California behavioral health system to close, lacks funds to pay employees

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Amid worsening financial troubles and an ongoing federal investigation, San Clemente, Calif.-based addiction treatment provider Sovereign Health will close its doors and is unable to pay employees, according to a memo sent to staff obtained by The Orange County Register.

Here are four things to know:

1. "Sovereign Health experienced a substantial downturn in revenue over the past year. While we attempted to secure funding to keep the business operating, we've been unsuccessful," Sovereign CEO Tonmoy Sharma wrote in a July 5 letter to employees, according to The San Clemente Times. "At this point, given the lack of resources to make payroll over this extended period, I cannot, in good conscience, ask you to continue working for no pay."

2. While the company doesn't have money to pay employees it's working with California's Labor Department to meet payroll obligations, the letter states.

3. Sovereign Health has been under scrutiny since reports surfaced that the provider was overcharging insurers. In one case, Sovereign billed more than $100,000 for one month's worth of urine tests for a patient, according to The Orange County Register.

4. The closure announcement comes amid a federal investigation. In June 2017, FBI agents raided Sovereign's headquarters and several other locations, including Mr. Sharma's house and a toxicology lab. Federal regulators have not disclosed the reason for the raid.

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