Legal Action filed Against Addiction Recovery Center by Angelica Capital Trust

By Roberta Cantrell
BSN Editor

Addiction Recovery Care, ARC, once again finds themselves under scrutiny after what was touted as the largest provider of addiction treatment in Kentucky was named in a federal lawsuit filed Jan. 12 in U.S. District Court for the Southern District of New York.

A lawsuit filed by Angelica Capital Trust against ARC and its owners, Tim Robinson and his wife Lelia, claims their company purchased tax credits from ARC which ARC has failed to repay as promised.

Angelica, a company incorporated in Delaware and based in the Bahamas, states in the lawsuit that “ARC is wrongfully withholding this money because it is in desperate straits.” It asks the court to freeze the funds it says ARC owes Angelica.  It also alleges ARC has threatened bankruptcy to avoid being forced to repay the money.

In a reply to the lawsuit, ARC and the Robinsons ask the court not to freeze the money, saying it would “disrupt the crucial health care services ARC provides to hundreds of patients.”

The lawsuit also stated that the company allegedly committed “massive fraud” in Medicaid and Medicare billing and is now in a struggle to raise nearly $28 million for a civil settlement with the federal government.  According to the DOJ document, $16 million of this amount is for restitution alone.

The DOJ’s settlement, an unsigned copy of which was included in a Jan. 12 court filing, alleges that ARC “knew or recklessly disregarded” Medicaid billing instructions and submitted “false claims” for peer-to-peer services the company provided to clients between 2018 and 2021, resulting in ARC receiving payments “to which they were not entitled.” The company further inappropriately billed for services led by staff who did not have the proper credentials or licenses, according to the statement. By sharing a draft of the settlement, which has otherwise not been made public, Angelica “violated the confidentiality provisions” of its non-disclosure agreement with ARC, Tim Robinson, ARC’s founder, said in a Jan. 20 filing. Robinson requested the document be put under seal.

The Department of Justice has not publicly confirmed the settlement. Kentucky’s U.S. Attorney declined to comment on pending litigation.

ARC signed an agreement with Angelica Trust Nov. 12 to sell tax credits that allowed the treatment company to remain in operation until a sale of most of ARC’s assets was finalized.  Court records show that the total value of the tax credits to be purchased was slightly over $6.9 million dollars.  Angelica  would pay ARC an amount lower than $6.9 million in order to make a profit and in addition, Angelica was to cover other costs of several hundred thousand for filings to the IRS through a third party firm.

However, after the sale of the company fell through in late December, ARC did not repay the money it contractually owed to Angelica.  Angelica tried repeatedly to recover that money and those transcripts of the correspondence are included in the lawsuit documents thus, Angelica sued to recoup that money plus additional costs and interest. Angelica Capital’s attorney, Anthony Candido, of New York, did not respond to multiple requests for comment. Vanessa Keeton, ARC’s vice president of marketing, declined to comment.

ARC, once Kentucky’s fastest growing addiction treatment company, has foundered in recent months amid reports of the FBI investigation into possible health care fraud and financial problems that have forced it to close facilities and lay off employees.

The potential sale of the company was what prompted ARC to seek the funds from Angelica. ARC wanted the money to improve its ability to sell the company, the lawsuit states.

The purpose of selling the tax credits was for ARC “to get cash quickly” to make it look better to the potential buyer.

ARC reportedly received the tax credit refund from the IRS on Dec, 2, but ongoing efforts by Angelica to collect the money failed, and by mid-December, ARC told Angelica its deal to sell the company had failed and it was attempting to negotiate a sale with a new buyer, the lawsuit states.

On Dec, 30, ARC lawyer Jessica Burke said ARC hoped to close a deal with a new buyer by Jan. 31, and also “threatened that ARC would declare bankruptcy” if Angelica didn’t agree to a delay in repayment, according to the lawsuit.

By early January, “it was clear that ARC was playing a shell game of some sort,” the lawsuit states.

Robinson wrote in his filing. “As of Jan. 13, 2026, there was a total of $3,817,171.03 in all of the bank accounts for ARC and (its) subsidiaries,” he said. “ARC continues, to pay only those operating expenses absolutely necessary to continue operations. That includes costs of food for patients, medications and lab supplies, and utilities for facilities.” Paying Angelica “would halt payments for day-to-day operations and ARC cannot simply cease operations. Care for hundreds of vulnerable patients would be interrupted and hundreds of employees would lose employment.” The lawsuit says Angelica claims ARC has stalled paying the DOJ’s settlement because the company is trying to raise money by selling most of its assets. Meanwhile, the DOJ has allowed ARC to continue billing Medicaid and Medicare, which make up 82% of ARC’s clients. ARC, based in Louisa, was once the largest for-profit residential addiction treatment in Kentucky. It played a key role in Kentucky’s status of having the most treatment beds per capita of any state in the country. But in August 2024, the FBI announced it was investigating the company for fraud. Medicaid reimbursement rate cuts followed, significantly curbing ARC’s ability to bill at the level it had previously. Over the past 15 months, ARC has closed all but 16 of its original 40 treatment centers, laid off hundreds of employees and displaced dozens of clients. The October announcement of the sale of the company to Ethema Health Corporation, a Florida-based behavioral health and drug treatment company, seemed like a solution and they planned to buy most of ARC and keep founder Tim Robinson in a corporate leadership role. The move was part of a “strategic consolidation” to continue growing the number of addiction treatment beds in Kentucky under Ethema’s existing Kentucky brand, ARIA Kentucky. But Ethema backed out of that sale in late December without public explanation.  After that deal fell through, ARC told Angelica it was keeping the tax receivables until it was able to close a deal with another buyer.” ARC “just needed the money to get a deal done and to survive,” the lawsuit said, adding that the company “said its bank account had little else and it faced operational expenses. ARC threatened that if it was not able to close a new deal, it would declare bankruptcy.” Angelica repeatedly asked ARC for reimbursement via money wire after it became clear the deal with Ethema had fallen through, but ARC refused. In a Dec. 30 email included in the lawsuit, Jessica Burke, ARC’s lead legal counsel, told Angelica that ARC was within 30 days of another acquisition. Until then, ARC would not pay Angelica. “While I acknowledge that Angelica Capital Trust is not a party to the sales transaction, Angelica Capital Trust does have a vested interest in the closing occurring as planned in the next few weeks,” Burke wrote. “Let me be clear that if the planned closing does not occur, (ARC) will be forced to seek debtor protection and/or reorganization. Such an action is not in the best interest of ARC, and is not in the best interest of Angelica Capital Trust.

However, the threat that was made by Burke of filing bankruptcy to keep from paying the debt to Angelica can’t happen because their petition for a preliminary injunction was granted and respondents were ordered to place $4,706, 872.75 in a separate bank account, segregated from the $1,000,000 reserved for daily operating expenses that they would incur until February 4.

Respondents (Robinsons) shall not transfer, cause to be transferred, or take any action to transfer the $4,706, 872.75 out of the segregated bank account during the pendency of this action without further order of the court.

This order was signed by George B. Daniels US District Judge.

(Listed in the lawsuit as respondents along with Tim and Lelia Robinson are Addiction Recovery Care LLC, ARC Health Systems LLC, London Valu Rite Pharmacy, Inc., (DBA South Creek Drug), Pioneer Health Group LLC, Science Hill Family Care LLC (DBA Pioneer Rural Health Clinic, Pioneer Rural Health Clinic Louisa, and Riverview Rural Health Clinic), Springfield Pioneer Rural Health Clinic LLC, Millard College LLC, Main Street Industries, LLC, Second Chance Enterprises LLC, Robinson Farm LLC, Shelton Robinson Properties LLC and DOES 1-100).