ARC owners ordered to appear at contempt hearing

Summary

A Kentucky Lantern article by Deborah Yetter dated January 27, 2026 reports that U.S. District Judge George B. Daniels ordered Addiction Recovery Care (ARC), Kentucky's largest provider of alcohol and drug treatment, and its owners Tim and Lelia Robinson to appear at a contempt hearing in federal court in New York over spending assets the court had ordered frozen. The order stems from a lawsuit filed Jan. 12 by Angelica Capital Trust, which says it advanced ARC $8 million against tax credits ARC expected from the IRS and was not repaid after ARC received $8 million from the IRS on Dec. 2. Angelica alleges ARC placed only $3.6 million in a separate account rather than the $4.7 million the judge ordered. The article reports an FBI investigation of ARC into possible health care fraud, and ARC's lawyers at Seyfarth Shaw asked to withdraw from the case.

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By Deborah Yetter - January 27, 2026 3:03 pm

Addiction Recovery Care and its owner Tim Robinson rebuilt a block in downtown Louisa into a coffee shop, commercial kitchen, community theater and an event space. The company has been beset by legal troubles and a federal investigation. (Kentucky Lantern photo by Matthew Mueller)

Addiction Recovery Care, or ARC, Kentucky’s largest provider of alcohol and drug treatment, is facing mounting legal troubles.

A federal judge has ordered ARC and its owners, Tim and Lelia Robinson, to appear at a hearing Thursday in federal court in New York to show why they should not be held in contempt of court for spending assets the court had ordered ARC to freeze.

The Louisa-based company, which bills the federal Medicaid program for most of its services, also is the subject of an ongoing FBI investigation into possible health care fraud.

The judge’s order stems from a civil lawsuit filed earlier this month by Angelica Capital Trust against ARC, the Robinsons and affiliated companies, claiming it advanced ARC $8 million which ARC failed to repay as promised.

U.S. District Judge George B. Daniels also ordered the Robinsons and ARC’s in-house lawyer, Jessica Burke, to appear for a deposition, or questioning under oath, by Angelica’s lawyers.

The court ordered ARC twice to preserve funds in a separate bank account that Angelica alleges it is owed but ARC has twice violated the court’s orders, Angelica said in a court filing.

Angelica, seeking to recover its money, said ARC is “on the brink of insolvency” in a court filing. It also said ARC is alleged to have committed “massive fraud” in Medicaid and Medicare billing and is scrambling to raise nearly $28 million for a civil settlement with the federal government.

“ARC is wrongfully withholding this money because it is in desperate straits,” said Angelica’s lawsuit filed Jan. 12 in U.S. District Court for the Southern District of New York.

ARC, in a response to the initial lawsuit, did not reference the fraud allegations or the proposed settlement with the U.S. Justice Department but asked the court not to freeze its assets, saying that would “disrupt the crucial health care services ARC provides to hundreds of patients.”

A spokeswoman for ARC did not immediately respond to a request for comment.

ARC was founded in his native Eastern Kentucky by Tim Robinson , a lawyer and recovering alcoholic, to provide treatment for people with drug and alcohol addiction. The for-profit company grew rapidly in recent years, fueled by an expansion in Medicaid payments for such treatment and Robinson and his company emerged as prolific political donors .

But ARC has foundered in recent months amid fraud allegations and cuts in reimbursement from insurers who pay Medicaid claims, and has been forced to close facilities and lay off staff .

In court filings this week, Angelica alleged ARC has twice violated court orders not to transfer further assets and has placed only $3.6 million in a separate account rather than the $4.7 million ordered by the judge.

“Given (ARC’s) willingness to mislead the court and violate its orders . . . Angelica is gravely concerned that (ARC) will continue to dissipate Angelica’s property in violation of the court’s injunction,” said a Jan. 25 letter to the judge from Angelica’s lawyer.

Angelica, a trust firm based in the Bahamas, agreed to buy from ARC about $8 million worth of tax credits ARC expected to receive from the IRS, according to its lawsuit.

The purpose was for ARC “to get cash quickly” to make it look better to the potential buyer. In turn, ARC would repay Angelica when it received the funds from the IRS, according to the lawsuit.

ARC received $8 million from the IRS on Dec. 2, but ongoing efforts by Angelica to collect the money failed, and by mid-December, ARC told Angelica its deal to sell the company had fallen through and it was attempting to negotiate a sale with a new buyer, the lawsuit said.

Angelica said that despite repeated attempts, it has not been able to confirm ARC’s claim that a new, “supposed” buyer has agreed to advance enough money to restore funds in the court-ordered account to preserve money owed the trust company.

In addition to asking the judge to find ARC and its owners in contempt of court, it asked the judge to order ARC’s remaining funds to be placed in an account controlled by the court or into a third-party escrow account, with funds to be released only with the judge’s approval.

“At this point, (ARC) cannot be trusted to comply with the injunction and the only practical means of ensuring compliance appears to be to remove the funds from their control,” said the letter to the judge from Clifford Chance, a lawyer with the New York firm representing Angelica.

Meanwhile, the New York lawyers representing ARC have asked the court’s permission to withdraw from the case, citing a “fundamental disagreement” with their clients. Also, ARC “failed to cooperate in the representation and rendered the representation unreasonably difficult,” lawyers with Seyfarth Shaw said in a motion filed Jan. 26.

The case is scheduled for a hearing Thursday at 10 a.m. in federal court in New York.

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