findings of abuse at the 11th Street group home. In fact, the Medicaid office, which is supposed to audit company billings annually, hadn't audited Brice-Warren once since it started its D.C. operations in 1991.

If there had been an inquiry, it might have discovered that, months before Irene's injuries, Peterson had been indicted in federal court in Ohio for stealing $430,000 in federal money intended for that state's mentally retarded -- and spending those stolen funds on jewelry, go-go dancers listed as "group-home consultants" and an elaborate sound system for a Columbus strip club called Dancers and Dreamers. In May 1997, Peterson was found guilty in Ohio and sentenced to prison.

By the time Medicaid officials finally tried to examine seven years of multimillion-dollar payments made to his D.C. homes, his company had been dissolved; his books had vanished. Peterson, contacted in federal prison, declined to comment.

Marcus Veazey, supervisor of a new unit of the FBI called the D.C. Health Care Fraud Squad, says the District is a particularly difficult place to catch Medicaid corruption: "There haven't been a lot of audits of providers because the city regulators are understaffed. So you end up with providers who know they're not being looked at. Those who want to get involved in criminal activity will because they don't think they'll get caught."

Today, a new for-profit corporation, RCM, runs the former Peterson homes. But inspection reports from the facilities ring familiar. In 1998, records note a client molested by another resident who remained in the home; a patient burned as a result of staff negligence; clients given psychotropic medication without the requisite psychiatric approval; and money missing from client accounts. RCM's director, Marsha Brevard, says the company has recently poured funds into physical improvements and quality control -- efforts that have thus far staved off city attempts to penalize the homes for poor quality.

Brevard notes that Carl Peterson calls collect from time to time, from prison. The owners of the new company are Amy Brooks, Peterson's longtime deputy, and Brevard, his old partner in, among other businesses, the now-bankrupt 360 Club.

Friendly Oversight

Not far from the 360 Club, in an old school on O Street NW, sits defense headquarters for the city's retarded men and women: the Mental Retardation and Developmental Disabilities Administration of the Department of Human Services. As the group home business burgeoned, the agency was meant to provide a regulatory counterweight -- to protect the retarded against indifferent providers. Sometimes, however, the agency's bureaucrats were not just bantam counterweights. They were closely involved with the profiteers. Consider what might be called the tale of two Smiths.

Every retarded person under the mental retardation administration's aegis receives an annual assessment of what he needs to maximize his physical and mental well-being: a road map to his care. Enter Smith One: psychologist Denise Braxtonbrown-Smith, with whom the city contracted after Forest Haven's closing to help do these annual assessments. Like many of those who served the retarded after Forest Haven closed, she was an entrepreneur as well as a psychologist. Besides doing assessments, she ran her own treatment companies -- which sometimes provided the very therapies she recommended for the clients she was assessing. One of those companies, Better Treatment Center, was soon charging $175 a day per client served, by far the highest rate for day treatment in the city.

Last October, the D.C. corporation counsel charged in a civil action that from 1995 to 1998, Braxtonbrown-Smith's companies filed $10 million in false and inflated claims for services. Taxpayer funds paid for the alleged psychoanalysis of 70 retarded people, even though the profoundly retarded are implausible candidates for analysis, and even though there are few records to indicate that clients actually saw a psychotherapist. Taxpayers also financed services rendered to clients who were hospitalized or dead, according to the District's court pleadings. In January, Smith's chief financial officer, Kenneth Strachan, pleaded guilty to criminal conspiracy in a case stemming from the false-claims scheme. He said in court papers that he helped Smith bilk Medicaid and pocket the profits.

Braxtonbrown-Smith declined repeated requests for comment. No charges have been filed against her.

The city official charged with safeguarding the retarded in such programs was, during most of the '90s, Smith Two: Arnett Smith, the mental retardation administration's chief of day programming and no relation to the psychologist. No family relation, anyway. In 1994, real estate records show, Arnett (who was married and lived elsewhere) bought a home on Columbia Road NW for the use of Denise.

Arnett Smith says of Braxtonbrown-Smith, "I treated her like everyone else." He declined through his lawyer to answer questions about his purchase of the home where Braxtonbrown-Smith lived, which he later sold.

Arnett Smith also had a business on the side: He sold travel packages to group homes for the mentally retarded, hiring other employees of his agency as his private company's staff. The nonprofit St. John's Community Services was one of several providers that complained to Smith's superiors that they felt pressured to buy these travel packages or lose their clients and contracts. Nevertheless, Smith ran his business with city permission until he retired in 1996 -- after which he went to work as a paid consultant to Braxtonbrown-Smith.

Today, he receives city funding to run a Southeast group home for the mentally ill.

A 42-year-old named Charlie Johnson was one of the retarded clients reliant on the two Smiths' care. At long tables at a 13th Street NW storefront, he and other retarded people spent several hours a day folding washcloths -- labor for which Braxtonbrown-Smith earned income through contracts she negotiated with private companies. By law, people like Johnson may be paid less than the minimum wage if their work is part of a treatment or job training plan. Last fall, after the city sent Johnson to one of its better group homes, the Community of the Ark, a staff member thought to check his pay stub to see exactly how much less than the minimum wage he was getting for his labor.

Over one two-week pay period, Johnson earned 85 cents.

As Braxtonbrown-Smith's programs grew large with city money, some respected, low-cost programs for the retarded lost their clients and contracts. For instance, by the mid-'90s, Rehabilitation Opportunities Inc., a nonprofit sheltered workshop, wasn't even getting clients the city had already paid for. "For the last years, we hardly ever saw a monitor or a caseworker," said Executive Director Rory Brett, whose group now serves only Maryland clients. "There was no benefit to running a good program and no penalty for running a bad one." Arnett Smith did visit occasionally, Brett recalls -- not to check on the retarded, but to drop off brochures about his travel agency.

And even when city officials do trip over a bad program, they may be forgiving. The mental retardation administration continued to pay Braxtonbrown-Smith to care for Johnson and other retarded people for six months after being notified that the District's own lawyers were suing the psychologist for fraud.

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