A federal lawsuit accusing Addiction Recovery Care, or ARC, Kentucky’s largest treatment provider, of defaulting on an $8 million loan has a new twist.

Just two and a half weeks after Angelica Capital Trust sued the embattled provider, accusing ARC of refusing to repay the $8 million, a second company is seeking to join the case, arguing it has a prior claim to the money because it was the first to lend ARC a similar amount.

In both cases, the loans were secured through about $8 million in federal income tax credits ARC was to receive last year, said the filing Jan. 28 in U.S. District Court in New York by Clear Cove Opportunities Fund.

ARC sold the “very same” tax credits to both financial firms, which buy such credits from businesses that are “in need of immediate liquidity,” said Clear Cove’s filing. In turn, businesses repay the firms with interest when they receive the money from the Internal Revenue Service.

ARC sold the same credits to Clear Cove in July and again, to Angelica in November, Clear Cove’s filing said. It is seeking to intervene in the lawsuit to protect its claims, it said.

“ARC has now been exposed as having perpetrated fraud in attempting to sell Clear Cove’s property (the tax credits) to another investor,” said the filing by the Chicago-based Clear Cove.

ARC in December received $8 million in tax credits but has repaid neither company, according to court filings. Both are asking the federal judge to freeze funds to keep ARC from dissipating what’s left of the $8 million.

ARC spokeswoman Vanessa Keeton provided a brief response in an email after the Kentucky Lantern asked for comment.

“A lawsuit only represents one side’s perspective,” ARC spokeswoman Vanessa Keeton said in an to the Kentucky Lantern. “We aren’t going to litigate our case in the media and will not comment on pending litigation.”

The litigation appears to be another major hit for the Louisa, Ky-based company, already the subject of an ongoing FBI investigation into possible health care fraud and facing mounting financial problems that have forced it to close facilities and lay off staff.

[Editor’s Note – Businesses in Louisa backed by ARC including the downtown theater, the Millard School , the welding center, and all the recovery centers are all in danger of closing their doors if ARC owners cannot find other financial help. Louisa mayor Harold Slone gave a four letter answer when asked how the city will be affected: “We’ll get over it” he said.}

Clear Cove firm’s court filing comes as Angelica is asking U.S. District Judge George B. Daniels to hold ARC and its owners, Tim Robinson and his wife, Lelia, in contempt of court for spending assets Angelica says it is owed.

The court had scheduled a hearing on the matter for today but the online docket shows the hearing is now scheduled for Feb. 11. Meanwhile, the judge on Thursday issued an order for ARC to place $4.7 million in an escrow account and update the court daily on the account balance to “ensure the funds have not been dissipated.”

Angelica, based in the Bahamas, has alleged ARC is on “the brink of insolvency” and has threatened to file for bankruptcy if forced to repay the funds.

“ARC has explicitly threatened to go into bankruptcy absent some prayed-for asset sale to a third party, which does not appear at all likely,” its lawsuit said.

ARC had claimed it was negotiating to sell the company and needed the $8 million advance from Angelica to “get the deal done and survive,” Angelica’s court filing said. But the proposed sale, which ARC announced in October, fell through last month, the company announced.

It is among a series of setbacks for ARC, once Kentucky’s fastest-growing provider of treatment for drug and alcohol addiction.

ARC was founded in his native Eastern Kentucky by Tim Robinson, a lawyer and recovering alcoholic. The for-profit company grew rapidly in recent years, fueled by an expansion in Medicaid payments for such treatment and Robinson and his company emerged as prolific political donors.

But ARC has foundered in recent months amid fraud allegations and cuts in reimbursement from insurers who pay Medicaid claims and had questioned what they described as aggressive billing practices.

Angelica, in a court filing, said ARC engaged in “massive fraud” by submitting millions of dollars in false claims to Medicaid and Medicare, both government health plans.

It said ARC, to attempt to resolve an ongoing federal investigation, has negotiated a proposed settlement with the U.S. Department of Justice to pay the government $27.7 million, $16 million of which is restitution.

According to the proposed settlement, which Angelica filed in court, the federal investigation began after some individuals filed a “qui tam,” or whistleblower lawsuit alleging fraudulent practices by ARC. Such cases typically are sealed while the government investigates.

Allegations under investigation include that ARC and its affiliates falsified medical records, billed for services already paid for by other programs, provided and billed for “medically unnecessary services” and unlawfully distributed certain medications used to treat addiction.

“This settlement agreement is neither an admission of liability by the ARC entities nor a concession by the United States that its claims are not well-founded,” it said.