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HSD audit targeted TeamBuilders’ business dealings

SANTA FE, N.M. — Nonprofit’s operators take in an estimated $1.5 million a year

Copyright © 2013 Albuquerque Journal

A couple who run a Santa Fe-based nonprofit providing Medicaid-funded services to children and families make as much as $1.5 million a year in salaries and other income, according to a recent audit of New Mexico behavioral health providers.

Shannon and Lorraine Freedle, operators of TeamBuilders Counseling Services Inc., derived much of that income from leases paid by the nonprofit to holding companies owned in full or in part by the Freedles and other TeamBuilders officers, according to a state-commissioned audit.

Lorraine R. Freedle of Team Builders. (Courtesy of Team Builders)

Lorraine R. Freedle of Team Builders. (Courtesy of Team Builders)

The audit of 15 behavioral health providers, including TeamBuilders, was commissioned by the Human Services Department and conducted by the Public Consulting Group of Boston. The department has refused to release the 400-page audit of the providers at the request of Attorney General Gary King, whose office has said it has 17 staffers reviewing the material.

The law requires HSD to forward what it determines to be “credible allegations of fraud” to the attorney general.

According to a summary of audit findings and recommendations obtained by the Journal , the nonprofit made lease payments of more than $3.3 million from 2006 through 2011 to limited liability companies owned in full or part by the Freedles and other TeamBuilders’ officers.

“While prosperous from its state contracts, Teambuilders (sic) does not own a single piece of real estate that it occupies. Teambuilders (sic) has essentially built a sizable real estate portfolio for its officers,” says the audit commissioned by HSD.

An attorney for TeamBuilders called information from the audit, relayed to him by the Journal , “grossly inaccurate.”

The lawyer, Gregory Richards of Kerrville, Texas, repeated the nonprofit’s complaint that it has not been able to defend itself against state accusations, because the state has refused to provide the audit to TeamBuilders.

TeamBuilders is among the nonprofits whose Medicaid funding was cut off by HSD in late June. The agency said the audit of 15 providers showed overpayments totaling $36 million, mismanagement and possible fraud. It turned the findings on all of them over to the state attorney general and federal authorities.

According to HSD, management of TeamBuilders’ operations is scheduled to be taken over on Aug. 17 by Agave Health Inc., one of the providers the HSD brought in from Arizona to assist or run the New Mexico nonprofits.

The PCG audit recommended that the lease payments to the limited liability companies be reviewed for conflict of interest, and that officers and directors of TeamBuilders be evaluated for conflict of interest and whether the transactions violate federal regulations or law.

Because the extent of the officer ownership of the LLCs wasn’t fully disclosed in the documents PCG reviewed, it’s possible that some unrelated parties also got part of that rental income, the audit said.

Audit challenged

Shannon Freedle, CEO of Team Builders. (Courtesy of Team Builders)

Shannon Freedle, CEO of Team Builders. (Courtesy of Team Builders)

Richards, the Freedles’ lawyer, told the Journal that TeamBuilders has been refused access to the audit by Human Services Secretary Sidonie Squier, despite “the fact that even the most rudimentary due process requires that the accused be allowed to see the accusations brought against him or her.”

Richards said the audit findings relayed to him by the Journal “are grossly inaccurate and call into question the validity of the audit and the secretary’s actions.”

“TeamBuilders has always operated with integrity and transparency,” Richards said in an email. “In fact, its financial information, including information regarding the compensation of its officers, has been publicly available for years.

“The audit information you have cited contradicts or misrepresents the publicly available information,” Richards continued. “TeamBuilders hopes it will eventually receive the detailed audit results so it can respond to them in a meaningful manner and demonstrate the integrity of its actions and the quality of its operations.”

Richards said the publicly available information he cited are TeamBuilders’ federal tax returns for a tax-exempt organization, often called “990s.”

Real estate and compensation

According to the audit, TeamBuilders leases property in Clovis, Clayton, Santa Fe, Tucumcari, Las Vegas and Taos from limited liability companies that are owned in whole or in part by the Freedles or for which Shannon Freedle is listed as the organizer.

In Ruidoso, the nonprofit leases from an LLC for which TeamBuilders’ chief operations officer was the organizer, the audit said. TeamBuilders has lease commitments of $1.57 million from 2011 to 2021 for the property, which was purchased by the LLC for $322,000 in 2011, according to the audit.

“TeamBuilders had sufficient capital to purchase this property outright in 2011,” and would have saved $1.25 million in lease payments had it done so, the audit said.

The audit said it is “noteworthy” that TeamBuilders invested in land for expansion in Quay County with the intention of building a facility, but continues to hold the land, and instead entered into leases and construction contracts “with related property holding companies to develop property that it would never own.”

“PCG considers this significant because more than $1M per year in Teambuilders (sic) assets is diverted to its officers and their families,” the audit says.

Shannon Freedle is TeamBuilders’ CEO, and Lorraine Freedle, a pediatric neuropsychologist, is its clinical director. According to the audit, in the fiscal year 2012, Shannon Freedle got a 71 percent raise, increasing his compensation to $252,000, while Lorraine Freedle got a 46 percent raise, bringing her compensation to $203,000.

“Combined with estimated income from related transactions, this family’s income from the nonprofit is estimated as high as $1.5M per year,” the audit said.

Services for children

TeamBuilders, which operates in 23 New Mexico counties, has over 700 employees and foster parents, and 3,000 active clients, according to Shannon Freedle. It focuses on “wraparound” services for children, which are individualized, community-based and emphasize family involvement.

The Freedles told the Journal for an article in 2011 that TeamBuilders has hard-to-find space requirements and that, while it owned small buildings in some communities, its board didn’t want to make big capital investments or saddle the nonprofit with long-term debt for larger or more specialized spaces.

So the Freedles, other TeamBuilders employees and outside investors started the real estate companies, the couple said.

Their lawyer, Richards, said in October 2011 the Freedles hadn’t gotten any income yet from those companies except to cover tax liability.

Shannon Freedle said in the same Journal story that the nonprofit was “very conservative and cautious,” making sure everything it did was both legal and ethical.

According to an executive summary from the Human Services Department, the PCG audit had three main components: a review of case file documentation, a review of billing systems, and an “enterprise audit” that reviewed the providers’ key stakeholders, third party contracts and other stakeholder relationships.