In March, Georgitta and Erik Koernig Sr., along with their dog, Hope Rose, a mix of sweetness, scrappiness and white fur, gathered what they had left and started anew — at the Ocotillo Apartments and Hotel — as part of a sober-living program. They found a semblance of stability abiding by the program’s strict schedule, walking Hope Rose and adding touches of themselves to the space. A fuzzy floral blanket, a wire basket for journals and important papers, always so many papers for government-funded programs, and a gray pillow to match the comforter on their bed.
As the weeks passed, Georgitta and Erik made their single room a home. They took small steps and long strides toward making a healthier life together. Six months later, the couple is sitting on their bed facing eviction.
Erik’s arm is draped around Georgitta, and the couple is wearing matching orange. They don’t know where they will go next.
“We’re just sitting around like sitting ducks. We don’t know, you know, what’s going on?” Georgitta Koernig said on Sept. 15. That was five days before management elevated their warnings for everyone to get out.
Armed security guards walked the halls on Sept. 20, as an estimated 250 people face living on the streets in Tucson when temperatures are still edging 100 degrees and affordable housing and addiction services remain rare to sparse across the state. Georgitta, Erik and their neighbors are among the latest wave of vulnerable people in Arizona to face widespread evictions after state officials targeted scammers luring mostly homeless and mostly Native American people into fake sober living houses.
At first, people living at Ocotillo thought they were safe.
The program, near Benson Highway and Park Avenue, originally promised to provide for residents. A place to stay with residential fees paid, daily meals, hygiene supplies and other basic necessities, as well as help and health services for their addiction, as required for government-funded sober-living and behavioral-health facilities. But over the past months, life at Ocotillo increasingly strayed far from safe.
Residents told Arizona Luminaria that they weren’t fed. Some people fell ill. And now, they are all homeless.
Juan Cruz, Ocotillo’s building manager, told Arizona Luminaria on Sept. 19 that the 250 or so program participants were told to vacate the Ocotillo residences in seven days.
Over the three days that Arizona Luminaria reported from inside the building talking with residents, many people said they were looking for answers and help.
The rehabilitation program named in the scam running at Ocotillo was formerly known as New Direction Behavioral Health.
New Direction Behavioral Health is among the growing list of sober living houses that has had its payments suspended after credible allegations of fraud. Heidi Capriotti, the public information officer for the state Medicaid program known as the Arizona Health Care Cost Containment System, or AHCCCS, said these operations, which heavily target Native American people, have been a problem for a while.
“We’ve had hundreds of these programs suspended in the past few years,” Capriotti said.
According to the AHCCCS list of suspended and terminated providers, the agency has suspended almost 300 programs this year alone.
These programs profit off the AHCCCS American Indian Health Program, which provides behavioral health services to tribal members. They recruit vulnerable people with promises of shelter, substance abuse help and daily necessities, like meals but don’t follow through while continuing to bill participants’ insurance.
Scrambling to help
This problem has persisted for years to the point that scammers have defrauded people from outside of Arizona to illegally use them and their insurance. In July, Sen. Jon Tester, D-Mont., wrote a letter in response to his state’s tribal citizens being targeted by these schemes.
In the letter, Tester criticizes state officials for allowing “this fraud to plague Arizona’s Tribal Communities for so long that it spread to other states.” Tester also held the Centers for Medicare and Medicaid services accountable for their lack of oversight
Tester’s statements came shortly after Gov. Katie Hobbs’ announcement on actions at a May press conference. Alongside state and tribal nation representatives, including Salt River Pima-Maricopa Indian Community President Martin Harvier, Attorney General Kris Mayes and 13 tribal leaders, Hobbs outlined plans to address hundreds of scam sober-living programs, promising “to bring about the systemic reforms we need to root out this problem and deliver true accountability.”
Despite the state and local governments knowing in advance about these schemes and program suspensions, they failed to prepare for the fallout — people in need of medical care being thrown onto the streets in scorching summer temperatures.
Cancelling payments, such as with New Direction Behavioral Health in Tucson, meant forcing more people to face homelessness in a state with intense inflation and skyrocketing housing prices. Because of this, organizations like Stolen People, Stolen Benefits have had to pick up the pieces by providing aid and transport to many Native people from across the country hurt by fraudulent Arizona programs.
Leaders with Stolen People, Stolen Benefits told Arizona Luminaria they’ve helped more than 250 Native American people — fraudulently lured to Arizona from states like Montana, North Dakota, South Dakota, Oklahoma, Colorado, Utah, New Mexico and Alaska — get back home.
An Arizona Luminaria reporter spoke with Ocotillo residents who identified as Native American. On Sept. 20, the one-week deadline for Ocotillo residents to get out was finally up.
Nonprofit organizations, city government officials and law enforcement were aplenty as they scrambled to help people sign up for shelters, get mental health evaluations and hand out supplies.
While the state has targeted the fraud, there has been little coordinated support from local, state and federal government agencies. That’s left gaping holes in a support network for people managing addiction, homelessness, trauma and other health conditions.
Ocotillo resident Gabriel Chavez told Arizona Luminaria that the city was even telling them to ask family to take them in.
“If families would take people in, why would they be here to begin with?” Chavez said.
State government leaders prepared for months to suspend fraudulent sober-living programs. Yet, today, thousands of vulnerable people across Arizona with health conditions are facing mass evictions with few options for housing. Many are questioning why they weren’t notified and cared for months ahead of time.
Chavez said the city isn’t doing anything they haven’t already done and continued to fail at addressing systemic problems that need a wider response to keep people safe.
“We’ve been signing up for Section 8 (housing) and no one wants to go to the shelter,” he said.
Amid the clamor and chaos, residents struggled to decide whether they wanted to risk staying or leave their home behind.
Some Ocotillo residents, like the Koernigs posted signs on their doors asserting their legal right to remain in their rooms. The building’s private armed security promptly ripped off the signs.
Another general manager told Arizona Luminaria that the building’s armed private security planned to knock on people’s doors and ask them to leave. If they refused, she said management would contact lawyers for the Ocotillo. The woman in charge on Sept. 20 told Arizona Luminaria her first name but refused to provide her full name, asking to be referred to as hotel management.
In addition to ripping signs off, Arizona Luminaria saw three security officers knocking on doors and speaking with residents. More than 10 residents said that the building’s private security has a history of aggressive and violent behavior.
Caught off guard
For the Koernigs, the eviction signifies more than leaving their home — they’re also leaving behind the grave of their beloved pup, Hope Rose, at the Ocotillo. She perished in May, after a fire ravaged a section of the apartments and hotel, including the Koernig’s single room, their home.
“We had to go get her, she was gray at the time,” Georgitta said.
The Koernigs switched rooms after the fire but soot from the blaze frames their new door as a reminder of what they lost.
Building management issued a written notification on Sept. 11 and initially gave residents only 48 hours to vacate. Then management decided to extend the timeline by seven days, according to a written notice Arizona Luminaria obtained and a manager who spoke with a reporter on site.
Cruz, Ocotillo’s building manager, said the sober living program initiated the order to vacate because they could no longer pay the hotel.
“It’s been almost two months since they’ve paid anything,” he said. As of last Friday, the program owed about $360,000, he said
The notice to vacate states residents may remain under a new pricing structure that requires them to personally pay when previously the health care treatment for addiction was funded by insurance. Residents were caught off guard. Many don’t have the money to pay for shelter.
Before living in Ocotillo, many residents didn’t have a home. The Koernigs lived in a tent before joining the program.
Lane Mandle, the city manager’s chief of staff, said Tucson officials were on site as soon as the hotel issued the notice. Right now, Mandle said the priority is to get people into shelters.
“The goal is to make sure everyone has a bed,” Mandle said.
The day after building officials sent out notices to vacate, the city held a resource fair across the street from the hotel during which they helped many residents apply for Section 8 housing. Applicants must first join a waitlist before they’re chosen to complete an application. On the application waitlist portal, the city says it’s unknown how long it may take to get off the waitlist.
Though no information is provided on how many people need shelter in Tucson, the backlog is clear as the city hosts a lottery monthly to place people on the waitlist and expects to serve 2,000 applicants this year, according to Tucson’s housing resources webpage.
Some residents were scared and left shortly after they saw news of the eviction. Residents still at Ocotillo, as well as grassroots advocates for people who are unsheltered, are worried and want more official outreach for people who were defrauded and have no knowledge of the city’s assistance initiatives.
As of Sept. 16, Tucson estimated 100 people still needed shelter. However, Mandle said that number may change. The city’s count was not current nor did they know whether local shelters have room to house everyone.
Mandle said she was confident they’d find a place for everyone and that they’d have more information after an onsite visit on Sept. 20.
Sept. 20 has come and gone, and many residents still don’t know where they will go next.
The Koernigs are reluctant to move into a shelter because many don’t allow couples to stay together. The city helped them apply for Section 8 housing, but they still haven’t found a long-term solution.
Pima County has seen a 300% increase in the number of people experiencing unsheltered homelessness between 2018 and 2023.
In June, the city announced it received $2.7 million in state funds to preserve existing emergency beds for people experiencing homelessness and to expand shelter services. The funding was part of a wider state budget allocation to invest $20 million in grants to local communities for shelter and related services.
Tucson leaders later announced plans to use some of that funding, along with federal dollars, to purchase the Knight’s Inn on South Craycroft Road to house people in immediate need of shelter due to an eviction. The plan involved moving people from a similar shelter with eviction services at a Comfort Suites hotel and providing about 30 new rooms. The effort faced criticism when people living at Knights Inn before the purchase said the city kicked them out without sufficient notice.
None of the residents at Ocotillo, nor city officials, told Arizona Luminaria that people at the sober-living facility would be transferred to Knights Inn.
Fraudulent group homes targeting Indigenous people
The Koernigs said the sober-living program started acting suspicious over time and failed people looking to turn their lives around.
The program has switched its name in the past two months after the Arizona Healthcare Cost Containment System suspended payments due to fraud under its previous name, New Direction Behavioral Health.
The program and its sustaining scam relied on participants’ insurance to pay for services. Like Georgitta, who said she is affiliated with the Blackfeet Nation in Montana, a vast majority of participants are insured through the American Indian Health Program. Georgitta said she’s working on getting her tribal I.D. — a common hurdle for people who are unsheltered and lose their records amid moves and instability.
Two Ocotillo residents — one who asked not to be named due to concerns over tension with the program and building management and another who went by Tim — said that officials with the program encouraged residents to lie about having a tribal membership to pay for their stay at Ocotillo. The two residents said they refused to do so.
Capriotti said program participants who report the program for any reason will not be charged with fraud or other charges if they were pressured and misinformed to falsely switch their insurance. To report scammers, call 211 and press 7.
Where coordinated government support has faltered, volunteers have spent months in Maricopa County at similar facilities, offering a hand to help navigate resources and keep people off the streets.
Jeri Long, a Native advocate for Stolen People, Stolen Benefits and director of business development for Milestone Recovery, arrived at Ocotillo on Sept. 20, the day people were told to vacate the facility. The organization is dedicated to helping Indigenous people targeted by scam sober-living programs.
Long and her team were hoping to hand out food and information at Ocotillo on how people scammed by the fraudulent program can access legitimate help. But Long told Arizona Luminaria that the Tucson Police Department continuously approached her, asking for her information and, at the city’s behest, eventually kicked her off the property.
Long has become familiar with working with unsheltered populations and government agencies so she made sure to hand officials her business card and make her intentions of supporting Native American and other vulnerable people clear. She lamented that her efforts did nothing to quell Tucson police and city officials’ speculation.
“I was given bad looks,” Long said. “I just felt very uncomfortable.”
Long is no stranger to these types of sober-living organizations defrauding her people.
“We help displace Natives coming out of these group homes, you know, we either assist them with getting into legitimate treatment if they want to continue their substance use treatment, or we help them get back to the reservations where they were brought,” she said.
Long said the Tucson police department’s reasoning for kicking her off-site fell short.
“They told me like, ‘oh, they’re telling everybody inside that you work for one of these fraudulent group homes that you’re here to recruit and take people away,’” she said.
The Koernigs and other residents said the officials with the sober-living program didn’t fulfill its promises, and violated other laws requiring basic needs for tenants.
Ocotillo residents have been living without hot water since May because of a fire that damaged housing facilities. Additionally, the program stopped giving them quarters to wash their laundry and stopped providing their already scant daily meals of cereal, a banana, juice or milk and two slices of Costco pizza.
According to the warning-to-vacate letter issued by Ocotillo Apartments and Hotel, the program is currently operating under the name Happy Times, which isn’t registered with the Arizona Healthcare Cost Containment System.
However, Ali Kulumba, told Arizona Luminaria that the program New Direction Behavioral Health is responsible for the fees that led to the attempts to evict people.
According to the Arizona Corporation Commission filings, Kulumba is the business entity manager for both Happy Times and New Direction Behavioral Health, along with one other health care and social assistance business, Tamz Hope Home Care and a foreign for-profit corporation, Mercy Hands Human Services. The statutory agent for New Direction Behavioral Health is listed as Odette Mucheso Mubalama.
Kulumba said “he wasn’t in the position” to answer any questions about the eviction or abandonment of program participants at the Ocotillo.
“What I know is that it’s the city right now who took over those people,” he said.
However, according to Cruz, the Ocotillo manager, program representatives, under the name Happy Times, requested rooms at the Ocotillo Apartments even after officials with the program initiated warnings to vacate. Cruz refused to take in any more participants under the program.
‘If I had somewhere else to go I would’
Georgitta and Erik were hopeful when they heard about the program. It offered a fresh start. It ended up, at best, offering the bare minimum.
Sept. 18 was the first day since May that Ocotillo residents had temporary access to hot water in the form of portable showers provided by the city. They were placed in the hotel’s courtyard in 105-degree weather. The city also bought snacks.
The effort was long overdue and little comfort to the Koernigs and other residents who for weeks have had to live off little food, no access to laundry or any sense of the security or medical care they were promised.
Instead, they’ve lived knowing that New Direction Behavioral Health was taking their insurance money while slowly depriving them of basic needs.
“They had the funds to do things that needed to be done. They chose not to,” Georgitta said. “They chose to take us at a vulnerable state and just use us.”
On Sept. 20th, a lawyer advocating for Ocotillo residents to remain sheltered stood in the Koernigs room explaining the lack of legality behind their eviction.
“So they need a court order?” Georgitta asked.
The Koernigs, resolute on staying, posted a sign on their door stating they won’t leave without the court order. They shared information about tenants’ rights with their neighbors.
Though fears remained, Georgitta said that all the commotion eased at about 1 p.m., two hours after the residential facility’s deadline to leave, when she saw the grassroots and nonprofit organizations, law enforcement and government officials abruptly pack up.
“Yesterday everyone left and today there’s nothing left in the parking lot,” Georgitta said Thursday morning. “So now we’re awaiting our court orders.”
For now, the Ocotillo’s halls are lined with handmade signs from desperate residents defending themselves.
“I will leave only when I see a court order with my name. Please call my lawyer.”
“If I had somewhere else to go I would! Until then, I am going to exercise my rights.”
Georgitta and Erik made the first sign. It paved the way for others. They haven’t packed up their belongings. It’s all we have left, she says.
Credits
Editor: Dianna M. Náñez Copy Editor: Irene McKisson Visuals: Michael McKisson and Teressa Enriquez
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