Evergreen Recovery has been accused of a "fraudulent conspiracy" involving "at least $28 million," following a KARE 11 investigation that revealed questionable Medicaid billings.
A federal judge has issued a Temporary Restraining Order freezing the assets of a St. Paul treatment program at the center of a KARE 11 investigation.
Judge Katherine Menendez determined that it is "more likely than not" that Evergreen Recovery, along with its owners and affiliated companies, "engaged in an illegal and fraudulent scheme to bill Medicaid for substance abuse treatment services not provided" and participated in an "illegal and fraudulent kickback scheme" in violation of federal law.
Federal authorities estimate the total amount involved in this "fraudulent conspiracy" to be "at least $28 million."
The judge signed the order last week, but it was sealed to allow ongoing investigations. On Tuesday, dozens of agents from the FBI and the U.S. Department of Health and Human Services (HHS) raided Evergreen’s headquarters, seen collecting box after box of evidence.
HHS is responsible for investigating allegations of Medicaid fraud. This government raid followed KARE 11's multi-part "Recovery Inc." investigation, which revealed that Evergreen owners David Backus and Shawn Grygo led a lavish lifestyle—complete with luxury cars and private jet travel—while billing millions of dollars to taxpayer-funded Medicaid for services that clients and employees said were often not provided.
KARE 11 also documented additional instances of questionable billing practices at Evergreen, with both workers and clients alleging improper charges for treatment that never occurred, misrepresenting group activities as individual sessions, and exaggerating time spent on van rides to and from recovery treatment.
KARE 11’s reporting is referenced in an FBI affidavit related to the case.
In a previous interview with KARE 11, Backus denied any intentional wrongdoing. Judge Menendez has scheduled a hearing for August 8 to discuss the case, including the potential appointment of a receiver to manage Evergreen's assets.
The judge's order, along with the government's filings requesting it, was unsealed on Wednesday afternoon. The newly revealed documents highlight the extent of the suspected fraud, including kickbacks and false claims that have cost taxpayers tens of millions of dollars.
According to the government, most of Evergreen’s approximately 600 clients receive healthcare through taxpayer-funded Medicaid programs. In seeking a permanent injunction against Evergreen, the U.S. Attorney’s office outlined what it describes as a "scheme to defraud" by billing Medicaid for substance abuse treatment services that were never provided.
For instance, the government alleges that Evergreen "routinely adds client names who did not attend group counseling" to attendance logs used for billing Medicaid. Additionally, they have reportedly billed meals served as "group counseling" by claiming the meals provided "therapeutic recreation." Investigators estimate that "30 to 40 percent" of the hours Evergreen has billed for group counseling are fraudulent.
The government also accuses Evergreen of operating an "illegal and fraudulent kickback scheme," providing free housing in exchange for clients participating in Medicaid-billable treatment programs.
**Private Jets and Luxury Vehicles**
The court documents state that Evergreen owners Backus and Grygo have used proceeds from the alleged fraud to purchase expensive homes and luxury vehicles, frequently traveling by private jet and taking lavish vacations. The records detail how they pocketed millions, with CEO Shantel Magadanz reportedly earning $703,539 last year.
In its motion to freeze Evergreen’s assets, the government argues that the owners "are dissipating, and will continue to dissipate the proceeds from their fraud scheme." They cited complaints indicating that Evergreen has been "unable to pay its employees on at least three separate paydays," prompting the government to request immediate action from the judge.
**Civil and Criminal Investigations**
The Restraining Order was issued as part of a civil case, and to date, neither Evergreen nor its owners have faced criminal charges. However, a sworn affidavit from FBI Special Agent Kurt Beulke indicates that parallel civil and criminal investigations of Evergreen are ongoing, involving the FBI, HHS, and the Minnesota Attorney General’s office.
The FBI affidavit references KARE 11’s reports and statements from witnesses, alleging that group therapy attendance logs submitted by counselors were "altered," and billing records were "falsified" to include names of individuals who did not actually attend treatment. It further states that Evergreen created false clinical notes to support these fraudulent entries.
Witnesses have also informed investigators that Evergreen used the promise of free housing to recruit homeless individuals into its taxpayer-funded substance abuse program, "regardless of whether they need or want" the treatment. The affidavit highlights "dangerous" conditions and "open drug use" at Evergreen's sober homes, quoting multiple witnesses who claimed that "staff have been instructed to forgo calling for emergency responses or police services" and "to silence clients who attempt to complain about safety."
