A Drug Rehab Mogul Built an Empire That’s Now Being Probed by the FBI, DA and State of California
Chris Bathum, embattled founder of Community Recovery, which will have $30 million in revenue 2015.
Image by Ted Soqui and Darrick Rainey
Julie Hluchota was 21. She was from Elkhart, Indiana. And she had a drug problem. She couldn't stop using heroin and Oxycontin.
In November 2009, Hluchota and her mom flew to Los Angeles and checked Hluchota into Seasons, a high-end drug rehab clinic in Malibu. According to a lawsuit she would later file, Hluchota came to trust only two people at Seasons: her therapist, and the treatment center's enigmatic, wild-haired co-founder and director, Christopher Bathum.
On Hluchota's first night there, Bathum told her, according to the suit, he "was always going to take care of her."
Hluchota spent 90 days in Seasons' in-patient treatment program, followed by another month of outpatient treatment. Not long after, in April 2010, she became a Seasons employee, doing administrative work.
Two months later, Hluchota began using heroin again.
One afternoon, according to her lawsuit, Bathum showed up at Hluchota's apartment unannounced. She didn't know he knew where she lived.
He confronted her about her relapse and, her lawsuit says, "began stroking [Hluchota's] hair and rubbing her shoulders. Bathum began telling [Hluchota] that if she came back, he 'would take good care of her.'?"
According to the complaint, his hands crept down her upper back, down her spine, then slipped under her shirt.
"Bathum began to work his hands around [her] side until he reached her bare breasts," according to the suit.
Hluchota felt anxious, humiliated and terrified.
"I can take care of your body any way you want me to," Bathum told her, according to the suit. "I have to be professional at work, but you are so beautiful. ... I just wish I could take you to a hotel and 'do' you."
The suit claims that Bathum reached down Hluchota's pants and Hluchota told him to stop, and then agreed to return to Seasons. But, she says, he started kissing her neck. "Let's go!" Hluchota exclaimed.
The document says Bathum stopped and drove Hluchota back to Seasons. That night, according to the lawsuit, Hluchota awoke to find Bathum in her bed, kissing her. She left the rehab the next day, against Bathum's wishes.
Days later, Hluchota returned to Seasons a final time to pick up her final paycheck. Her complaint says she was high on heroin, and Bathum told her it "made her much more relaxed and very sexually appealing." He also told her, she claimed, that she "would be much better off giving me blow jobs rather than someone on Skid Row who you don't know, who wouldn't pay you what you're worth."
In 2011, Bathum settled her lawsuit, which sought damages for fraud and sexual battery, for an undisclosed amount of money.
In July of this year, Hluchota died. According to an obituary in the Elkhart Truth, "Her ongoing battle with addiction ultimately overcame her strong will and hopes for her future." She was 27.
"I deny completely the allegations of inappropriateness with Julie Hluchota," Bathum says today. "Why people do false accusations, in general, is interesting, and I don't really understand all the pieces of it. I know that she got dope and got sympathy and got attention for a while. But this is a dead young woman. It's actually a fucking tragedy."
Says Alan Schimmel, Hluchota's attorney: "People like Bathum can get away with stuff, because who's going to believe a drug addict? That's a huge issue in these cases." Of Bathum, Schimmel declares: "He shouldn't be in this business."
Christopher Bathum at his coffee shop, Grounded, on Melrose
Photo by Ted Soqui
But Bathum has stayed in business, and prospered. He founded Walking Miracles in Koreatown in 2011, shortly before he was pushed out of Seasons. And when a disgruntled investor forced Walking Miracles into bankruptcy, Bathum founded his current enterprise, Community Recovery, in 2012.
In just three years, Community Recovery has grown into a veritable empire, comprising more than 20 sober-living houses and outpatient clinics in Anaheim, West Adams, Calabasas, Malibu, Woodland Hills, Hollywood and Colorado. And the center just purchased a large house on five acres of starkly beautiful land in Joshua Tree. In all, Bathum guesses, his operation can house 200 clients. By the end of 2015, he says, the company will have earned nearly $30 million in annual revenue, 30 percent of it profit.
But a cloud of allegations has followed Bathum, who is a convicted felon and, by his own admission, not a licensed drug counselor or therapist. He doesn't have a college degree, and the only certification he holds, he says, is to practice hypnotherapy.
Bathum is being investigated by nearly every large insurance company in California, as well as the FBI, LAPD, L.A. County District Attorney and California Department of Health Care Services, according to documents and emails obtained by L.A. Weekly, as well as former clients and employees who say they have been interviewed for these investigations. None of the agencies would comment on the nature of the allegations.
In an April declaration to the state Department of Health Care Services, former Community Recovery employee Rose Stahl wrote: "Countless statements have been written and therapists have called in reports of continuous sexual relations and drug use between Christopher Bathum and female clients that he hires as his personal driver and/or co-assistant."
In a statement to Blue Shield obtained by the Weekly, another young woman, who entered Community Recovery in February 2014, claims Bathum gave her money, alcohol and drugs in exchange for sex.
"Chris would occasionally perform hypnotism on me," the woman writes. "This specific time he was telling me how this was all part of my treatment. ... I remember pulling up to the hotel and not feeling like I had a choice. How was I supposed to tell the leader of this small world I was in that I was not interested in being sexual with him? I was slow to undress but he didn't let that stop him."
She left the treatment facility but returned in July 2014, she wrote, and "was there two weeks when Chris asked to see me in his office. ... He made sure the door was locked. ... There was a mattress pad on the floor that he said he used for naps. He laid down and asked me to lay with him. He took off his jacket and unbuttoned his shirt and started acting very sexual. He pushed my head down to give him oral. I just wanted it to be over so I could get out of there."
The woman's half-sister attended Community Recovery as well, and, in a written statement to Blue Shield also obtained by the Weekly, said that she too had been coerced into having sex with Bathum.
"We would have sex in the back of my car, or I would give him a blow job," she wrote. "He would then give me money."
After Bathum sent a letter to the sisters threatening to sue them, the half-sister recanted her statement, writing, "The accusations I made against Community Recovery and its CEO were false." But the other sister has not recanted and, in an email to the Weekly, reconfirmed the details of her letter. She asked that her name not be used, writing in an email, "I am scared of the man."
Bathum denies having sex with any clients but says he did send out letters threatening to sue former clients and employees for speaking against him. "Our stated policy is to hold accountable in the court of law anyone who tries to talk about us inaccurately," he says. "And we would love to do that."
The California Department of Health Care Services has received, over the last few years, a number of complaints that Community Recovery has been running an unlicensed drug and alcohol rehab facility. Inspectors attempted to visit five Community Recovery locations but were denied entry to all of them.
In an application for a warrant to search those houses, state inspectors attached a report written by Blue Shield senior investigator Lisa-Noelle LeGare in February 2015.
"Our investigation strongly indicates [Community Recovery] is engaging in extensive unlicensed residential treatment activity, and in potential patient abuse, fraud and forgery," the report states. "Blue Shield received information from four sources that Christopher Bathum may be supplying drugs to patients and acting in a sexually inappropriate way with female patients."
Bathum calls LeGare a "dip-shit," and tells the Weekly that he "categorically denies" ever getting high or having sex with a client.
The Blue Shield investigation found "strong evidence that suggests [Community Recovery] is engaged in a large-scale fraudulent scheme by recruiting a vulnerable population into its substance-abuse treatment operation by offering financial incentives, including free addiction treatment, room and board and the prospect of employment."
Community Recovery CEO Kirsten Wallace, who is Bathum's longtime business partner, wrote a 10-page, single-spaced response letter to Blue Shield and provided it to the Weekly. In it, Wallace called Blue Shield's allegations "blatantly false."
Christopher Bathum at Community Recovery headquarters in Hollywood
Photo by Ted Soqui
Wallace's letter insists that Blue Shield's senior investigator did not understand that addicts can't be recruited with offers like free room and board. Addicts, she wrote, "long ago gave up family, job and food for their drug. If they would come into treatment for these simple bribes, [their addiction] would have been long ago vanquished."
She also dismissed the allegations of the half-sister, whom she claimed asked for money in exchange for not talking to Blue Shield. The letter calls the woman "the recanted extortionist."
Wallace went on to suggest that Blue Shield's investigation is motivated by a desire to save money.
"Eager for negative news and working for a company who now owed us more than $8,000,000 Ms. Legare [sic] was looking for how we 'could come out of nowhere' to those kinds of billing numbers," Wallace wrote.
The Weekly spoke with dozens of people with ties to Bathum: former clients, parents of former clients, ex-employees and former investors and colleagues of Bathum's — a majority of whom made allegations against Bathum similar to those of Blue Shield. Many described Bathum with the type of hyperbole usually reserved for comic book villains.
"He's got the gift of gab," says Loretta Di Lustro, a former Community Recovery employee. "But he has no degree, he's not a professional, he did not go to college. He was a pool man. He has a criminal record. How do you let a guy like this run an empire?"
When he was contacted by the Weekly last month, Chris Bathum readily and cheerfully agreed to an interview at his corporate headquarters in Hollywood, on Melrose near Highland Avenue.
The unusual facility includes a recording studio and space for group therapy sessions, and is fronted by Grounded, a coffee shop operated by Bathum and largely staffed by recovering addicts under his care.
The 54-year-old Bathum has wispy white and yellow hair and an unkempt beard. His face is lobster pink. He wore a black blazer over a black T-shirt. His female assistant brought him a veggie burger from the kitchen, which he ate with a plastic knife and fork. Throughout the interview, he seldom looked up from the desk at which he sat.
In a wide-ranging interview, Bathum rebutted his chorus of critics and explained why some of his former employees and clients would make up tales.
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"Our community is a little bit character-disordered," Bathum says. "It's like this interesting, wildly gossipy, salacious weirdness. I mean, if I had a nickel for every time I was accused of something."
Bathum grew up in Elmhurst, a suburb of Chicago. He dropped out of college, worked at a crisis hotline center, then moved to India and lived in an ashram for a few years in the 1980s. He moved to Los Angeles in 1991. He wrote a few screenplays, worked on a few political campaigns. He and his then-wife bought a pool-cleaning business.
In 2002, Bathum pleaded guilty to four federal felony counts of mail and wire fraud for selling on eBay computers and exercise equipment that he never delivered. He was sentenced to six months of house arrest and ordered to pay his 23 victims a total of $29,733.
Today, Bathum blames those crimes on a female employee. In a statement to the court before sentencing, however, Bathum admitted his wrongdoing, calling it "an altogether easy solution to a difficult financial problem," and explaining that he was close to filing bankruptcy.
The ordeal behind him, Bathum quit the pool-cleaning business to concentrate on his hypnotherapy practice, launched in 2001. He noticed that many of his clients had substance-abuse disorders and other addictions.
A fax sent by Christopher Bathum to an insurance company details a patient's health needs.
Without training or experience in addiction recovery — and unlike many rehab operators, Bathum is not personally sober or in recovery — he opened his first sober-living house in 2006 in Topanga Canyon.
"It was a little bit of a lark," he admits. "I kind of came into it pretty ignorant. Not thinking I was ignorant, 'cause, you know, everyone always thinks they're clever when they start anything."
The next year, he launched Seasons, a posh, licensed drug-treatment center in Malibu, along with two wealthy investors.
He could hardly have picked a better time to enter the sobriety business. Twenty years ago, there was one rehab in Malibu, the celebrity-filled Promises. "Now there's something like a hundred treatment centers in Malibu," says Howard Samuels, former program director at Promises, who now runs Los Angeles rehab the Hills Treatment Center, which caters to a much higher income bracket than Community Recovery. "In the last five years, the industry has just exploded."
Several factors have fueled the boom — notably, a high rate of drug addiction among white men. Just as important is the federal Mental Health Parity Act of 2008, which requires insurance companies to treat mental and substance-abuse disorders the same as any medical problem. On top of that, the 2010 Affordable Care Act prevents insurance companies from rejecting patients with pre-existing conditions.
The two laws combined make rehab facilities fantastically profitable — and they're subject to minimal oversight.
Regulations aimed at treatment centers such as Bathum's are riddled with loopholes. While in-patient rehabs and hospitals have to be licensed, sober-living houses and outpatient clinics do not. When coupled together, as is practiced by Community Recovery, the two separate facilities perform the same functions as an in-patient rehab — yet they are allowed to operate without a license.
"These facilities aren't monitored, they aren't well-regulated, and the people running them are usually money makers," says Alan Schimmel, Hluchota's lawyer, who has sued a number of rehabs not operated by Bathum. "The therapists and the technicians maybe have six months of sobriety. It's a joke. And a lot of times, something horrible occurs."
Samuels, perhaps the most prominent rehab operator in the world, is even more blunt. "There's no recovery in the recovery business," he says. "You can quote that."
"No one knows the truth behind Chris Bathum," says Cliff Brodsky, one of Bathum's former business partners. "Everyone's under his spell, thinking he's a wacky visionary."
In 2011, Bathum started Walking Miracles, an unlicensed rehab enterprise on the top three floors of the Kipling, an aging residential hotel in Koreatown.
"It was an old fleabag hotel that had been renovated a little bit," says Tony, a former patient at Walking Miracles, who agreed to speak only if the Weekly withheld his last name. "Lots of cockroaches. Oh my God, it was terrible. Actually, it was really fun. Everyone was housed in these hotel rooms, two to a room. It had the vibe of a Berkeley co-op."
Some employees were less amused.
"It was seedy," says Richard Hite, a drug counselor who worked there for about five months starting in September 2011. "You had people in a residential treatment center in a hotel" serving regular hotel guests who weren't in treatment and "were smoking pot."
"From my first day there, I thought, this is wrong," Hite says. "The med closet was wide open. No one was watching it. There was no confidentiality of patients."
In contrast to Seasons, Walking Miracles was cheap, at least for the clients. Money was supposed to come from billing the insurers. But the operation was slow to get off the ground. Claims were denied on technicalities.
"In the first month I was there, we were running out of money, and checks were bouncing left and right," says former Walking Miracles clinical director Tom Hedlund. "The Internet got shut off. Bills were not getting paid."
Grounded is staffed in part by addicts from Community Recovery.
Photo by Ted Soqui
Enter Brodsky, a music producer 17 years sober and looking to invest a recent windfall in a drug-treatment facility. He was sold on Bathum's vision, investing half a million dollars in Walking Miracles and loaning Bathum another $150,000. Brodsky says that in exchange, he was supposed to get $4,000 a month.
"The first check for $4,000 came through," Brodsky says. "The second check bounced, and then got covered. The third check bounced. Then the checks just stopped. And I knew I'd been had."
Brodsky sued Bathum and other key Walking Miracles employees for fraud. He dug into the operation, interviewing Hedlund and other disgruntled ex-employees. Their allegations ended up in Brodsky's civil complaint, in which he claimed:
"Defendants routinely steal the identity of physicians to fraudulently bill insurance companies. ... Defendants routinely use third parties to commit check-kiting (check fraud). ... Defendants routinely break & enter into known vacant single-family residences in and around Los Angeles County to squat. ... Defendants routinely submit false insurance claims for services that are never provided. ... Defendants use many 'shell' companies to secret assets from creditors and investors."
Brodsky's suit, which is still pending, forced Walking Miracles into involuntary bankruptcy. Bathum denies all of Brodsky's claims. He has countersued Brodsky for defamation, in a case that is also pending, and claims Brodsky caused a ruckus just as the business was about to turn around.
"It wasn't running smooth, by any means, but we were trying to figure it out," Bathum says. "We were very much on the verge of receiving money and we would have, but [Brodsky] went after it."
Bathum started Community Recovery a month after Walking Miracles went into bankruptcy, in early 2012. His idea was to provide affordable long-term treatment. "Time in treatment is a big deal," says Bathum, who still has no formal training. "It's one of the correlations in studies that work. It doesn't matter what place a person goes to, it matters how long they stay. It's interesting."
More "time in treatment" also meant that Bathum could bill insurance companies for more money. But he still needed to convince the addicts themselves to stay on.
The idea he came up with was internships. At around 90 days sober, Bathum says, most of his clients are offered internships, for which they are often paid $100 a week.
A Community Recovery sober-living house, directly across the street from Grounded
Photo by Ted Soqui
Then, at around six months sober, many interns are offered staff positions — working in admissions, PR, insurance billing or even running group counseling sessions.
"It was completely unusual," says Jimmy Doyle, a licensed drug counselor who worked for Community Recovery. "I found myself working with people who had once been my clients."
According to Blue Shield's report to the Department of Health Care Services, "Blue Shield members who are identified in records as interns and staff continue to be subject of extensive claim billings by [Community Recovery]. ... The medical records reviewed have not supported the services billed."
Most clients who enter Community Recovery are offered "scholarships" that cover their costs, according to former clients and employees. Many are then enrolled in insurance, some allegedly without their knowledge, and Community Recovery pays the premiums.
For example, between January and September of 2014, Blue Shield received no fewer than 164 applications from individuals seeking insurance, all using one of eight Community Recovery mailing addresses. Blue Shield reported to the state that the email addresses were not personal names but numbered sign-ins under the Community Recovery Los Angeles rubric, starting at ashCRLA1@gmail.com and counting up the ladder with ashCRLA2@gmail.com and so on. The contact phone numbers also led to Community Recovery.
"In at least two cases," reads the Blue Shield report, "patients stated they were unaware [Community Recovery] had enrolled them in Blue Shield plans and did not have possession of their Blue Shield plan card."
It goes on to say: "We have several witness reports indicating Kirsten Wallace and Christopher Bathum collected and sorted and acted on patient mail. ... The evidence also strongly suggests member signatures are being forged on checks issued by Blue Shield for patient service reimbursements."
Bathum insists he and his staff simply help clients enroll in insurance, and that a separate nonprofit he runs sometimes pays premiums for clients who can't afford them. "Are we involved in that? Absolutely," he says. "I don't even know what the law is, regarding how much can people be supported in enrollment."
But, he adds, "We don't open people's mail. We open mail with them — to make sure they're not getting heroin."
Wallace did not respond to requests for comment.
One former employee who would speak only on condition of anonymity worked in the Community Recovery insurance department. She describes it as a boiler room of 15 newly sober interns and employees who billed insurers for treating clients and the rotating groups of new "employees" alike.
"When one policy would stop paying, they would just enroll them in a new policy with a different insurance company," she tells the Weekly.
Rebecca Arvizu's son was a Community Recovery client for around a year. She says the rehab charged $9,500 and billed the insurance company on top of that. Her son's insurance, she wrote in a declaration to the Department of Health Care Services, was "billed for many labs, sometimes several in the same day."
Her son, she says, is on the streets using drugs, and Arvizu can't help but feel guilty for trusting Bathum.
"Here I thought he was a licensed therapist," she says.
It would be wrong to say that Community Recovery doesn't help anyone. A number of former clients credit the rehab — and Bathum— with saving their lives.
"It's given me a chance at long-term recovery, and made me a stand-up dude," says one former client, clean nearly two years. "This place does change the lives of many people that otherwise wouldn't have a snowball's chance in hell. It's just, the other shit that has gone on, it's inexcusable."
Lots of rehabs function as tight-knit communities, composed, as they are, of often young recovering addicts at their lowest point — lonely, sick, desperate. Their minds are opened to new possibilities, and they bond with their peers. But Community Recovery, by many accounts, is a tighter, more insular world.
"All your friends become people in that treatment center, all the numbers in your cellphone are people from that treatment center," says Erika, a former client who asked that the Weekly not print her last name. "And if you get cut out of it, you don't have any of those people to call anymore, you don't see any of the people."
According to the Blue Shield memo, "There are indications that 'interns' and 'staff' are pressured to continue their residency at [Community Recovery] locations. In one patient's medical record, Christopher Bathum states, "So that everyone is clear, there is no work for the clients/staff who decide they are not part of the community.' This indicates that job positions, possibly other subsidies and benefits are only available to those where residency is continuing within [Community Recovery]. In the words of one witness, the interns and staff are 'sober slaves.'?"
Earlier this year, former Bathum employee Rose Stahl said in a written declaration to state health investigators that she had found methamphetamine in Bathum's Tesla. In her declaration, Stahl said Kirsten Wallace confirmed to her "that Chris Bathum had been using drugs with clients and hav[ing] sexual relations with them as well. A statement was made about the absolute horror that Chris Bathum had been running trauma groups for the women he had been traumatizing."
Wallace did not respond to requests for comment.
Shortly after Stahl's discovery, Bathum stepped down as CEO of Community Recovery, with Wallace taking his place. But Bathum, according to former employees, remains firmly in charge.
That's when Stahl started talking to state and insurance investigators. After Stahl met with Blue Shield, the insurance company received a fax headed, "Pls forward to Rose Stahl," and signed, "You know who."
A Community Recovery outpatient facility next to Grounded on Melrose
Photo by Ted Soqui
Bathum denies writing the fax, which read, in part, "I wanted you to know the first part of the legal strategy the lawyers are recommending to Boss is that the first person who puts their name to an accusation as opposed to gossiping about it, he immediately and personally [will] sue. ... This is our way of saying enough is enough. There are many changes going on here, but in the heads of the sick fucks who perpetuate this stuff are there any changes? Are there changes going on there Rose? We will make sure there are — we will apply enough pressure to make sure."
According to Stahl and another former employee, Loretta Di Lustro, nearly all of the top insurance companies have stopped paying Community Recovery's claims. The notable exception, they say, is Health Net.
Bathum denies this, saying the only insurer that isn't reimbursing the company is Blue Shield. "But we're gonna probably sue them," he says. "How much do you think it will cost? I'm budgeting about a million."
After his cooperative interviews with the Weekly, Bathum published a series of blog posts last week in which he accused the paper of bias and threatened to sue.
"If they jump the shark, we sue and attack — we go to media war," he wrote. " We mock — we expose — we ridicule the sick old newspaper — barely even able to print on paper anymore. We got lawyers and they know how to sue. We are bigger and we use the systemic advantages we have. More money, more motivation."
At least eight former Community Recovery clients have died of drug-related causes, five this year — a figure Bathum confirms.
"It's a pretty low number, considering the volume of people coming in," he says. "I think about these things a lot. Yeah, I do [take responsibility]. If I didn't, I'd be, like, pissing on the whole thing."
Many who died were chronic relapsers — drug addicts caught in an endless cycle of getting sober and high. It's a dangerous way to live.
Yet parents of former clients are left wondering why there are no protections that would prevent Bathum — a convicted felon with no credentials — from treating an at-risk population.
One former client who died in January, 25-year-old Mohammad Barakat, known as Moe, had been kicked out of the rehab for repeatedly getting high.
"I loved Moe, and I love his family," Bathum says. "Moe didn't really want to be sober. He wanted to be high in treatment. We have to make a call at some point. We were really fucking patient."
Other rehabs might refer a client like Moe to a different treatment center. Instead, Barakat's mother says, Bathum told her to leave her son on the streets.
In her declaration to the state Department of Health Care Services, Stahl wrote that the night after Barakat was kicked out, he "called a client-staff (Adam D.) begging to be let back into [Community Recovery]. He told client-staff Adam D. that he was hopeless and planning to kill himself that night if they turned him away.
"Adam D. then called Chris Bathum and reported the call and the texts and said he felt afraid for Moe and would like permission to let him back in or to call the police."
Bathum did neither, Stahl alleged.
Days later, another client found Barakat's body sitting in another rehab client's car outside one of Community Recovery's sober-living houses. An autopsy found fatal levels of oxycodone and oxymorphone in his system.
Stahl later wrote to investigators: "I was present during the call when Moe Barakat's mother was screaming over the car speaker to Chris Bathum that he had coerced her into not helping her son get into another facility the day he died.
"A witness was present days later when Kirsten Wallace and Christopher Bathum wrote a $17,000 check to Moe Barakat's mother."
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