Ilouno has pleaded not guilty. His attorney, Helfend, said in a letter to CIR that counselors acted without GB Medical's knowledge or consent. GB Medical, he added, is prepared to work on a repayment plan, if that becomes necessary.
Of the counselors charged, two pleaded no contest to felony Medi-Cal fraud. The driver pleaded no contest to a misdemeanor charge of paying kickbacks, and the fourth staff member has not yet entered a plea.
After Ilouno's arrest, GB Medical remained open and continued collecting public funds. Its billing slowed dramatically, though, with three clients one day and five the next.
Asked why funding had continued, Los Angeles County spokeswoman Lydia Becerra said her department was unaware that Ilouno had been arrested.
Approached by reporters in the parking lot of his Long Beach clinic in April, Ilouno declined to comment and hopped in his Mercedes, his tires squealing as he sped away. In July, a sign posted on GB Medical's door said the clinic no longer provides Drug Medi-Cal services.
Difficulty policing fraud
Around the time the state alcohol and drug department cleared GB Medical to operate, the only full-time investigator on the department's team was growing disillusioned.
That was in 2008, a turning point in state oversight. Soon, the larger Department of Health Care Services would gain more control through an unusual series of events, but it would wait years -- until earlier this month -- to initiate major changes.
Drug and alcohol investigator Lorna Flores recalls turning down bribes from clinics even as she tried to clean up the program.
"I speculated that we were seeing the tip of an iceberg," said Flores, who today works in the private rehab sector with her former boss, Rebecca Lira. "At that time, I would have said 50 percent of the programs out there are potentially fraudulent in L.A. County."
Flores left state service soon after Lira, in 2008, disheartened that she could not seem to solve the problem.
Then, things took a strange turn.
Gary Goethe assumed control of the small Drug Medi-Cal investigations unit. In 2009, the FBI arrested him on charges of extorting cash from a clinic owner. Goethe pleaded guilty but characterizes his actions as trying to root out fraud through an overzealous sting.
"I was really trying to elicit wrongdoing from providers," Goethe said in an interview. "I was left out to dry by myself, with no support from the department on my fraud efforts."
Karen Johnson, the chief deputy director of the Department of Health Care Services, said Goethe's arrest undermined investigative efforts.
After Goethe's arrest, a state drug and alcohol official ordered staff to stop passing cases of suspected fraud directly to criminal investigators. Instead, cases would be referred to health services, which would decide whether to refer them to law enforcement.
Jarfors, then the Drug Medi-Cal supervisor, said the edict pushed her staff too far from the action of prosecuting fraud.
Little had come out of monthly anti-fraud meetings led by investigation leaders in the Department of Health Care Services, Jarfors claimed. "We practically stood on tables just screaming, we brought it up at every opportunity that we could, and nothing would be done," she said.
Daniel Steinhart, Jarfors' boss, agreed that the anti-fraud meetings were all talk and no action. And he said he knows his order to shift decision-making to the Department of Health Care Services disappointed his staff. They believed the larger department viewed rehab clinic cases as minor compared with other health scams.
"The general belief was (the rehab cases) were small potatoes -- they weren't interested," Steinhart said.
Funding hard to cut off
The head of L.A. County's substance abuse department for five years is at once part of the problem and part of the solution.
John Viernes has worked with other county substance abuse leaders to point out flaws in the Drug Medi-Cal counseling program and has advocated for other styles of treatment proven to turn around lives.
But he's also signed off on raises for providers repeatedly accused of cheating or caught in deceptive billing practices.
Viernes says he has little choice.