11 ms·

The Giant, Under Attack

148 points by QAPereo 9y ago

danso 9y ago
> Following Mr. Hill’s advice, Mr. Drose flew to California in the spring of 2015. He may have been working for a major hedge fund, but he was so young — still only 20 — that he had to pay extra to rent a car....Mr. Hill thought the college kid was an investigative reporter. So he was thrilled to have someone to listen to his concerns about the treatment business. Until I moved to New York, I had no idea what hedge fund people generally did, or how much of their work and skillset was similar to what investigative journalists did, especially when it came to looking at public records and lawsuits. Indeed, the litany of alleged mishaps and deaths that short-sellers found while investigating American Addiction Centers -- including the man in the lead anecdote -- could easily be the core of an investigative project. e.g. what's described under the subhed, "Open Beds and 'Closing a Sale'" > Mr. Drose returned to Kingsford’s offices in Atlanta, took over a glass-enclosed conference room, and made piles of documents related to each death. None of the deaths had been disclosed to investors when the stock of American Addiction Centers began trading publicly. > The dead included Shaun Reyna, an alcoholic, who killed himself with a shaving razor in one of the company’s treatment houses. Mr. Reyna’s widow said in a 2014 lawsuit that the staff had ignored signs that her husband was suffering withdrawal symptoms that required urgent medical care. The case is expected to go to trial early in 2018. > There was also Gregory Thomas, who hanged himself from a bridge one block from the company’s main office in Temecula in November 2010. He had been brought to the office by a company employee, but never went through with the treatment...* > But the circumstances of Mr. Benefield’s death, as detailed in a lawsuit his wife brought in 2011, stood out.
- IronKettle 9y ago
  Also worth noting that this was somewhat of a plot point in The Big Short: * A GS employee scoffs at Christian Bale's character (Burry) for saying that he actually investigated the mortgages that comprised a few CDOs * Steve Carrell's team goes down to Miami to meet realtors and mortgage buyers
  - hguant 9y ago
    Which makes sense - when you're dealing with that much money, (and working in an environment where lying and sweeping things under the rug are viewed as valuable skills) it's irresponsible NOT to go and see what's going on with your own eyes, or to employ some third party to do so for you.
  - shostack 9y ago
    That was one of the best scenes in the movie IMHO. Personally, I also had no idea that level of investigation took place. This strikes me as similar to how energy trading firms will pay for thermal imaging data of power lines and such to gain an edge, or how other companies look at satellite imagery of parking lots to predict retail performance.
  - shostack 9y ago
    That was one of the best scenes in the movie IMHO. Personally, I also had no idea that level of investigation took place. This strikes me as similar to how energy trading firms will pay for thermal imaging data of power lines and such to gain an edge.
frgtpsswrdlame 9y ago
This is usually the kind of story that gets me all riled up, top-down corporate pressure puts bottom-rung workers between a rock and a hard place where they make the wrong decision. That decision cost a life and then everyone blames the workers at the bottom and never changes the companies practice. Then you add in it's taking advantage of our screwed up health system to overcharge insurance and it's preying on the weak, this is my stuff. However most of those deaths were suicides and there's only one that wasn't. It's tragic but if in the total life of this company they've only had one accident like this and it's not re-occurred and they cleared up any discrepancy with their workers about what sort of existing medical conditions they can handle then I have a harder time engaging my righteousness.
- Bartweiss 9y ago
  Suicides, yes, but Reyna's at least seems like a special case - even compared to other inpatient systems. Acute alcohol withdrawal is horrible, and can even be directly fatal. If an addiction treatment facility overlooked that or declined to provide urgent care, I'd impute a significant role to them even in a patient suicide. It's like hearing that someone committed suicide after a hospital ignored their need for pain relief - they may not be responsible for the death, but they're responsible for neglecting a serious need of someone in their care.
tptacek 9y ago
The analyses about drug testing reimbursement alluded to earlier in the article is interesting; here's a source that alludes to the original Drose Seeking Alpha analysis, but purports to improve it: https://www.valueinvestorsclub.com/idea/American_Addiction_Centers/138105 https://www.valueinvestorsclub.com/idea/American_Addiction_C... The nut of it is: treatment centers make more top-line dollars from treatment than testing, but the margins on testing (which takes just minutes to do and scales much better than delivering treatment) are so much better that the bottom line is dominated by testing revenue. This creates an incentive to test more than is necessary; it's essentially a vector for insurance fraud. The original argument against AAC was that insurers would crack down on fraudulent testing and put AAC out of business.
- tinymollusk 9y ago
  AAC owns its testing facilities, so their margins are much better. I have quite a bit of knowledge, having worked in this industry for a few years for one of the largest providers. The industry is a weird mix of small do-gooders and people at the top who purport to do good, but their actions belie that. Addiction treatment is insanely expensive and incredibly unsuccessful. (Part of that is insurers will generally pay for a much shorter length of stay than is shown to be successful). It's a dirty industry, run by people who tell themselves they're good people but in reality are incredibly exploitative of a very vulnerable population. At the same time, most of my colleagues are/were decent people. It's amazing how something bad can grow from good intentions.
soared 9y ago
Every angle of this story is unpleasant - deaths in/related to rehab, hedge fund managers trying to promote murder charges against employees, attacking a business in order to drive profit.
- touristtam 9y ago
  > On Facebook, years after he died, Ms. Benefield wrote, “I miss him so much.” At least it ends on a honest and very human touch. Sad that health should be treated as a business.
Dangeranger 9y ago
You can find the rest of the articles by Chris Drose on Seeking Alpha here[0] [0] https://seekingalpha.com/author/bleecker-street-research/articles#regular_articles https://seekingalpha.com/author/bleecker-street-research/art...
raviqqe42 9y ago
Why don't you say Attack On The Titan?
- cwbrandsma 9y ago
  There might be a trademark issue with using that phrase.
EGreg 9y ago
America is convulsed by an addiction crisis — painkillers, heroin, alcoholism, meth — and its victims die with tragic regularity. But Mr. Benefield’s case is extraordinary. This made me think of all the jokes people made about USSR Russians drinking themselves silly because of bad times. Is the USA like that too these days for many people?
- cwbrandsma 9y ago
  Near as I can tell, every country is like that for some people. I have friends that are alcoholics, they will drink themselves to death no matter what their circumstances are like. One nearly died from not having a drink for a couple days (lucky him, his mother and sister-in-law were both nurses). I also have friends that are depressives, they feel everything is horrible not matter what. As soon as Trump was elected one was having trouble leaving his house because he was afraid one of his neighbors might be a Trump supporter -- ergo a closet "I HATE ALL THE THINGS" person.
  - llamataboot 9y ago
    There are substance abuse problems in all countries, yes. it does not follow from this that the country doesn't matter. Social norms, access to treatment, poverty/inequality, perceived hope about the future, etc are all functions of particular policies as well. See Portugal's response to a major opioid crisis versus the US response and which one had better healthcare outcomes, etc. See the links between chronic joblessness and substance abuse, etc.
- wil421 9y ago
  From wikipedia: >"Alcohol consumption and alcoholism are major problems in Russia. It is estimated that Russians drink 15 litres (26 pints) of pure alcohol each year. This number is nearly 3 times as much as it was in 1990.[13] In Moscow on September 24 of 2009, Russia's interior minister Rashid Nurgaliyev cited the average intake at an estimated 18 liters a year; "In Russia, each person, including babies, accounts for about 18 liters of spirits per year. In the opinion of WHO experts, consumption of more than 8 liters per year poses a real threat to the health of the nation. Russia has long exceeded this level".[14] It has even been reported that excessive alcohol consumption is to blame for nearly half of all premature deaths in Russia.[15] A recent study blamed alcohol for more than half the deaths (52%) among Russians aged 15 to 54 from 1990 to 2001.[16] For the same demographic, this compares to 4% of deaths for the rest of the world.[17]" For the US in 2016, it looks like alcohol and drug related deaths were close to the 4% cited above, 3.56%.[2] [1]https://en.wikipedia.org/wiki/Health_in_Russia#Common_causes_of_death https://en.wikipedia.org/wiki/Health_in_Russia#Common_causes... [2]http://www.drugwarfacts.org/chapter/causes_of_death http://www.drugwarfacts.org/chapter/causes_of_death
Bartweiss 9y ago
> [Chris Drose] wrote an article about his findings on a website called Seeking Alpha, which short sellers frequent for investment tips. The company’s stock promptly dropped 10 percent. Drose is a professional short-seller. Assuming he was already shorting AAC, it looks like he turned a substantial profit not on the company's weakness but on his ability to publicize it among traders. "Short and distort" is securities fraud, the mirror practice of "pump and dump". There's no particular sign that Drose distorted the situation, but I'm curious where the lines are. Does anyone know whether misinformation is required for this practice to rise to fraud? I assume totally-factual statements about a company would be safe, but I can imagine a lot of grey areas around opinion or hypothetical statements. If a political writer shorts a company, then starts loudly calling for it to be regulated or investigated, is that fraud? How about if a politician does so, without introducing a law?
- verganileonardo 9y ago
  Probably not fraud, if the accusations are true. This sounds similar to what Bill Ackman did when his fund shorted Herbalife - he started a campaign suggesting Herbalife was illegal and demanding an investigation on the company supposedly illegal practices. [1] 1 https://www.institutionalinvestor.com/article/b1505px65dmmnr/bill-ackman-gets-vindication-in-herbalife-battle https://www.institutionalinvestor.com/article/b1505px65dmmnr...
  - r00fus 9y ago
    How is this not illegal?
    - tim333 9y ago
      The argument for not making that kind of stuff illegal is it exposes the scammers pushing overpriced stocks to the public and so protects the investing public.
    - dragonwriter 9y ago
      It's not illegal if it's information that isn't libelous, because revealing true illegal conduct and taking legal action to stop it is considered desirable, and regulation that discourages that by removing a strong incentive is considered actively harmful. If the information is libelous, well, then it is illegal.
jdietrich 9y ago
I'm bookmarking this article, for the next time I see someone say that financial speculation has no social value. When smart people have the opportunity to make big bets against a company, we all stand to benefit.
- __throwaway1 9y ago
  The antidote to greed is more greed. Brilliant.
orbitingpluto 9y ago
No one likes a story where the protagonist dies at the beginning and plot resolution centers on which of the antagonists profit more over his death.
valuearb 9y ago
This is a good article, but i always feel like i’m being taken for a ride by a potentially biased author when they open with the main crime that they don’t resolve till the end. This is written like muckraking, not journalism.

148 points by QAPereo 9y ago

> Following Mr. Hill’s advice, Mr. Drose flew to California in the spring of 2015. He may have been working for a major hedge fund, but he was so young — still only 20 — that he had to pay extra to rent a car....Mr. Hill thought the college kid was an investigative reporter. So he was thrilled to have someone to listen to his concerns about the treatment business. Until I moved to New York, I had no idea what hedge fund people generally did, or how much of their work and skillset was similar to what investigative journalists did, especially when it came to looking at public records and lawsuits. Indeed, the litany of alleged mishaps and deaths that short-sellers found while investigating American Addiction Centers -- including the man in the lead anecdote -- could easily be the core of an investigative project. e.g. what's described under the subhed, "Open Beds and 'Closing a Sale'" > Mr. Drose returned to Kingsford’s offices in Atlanta, took over a glass-enclosed conference room, and made piles of documents related to each death. None of the deaths had been disclosed to investors when the stock of American Addiction Centers began trading publicly. > The dead included Shaun Reyna, an alcoholic, who killed himself with a shaving razor in one of the company’s treatment houses. Mr. Reyna’s widow said in a 2014 lawsuit that the staff had ignored signs that her husband was suffering withdrawal symptoms that required urgent medical care. The case is expected to go to trial early in 2018. > There was also Gregory Thomas, who hanged himself from a bridge one block from the company’s main office in Temecula in November 2010. He had been brought to the office by a company employee, but never went through with the treatment...* > But the circumstances of Mr. Benefield’s death, as detailed in a lawsuit his wife brought in 2011, stood out.

IronKettle 9y ago
Also worth noting that this was somewhat of a plot point in The Big Short: * A GS employee scoffs at Christian Bale's character (Burry) for saying that he actually investigated the mortgages that comprised a few CDOs * Steve Carrell's team goes down to Miami to meet realtors and mortgage buyers
- hguant 9y ago
  Which makes sense - when you're dealing with that much money, (and working in an environment where lying and sweeping things under the rug are viewed as valuable skills) it's irresponsible NOT to go and see what's going on with your own eyes, or to employ some third party to do so for you.
- shostack 9y ago
  That was one of the best scenes in the movie IMHO. Personally, I also had no idea that level of investigation took place. This strikes me as similar to how energy trading firms will pay for thermal imaging data of power lines and such to gain an edge, or how other companies look at satellite imagery of parking lots to predict retail performance.
- shostack 9y ago
  That was one of the best scenes in the movie IMHO. Personally, I also had no idea that level of investigation took place. This strikes me as similar to how energy trading firms will pay for thermal imaging data of power lines and such to gain an edge.

frgtpsswrdlame 9y ago

This is usually the kind of story that gets me all riled up, top-down corporate pressure puts bottom-rung workers between a rock and a hard place where they make the wrong decision. That decision cost a life and then everyone blames the workers at the bottom and never changes the companies practice. Then you add in it's taking advantage of our screwed up health system to overcharge insurance and it's preying on the weak, this is my stuff. However most of those deaths were suicides and there's only one that wasn't. It's tragic but if in the total life of this company they've only had one accident like this and it's not re-occurred and they cleared up any discrepancy with their workers about what sort of existing medical conditions they can handle then I have a harder time engaging my righteousness.

Bartweiss 9y ago
Suicides, yes, but Reyna's at least seems like a special case - even compared to other inpatient systems. Acute alcohol withdrawal is horrible, and can even be directly fatal. If an addiction treatment facility overlooked that or declined to provide urgent care, I'd impute a significant role to them even in a patient suicide. It's like hearing that someone committed suicide after a hospital ignored their need for pain relief - they may not be responsible for the death, but they're responsible for neglecting a serious need of someone in their care.

tptacek 9y ago

The analyses about drug testing reimbursement alluded to earlier in the article is interesting; here's a source that alludes to the original Drose Seeking Alpha analysis, but purports to improve it: https://www.valueinvestorsclub.com/idea/American_Addiction_Centers/138105 https://www.valueinvestorsclub.com/idea/American_Addiction_C... The nut of it is: treatment centers make more top-line dollars from treatment than testing, but the margins on testing (which takes just minutes to do and scales much better than delivering treatment) are so much better that the bottom line is dominated by testing revenue. This creates an incentive to test more than is necessary; it's essentially a vector for insurance fraud. The original argument against AAC was that insurers would crack down on fraudulent testing and put AAC out of business.

tinymollusk 9y ago
AAC owns its testing facilities, so their margins are much better. I have quite a bit of knowledge, having worked in this industry for a few years for one of the largest providers. The industry is a weird mix of small do-gooders and people at the top who purport to do good, but their actions belie that. Addiction treatment is insanely expensive and incredibly unsuccessful. (Part of that is insurers will generally pay for a much shorter length of stay than is shown to be successful). It's a dirty industry, run by people who tell themselves they're good people but in reality are incredibly exploitative of a very vulnerable population. At the same time, most of my colleagues are/were decent people. It's amazing how something bad can grow from good intentions.

soared 9y ago

Every angle of this story is unpleasant - deaths in/related to rehab, hedge fund managers trying to promote murder charges against employees, attacking a business in order to drive profit.

touristtam 9y ago
> On Facebook, years after he died, Ms. Benefield wrote, “I miss him so much.” At least it ends on a honest and very human touch. Sad that health should be treated as a business.

Dangeranger 9y ago

You can find the rest of the articles by Chris Drose on Seeking Alpha here[0] [0] https://seekingalpha.com/author/bleecker-street-research/articles#regular_articles https://seekingalpha.com/author/bleecker-street-research/art...

raviqqe42 9y ago

Why don't you say Attack On The Titan?

cwbrandsma 9y ago
There might be a trademark issue with using that phrase.

EGreg 9y ago

America is convulsed by an addiction crisis — painkillers, heroin, alcoholism, meth — and its victims die with tragic regularity. But Mr. Benefield’s case is extraordinary. This made me think of all the jokes people made about USSR Russians drinking themselves silly because of bad times. Is the USA like that too these days for many people?

cwbrandsma 9y ago
Near as I can tell, every country is like that for some people. I have friends that are alcoholics, they will drink themselves to death no matter what their circumstances are like. One nearly died from not having a drink for a couple days (lucky him, his mother and sister-in-law were both nurses). I also have friends that are depressives, they feel everything is horrible not matter what. As soon as Trump was elected one was having trouble leaving his house because he was afraid one of his neighbors might be a Trump supporter -- ergo a closet "I HATE ALL THE THINGS" person.
- llamataboot 9y ago
  There are substance abuse problems in all countries, yes. it does not follow from this that the country doesn't matter. Social norms, access to treatment, poverty/inequality, perceived hope about the future, etc are all functions of particular policies as well. See Portugal's response to a major opioid crisis versus the US response and which one had better healthcare outcomes, etc. See the links between chronic joblessness and substance abuse, etc.
wil421 9y ago
From wikipedia: >"Alcohol consumption and alcoholism are major problems in Russia. It is estimated that Russians drink 15 litres (26 pints) of pure alcohol each year. This number is nearly 3 times as much as it was in 1990.[13] In Moscow on September 24 of 2009, Russia's interior minister Rashid Nurgaliyev cited the average intake at an estimated 18 liters a year; "In Russia, each person, including babies, accounts for about 18 liters of spirits per year. In the opinion of WHO experts, consumption of more than 8 liters per year poses a real threat to the health of the nation. Russia has long exceeded this level".[14] It has even been reported that excessive alcohol consumption is to blame for nearly half of all premature deaths in Russia.[15] A recent study blamed alcohol for more than half the deaths (52%) among Russians aged 15 to 54 from 1990 to 2001.[16] For the same demographic, this compares to 4% of deaths for the rest of the world.[17]" For the US in 2016, it looks like alcohol and drug related deaths were close to the 4% cited above, 3.56%.[2] [1]https://en.wikipedia.org/wiki/Health_in_Russia#Common_causes_of_death https://en.wikipedia.org/wiki/Health_in_Russia#Common_causes... [2]http://www.drugwarfacts.org/chapter/causes_of_death http://www.drugwarfacts.org/chapter/causes_of_death

Bartweiss 9y ago

> [Chris Drose] wrote an article about his findings on a website called Seeking Alpha, which short sellers frequent for investment tips. The company’s stock promptly dropped 10 percent. Drose is a professional short-seller. Assuming he was already shorting AAC, it looks like he turned a substantial profit not on the company's weakness but on his ability to publicize it among traders. "Short and distort" is securities fraud, the mirror practice of "pump and dump". There's no particular sign that Drose distorted the situation, but I'm curious where the lines are. Does anyone know whether misinformation is required for this practice to rise to fraud? I assume totally-factual statements about a company would be safe, but I can imagine a lot of grey areas around opinion or hypothetical statements. If a political writer shorts a company, then starts loudly calling for it to be regulated or investigated, is that fraud? How about if a politician does so, without introducing a law?

verganileonardo 9y ago
Probably not fraud, if the accusations are true. This sounds similar to what Bill Ackman did when his fund shorted Herbalife - he started a campaign suggesting Herbalife was illegal and demanding an investigation on the company supposedly illegal practices. [1] 1 https://www.institutionalinvestor.com/article/b1505px65dmmnr/bill-ackman-gets-vindication-in-herbalife-battle https://www.institutionalinvestor.com/article/b1505px65dmmnr...
- r00fus 9y ago
  How is this not illegal?
  - tim333 9y ago
    The argument for not making that kind of stuff illegal is it exposes the scammers pushing overpriced stocks to the public and so protects the investing public.
  - dragonwriter 9y ago
    It's not illegal if it's information that isn't libelous, because revealing true illegal conduct and taking legal action to stop it is considered desirable, and regulation that discourages that by removing a strong incentive is considered actively harmful. If the information is libelous, well, then it is illegal.

jdietrich 9y ago

I'm bookmarking this article, for the next time I see someone say that financial speculation has no social value. When smart people have the opportunity to make big bets against a company, we all stand to benefit.

__throwaway1 9y ago
The antidote to greed is more greed. Brilliant.

orbitingpluto 9y ago

No one likes a story where the protagonist dies at the beginning and plot resolution centers on which of the antagonists profit more over his death.

valuearb 9y ago

This is a good article, but i always feel like i’m being taken for a ride by a potentially biased author when they open with the main crime that they don’t resolve till the end. This is written like muckraking, not journalism.