"I'm greedy": Ex-sober home operator remorseless in testifying against doctor

Ken Bailynson leaves court after a hearing Tuesday morning, October 20, 2015.
Ken Bailynson leaves court after a hearing Tuesday morning, October 20, 2015.

If the FBI hadn’t shut down his illicit sober home operation in September 2014, Kenneth Bailynson on Friday insisted he would be a multi-billionaire.

The star witness in the health care fraud trial of Dr. Mark Agresti made no apologies for making millions by exploiting people struggling with addiction and said the Palm Beach psychiatrist was a willing — and critical — accomplice.

“I’m greedy,” said Bailynson, a 49-year-old former CPA. “I’m out to make as much money as humanly possible.”

More: Sober home owner Kenneth Bailynson pleads guilty in $31.3 million health care fraud scheme

More: Doctor says sober home kingpin 'conned' him. Prosecutors say he defrauded health insurers of $30M.

But, he said, he couldn’t do it alone. As medical director of Good Decisions Sober Living, only Agresti could write the orders for urine tests that kept the money flowing.

“It was always about the money and for Dr. Agresti it was all about the money, too,” he told a federal jury.

Unfortunately, he said, his plans to rake in even more cash during the height of South Florida’s opioid epidemic were cut short by federal agents.


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The $31.3 million operation he ran out of a rundown condominium complex in West Palm Beach and the lab he established to process urine tests from those who lived there were supposed to be just a warm up, he said.

Eventually, he planned to own sober homes throughout the state and open a second lab that would be able to process hundreds of urine tests a day — tests that were literally liquid gold because of the money he could recoup from insurance companies.

Sober home operator Bailynson claims he would have made billions on the scheme

When Agresti’s defense attorney asked him if he would have amassed as much as $2 billion if he hadn’t been arrested, Bailynson smiled.

“I wouldn’t have been working toward it, I would have achieved it,” he said.

After spending two days watching Bailynson answer friendly questions from federal prosecutors, defense attorney Richard Lubin spent hours on Friday trying to paint the New Jersey native as a chronic liar who wouldn’t hesitate to smear Agresti to avoid spending a long time behind bars.

Bailynson readily admitted he was a liar. He was equally willing to admit that he hoped to avoid a lengthy prison sentence by helping federal prosecutors convict the 59-year-old Agresti of a single charge of conspiracy to commit health care fraud and 11 charges of health care fraud.

As part of a plea deal, Bailynson in November pleaded guilty to conspiracy to commit health care fraud after prosecutors agreed to drop 13 other charges he faced.

Most importantly, they agreed to cap his possible punishment at 10 years even though the charge carries a maximum 20-year sentence. In exchange, he agreed to testify against Agresti and others.

But, Bailynson said, if he doesn’t testify truthfully, the deal is off.

“I don’t have any skin in the game if your client gets convicted or not,” Bailynson told Lubin. “My sole obligation is to tell the truth.”

Still, he said, after spending two years in custody before being released on house arrest for health reasons, he didn’t want to return to lock up.

“Obviously, I’d like the minimum amount of time I’d have to go back,” he said.

Despite his reputation for having an explosive tempter, Bailynson testified calmly with his glasses perched atop his head. He didn’t flinch as Lubin battered him with questions about lies he told the FBI, past allegations of insurance fraud and his inability to produce records to back up some of his most damning claims.

Bailynson said Agresti aware the drug testing operation was a scam

Bailynson steadfastly insisted that Agresti not only knew the operation was a scam but benefited handsomely from it.

“We are all guilty — me, Dr. Agresti and the others who were charged as well,” he said. Two other employees were also charged, have pleaded guilty and are also expected to testify against Agresti.

As medical director, Agresti was key to the entire illegal operation, Bailynson said. Insurance companies wouldn’t pay the claims for urine screens without a doctor’s okay. During questioning from federal prosecutors earlier this week, Bailynson said Agresti agreed to sign orders for each resident to be screened for drugs every other day.

While a simple test would have been sufficient, Agresti ordered each sample to be tested for up to 80 different drugs, Bailynson said. That meant instead of being paid an average of $300 for a simple test, insurance companies would send him a check for at least $1,500.

Over the three-year run of the operation, he billed insurance companies more than $100 million for some 30,000 tests and made about $31.3 million, he said.

Lubin repeatedly pointed out that the money went to Bailynson. As the owner of the sober home and the lab, Bailynson admitted he was the biggest winner, pocketing between $13 million and $15 million.

But, he said, Agresti was paid well for doing what he estimated was less than 10 hours of work a week.

When the sober home first opened in 2011, Agresti was paid $1,750 monthly. But, as the business grew, so too did his paycheck.

By April 2014, however, Bailynson said Agresti wasn’t doing the work he was hired to do. The physician hadn’t signed off on roughly 2,500 drug tests. That meant that insurance companies wouldn’t pay for the tests that had already been done.

When he visited Agresti in his West Palm Beach office, the physician demanded more money, Bailynson testified. The doctor wanted $9,000 a month.

Bailynson, an accountant, said he did the math in his head. Agresti’s refusal to order the drug tests would cost him about $3.75 million in lost payments from insurance companies. He said he quickly agreed to Agresti’s request for a salary increase and also his demand to be paid another $9,000 in cash each month.

While he initially delivered the cash to Agresti, he said he soon tired of it. He turned the delivery task over to a man who drove van loads of residents from the sober home to Agresti’s office.

Agresti's lawyer challenges Bailynson over lack of records on payments

Bailynson said he had no problem coming up with the cash. A longtime card player, who made millions in gambling income that he never reported to the IRS, he said he always kept large amounts of money around his house.

But, he acknowledged, there is no record of the cash payments. Further, the driver, who could verify them, is dead.

“So there’s no evidence to support (these payments) other than your word — the word of a liar?” Lubin asked.

Lubin also pointed out that Agresti sent Bailynson a fax in December 2013 saying people should only be tested for drugs three times a week and the number of urine screens should be reduced over time

Bailynson insisted that the fax was an attempt by Agresti to cover his tracks.

“He said it was to cover his ass in case the feds came in,” Bailynson said. “It was a total fallacy. It never happened.”

Residents continued to be tested every other day. The repeated testing was the only way to keep the insurance checks coming, he said.

Prosecutors must prove that the repeated testing wasn’t medically necessary. They are expected to call an expert to testify next week that there was justificiation for the frequent tests.

During opening statements, Agresti's defense team said the physician believed that testing helped addicts become sober. He embraced the “step down” approach that was outlined in his fax to Bailynson.

But, Bailynson insisted, Agresti never reviewed the test results. To find out if any of the residents were still using, Bailynson said he hired a teenager to comb through the test results. Those who tested positive were either kicked out or taken to a treatment center, he said.

But, he said, he didn’t get into the business to help people.

“If I could help people that was a secondary thing, but it was always about the money,” he said.

His attorneys declined to say whether Agresti will testify. The trial, which began Tuesday, is expected to wrap up by Feb. 11.

jmusgrave@pbpost.com

This article originally appeared on Palm Beach Post: Ex-sober home operator Ken Bailynson testifies against Dr. Mark Agresti