The US Department of Justice filed a lawsuit against Gov. Kathy Hochul’s administration Tuesday claiming it rigged the bids on an $11 billion Medicaid homecare program — allowing a handpicked company to siphon off millions in taxpayer money.

State Health Commissioner James McDonald and Medicaid Director Amir Bassiri are both named in the lawsuit which lays out startling new allegations that claim Hochul’s administration schemed to consolidate payroll services for nearly 250,000 homecare recipients under Public Partnerships LLC and moved forward with the disastrous transition despite clear warning signs of the coming chaos.

“New York’s failure to police a favored vendor that unlawfully siphoned millions of dollars of Medicaid funding is egregious and betrays the public trust,” Brett A. Shumate, assistant attorney general for the Department of Justice’s Civil Division, wrote in a statement.

“The Justice Department is acting to ensure that federal laws regarding truthful statements and fair dealing in federal health care programs are upheld and to prevent additional harm from being exacted against the public by PPL and New York,” Shumate added.

Hochul is not directly accused of wrongdoing in the 55-page complaint filed in US District Court Eastern District of New York but snippets of emails between her office, the health department and PPL uncovered by federal investigators show she was actively involved in not only the transition process, but also the awarding of the bid to the company.

“As late as Tuesday, September 17, 2024, Defendant BASSIRI was part of last-minute email exchanges with DOH’s counterparts in other states in which DOH officials stated that under ‘pressure from our Governor’s Office,’ they were trying to determine whether other bidders—at least one of whom ended up being a qualified bidder—were actually performing FI services in other states and were therefore qualified bidders,” the lawsuit notes.

Several months later, after PPL had been awarded the bid, the company’s own reps proposed to DOH that it extend the timeframe needed to transition CDPAP recipients and caregivers to its own platform from three months to nine months as it rushed to hire staff.

But Hochul’s office refused to extend the timeline, according to internal emails from a “DOH principal” included in the complaint.

“I wanted to give you a heads up that Chamber is coming in hard on the SFI [Statewide Fiscal Intermediary] launch, they really aren’t entertaining options to move off of a path that gets this done by 4/1. We will not be advancing statutory or regulatory changes [to extend the CDPAP transition timeframe] at this time,” the DOH staffer wrote.

Over the next few months, Hochul’s office was actively involved in downplaying the seriousness of the transition disaster as thousands of disabled New Yorkers spent hours dealing with horrible customer service problems as they tried to keep their caregivers paid.

On Jan. 13, 2025, a week after the transition window opened, only 43 of the 214,000 people in PPL’s system had completed, per PPL records unveiled in the lawsuits.

Three days later, McDonald wrote in a statement saying “the facts and data show that the transition is proceeding efficiently and effectively.”

“New York’s backroom deal with PPL has cost taxpayers millions of dollars and cast countless Medicaid patients to the curb,” Colin McDonald, assistant attorney general for the Justice Department’s National Fraud Enforcement Division, wrote. 

“Today’s action is the latest reminder that the Justice Department is mobilizing every available tool to protect taxpayer-funded programs from fraud and corruption,” he added.