Is fraud in Minnesota “Evergreen”?

A St. Paul-based drug- and alcohol-treatment center, Evergreen Recovery, accused of defrauding the state in the amount of $28 million, had its day in court.

Fifteen days ago, on July 25, Evergreen, four related corporate entities and three individuals were sued by the Federal government.

The action by the Feds appears to have been prompted by a series of investigative reports aired by KARE-11 TV. The clients of Evergreen reportedly reside in residential facilities owned by Evergreen. The corporate headquarters for Evergreen are located on Energy Park Drive, east of Snelling Avenue.

[Note: Evergreen Recovery is not in any way related to Evergreen Grocery, a business linked to the Feeding Our Future scandal.]

It used to be that $28 million was considered to be a big dollar amount, at least as far as state-level fraud scandals go. But I cannot locate any news coverage of this scandal outside of KARE 11.

The Feds sought and received that same day a Temporary Restraining Order (TRO), essentially shutting down the business and related entities and freezing the assets and bank accounts of all businesses and individuals named in the lawsuit.

Although the existence of an ongoing criminal investigation has been mentioned frequently, including today, no charges have been filed against anyone.

This morning’s hearing in Federal court in downtown Minneapolis was to hear the government’s motion to convert the TRO into a preliminary injunction. To quote the judge’s order (p. 2) granting the motion,

The defendants have offered neither evidence nor argument to counter the facts set forth in the government’s filings but do not concede that a fraud has been committed.

So, they opposed the motion for a preliminary injunction, but offered no witnesses, or exhibits or arguments against the motion.

The principals are the husband-and-wife co-owners of Evergreen, named David Backus and Shawn Grygo. Both were in the courtroom today and sitting together, hugging one another.

The third individual, Shantel Magadanz, a senior manager with Evergreen, was represented by an attorney and was excused from attending today’s hearing.

The back of the courtroom was filled with former Evergreen employees, who reportedly have not been paid in weeks or even months.

The wife (Grygo) and the corporate entities were represented by two attorneys from a prestigious local law firm.

The husband (Backus) had no attorney. He told the judge that since his assets were frozen, he could not afford to hire a lawyer. The judge explained that defendants in civil cases do not have the right to an attorney, she could not appoint one for him, and that he had two weeks for find one on his own.

In his defense, Backus asserted that both the FBI agent who filed the supporting affidavit and the lead Federal prosecutor were lying and that he (Backus) had done nothing wrong.

In issuing the preliminary injunction, the judge also appointed a receiver with the mission to wind up Evergreen’s affairs in an orderly manner. Once she has completed her work, there may be no need for further proceedings in the matter.

So, we are left with the evergreen question: how did all the government agencies involved–the Department of Labor, the Department of Human Services, the Department of Health, and Ramsey County–let this situation fester to the point were $28 million is gone and dozens of patients abandoned and left to fend for themselves?