- Connections Community Support Programs was slapped with a federal lawsuit in April 2021 for defrauding the federal government out of more than $4.5 million.
- The nonprofit’s founder and CEO Cathy Devaney McKay was among leadership officials charged with failing to delegate responsibility for following federal laws when dealing with narcotics.
- McKay will pay $300,000 over five years to settle charges against her.
The founder and CEO of Connections Community Support Programs has agreed to pay $300,000 to settle claims that she failed to ensure the nonprofit provider of mental health and substance abuse services followed federal laws and guidelines when handling narcotics.
The settlement with Connections’ former CEO Cathy Devaney McKay comes nearly two years after Delaware’s once-largest provider of mental health and substance abuse services was accused of defrauding the federal government out of more than $4.5 million, then quickly filed for bankruptcy.
The $300,000 individual settlement with McKay is on top of an over $15 million settlement reached with Connections last year − neither of which has been paid due to the ongoing bankruptcy case with the defunct nonprofit.
“Over the many years that she served as CEO of Connections, Ms. McKay repeatedly failed to take those steps to address the company’s compliance failures,” said U.S. Attorney David Weiss in a news release. “Those failures increased the possibility of drug diversion, putting at risk the very population that Connections purported to serve.”
After years of Delaware Online/The News Journal coverage of Connections’ questionable business practices, Weiss in April 2021 filed a false-claims lawsuit accusing Connections of improperly billing federal programs and lacking proper recordkeeping for narcotics.
A separate suit was filed against McKay, then-CEO William Northey and Chief Compliance Officer Steven Davis, claiming they failed to delegate responsibility for complying with federal laws and failed to train and supervise those employees.
PREVIOUS:Connections founder and CEO blames former employee for issues at nonprofit
Less than two weeks later, the nonprofit filed for Chapter 11 bankruptcy. By August of that year, the nonprofit agreed to an over $15 million settlement to settle the federal charges.
But issues at Connections were well in the making prior to Weiss filing the federal suit.
Connections’ history of problems
A 2019 Delaware Online/The News Journal investigation revealed Connections falsified records to conceal inadequate addiction treatment at one of its taxpayer-funded treatment facilities in Georgetown.
2019 INVESTIGATION:After reports of record falsification, Department of Justice investigating Connections prison services
This news organization’s investigation prompted the state Department of Justice to investigate the nonprofit’s prison services, leading to Connections ending its $60 million contract early with the state in 2020.
The nonprofit also faced mounting lawsuits from unpaid contractors and aggrieved clients.
Despite Connections’ troubles, Delaware shielded the contractor from oversight and scrutiny, increasingly relying on the nonprofit to serve as the state provider of mental health and substance use services in prisons and across the state.
SUBSCRIBER STORY:How Delaware shielded Connections from scrutiny for years
In fact, state officials cemented a shroud of secrecy with Connections in the contracts themselves, blocking public access to any records reviewing the nonprofit’s compliance and continuing to dodge questions about how Delaware oversees contracts.
Settlements reached, but unpaid
A $15.3 million settlement was reached with Connections in August 2021, but it remains unpaid due to the ongoing bankruptcy case.
The agreement requires Connections to pay $13,757,520.60 plus interest to resolve the improper billing allegations and $1,621,571 plus interest to resolve the controlled substance claims.
The likelihood that the settlement will be paid in full, however, is slim.
In October 2021, Connections switched to Chapter 7 bankruptcy after dumping over $1 million on attorneys and other professionals hired to handle the nonprofit’s Chapter 11 bankruptcy filing. The nonprofit had run out of money to continue a pricey Chapter 11 proceeding and needed to liquidate its remaining assets to pay off its debts.
What funds will be left once the bankruptcy is finalized remains unclear.
Connections has assets totaling more than $40 million, but its debt far exceeds that, an October 2021 operating report shows. Over $33 million in secured debt is owed to creditors, which means those creditors will take priority when it comes to any payouts.
WATCHDOG REPORT:While feds say Connections was falsifying documents, nonprofit was rewarding top leaders
Administrative expenses from bankruptcy proceedings, which were over $2 million in the latest operating report available in court documents, will also take precedence.
Unsecured creditors, numbering in the tens of thousands and including the federal government, will be the last to be paid.
Meanwhile, McKay, who was paid nearly $400,000 the year before she stepped down as CEO, will have five years to pay the $300,000 settlement obligation. Federal attorneys stressed that the settlement makes “no determination of liability.”
She left the nonprofit in early 2019 amid the state’s investigation of the nonprofit’s prison contract, receiving $308,172 through June 30, 2019, according to the latest 990 filings available for Connections.
Got a tip? Contact Amanda Fries at afries@delawareonline.com, or by calling 302-598-5507. Follow her on Twitter at @mandy_fries.
