DHS at Center of Secret Multi-Million Dollar Medicaid Fraud Case

Hawai'i Free Press

Sunday, May 17, 2026

DHS at Center of Secret Multi-Million Dollar Medicaid Fraud Case – sealed by Court
By Andrew Walden @ 4:05 PM :: 1008 Views :: Ethics, Health Care

DHS at Center of Secret Multi-Million Dollar Medicaid Fraud Case – sealed by Court

by Andrew Walden

The Attorney General’s ‘Medicaid Fraud Control Unit’ worked only five cases between 2019 and 2025 earning Hawaii the ‘worst-in-the nation’ mark for Medicaid fraud enforcement.

Here is one of the cases in which Hawaii MFCU did not intervene:

Mental Health Kokua and Lighthouse Inc were the target of a multi-million dollar Qui Tam lawsuit filed by ‘relator’ Peter Bonewitz, March 27, 2020. A former resident of a Mental Health Kokua group home, Bonewitz has an employment background in medical billing. The case remained under court-ordered seal until May 22, 2023 when the Public First Law Center won a court order unsealing it. It has never received any media attention.

In a Qui Tam case, the private party ‘relator’ (aka plaintiff) has inside knowledge of alleged wrongdoing costing State or Federal taxpayer dollars. The victim State is invited to ‘intervene.’

May 29, 2020, Deputy AG Lauren Nakamura, representing MFCU, filed under seal for an 180 day extension to decide whether to intervene.

Nakamura told the Court:

In the Complaint, Relator alleges, in part, that the Defendants have violated the Hawaii False Claims Act by submitting false claims for payment to the Hawaii Medicaid program. Specifically, the Relator alleges that Defendants falsify or back fill” records which are later provided to the State of Hawaii’s Adult Mental Health Division in support of Defendants’ requests for payment from the Hawaii Medicaid program; as well as forcing Relator into mental health treatment programs for which there is no basis.

Both prior to and after Governor David Ige’s March 17, 2020 emergency proclamation requiring most State employees to work from home, the State has begun gathering and reviewing documentation relevant to Relator’s claims. Further, the State is currently attempting to acquire and analyze claims data as well as identify and interview potential witnesses to Relator’s claims. Such work is essential to determine the legal basis for the claims alleged in the Complaint, and necessary to determine whether the allegations can be corroborated or disproved. ...

There is nothing in the Court docket indicating further extensions, but logically they would have been filed in December 2020 and June 2021.

MFCU Supervisor Dawn Shigezawa, supervisor of MFCU was fired by AG Claire Connors effective June 14, 2021. She has since sued for wrongful termination.

October 14, 2021 the state declines to intervene in the Bonewitz litigation, thus effectively killing the case as the pro-se ‘relator’ does not have the resources to proceed. Without further action, the case was dismissed under ‘Rule 28’ October 30, 2025.

Deinstitutionalization explained. But I digress...

Founded in 1973, originally to serve patients being deinstitutionalized from Hawaii State Hospital, Mental Health Kokua now operates group homes with hundreds of residents statewide. Lighthouse, Inc owns the real estate. According to their 990s, Mental Health Kokua reports income of $18.9M and assets of $21.1M. The complaint explains: “Lighthouse, INC engages in HUD 811 projects; allowing it to purchase homes and provide subsidized rent to low income disabled.”

The federal mandate for State-level MFCUs was signed into law by President Jimmy Carter in 1977. Hawaii has been targeted for failure to act again and again--under both Democrat and Republican administrations. (Scroll down to see 120 articles on Hawaii's performance.)

The State Department of Human Services, Adult Mental Health Division spends millions of dollars yearly on Mental Health Kokua contract. These allegations, if proven in court, could get Mental Health Kokua barred from receiving Medicaid funds which would be very destabilizing to the program—hence the blind eye.

The complaint outlines the magnitude of the problem:

9. There are hundreds of people who live in group homes in Hawaii; at facilities like MHK's group homes. Many of these group homes have been financed through HUD to provide subsidized living to low income disabled homeless. The subsidized rent that the tenant pays is based off of 30 percent of his or her income. HUD pays the difference. This program is called the HUD 811 program.

10. When Tenants move into an MHK group home they sign a 12-Month HUD 811 Lease. This lease assures certain rights under the HUD 811 program. One of them is that disabled tenants are supposed to have state supportive services available; but they can't be forced into a supportive service program in order to live there. Since HUD is already covering the rent; this stipulation prevents false claims from occurring against Medicare and Medicaid.

11. Unfortunately, most tenants forget to ask for a copy of their HUD lease; and just get the monthly fee schedule. This makes them think they are on a month to month basis.

12. In a typical situation the tenant pays about 106 per month rent and HUD pays 400 per month, per room; depending on the tenant's income. Tenant is also paying a separate $80 per month management fee to cover basic house management; to MHK.

State AMHD Program is Very Expensive

13. The state Supportive Service that HUD approved is AMHD's 8-16 Group Home program. This support service is required as an option for disabled tenants to use. MHK put together a support plan for Tenants that both AMHD and HUD approved many years ago.

14. The AMHD 8-16 Group Home Support program is very expensive; based on per occupied bed per day. It is meant as a short-term solution to assist individuals that want help learning basic life skills. Depending on the group home's contract AMHD (Medicaid) pays $60-100 per person, per day for this support service.

According to an HigherGov.com estimate, the contract value of ‘AMHD's 8-16 Group Home program’ is $5M-$15M per year.

Tenants Are Being Mislead

15. When new MHK tenants move in; they are overwhelmed with paperwork during the sign in process. They do not know what an 811 program is or their rights under the lease they sign. Much of this paperwork is regarding the separate Supportive Services (AMHD) 8-16 Group Home program that MHK runs - that tenants are being forced into. The Group Home program has very restrictive rules within its 20-page Consumer Handbook.

16. Consumers are told to sign this Support paperwork as part of the move-in process; which should actually be a choice they can opt out of.

17. MHK's Program rules violate both (PAIMI), the Protection and Advocacy for Individuals with Mental Illness Act (1986) and the Fair Housing Act.

18. MHK is also violating the Olmstead Act and a Statement of Guidance by HUD in Washington D.C.; regarding how the Olmstead Act should be followed. "Individuals with disabilities, like individuals without disabilities, should have choice and self-determination in housing and in the health care and related supportive services that they receive."

19. Tenants aren't being allowed to choose to opt out of the program, however; even when they exhibit that they are fully self-sufficient.

20. MHK's Consumer Handbook house rules are oppressive. They include 6pm curfew (for first month), 10 pm curfew weekdays, no guests in room, visitors only at certain times of day, no alcohol, unannounced room inspections, eviction if gone from house for 72 hours, daily room checks (to see if you are on premise), laundry checks (weekly) and clean room checks (weekly).

21. Tenants are also forced under MHK's Program rules to see a psychiatrist once a month, their case manager once a month; and to agree to take their meds - or else face eviction. Again, these are violations of the HUD 811 program and the Olmstead Act.

22. MHK's 8-16 Group Home program is NOT a court ordered rehabilitation program, but the residents are being treated by MHK as though it is. The rules of the program reflect someone that is recovering from drug addiction; or did criminal activity and require this structure. However, people living in the houses are not recovering addicts.

23. On multiple occasions Relator and Tenants were threatened by staff (as a group reminder) during group meetings; that if they didn't follow the program they would be evicted.

24. Forcing tenants into the AMHD Support Program is fraud; and a false claim. Evidence reveals MHK management knows the tenants are supposed to be given a choice, but aren't. Consequently, MHK's false claims are causing the State of Hawaii (Medicaid) to spend far more than it should to treat self-sufficient disabled.

Purpose of AMHD Support Program

25. The purpose and intent of the AMHD 8-16 Group Home Support Program is to teach the Consumers living skills to help make them self-sufficient. These living skills include training residents how to cook, do laundry, make their beds, hygiene practice, chores and other life skills. The training is supposed to be provided by qualified mental health technicians.

MHK Staff Providing No Support Whatsoever

26. Over the course of 12 months Relator never once observed a staff member teaching any of the 12 Consumers in his house; any life skills. The staff are never observed supporting tenants with meals, laundry, hygiene, goals, chores or other life skills. Mostly they are in the office or watching TV.

Selected Tenants are Already Self-Sufficient and Don't Need the AMHD Program

27. The tenants that MHK is selecting to move into homes are already self-sufficient. Over 12 months Relator observed housemates cooking their own meals, doing their own chores, and doing their own laundry - always without assistance.

28. Most of the Tenants have been forced into the AMHD program for 3-7 years; when all they really need is the HUD 811 subsidized housing.

Cost of False Claims

29. At $60-100 per person, per day; MHK is being very wasteful with the state's money; and earning a tremendous profit, by billing for people that don't need support. The cost of MHK's false claims; which need to be recovered, is likely in the millions.

MHK is Understaffed and Underqualified

30. Relator and Tenants have observed on numerous occasions where staff will often leave to fill in at other group homes; leaving the Pahoa House short staffed.

31. Additionally, Relator learned through a staff assistant that the 12-person Pahoa House should have 2 qualified Mental Health Technicians on site; and it has none on site. On information and belief, the other houses have underqualified staff also.

32. Relator on multiple occasions witnessed a staff member complain about how severely underpaid they were. This staff person shared that management doesn't care about the staff. It also seemed that management didn't care whether or not staff was providing actual support to consumers.

Failure to Deliver on Promises and Obligations

33. Besides the fraud of forcing Consumers into a support program; MHK's billing to AMHD is also false because it is failing to deliver on its promises and obligations to the State of Hawaii. MHK isn't rehabilitating Consumers by teaching them life skills. The Consumers that MHK is interviewing already had the life-skills for living independently. Consequently, no support is being provided; and no life improvements are made. Meanwhile MHK is understaffed with unqualified professionals. This means that MHK's operations are merely a pre-text for false claims.

After 53 years, the real estate benefits should be appearing. The complaint explains:

80. Through the HUD 811 Program, Non-Profit organizations are provided 0-Interest loans that don't have to be repaid, as long as the non-profit continues to provide the house to low income disabled for 40 years under the terms of the program.

81. One small stipulation is that Tenants can't be forced into State Support Programs that Medicare and Medicaid pay for because that could cause a lot of unnecessary, redundant government spending.

82. The equity income and passive income that a non-profit generates just through the HUD 811 program; is substantial by itself. At the end of the 40-year loan, the non-profit owns a property with significant increased value AND they have all the rental income toward the loan that doesn't have to be repaid. Almost all of this guaranteed rental income is provided by HUD, Social Security and the State of Hawaii. Across 16 HUD properties that's millions of dollars.

The Star-Advertiser May 17, 2026 points out:

…the MFCU relies on DHS’ Adult Protective and Community Services Branch for referrals. But the report said branch staff didn’t screen public complaints for credibility or in many cases for complete information before forwarding them to the MFCU, unlike most states.

So the fraud unit received thousands of complaints unsuitable for investigation that diverted resources from work on cases with substantial potential for criminal prosecution, according to the report, which said less than 5% of 5,948 such complaints received from 2016 to 2018 led to an MFCU investigation….

Community resistance was another factor in the unit’s low fraud caseload, according to the report, which said MFCU staff cited a tendency for some stakeholders to protect others, including service providers, from law enforcement.

“In interviews, MFCU staff reported that there is a ‘cultural resistance’ to reporting providers in Hawaii,” the report said. “Staff explained that many communities on the Hawaiian Islands are small and isolated, with limited access to providers, which sometimes makes people less willing to report provider fraud.”…

Now you know what they’re talking about. Medicaid fraud is foundational.

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PDF: COMPLAINT

ProPublica: Mental Health Kokua 990s

BACKGROUND: