Agents investigate California Palms
Addiction-recovery site searched in Austintown
AUSTINTOWN — The California Palms Addiction Recovery Campus, which has been in litigation with its creditor over financing in recent years and fighting licensing issues, is now facing another challenge: an investigation by federal and state agencies, including the FBI and Ohio Attorney General’s office.
Agents with the FBI, other federal agencies and multiple state agencies were at the facility at the state Route 46 / Interstate 80 interchange Tuesday carrying out an investigation. Agents could be seen removing a computer and other items from the facility about 12:30 p.m.
Vicki Anderson, FBI special agent in Cleveland, confirmed the investigation but said she could not comment on its nature. She said no one would be taken into custody Tuesday.
A request was made Tuesday to a California Palms official for the owner, Sebastian Rucci, to call The Vindicator, but Rucci did not call.
The Ohio Department of Mental Health and Addiction Services, which licenses addiction-treatment facilities, said California Palms is temporarily closed because of the investigation.
In a news release and in response to Vindicator questions about the status of California Palms’ license to operate, ODMHAS stated that California Palms has a license, but the state is pursuing legal action to revoke the license “following repeated rules violations.”
The letter states that the investigation by federal and state agencies is “unrelated” to the “separate, ongoing legal action being pursued by the state to revoke California Palms’ license.”
ODMHAS initiated a revocation of the certificate in June 2020. The action was taken after California Palms failed to follow through with a plan of correction for problems that included improper record keeping, improper staffing and other quality-of-care concerns.
An administrative hearing was held in April, where an independent hearing officer recommended licensure revocation, the agency stated in the news release.
The department upheld the hearing officer’s findings and issued a final adjudication order Sept. 28, notifying California Palms that its license to operate an addiction treatment facility was being revoked effective Oct. 28.
California Palms and Rucci have been in the news for several years because of litigation involving California Palms and Pender Capital of California, which tried to close down the facility and recover funds it loaned to California Palms.
In April, Pender Capital purchased California Palms for $4 million at sheriff’s sale, but Rucci appealed the sale to the Youngstown-based Seventh District Court of Appeals. On Sept. 17, the appeals court dismissed the appeal at the request of California Palms.
Rucci purchased the four-story, 122-room facility on Clarkins Drive in 2012. Five years later, he leased it to the California Palms Addiction Recovery Campus Inc., which he also owns, with the intent to covert it into an addiction treatment center.
According to court documents, Rucci invested $5 million and borrowed $4 million from Pender Capital. Rucci sued Pender Capital in April 2018 over the terms of the loan, asking the court to require Pender Capital to accept $3.1 million to release its lien or disburse $881,795 that was undisbursed at closing from the loan, according to paperwork filed with the appeals court.
In June 2018, Pender Capital filed a counterclaim with a foreclosure complaint.
Pender Capital won the property at sheriff’s sale earlier this year, writing in another court filing that the $4 million was the highest and best bid and exceeded the appraised value.
Pender Capital also states in court documents the building consists of 102 units and 138 beds with a maximum occupancy of 200 people. It also has a restaurant, outdoor sports area, entertainment area, Jacuzzi pool, fitness room, billiards, volleyball court and 800-square-foot conference room.
Since earlier this year, California Palms also has been in litigation in Mahoning County Common Pleas Court with the ODMHAS director over the way the state has handled the investigation into California Palms’ license. Specifically, the suit argued that California Palms was not allowed to correct deficiencies.
The ODMHAS director filed a motion in March asking for the lawsuit to be dismissed, but that is the last entry in the case docket with no decision on the motion having been filed.