This article has been updated to incorporate additional reporting.
The Oregon Department of Justice and Oregon Health Authority have sued a Klamath Falls recovery services provider over misspent Measure 110 funds for the second time in four months after the nonprofit transferred a piece of property to a lawn care company in what state lawyers claim amounted to an effort to dodge collection efforts.
The suit against Red is the Road to Wellness amounts to the latest manifestation of problems with the rollout of Measure 110, the voter-approved decriminalization measure that opened a spigot of funding for addiction and recovery services overseen by a state oversight council that lacked support. Under the measure the state provided more than $2 million of grant funds to the nonprofit Red is the Road to Wellness, which was formed in 2008 to help people with substance use disorders with housing, counseling and training.
Lawmakers have since passed legislation that made improvements to oversight of the measure's spending. Earlier this year they also rolled back decriminalization of drugs like meth and fentanyl.
The founder of Red is the Road to Wellness, William Barnes, died in September 2023. Months before that, when asked about the state’s concerns, he told The Oregonian/OregonLive that Measure 110 “has been a learning experience for everybody involved, including our organization.”
New leadership of the nonprofit could not be reached for comment on the suit. In the past, leadership of the nonprofit has repeatedly declined to comment on the state’s decision to terminate its grants and collect unspent funds, according to the Oregon Capital Chronicle and other media outlets.
With the Klamath Falls provider, the state concluded the nonprofit had failed to make required reports and also mismanaged funds by, among other things, purchasing a building for housing for far more than was authorized. The Oregon Department of Justice terminated its funding and made repeated demands for repayment. The state filed its first lawsuit against the provider in May 2024. In August 2024, that first debt collection suit resulted in a default judgement against the provider of nearly $2.1 million, growing at a rate of interest of about 9% per month.
On August 14, 2024, two days after the state mailed default judgment documents to the group, the group conveyed property to a lawn care company owned by a man listed on the nonprofit's filing as secretary, according to the suit. The nonprofit had paid $165,000 for the property three years ago, but sold it to the lawn care company for $77,000, according to the suit, with no title company involvement. The new state lawsuit accused the nonprofit of transferring the land “with intent to delay and defraud” the state.
The man named in the suit as the lawn care company owner told The Lund Report that he had worked for the nonprofit, but never served on its board or as secretary. However, he defended the purchase as legitimate, saying he deemed the property as worth only about $100,000 before damage to the building on the property reduced its value further. He said that the nonprofit laid off all its employees after Barnes’ death.
