Community Options Lawsuits: Medicaid Fraud, Wages, and Privacy

Community Options, Inc., a Princeton-based nonprofit that serves people with intellectual and developmental disabilities, has been the subject of several significant legal actions. The most consequential Community Options lawsuits include a roughly $5 million federal and state Medicaid fraud settlement finalized in March 2025, a proposed wage-and-hour class action filed in Brooklyn in 2020, and a $25,000 personal injury settlement approved in Pennsylvania in early 2025. Regulators have separately scrutinized how the organization spends its Medicaid revenue.

The $5 Million Medicaid Fraud Settlement

On March 26, 2025, the U.S. Attorney’s Office for the Southern District of New York announced that Community Options, Inc. and its subsidiary Community Options of New York, Inc. would pay approximately $5,016,626 to resolve allegations that they billed New York Medicaid for day habilitation services that never met program requirements.¹ The federal government took roughly $2.15 million of the total; New York State received about $2.87 million.²

The case started as a whistleblower action filed under seal on June 15, 2020, by a relator identified as SCOIF LLC (Case No. 20-cv-4684). New York’s Office of the Attorney General partially intervened in November 2024, and the whistleblower was entitled to 19% of the state’s share of the recovery.²

What Community Options Admitted

The settlement covers conduct from January 1, 2017, through September 13, 2024, involving services in Manhattan, Brooklyn, and Queens. Community Options admitted it billed Medicaid for day habilitation services that fell short of the frequency and duration required by the New York State Office for People With Developmental Disabilities. It also admitted it did not keep the documentation state rules demand, including daily service notes, monthly summaries, individualized life plans, staff action plans, and annual eligibility determinations.³

The more serious conduct came in January 2022. According to the Attorney General, a non-routine internal review found that monthly summary notes were missing for dozens of clients across all three boroughs, affecting hundreds of claims. Instead of reporting and refunding the resulting overpayments, a senior employee directed staff to create the missing notes after the fact and backdate them, in some instances by as much as a year.³ The organization also admitted it had failed to conduct routine audits of its documentation or to adequately train staff on compliance.²

What Comes After the Payment

The settlement is not just a check. Community Options entered a five-year Corporate Integrity Agreement with the HHS Office of Inspector General effective March 25, 2025, running to March 2030.⁴ Under the New York agreement, the organization must bring its day habilitation services into compliance with state regulations, cooperate with any continuing state investigations by producing records and making current and former employees available for interviews, and refrain from seeking Medicaid reimbursement for costs tied to the investigation or defense. If it misses a payment and does not cure within seven days, the state can rescind the deal and pursue a consent judgment for the full amount.²

Brooklyn Overtime Class Action

A separate proposed class action filed November 23, 2020, in the U.S. District Court for the Eastern District of New York accuses Community Options, Inc. and Community Options New York, Inc. of shaving hours off employee timesheets. The case, Garcia v. Community Options, Inc. et al. (Case No. 1:20-cv-5711), was brought by former program manager Juana Garcia.⁵

According to the complaint, the executive director of the Brooklyn office manually edited clock-out times in the Kronos timekeeping system so records reflected the end of a scheduled shift regardless of when employees actually left. The alleged effect was to keep everyone’s hours at or below 40 per week on paper. Employees, the complaint says, routinely worked past their shifts while searching for parking after transporting clients, waiting on paperwork, or returning company vehicle keys. Garcia says she was fired in September 2020 after repeatedly complaining to management.⁶

The proposed class would cover hourly employees at the Brooklyn location who worked more than 40 hours in a week without proper pay, reaching back six years under New York Labor Law and three years under the federal Fair Labor Standards Act. The available record does not show a ruling or resolution.

Pennsylvania Personal Injury Settlement

A smaller matter, Marques v. Community Options, Inc. et al. (Case No. 5:24-cv-04577), was filed in the Eastern District of Pennsylvania. On February 24, 2025, Judge Jeffrey L. Schmehl approved a settlement in which Community Options agreed to pay $25,000 to the guardian of the estate of Maria Marques.⁷ The underlying facts of the case are not part of the public record reviewed here.

New Jersey Comptroller Findings on Medicaid Spending

Not every legal-adjacent scrutiny of Community Options is a lawsuit. In February 2026, the New Jersey Office of the State Comptroller completed a limited-scope audit of a Community Options group home in Parsippany covering the 2024 calendar year. On the compliance items examined, billing documentation, background checks, training records, and handling of residents’ personal funds all met requirements.⁸

What the Comptroller flagged was spending. Of roughly $78 million in annual New Jersey Medicaid revenue tied to serving 426 people across 138 group homes, about 61% went to direct care staff, 29% to administrative expenses, and 10% to profit. At the audited Parsippany home, only 57% of $953,000 in Medicaid revenue went to direct care, with 25% going to administration and 18% recorded as profit. Those ratios are well above the 12% administrative-and-profit benchmark modeled in a 2014 state rate-setting study. The Comptroller noted that no current regulation caps the split between direct care and overhead, so no corrective action was required.⁸

Executive pay has drawn attention alongside those figures. According to IRS Form 990 filings compiled by ProPublica’s Nonprofit Explorer, compensation for founder and CEO Robert Stack grew from roughly $713,000 in fiscal year 2014 to approximately $2.56 million in fiscal year 2025.⁹ An NJ Advance Media analysis of IRS records identified Stack as the highest-paid CEO among New Jersey group home providers, citing $2.37 million in 2023 compensation.¹⁰

2026 Data Privacy Incident

Community Options disclosed a phishing incident on its website in early 2026. Between January 22 and January 27, 2026, an email phishing attack gave an unauthorized party access to employee email accounts. On March 18, 2026, the organization determined the accessed emails contained patient information, including names, dates of birth, Social Security numbers, diagnoses, medications, and insurance details. Notification letters were mailed to affected individuals starting May 15, 2026, and a dedicated response line was made available for inquiries.¹¹ No litigation stemming from the incident appears in the record.

A Note on Name Confusion

Search results sometimes surface Christensen v. Miner, a Utah class action about moving people with intellectual and developmental disabilities out of private Intermediate Care Facilities. That case involves the State of Utah, not Community Options, Inc., and the “community options” language in coverage refers to community-based living rather than to this organization.¹²

1
HHS Office of Inspector General. Acting US Attorney Announces $5 Million False Claims Act Settlement With Providers of Programs for Adults With Developmental Disabilities
2
New York Attorney General. Community Options Inc. and Community Options of New York Inc. Settlement
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New York Attorney General. Attorney General James Recovers Over $5 Million From Nonprofit for Failing to Serve New York City Residents With Developmental Disabilities
4
HHS Office of Inspector General. Community Options Inc. and Community Options of New York Inc. Corporate Integrity Agreement
5
ClassAction.org. Garcia v. Community Options Inc. et al. Complaint
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ClassAction.org. Class Action Claims Community Options Owes Workers Unpaid Overtime Due to Time Shaving Practices
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PACER Monitor. Marques v. Community Options Inc. et al.
8
New Jersey Office of the State Comptroller. Community Options Inc. Closing Report
9
ProPublica Nonprofit Explorer. Community Options Inc. Form 990 Filings
10
New Jersey Treasury. Are They Making Too Much
11
Community Options. Notice of Data Privacy Incident
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Disability Law Center. Class Action Lawsuit Community Integration for People With Disabilities