Embattled Addiction Recovery Care says it has agreed to pay DOJ settlement
Addiction Recovery Care, once the largest for-profit drug treatment company in Kentucky, said it has settled two major federal legal disputes that accused the company — and it’s former CEO — of fraud, according to an ARC spokesperson.
Addiction Recovery Care, known as ARC, announced Thursday it had agreed to settle with the United States Department of Justice, as well as a loan company, Clear Cove, who sued ARC earlier this year for allegedly failing to repay tax credit loans.
“ARC has reached a settlement with the Civil Division of the U.S. Department of Justice, resolving all civil claims related to historical Medicaid billing practices,” said Vanessa Keeton, a spokesperson for ARC. “The settlement brings the matter to a conclusion and allows ARC to continue focusing its resources and attention on its core mission of providing treatment and recovery services to individuals and families throughout Kentucky.”
ARC did not disclose how much it agreed to pay the DOJ. A signed copy of the settlement, which is typically confidential, was not immediately available. The DOJ has not yet confirmed or announced its settlement with ARC.
The U.S. Attorney’s office and the Attorney General’s office didn’t immediately respond to requests for comment Thursday.
A draft settlement was made public in a different civil suit against ARC that claimed they were on the hook for $28 million for Medicaid fraud claims. The document went unsigned for months. It was only when the lawsuit included the draft as an exhibit that the document was made public.
It is unclear if ARC agreed to pay the initial $28 million fine associated with the DOJ draft. Keeton said ARC agreed to settle a separate civil suit filed in New York federal court by Clear Cove that said ARC did not repay millions of dollars worth of loans.
In early June, ARC’s founder and former CEO Tim Robinson was indicted for wire fraud and money laundering. Multiple creditor companies, including Clear Cove, who have sued Robinson for defaulting on repayment plans allege Robinson used the money to keep his company from going bankrupt. He stepped down from his leadership role at the company shortly after. Robinson pleaded not guilty to those charges. His trial is scheduled for August 10.
ARC’s Thursday announcement did not disclose how much the company agreed to pay for either settlement, citing that settlements are confidential. However, a proposed judgment in the federal court filing shows ARC could pay nearly $4 million for breach of contract claims to Clear Cove.
“Reaching a resolution with the Department of Justice represents an important milestone for ARC,” said Cassandra Webb, ARC’s president and chief executive officer. “We approached this process transparently, cooperatively and worked diligently to identify and resolve the billing issues involved. The resolution provides greater certainty for our organization and allows us to move forward with an enhanced focus on compliance, accountability, and the delivery of high-quality treatment services.”
The FBI has been investigating ARC for possible Medicaid fraud since August 2024. It is unclear if the DOJ settlement resolution ends the investigation. An FBI spokesperson said Thursday afternoon the criminal investigation was ongoing.
The Herald-Leader in partnership with ProPublica reported in April firsthand accounts from former ARC employees and clients who said they were told by ARC to falsely bill Medicaid, or witnessed others billing for services that were not actually provided.
The Clear Cove lawsuit
Clear Cove Funding filed a lawsuit against ARC in January, after they discovered a different loan company, Angelica Capital Trust, was seeking repayment of tax credits from ARC.
An unsigned draft of a DOJ settlement was made public Jan. 12 as an exhibit in Angelica's lawsuit against ARC. The Bahamian-based company accused ARC of breach of contract for not repaying millions of dollars, alleging ARC was instead using that money to “stave off imminent bankruptcy,” spurred in part by a need to pay the DOJ’s settlement. A draft copy of that document was included as an exhibit in that case.
Clear Cove asked a New York federal judge to halt the Angelica Trust proceedings, claiming the tax receivable credits were rightfully theirs. They claimed they first provided tax credits to ARC as early as 2021 and therefore, predated Angelica’s claims.
In the unsigned, proposed judgment listed in the Clear Cove filing, the parties agreed to settle for a breach of contract claim. Another breach of contract claim was confirmed against Tim Robinson, the former CEO of ARC, individually.
The proposed settlement dismissed the claim Clear Cove asserted of unjust enrichment.
There are still nearly a dozen claims pending in New York from other loan companies that allege ARC and the former founder and CEO, Tim Robinson, owe more than $32 million in tax credits.
DOJ investigation
The DOJ in its draft settlement stipulates at least five allegations of Medicaid fraud, including that ARC “knew or recklessly disregarded” Medicaid billing instructions and submitted “false claims” for peer-to-peer services the company provided to clients between 2018 and 2021, resulting in ARC receiving payments “to which they were not entitled.”
The DOJ and the Kentucky attorney general also allege ARC illegally billed for services that were supposed to be provided by a licensed clinician or doctor but weren’t; allegedly billed Medicaid for services that weren’t medically necessary; submitted duplicate Medicaid claims for a single service, and billed Medicaid for services that were already paid for by Operation UNITE. Operation UNITE, a Kentucky-based anti-drug coalition, is largely funded by grants and individual donations.
The Herald-Leader’s story with ProPublica in April included accounts from six former ARC employees and clients, most of whom said they were directed by the company to fraudulently bill for services, or witnessed others billing for services that weren’t in fact provided. Two people interviewed for the story had talked with the FBI for its investigation into ARC.
The company has denied these allegations, saying in April it “has never knowingly or fraudulently billed Medicaid for services, and there is no evidence that the organization encouraged employees to falsify group notes for billing purposes.”
This story was originally published July 16, 2026 at 5:31 PM.
