WISCONSIN ADULT FAMILY HOME OWNER SENTENCED TO FEDERAL PRISON FOR $1.25 MILLION MEDICAID FRAUD SCHEME

MILWAUKEE, WISCONSIN — A former Wisconsin adult family home operator has been sentenced to 28 months in federal prison for stealing more than $1.25 million from a Medicaid-funded residential care program by submitting fraudulent claims for caregiver services that were never provided to disabled residents.

Lori Butts, 49, the former operator of the now-closed Lordan Care Adult Family Homes, received her sentence on October 22, 2026, before U.S. District Judge J.P. Stadtmueller. The court also ordered her to pay $1,253,920.47 in restitution to Medicaid, according to an October 28 announcement from the U.S. Attorney’s Office for the Eastern District of Wisconsin.

Butts admitted that between July 2019 and December 2020, she systematically billed the government for caregiver hours that her company never delivered. The fraudulent claims included charges for two workers supposedly assigned to provide continuous, individualized care to a single resident around the clock, even though those employees were not present to perform the services.

The residential program was designed to support Wisconsin Medicaid beneficiaries with disabilities who required supervised living arrangements. Residents were housed in multi-bedroom apartments with 24-hour caregiver supervision, while individuals requiring additional assistance could receive dedicated one-on-one support. These services were authorized separately for each beneficiary based on their care requirements, making accurate staffing records and billing essential to the program’s operation.

Federal prosecutors established that Butts’s facilities were severely understaffed during the fraudulent billing period. The homes also experienced frequent police involvement, including incidents in which insufficient staffing made it difficult to manage volatile or inappropriate resident behavior. The conditions demonstrated that the misconduct extended beyond improper financial transactions, affecting the availability of services intended for individuals with substantial care needs.

During sentencing, Judge Stadtmueller condemned the conduct as “reprehensible,” emphasizing that public funds had been paid for tens of thousands of hours of nonexistent caregiver services. He characterized the fraudulent billing as the “functional equivalent of grand larceny” and explained that a substantial prison sentence was necessary to deter similar offenses involving government healthcare programs.

First Assistant U.S. Attorney Brad D. Schimel announced the sentence, emphasizing that the stolen funds had been diverted from a program serving individuals who depended on publicly financed assistance. Federal investigators treated the misconduct as a serious breach of the financial accountability required of organizations entrusted with providing care to vulnerable populations.

The investigation was conducted by the FBI and IRS Criminal Investigation. FBI Milwaukee Special Agent in Charge Alan Karr identified the exploitation of publicly funded care services as a central concern, while Robert J. Kuszynski, Acting Special Agent in Charge of IRS Criminal Investigation’s Chicago Field Office, addressed the financial misconduct involving payments collected for services that were never performed.

Assistant U.S. Attorneys Carter B. Stewart and Zachary J. Corey prosecuted the case.

The prosecution illustrates the consequences of falsifying Medicaid reimbursement claims in residential care settings, where government payments are tied directly to authorized services and staffing requirements. Butts’s conduct deprived the program of funds while leaving residents without the level of professional assistance for which Medicaid had been billed.

There is no parole in the federal prison system.

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