West Palm sober home operator gets 6 years in prison in $31.3 million health fraud scheme

FORT LAUDERDALE — A 49-year-old Lake Worth Beach-area man who used people struggling with addiction to bilk insurers out of $31.3 million will spend six years behind bars, a federal judge decided Wednesday.

Despite a blunt assessment from a grieving mother that Kenneth Bailynson had “blood on his hands” for causing the overdose death of her son, U.S. District Judge Rodolfo A. Ruiz II said he was reluctantly imposing what he acknowledged was a lenient sentence.

Since the former New Jersey accountant has already spent more than two years in jail, he will spend less than four years in a federal prison.

'I'm greedy': Ex-sober home operator remorseless in testifying against doctor

'It blows my mind': Doctor tells court sober-home owner duped him into $31 million insurance fraud

Operation based out of West Palm Beach condo complex

The stage of what Ruiz acknowledged might be considered a “light sentence” was set in November when Bailynson pleaded guilty to one count of conspiracy to commit health care fraud.

To convince federal prosecutors to drop the other 13 charges he faced, he agreed to help them bring down others who raked in millions by defrauding insurers.

Notably, he spent three days on the witness stand in February testifying against Dr. Mark Agresti, who served as medical director of the sober home Bailynson operated out of a rundown condominium complex in West Palm Beach.

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His testimony was key to Agresti’s conviction on 12 charges of health care fraud, said Assistant U.S. Attorney James Hayes.

Ruiz, who presided over the two-week trial of the Palm Beach psychiatrist, agreed.

“I don’t for a second doubt that without Mr. Bailynson’s cooperation that the trial of Dr. Agresti would not come to pass,” Ruiz said.

Still, the judge admitted, he was still haunted by Bailynson’s description of what drove him.

“I can’t get out of my mind what you said and I think I can quote it exactly,” he said. “You said, 'If you didn’t catch me I would have made $2 billion.' The amount of avarice and greed that was illustrated was stunning to me.”

Further, he said, Bailynson amassed his illicit fortune by taking advantage of people who were desperate to beat their addictions and live normal lives.

Instead of offering them help, Bailynson turned their urine into liquid gold by convincing Agresti to order countless expensive and unnecessary lab tests for those covered by insurance.

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“You preyed on the weakest in society,” Ruiz said. “Not only the weak, but people who were weak and were trying to get clean.”

Still, Ruiz said, Bailynson had held up his end of the bargain by testifying against Agresti.

He also helped prosecutors untangle a multi-state $1.2 billion scam that involved a man who helped him rake in millions in his West Palm Beach operation. Bailynson is expected to testify against the man in a trial scheduled for August in New Orleans.

Kenneth Bailynson claims remorse. Others wonder.

Unlike the braggadocio he showed in February, when he boasted about his business savvy and gambling acumen and proudly described himself as greedy, Bailynson voiced remorse over the lives he ruined.

“I recognize the damage I have caused,” he said, reading from a prepared statement. “I realize the pain I have caused all these innocent people.”

Since the birth of his son in 2016, he said he has realized that some things are more important than money. Locked in a bitter custody battle with the boy’s mother, he has only been able to see his son for a few seconds at a time.

“Those few seconds are more valuable than any amount of money,” he said of his desire to get out of prison and build a relationship with the boy, who is now 5.

Testifying via Zoom from her home in Pittsburgh, Sharon O’Brien scoffed at Bailynson’s claims that he is a changed man who deserved mercy.

“It sickens me to hear him talk about how he can’t see his son,” she said. “My son is deceased. He died 13 days after he came home from (Bailynson's) treatment center.”

Like dozens of other people with addictionswho traveled to the sober home at the Green Terrace condominium complex on Georgia Avenue, her son was trying to turn his life around, O'Brien said.

“My son finally wanted to embrace getting sober,” she said. “I did everything I could to help him get to Florida.”

But instead of getting help, her son was used as a pawn in Bailynson's lucrative scheme.

'There is a part of you that needs a lot of work.'

An owner of a unit in the condominium complex also said he didn’t trust Bailynson’s claims of redemption. After buying up 38 units and filling them with people struggling with addiction, Bailynson took over the complex.

“He destroyed the entire community,” said Frank Kundra. Those who got in Bailynson’s way were slapped with lawsuits, which continue to this day, he said.

“I’m afraid of him,” Kundra said. “I’m very much afraid of him. He sues people for sport.”

When he gets out of prison, Kundra said he fears Bailynson will come after the association to recoup money he claims he is owed.

Ruiz also voiced concern that Bailynson had squirreled away some of his ill-gotten gains.

But his attorneys, David Bogenschutz and Jamie Benjamin, said Bailynson has agreed to forfeit the units he owns in Green Terrace as well as the two homes he owns, valued at a total of $2.5 million. How much he will be ordered to pay in restitution will be determined at hearing in June.

The attorneys insisted Bailynson wasn’t a flight risk and had no intention of resuming a life of crime. With those assurances, Ruiz agreed Bailynson could remain free until June 21, when he must report to prison.

Two of Bailynson's underlings in the operation, Matthew Noel and Stephanie Curran, were sentenced Tuesday for their roles in defrauding insurers. Noel, 36, received a 14-month sentence and Curran, 39, was handed a year-long term. Both were allowed to remain free until June 21.

Agresti, who is free on bond, is to be sentenced on May 27.

Ruiz said he was hopeful that Bailynson had learned from his mistakes. Perhaps in prison, Bailynson can deal with demons that prompted him to hurt countless people, he said.

“You are an extremely smart man and you have squandered your gifts ” Ruiz said. “It is a depressing fact because who knows what you could have accomplished and still can. … But you are a greedy person with a lot of anger. There is a part of you that needs a lot of work.”

jmusgrave@pbpost.com

This article originally appeared on Palm Beach Post: Sober home fraud scheme lands Kenneth Bailynson 6 year prison sentence