The state allows almost anyone to open a clinic, he said. And once it's running, owners are entitled to public funding for as many patients as they sign up under a 1994 court ruling, Sobky v. Smoley, which establishes Medi-Cal patients' right to drug treatment. The county, according to Viernes, is obligated to contract with state-certified clinics and sign off on their funding.
"This program is just not well run," Viernes said of state oversight.
Viernes' deputy Michael Kerr supervises a staff of seven "contract monitors" who inspect 120 counseling clinics annually, plus 20 more methadone clinics. Each clinic may have one or more sites; some have more than a dozen.
Around the state, Drug Medi-Cal clinics submit bills and regularly receive payment from the counties within weeks. State and county auditors discover taxpayer money has been squandered only if they later review the clinics' client charts.
The county's enforcement vigor has waned considerably in recent years. Viernes signed off on a blitz of nine contract terminations in 2009, shutting down one Wilshire Boulevard clinic that paid two clients $20 each to sign admission paperwork used to generate $11,000 in bills for phantom care.
His team cut off another pair of clinics -- in Los Angeles and Compton -- caught billing for the same clients' care at the same time, eight miles apart.
Even as complaints and evidence of cheating piled up, the county pulled back -- and closed no clinics this year. Viernes said officials have shifted toward helping clinics improve when they fail to meet standards.
The state alcohol and drug department has suspended or terminated certification for at least three clinics since 2009, under a state law that calls for such action during a fraud probe. The Department of Health Care Services declined to identify any cases in which it had cut off a clinic until its crackdown in July.
Funding still flows
Seven years after Alexander Ferdman had his Palm Springs spending spree, auditors in L.A. County began to question whether some of the counseling sessions at his clinic actually took place.
Able Family billed for a group therapy session held on a Sunday when the counseling center was closed, according to a July 2011 county billing review. The 10 a.m. on-site review also turned up notes recounting results of a group therapy session that had not yet been held.
County auditors issued a report warning Ferdman that the county considers such findings evidence of "fraudulent practices" and that the clinic could lose its contract. The county ultimately docked him $7,000.
And then the funding boosts came. Viernes approved an increase in Able Family's funding from $1.6 million in 2011 to nearly $2 million in 2013. Kerr, the county's Drug Medi-Cal supervisor, said such funding increases are approved routinely if clinics fix problems cited in audits.
When reporters laid out the results of their April 2013 stakeout to county regulators, officials pledged to follow up. County auditors went out to dig through paperwork at the clinic last week, only to find Able Family closed.
The clinic's medical director, Dr. Howard Oliver, told CNN that Able Family had been suspended by the state -- a month after reporters confronted California's top health official about Ferdman's record and after the county was notified about the stakeout results.
The doctor praised Ferdman, saying he was helping people and "I've never seen him do anything wrong."
Back in Texas, defense attorney Barrett Hansen was bemused to learn of Ferdman's 10-year career in government contracting. Hansen worked as a prosecutor on Ferdman's insurance fraud case.
"If the state of California is willing to throw money at him," she said, "he's willing to catch it."