MINNEAPOLIS — New information has emerged in the ongoing criminal fraud investigation into Twin Cities addiction recovery company Evergreen Recovery – and its owners, David Backus and Shawn Grygo.
Multiple sources confirm that a grand jury has convened at the Minneapolis Federal Courthouse. The grand jury, which meets in private, has begun issuing subpoenas, hearing testimony, and assessing evidence in the government’s criminal case against Evergreen Recovery.
The fraud allegations were first brought to light as part of KARE 11’s multi-part “Recovery Inc.” investigation which exposed Evergreen's owners living a lavish lifestyle – with expensive cars and travel on private jets – as their company billed millions of dollars to taxpayer-funded Medicaid for services clients and employees said were not always provided as claimed.
An FBI affidavit, unsealed after a July raid on the company’s offices, outlines the scope of the government’s investigation, which centers on “systemic fraudulent practices” within Evergreen Recovery. The affidavit details allegations of at least $28 million in fraudulent billing.
A significant portion of this alleged fraud is linked to what the FBI describes as illegal kickbacks between Evergreen Recovery and a related company, Second Chances Sober Living. This company, also owned by Backus, housed hundreds of Evergreen clients.
When KARE 11 first interviewed Evergreen’s management team in February 2024, they initially denied any connection between the treatment facility and the sober homes. Shantel Magadanz, Evergreen’s former Residential Director who later became Chief Clinical Officer with a salary of $703,000 per year, asserted that there was no affiliation between Evergreen and any sober homes.
“Evergreen doesn’t have any sober homes that are connected,” Magadanz said during the recorded interview.
However, insider documents obtained by KARE 11, including a Charting and Log Guide, instructed Evergreen employees to hide the sober home connection, stating, “Bottom Line: there should never be any reference to sober housing on your logs or in your chart notes.”
When KARE 11 investigative reporter A. J. Lagoe told Evergreen officials he’d seen a copy of the charting instructions and pressed further during the interview, their statements shifted.
While Evergreen’s leadership admitted to the existence of affiliated sober homes, they claimed the homes operated independently. David Backus stated, “We never connect housing with treatment – that would be a kickback and we don’t do it. So, they are two separate companies.”
The FBI affidavit of Special Agent Kurt Beulke contradicts those claims, asserting that there was no separation between the two companies.
According to the affidavit, “…clients are offered housing free of charge to induce them to agree to attend a certain amount of programming at Evergreen Recovery for which Evergreen Recovery can bill Medicaid. In turn, some portion of the health care billing proceeds from the client’s substance abuse treatment participation is kicked back to the entities providing housing to the clients, which are primarily owned or affiliated with Second Chances Sober Living.”
Further, the FBI affidavit alleges that Backus’ sober home company “does not have employees of its own and is operated primarily by Evergreen Recovery employees.”
KARE 11’s investigation also uncovered serious concerns about the legitimacy of the treatment services billed by Evergreen. Both workers and clients accuse the company of improperly billing taxpayers for treatment never provided, falsely billing group activities as if they were a series of individual interactions, and overstating the times spent on van rides to and from recovery treatment.
KARE 11’s reporting is cited in the FBI affidavit.
Evergreen’s owners vehemently deny any wrongdoing. In a heated interaction outside federal court, Shawn Grygo yelled at KARE 11’s Lagoe, “We didn’t steal millions of dollars bro – read the state statute. Have a good f***ing life.” David Backus added, “Everything you’ve said is false, everything you said is slander, and it will be unveiled in court, I can promise you that.”
Federal Judge Katherine Menendez froze Evergreen’s assets as part of a civil action against the company and ruled that “more likely than not” Evergreen Recovery, its owners and affiliated companies “engaged in an illegal and fraudulent scheme to bill Medicaid for substance abuse treatment services not provided” and in an “illegal and fraudulent kickback scheme” in violation of federal law.
Citing a breakdown in communication with her clients and their inability to pay, lawyer Manda Sertich who represented Evergreen and Shawn Grygo, requested to be removed from the case.
Court records show that on August 23, Judge Menendez granted that request.
The decision on whether to criminally indict the company and its owners now rests in the hands of a Federal Grand Jury.