Addiction Recovery Care finds itself in a financial and legal morass after its deal with Ethema Health Corp. (OTCQB: GRST) fell apart. However, court documents show the company’s ownership expects a sale to close soon, generating funds to cover its various obligations.
Two lenders accuse the Louisa, Kentucky-based behavioral health company of failing to make loan payments. At the heart of both debt obligations, Addiction Recovery Care allegedly promised to sell pending federal employee retention credits, with interest, in exchange for the loans, according to the documents.
Further complicating matters, Angelica Capital Trust, the lender who originally initiated the federal proceedings in the U.S. District Court for the Southern District of New York, claims in court documents that Addiction Recovery Care faces a $27.7 million settlement obligation with the U.S. Department of Justice over allegations of fraudulent payments. About 82% the company’s patients are Medicaid beneficiaries.
A contract document detailing the sale of the credits filed in the proceedings by Angelica Capital Trust includes language that states that the DOJ settlement is partially predicated on the sale of the company to Ethema. Further, the contract states that the sale of the employee retention credits was part of the company’s financial representation to the DOJ.
The DOJ has not announced a settlement or any other resolution related to Addiction Recovery Care. However, it is publicly known that the FBI has been seeking information about the company since the summer of 2024.
Orders and rulings in the case so far have gone against Addiction Recovery Care.
Angelica Capital Trust filed federal proceedings on Jan. 12 seeking a temporary restraining order, in part, to prevent Addiction Recovery Care from spending or otherwise moving funds it might have a claim to as part of a separate arbitration process related to the debt matter.
That restraining order was issued on Jan. 13. Angelica Capital Trust further secured a temporary injunction on Jan. 22 that requires the company to freeze $4.7 million, to have those funds segregated from other company accounts, and to have $1 million set aside for daily expenses.
During that time, Angelica Capital Trust filed for sanctions and a contempt-of-court ruling against Addiction Recovery Care. Those motions are dated Jan. 20.
The second lender, Clear Cove Partners, jumped into the legal fray on Jan. 28. It claims that Addiction Recovery Care sold the rights to the retention credits before the sale to Angelica Capital.
Angelica Capital Trust has an expedited arbitration process with Addiction Recovery Care, according to the documents. The accompanying federal court filings called for a temporary restraining order against Addiction Recovery Care on January 12, just days after news broke that the Addiction Recovery Care-Ethema Health Corp. tie-up was dead. The restraining order prevents Addiction Recovery Care from transferring funds from certain company accounts.
Soon thereafter, Angelica Capital Trust filed with the court, claiming that Addiction Recovery Care violated the temporary restraining order and seeking for the court to find the company in contempt.
A representative of Addiction Recovery Care has not responded to a request for comment. A representative of the company reportedly told the Kentucky Lantern that: “We aren’t going to litigate our case in the media and will not comment on pending litigation.”
Addiction Recovery Care is owned by Tim and Lelia Robinson, who are specifically named in the suits alongside the company. Tim founded the company in 2010.
While it’s not clear what has been established in the Angelica Capital Trust arbitration process — such proceedings are private — the financial firm did not hold back in its telling of Addiction Recovery Care’s business.
Angelica Capital Trust states in court documents that “The U.S. Department of Justice (“DOJ”) is pursuing claims against (Addiction Recovery Care) for Medicaid and Medicare fraud, and to settle those claims (Addiction Recovery Care) needs $27.7 million. ARC has held off the DOJ by saying it can raise the money to pay for that settlement by selling assets and entities.”
Further, Angelica Capital Trust states that the investigation arises from a qui tam suit — United States ex rel. Relators v. Addiction Recovery Care, LLC (23-CV-0051 — however, no such case can be found in federal court records. Yet, qui tam proceedings are usually held under seal while the government reviews the allegations.
A declaration by Tim Robinson, dated Jan. 20, states that action by Angelica Capital and the courts may force the company into bankruptcy proceedings. It also states: “(Addiction Recovery Care) has a pending financial transaction that is expected to close in or around the end of January 2026 or shortly thereafter that will include the payment of multiple obligations, including any obligations owed to Angelica Capital Trust.”