Officials: Ex-CEO of Hacienda Healthcare pleads guilty in fraud scheme case

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PHOENIX - Officials with the Arizona Attorney General's Office announced on June 21 that the ex-CEO of Hacienda Healthcare has pleaded guilty to felony fraud-related charges.

According to a statement, William J. Timmons, who served as the company's CEO from 1989 to 2019, has pleaded guilty to two counts of Felony Fraudulent Schemes and Artifices.

Timmons accused of misallocating state funding

Officials say from 2013 to June of 2018, Timmons and Joseph O'Malley, the company's former Chief Financial Officer, misallocated funds from the Arizona Department of Economic Security's Division of Developmental Disabilities and from the Arizona Health Care Cost Containment System (AHCCCS) by "manipulating costs to avoid repayments of state funds in favor of inflated salaries and bonuses."

"The DES/DDD contract was with Hacienda’s Intermediate Care Facility (ICF) only. However, Timmons used the money to pay for a large portion of costs at Hacienda's other facilities and did not reimburse the State as required by the contract. This resulted in millions of dollars of overpayment by the State."

Investigators also allege that between July 2013 and June 2018, a company that operated under the umbrella of Hacienda bought medical supplies from third-party vendors, and then re-sold the supplies to Hacienda at a 12.5% markup.

"Timmons directed the payment of the inflated prices, including a delivery fee (even though the two entities were located at the same address), with public monies," read a portion of the statement

Timmons and O'Malley were indicted in 2020.

Officials with the Arizona Attorney General's Office say Timmons is facing three years to 12.5 years in prison on each count. A sentencing hearing for Timmons is scheduled for July 22.

O'Malley, meanwhile, is scheduled to go on trial in March 2022.

Hacienda garnered attention over child birth incident

In 2019, Hacienda Healthcare garnered widespread media attention over an incident where an incapacitated woman at one of its facilities gave birth to a child.

The pregnancy was discovered in December 2018 when an employee at the long-term care facility was changing the garments of the then-29-year-old victim and noticed she was in the process of delivering a child. Employees told police that they had no idea the woman was pregnant.

She lived at Hacienda for 26 years, until the child’s birth. Her medical conditions stem from a brain disorder that caused motor and cognitive impairments and vision loss. She was also left with no functional use of her limbs.

The surprise birth triggered reviews by state agencies, highlighted safety concerns for patients who are severely disabled or incapacitated and prompted the resignations of Timmons and one of the victim’s doctors.

Nathan Sutherland

A nurse, identified as Nathan Dorceus Sutherland, was arrested in connection with the incident. In February 2021, Sutherland asked a court to toss out DNA evidence that investigators say ties him to the sexual assault, with Sutherland's attorney claiming that Phoenix police officers didn’t get a warrant or have probable cause to take his client’s DNA, relying instead on a court order with a lesser standard of proof to gather the evidence.