NEW YORK – August 22, 2026 (STL.News) — Medicaid Fraud Scheme – Four alleged members of a Bronx-based organization known as the “War Room” have been charged in a sprawling federal racketeering case that prosecutors say combined more than $12 million in fraudulent Medicaid claims with drug distribution, kickbacks, money laundering, firearms offenses and violence against rivals.
The U.S. Department of Justice announced Thursday, Aug. 20, that a nine-count indictment had been unsealed against Louis Trejo, also known as “Machete”; Kenneth Garner, also known as “KG”; Harold Stevenson, also known as “Bazz”; and Erihk Belis, also known as “Eddie.”
Federal prosecutors allege the defendants participated in a racketeering organization that manipulated Medicaid-funded transportation services for patients attending methadone clinics in New York City.
According to the indictment, members of the organization allegedly fabricated transportation records to support at least $12 million in fraudulent Medicaid claims, while paying patients recurring kickbacks that included cash and drugs.
The allegations go significantly beyond a conventional health care billing fraud case.
Prosecutors say members of the organization laundered millions of dollars generated through the alleged scheme and used violence to protect and expand their operation, including an armed home invasion targeting the leader of a rival fraud organization in New Jersey.
The defendants have been charged, not convicted. The indictment allegations must be proven beyond a reasonable doubt in court.
Medicaid Fraud Scheme – DOJ alleges fake Medicaid transportation rides
At the center of the federal case is Medicaid’s non-emergency medical transportation benefit.
Such transportation can be critical for Medicaid beneficiaries who need regular medical treatment but otherwise have difficulty traveling to appointments.
Federal prosecutors allege members of the War Room exploited that system by generating false transportation data connected to Medicaid patients traveling to and from methadone clinics in the Bronx.
The Justice Department said the defendants allegedly logged fake rides and used the fabricated transportation information to support fraudulent Medicaid reimbursement claims.
Reporting on the indictment indicates the alleged operation ran from at least 2023 through at least 2025. Investigators say participants recruited Medicaid patients at methadone clinics and allegedly used technology, including smartphones and GPS-spoofing software, to create records for transportation that had not actually occurred.
The alleged manipulation of transportation records allowed fraudulent claims to appear as legitimate Medicaid-funded rides.
Prosecutors say the organization then used part of the proceeds to maintain access to Medicaid beneficiaries whose identities or transportation benefits were central to the alleged fraud.
Medicaid Fraud Scheme – Patients allegedly received cash and drugs as kickbacks
The indictment also alleges that patients were offered recurring kickbacks.
Those payments allegedly included both cash and narcotics.
The Justice Department said members of the War Room paid Medicaid patients in cash and drugs as part of the scheme involving fraudulent transportation claims.
That allegation adds another dimension to the case because the transportation involved patients receiving treatment at methadone clinics.
Assistant Attorney General Colin M. McDonald of the Justice Department’s National Fraud Enforcement Division said the allegations demonstrate what federal authorities described as a troubling connection between benefits fraud and violent criminal networks.
McDonald said the defendants are accused of targeting vulnerable patients, defrauding a health care program and resorting to violence to protect their alleged operation.
The case comes as the Justice Department has increased its focus on fraud involving federal benefit programs.
The department established its National Fraud Enforcement Division in April 2026, and health care fraud has been one of the areas receiving increased federal attention. In June, federal authorities announced a national health care fraud takedown involving 455 defendants and more than $6.5 billion in alleged fraudulent claims.
Medicaid Fraud Scheme – Prosecutors allege violence against rival fraud operation
One of the most serious aspects of the War Room case concerns allegations that the defendants used violence to protect and expand their operation.
Federal prosecutors allege Trejo, Garner and other members of the organization participated in violence directed at competitors.
The indictment specifically references an alleged armed home invasion on Jan. 12, 2024, in Teaneck, New Jersey.
According to the Justice Department, the victim led a rival fraud organization.
Prosecutors contend the alleged home invasion was connected to the defendants’ efforts to protect or expand the War Room’s racketeering activities.
The allegation matters because it shifts the government’s case from one centered solely on fraudulent Medicaid billing to a broader racketeering prosecution involving accusations of organized criminal activity.
The nine-count indictment includes allegations involving racketeering, violence in aid of racketeering, firearms, fraud, narcotics and money laundering offenses.
No court has determined that the defendants committed those crimes.
Medicaid Fraud Scheme – Millions in alleged proceeds were laundered
Federal authorities also accuse the organization of laundering millions of dollars generated by the alleged Medicaid scheme.
Money laundering is frequently an important component of major fraud prosecutions because investigators attempt to determine not only how allegedly fraudulent proceeds were obtained but how defendants moved, concealed or converted the money after receiving it.
The Justice Department alleges that millions of dollars in proceeds from the War Room’s operation were laundered.
Authorities have not characterized the case simply as isolated false claims submitted to Medicaid.
Instead, prosecutors describe an organized operation that allegedly combined health care benefits fraud with narcotics activity, financial crimes and violence.
The HHS Office of Inspector General has also listed the case among its Aug. 20 criminal and civil enforcement actions, confirming its involvement in the government’s broader health care fraud enforcement effort.
Medicaid Fraud Scheme – Three defendants arrested, one remains at large
Trejo, Garner and Belis were arrested Thursday morning, the Justice Department said.
They were expected to appear before U.S. Magistrate Judge Robert W. Lehrburger in Manhattan federal court.
The case has been assigned to U.S. District Judge John G. Koeltl.
Stevenson remained at large when federal authorities announced the indictment Aug. 20.
The prosecution is being handled in the Southern District of New York as part of a multi-agency investigation involving federal and state law enforcement authorities.
The case illustrates the increasingly complex nature of federal health care fraud investigations, particularly when investigators believe allegedly fraudulent billing is connected to organized criminal activity.
Medicaid Fraud Scheme – Medicaid fraud remains a federal enforcement priority
Medicaid is jointly financed by federal and state governments and provides health coverage to millions of Americans, including low-income adults, children, pregnant women, elderly adults and people with disabilities.
Fraudulent claims can divert money intended to pay for legitimate health services and increase costs for taxpayers and government programs.
Federal investigators have consequently devoted substantial resources to identifying suspicious billing patterns, kickbacks, and organizations that allegedly exploit government health care programs.
HHS-OIG’s current enforcement records show numerous criminal and civil health care fraud cases announced during August alone, involving home health care, wound care, Medicare Advantage, pharmacies and other health care services.
The War Room indictment is unusual because prosecutors allege that fraudulent Medicaid billing was only one component of a broader criminal enterprise.
According to the government, the organization allegedly fabricated transportation records, used cash and drugs to maintain participation by Medicaid beneficiaries, laundered the proceeds and resorted to violence when dealing with competitors.
Those remain government allegations.
Medicaid Fraud Scheme – Technology allegedly helped generate fake ride records
The case also highlights the challenge that technology can create for agencies administering transportation benefits.
Reporting based on the federal allegations says participants allegedly used GPS-spoofing technology to generate transportation records that made nonexistent rides appear legitimate.
Location information can be an important tool for documenting whether a transportation provider actually completed a trip.
But if location data can be manipulated, investigators and health care agencies may need to compare multiple forms of information — including patient records, billing information, vehicle data and other electronic evidence — to identify potentially fraudulent claims.
Federal health care fraud enforcement increasingly relies on data analytics to identify unusual billing patterns across large government programs.
The Justice Department’s expanded fraud enforcement effort has emphasized using federal and state cooperation and data sharing to identify suspected schemes.
What happens next
The federal prosecution will now move through the Southern District of New York.
If the case proceeds to trial, the government must establish the defendants’ individual roles and prove the charged offenses beyond a reasonable doubt.
The indictment itself is not evidence of guilt.
The case may also provide additional information about how prosecutors believe the alleged organization operated, how the fraudulent transportation claims were generated, and how much Medicaid ultimately paid based on the allegedly fabricated records.
For federal investigators, the prosecution is another part of a broader effort to combat fraud in taxpayer-funded health programs.
For Medicaid administrators, the allegations underscore a different concern: fraud involving routine services such as transportation can become highly organized and potentially involve criminal conduct far beyond inaccurate billing.
In this case, prosecutors allege more than $12 million in fraudulent claims were connected to an organization that also distributed drugs, paid kickbacks, laundered money and used violence against rivals.
The federal judicial process will now decide whether prosecutors can prove those allegations.
Primary source: U.S. Department of Justice announcement and indictment summary. The HHS Office of Inspector General separately lists the matter as an Aug. 20, 2026, criminal enforcement action.
An indictment contains allegations only. Louis Trejo, Kenneth Garner, Harold Stevenson and Erihk Belis are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
