Ex-therapy services exec strikes deal in fraud case

LITTLE ROCK — Chirie Bazzelle, whose New Beginnings Behavioral Health Services was accused of Medicaid fraud in a public corruption scandal, has pleaded guilty to one misdemeanor, the state attorney general’s office announced Tuesday.

Bazzelle admitted to obstructing governmental operations in failing to disclose contracts with a former lobbyist, Rusty Cranford, and a former state Department of Human Services auditor, Robin Raveendran. The two have pleaded guilty in a two-state federal investigation into fraudulent Medicaid billing and public corruption.

The chief executive of now-closed New Beginnings, Bazzelle has agreed to pay a $500 fine, court costs and $5,000 restitution, according to the plea agreement. She agreed to testify against “any defendant to whom she has knowledge,” according to the signed agreement.

Bazzelle, 46, of Benton pleaded guilty Monday in a virtual court appearance. She does not face prison time, her attorney said.

Both Cranford and Raveendran were former employees of Preferred Family Healthcare of Springfield, Mo. With others, they “secretly helped Bazzelle turn New Beginnings into one of the state’s largest single site mental health providers,” according to a statement Tuesday by Attorney General Leslie Rutledge.

An attorney for Bazzelle, Jeffrey Rosenzweig, said Tuesday he believes her guilty plea to a single misdemeanor was a resolution his client and the attorney general’s office “could live with.”

“Had this case gone to trial, we would have argued the defense of advice of counsel — counsel being Jeremy Hutchinson and people associated with Jeremy Hutchinson — and we believe that would have been a viable defense in light of the substantial amount of money Ms. Bazzelle paid for legal services,” Rosenzweig said.

“The prosecutor realized the strength of that defense,” he said.

The for-profit New Beginnings operated in Little Rock and Cleveland County. It served roughly 1,000 clients, including several hundred public school students, before the state suspended New Beginnings from participating in the Medicaid program after Bazzelle’s April 2019 arrest.

The attorney general’s office initially charged her with felony Medicaid fraud and attempted tax evasion, later tacking on a misdemeanor of lying to authorities despite promising to cooperate.

A former governor’s appointee to the state board that regulates and licenses counselors and therapists, Bazzelle’s formation of New Beginnings in 2010 made her the only woman and only Black person to solely own a Medicaid-enrolled behavioral-health company in Arkansas at the time, according to a 2017 Arkansas Business profile.

At the time, Arkansas was in the midst of what became a 10-year statewide moratorium on new Medicaid-funded mental-health clinics.

Officials imposed the ban in 2008 during exorbitant growth in spending on the so-called Rehabilitative Services for Persons with Mental Illness program, sometimes abbreviated RSPMI.

Documents charging Bazzelle in 2019 called the program’s rules “flawed” and said Human Services Department “leaders of 2008-2013 did not seem to understand the problem with the implementation of the RSPMI program …”

The Arkansas Democrat-Gazette examined the moratorium in depth for an article in 2018. The newspaper found that state officials repeatedly extended what was initially designed as a one-year freeze because they were unable to fix what they viewed as a flawed program.

Because the policy blocked new providers, it slowed growth in Medicaid spending. But it did not address the fundamental problems that made the system susceptible to abuse, making the program profitable for firms such as Preferred Family, the newspaper reported.

Cranford, whom repeatedly lobbied to keep the ban in place, helped Bazzelle circumvent the freeze on two occasions, according to the 2019 charging documents.

Cranford, Raveendran, Bazzelle and an unidentified fourth person “manipulated the moratorium rules” both when setting up New Beginnings in 2010 and when opening a new clinic near Pine Bluff in 2016, an affidavit supporting her arrest alleged.

New Beginnings billed $25.5 million to Medicaid for outpatient mental-health treatment from fiscal 2011-18, state data shows. Its annual billings increased each year beginning in fiscal 2013, from $1.6 million that year to $5.8 million in 2018.