
The Giant, Under Attack - QAPereo
https://www.nytimes.com/interactive/2017/12/27/business/drug-addiction-rehab.html
======
danso
> _Following Mr. Hill’s advice, Mr. Drose flew to California in the spring of
> 2015. He may have been working for a major hedge fund, but he was so young —
> still only 20 — that he had to pay extra to rent a car._... _Mr. Hill
> thought the college kid was an investigative reporter. So he was thrilled to
> have someone to listen to his concerns about the treatment business._

Until I moved to New York, I had no idea what hedge fund people generally did,
or how much of their work and skillset was similar to what investigative
journalists did, especially when it came to looking at public records and
lawsuits. Indeed, the litany of alleged mishaps and deaths that short-sellers
found while investigating American Addiction Centers -- including the man in
the lead anecdote -- could easily be the core of an investigative project.
e.g. what's described under the subhed, "Open Beds and 'Closing a Sale'"

> Mr. Drose returned to Kingsford’s offices in Atlanta, took over a glass-
> enclosed conference room, and made piles of documents related to each death.
> None of the deaths had been disclosed to investors when the stock of
> American Addiction Centers began trading publicly.

> _The dead included Shaun Reyna, an alcoholic, who killed himself with a
> shaving razor in one of the company’s treatment houses. Mr. Reyna’s widow
> said in a 2014 lawsuit that the staff had ignored signs that her husband was
> suffering withdrawal symptoms that required urgent medical care. The case is
> expected to go to trial early in 2018.

> _There was also Gregory Thomas, who hanged himself from a bridge one block
> from the company’s main office in Temecula in November 2010. He had been
> brought to the office by a company employee, but never went through with the
> treatment...*

> _But the circumstances of Mr. Benefield’s death, as detailed in a lawsuit
> his wife brought in 2011, stood out._

~~~
IronKettle
Also worth noting that this was somewhat of a plot point in _The Big Short_ :

* A GS employee scoffs at Christian Bale's character (Burry) for saying that he actually investigated the mortgages that comprised a few CDOs

* Steve Carrell's team goes down to Miami to meet realtors and mortgage buyers

~~~
shostack
That was one of the best scenes in the movie IMHO. Personally, I also had no
idea that level of investigation took place. This strikes me as similar to how
energy trading firms will pay for thermal imaging data of power lines and such
to gain an edge, or how other companies look at satellite imagery of parking
lots to predict retail performance.

------
Bartweiss
> _[Chris Drose] wrote an article about his findings on a website called
> Seeking Alpha, which short sellers frequent for investment tips. The
> company’s stock promptly dropped 10 percent._

Drose is a professional short-seller. Assuming he was already shorting AAC, it
looks like he turned a substantial profit not on the company's weakness but on
his ability to publicize it among traders.

"Short and distort" is securities fraud, the mirror practice of "pump and
dump". There's no particular sign that Drose distorted the situation, but I'm
curious where the lines are.

Does anyone know whether misinformation is required for this practice to rise
to fraud? I assume totally-factual statements about a company would be safe,
but I can imagine a lot of grey areas around opinion or hypothetical
statements. If a political writer shorts a company, then starts loudly calling
for it to be regulated or investigated, is that fraud? How about if a
politician does so, without introducing a law?

~~~
taneq
The 'pump' side of 'pump and dump' doesn't have to be misinformation, does it?
Can't it just be a barrage of PR puff pieces?

I'd expect the same here. The information doesn't have to be false for it to
be a hit piece designed to profit the stock-shorting author.

~~~
dragonwriter
> The 'pump' side of 'pump and dump' doesn't have to be misinformation, does
> it?

Usually, it's _disinformation_ , not _misinformation_ , but it is possible or
it to be lies of misdirection and omission rather than direct falsehoods,
which may or may not literally constitute disinformation.

> The information doesn't have to be false for it to be a hit piece designed
> to profit the stock-shorting author.

Certainly, if you short based on not-yet-widely known true information, you
want to ensure that the market discovers that information between the time
that you get into the short position and the time you have to cover the short.

OTOH, trying to get the market to recognize and react to true information
isn't really a “hit piece”.

~~~
jdietrich
The common law definition of fraud is an act of _deliberate deception_ for the
purposes of _personal gain_. Both elements must be true for an act to
constitute fraud. If you say "I'm shorting x stock because of y" and you
reasonably believe y to be true, then you're almost certainly acting lawfully.
If you don't hold a position, you can say what you like about a company
without the risk of committing fraud, because you don't stand to gain from
your actions (although you may be guilty of libel). If you make public
statements about a company and fail to disclose a financial interest, there's
an inherent element of deception, regardless of the truthfulness of your
statements.

------
frgtpsswrdlame
This is usually the kind of story that gets me all riled up, top-down
corporate pressure puts bottom-rung workers between a rock and a hard place
where they make the wrong decision. That decision cost a life and then
everyone blames the workers at the bottom and never changes the companies
practice. Then you add in it's taking advantage of our screwed up health
system to overcharge insurance and it's preying on the weak, this is my stuff.

However most of those deaths were suicides and there's only one that wasn't.
It's tragic but if in the total life of this company they've only had one
accident like this and it's not re-occurred and they cleared up any
discrepancy with their workers about what sort of existing medical conditions
they can handle then I have a harder time engaging my righteousness.

~~~
Bartweiss
Suicides, yes, but Reyna's at least seems like a special case - even compared
to other inpatient systems. Acute alcohol withdrawal is horrible, and can even
be directly fatal.

If an addiction treatment facility overlooked that or declined to provide
urgent care, I'd impute a significant role to them even in a patient suicide.
It's like hearing that someone committed suicide after a hospital ignored
their need for pain relief - they may not be responsible for the death, but
they're responsible for neglecting a serious need of someone in their care.

------
tptacek
The analyses about drug testing reimbursement alluded to earlier in the
article is interesting; here's a source that alludes to the original Drose
Seeking Alpha analysis, but purports to improve it:

[https://www.valueinvestorsclub.com/idea/American_Addiction_C...](https://www.valueinvestorsclub.com/idea/American_Addiction_Centers/138105)

The nut of it is: treatment centers make more top-line dollars from treatment
than testing, but the margins on testing (which takes just minutes to do and
scales much better than delivering treatment) are so much better that the
bottom line is dominated by testing revenue.

This creates an incentive to test more than is necessary; it's essentially a
vector for insurance fraud.

The original argument against AAC was that insurers would crack down on
fraudulent testing and put AAC out of business.

~~~
tinymollusk
AAC owns its testing facilities, so their margins are much better.

I have quite a bit of knowledge, having worked in this industry for a few
years for one of the largest providers. The industry is a weird mix of small
do-gooders and people at the top who purport to do good, but their actions
belie that.

Addiction treatment is insanely expensive and incredibly unsuccessful. (Part
of that is insurers will generally pay for a much shorter length of stay than
is shown to be successful).

It's a dirty industry, run by people who tell themselves they're good people
but in reality are incredibly exploitative of a very vulnerable population. At
the same time, most of my colleagues are/were decent people.

It's amazing how something bad can grow from good intentions.

------
soared
Every angle of this story is unpleasant - deaths in/related to rehab, hedge
fund managers trying to promote murder charges against employees, attacking a
business in order to drive profit.

~~~
touristtam
> On Facebook, years after he died, Ms. Benefield wrote, “I miss him so much.”

At least it ends on a honest and very human touch. Sad that health should be
treated as a business.

------
EGreg
_America is convulsed by an addiction crisis — painkillers, heroin,
alcoholism, meth — and its victims die with tragic regularity. But Mr.
Benefield’s case is extraordinary._

This made me think of all the jokes people made about USSR Russians drinking
themselves silly because of bad times.

Is the USA like that too these days for many people?

~~~
cwbrandsma
Near as I can tell, every country is like that for some people. I have friends
that are alcoholics, they will drink themselves to death no matter what their
circumstances are like. One nearly died from not having a drink for a couple
days (lucky him, his mother and sister-in-law were both nurses).

I also have friends that are depressives, they feel everything is horrible not
matter what. As soon as Trump was elected one was having trouble leaving his
house because he was afraid one of his neighbors might be a Trump supporter --
ergo a closet "I HATE ALL THE THINGS" person.

~~~
llamataboot
There are substance abuse problems in all countries, yes. it does not follow
from this that the country doesn't matter. Social norms, access to treatment,
poverty/inequality, perceived hope about the future, etc are all functions of
particular policies as well.

See Portugal's response to a major opioid crisis versus the US response and
which one had better healthcare outcomes, etc. See the links between chronic
joblessness and substance abuse, etc.

------
Dangeranger
You can find the rest of the articles by Chris Drose on Seeking Alpha here[0]

[0] [https://seekingalpha.com/author/bleecker-street-
research/art...](https://seekingalpha.com/author/bleecker-street-
research/articles#regular_articles)

------
orbitingpluto
No one likes a story where the protagonist dies at the beginning and plot
resolution centers on which of the antagonists profit more over his death.

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jdietrich
I'm bookmarking this article, for the next time I see someone say that
financial speculation has no social value. When smart people have the
opportunity to make big bets against a company, we all stand to benefit.

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valuearb
This is a good article, but i always feel like i’m being taken for a ride by a
potentially biased author when they open with the main crime that they don’t
resolve till the end. This is written like muckraking, not journalism.

------
raviqqe42
Why don't you say Attack On The Titan?

~~~
cwbrandsma
There might be a trademark issue with using that phrase.

