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Representative Recent Prosecutions of Nursing Homes and the Individuals that Own and Operate Them

Last Updated: July 16, 2012

As discussed more fully in a related article regarding the current healthcare regulatory compliance environment as it relates to nursing homes, Federal and State governmental agencies have targeted nursing facilities, as well as their owners, operators, executives and administrators, with unprecedented aggression.  Most often through qui tam lawsuits – which incentivize current and former employees to report questionable activity by, inter alia,awarding whistleblowers with a substantial percentage of monies collected in proceedings – the authorities utilize an array of statutes to bring criminal and civil actions against companies and individuals.

As is evident from the barrage of recent prosecutions, a sampling of which is highlighted herein, the United States Attorney’s Office (“USAO”), the Office of Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”), the Department of Justice (“DOJ”), states’ Attorneys General (“AG”), states’ Medicaid Fraud Control Units (“MFCU”) and others have established an undeniable trend of fierce enforcement of the many operative rigorous regulations with which a nursing facility must comply.  The pervasive legal pursuit of nursing homes and the individuals who own and operate them – which have focused on various forms of fraud, substandard care, theft, kickbacks, larceny, tampering with records, billing practices, embezzlement, neglect and abuse, employee selection, misappropriation, tax evasion and obstruction of justice – have resulted in prison sentences in excess of 25 years, ordered payments in the tens of millions of dollars and exclusions from participation in healthcare programs that are permanent and unappealable.  And in light of the extraordinary additional resources the government has invested in compliance enforcement in the last couple of years and the impending implementation of various facets of the recent Patient Protection and Affordable Care Act of 2010 health reform law, those holding key positions in nursing homes face an exponentially greater risk of legal action – and at far graver consequence – than ever before.

Below is a brief abstract of more than 50 recent cases (35 since 2011) in which Nursing Homes and/or their owners, operators, administrators or managers have faced sanctions—often criminal and involving the sentencing of the individuals involved to jail terms.  The cases are organized by alleged misconduct; although there is significant overlap, as numerous entities and individuals were charged with multiple separate offenses.

For assistance in structuring a practical and effective eight-part Compliance and Ethics Program as mandated by the 2010 Healthcare Reform law (PPACA); federally-required Governing Body services; Professional Liability litigation management; Employee Compliance support; Crisis Management; and/or Spokesperson Services, please contact us at (888) 99-RYTES or info@rytescompany.com.[1]

Improper Scoring/Upcoding

Eufemia Fe Salomon-Flores; Glen Island Center for Nursing and Rehabilitation

A former administrator at a Westchester, NY nursing home was sentenced in January 2012 to 1-3 years in state prison and signed a confession of judgment on the $2.2 million she admitted to defrauding from Medicaid.  Eufemia Fe Salomon-Flores pleaded guilty to one count of Grand Larceny in the Second Degree, a class C felony, and one count of Criminal Tax Fraud in the Third Degree, a class D felony, for illicit activity carried out when she was administrator of New Rochelle’s Glen Island Center for Nursing and Rehabilitation.

The investigation began after an informant revealed that the Glen Island Center had submitted information to the State Department of Health that falsified the type of care residents received by allegedly exaggerating residents’ diagnoses, conditions and required treatments, thus inflating the Medicaid rate the home received.  For example, it was alleged, Ms. Salomon-Flores routinely stated in the home’s quarterly reports that residents were receiving suction and oxygen treatments, as well as receiving treatments for cancer and infections, when such treatments were not required and/or not provided.

The New York AG’s investigation also revealed that Ms. Salomon-Flores received payments in excess of $300,000 from checks issued to two dubious entities she owned—payments she failed to report as income on her New York State tax returns.

Carolyn Wetterberg; Wetterberg Nursing Homes; Pond View Nursing Facility

Among the 118 criminal indictments against 10 people linked to a series of Medicaid fraud schemes announced by Massachusetts AG Martha Coakley on September 30, 2011, were the charges of fraud and larceny brought against the owner of a 43-bed Boston nursing home.  Carolyn Wetterberg, who owned Pond View Nursing Facility located in Jamaica Plain with her husband, was charged with defrauding the State Medicaid Program and billing MassHealth in excess of $600,000 in services not provided.  The Wetterbergs also owned Wetterberg Nursing Homes, which managed the Pond View facility.

In June 2008, Pond View was shut down by the Massachusetts Department of Public Health due to poor quality of care provided to its residents and the Wetterbergs sold the facility for about $1.3 million.

After receiving an anonymous tip, the Medicaid Fraud Division began an extensive investigation, which soon focused on Wetterberg’s misuse of residents’ Management Minute Questionnaires (MMQs)—the form used to determine the reimbursement rate long term care facilities receive under Massachusetts Medicaid.  When the residents arrived at new facilities as a result of Pond View’s closure and many of their MMQ scores dropped substantially, the authorities concluded that Wetterberg and Pond View had intentionally inflated residents’ scores in order to receive a higher payment rate.  The AG, in turn, accuses Wetterberg of grossly exaggerating many of her residents’ disabilities; pointing to residents Wetterberg claimed to be in need of assistance walking who were able walk independently in their new facilities and residents claimed by Wetterberg to need assistance eating who were able to eat unaided.

Wetterberg was charged with 12 counts of Medicaid False Claims and 12 counts of Larceny by False Pretenses.  Each count of Medicaid Fraud carries a sentence of up to 5 years in jail and up to $10,000 in fines.  Each larceny charge carries a sentence of up to 5 years in jail and up to $25,000 in fines.  The trial is scheduled to commence in July 2012.

Green Valley Pavilion

After being served with a sealed whistle-blower lawsuit in early 2004, State and Federal prosecutors launched an investigation of a facility accused of fraudulent billing involving the Delaware Medicaid program.  In conjunction therewith, State and Federal law enforcement officers executed a search warrant against Green Valley Pavilion, LLC, and seized 65 boxes of records and the contents of seven facility computers.  The 15-month investigation, managed by the Delaware Department of Justice MFCU[2], revealed that Green Valley’s employees were allegedly altering patient charts by, inter alia, forging records, as a means of maximizing the facility’s Medicaid reimbursements.  Indeed, several Green Valley employees admitted to their role in the fraud, which was corroborated by residents’ medical charts.[3]

Based on the development of probable cause by investigators, arrest warrants were issued for six Green Valley nurses who allegedly participated in the scheme.  Five of the six pled guilty.  Because none of the individual defendants personally profited from the fraudulent reimbursement requests, however, prosecutors pursued Green Valley for the money due to Medicaid.

In May 2007, Green Valley ultimately agreed to (i) pay $550,000 in restitution to the government; and (ii) enter into a CIA, as imposed by the OIG, which required Green Valley to hire a nurse consultant/monitor to inspect Green Valley and 5 other facilities owned by its parent company, Green Acres Health Systems, Inc., and report on the facilities’ compliance with relevant regulations and standards of care for nursing home residents.[4]

Senior Care Group; Sunrise Rehabilitation Center and Brookside Rehabilitation Center

In February 2011, Senior Care Group Inc. of Tampa, Florida – which owns nursing homes in Western North Carolina – agreed to pay nearly $1 million to settle Federal allegations that it defrauded Medicare.  After the government received information about billing fraud at Sunrise Rehabilitation Center (formerly known as McDowell Nursing Center) of Nebo and Brookside Rehabilitation Center (formerly known as Yancey Nursing Center) in Burnsville, a multi-year investigation by the FBI and HHS ensued.  Investigators found that Senior Care’s rehabilitation contractor, Evergreen Rehabilitation LLC of Kentucky, put intense management pressure on its employees to maximize billing, allegedly instructing them, on a routine basis, to “get their numbers up” or be fired.  Evergreen billed for unnecessary services – upcoding and billing for rehabilitation services not covered by Medicare – and forwarded the billings to Senior Care, which then wrongfully billed those costs to Medicare.  A clear pattern of falsified rehabilitation records were found at both facilities.

As a condition of settlement, Senior Care entered into a 5 year CIA, which includes that appointment of a monitor from the OIG’s office, at Senior Care’s expense.

Lake Worth Nursing Home

A Texas nursing home that housed a large number of parolees and sex offenders should repay the State $321,335 in Medicaid funding it received for 11 residents who did not appear to require the level of care they received, the Texas Health and Human Services Commission determined in October 2011.  Lake Worth Nursing Home came under investigation when neighborhood residents complained about residents who were seen walking and riding bicycles around the neighborhood.  The OIG found that 11 residents did not meet the medical necessity requirement for nursing home care and that information provided by the facility to Medicaid was not supported by clinical documentation in the medical records maintained at the facility.  The home denied any wrongdoing, claiming that it was doing the patient assessments but the State’s contractor determined medical necessity.  Nevertheless, the OIG ruled that Medicaid be repaid for the subject claims.  The matter has been referred to the Texas Department of Aging and Disability Services for potential further action.

Fraudulent Billing; Services Not Provided/Double Billing/Billing for Non-Covered Items

Umawa Oke Imo; City Nursing Services of Texas

In October 2011, the owner of a Texas nursing home was sentenced to 327 months (more than 27 years) in Federal prison for his role in a healthcare fraud conspiracy, which prosecutors say resulted in the billing of the Federal Medicare and Texas Medicaid programs for $45 million over a two-and-a-half year period.  Imo was found guilty of (i) 1 count of conspiracy to commit healthcare fraud, (ii) 39 counts of healthcare fraud, (iii) 3 counts of mail fraud and (iv) 5 counts of money laundering.

The alleged illicit activities that had taken place at the home included cash payments to program beneficiaries, the signing of undated blank treatment forms and payment to marketers and recruiters to lure healthcare recipients.  Former employees testified that when program beneficiaries took Medicare Explanation of Benefit statements to personnel to complain about the fraudulent billing, they were, on occasion, given hundreds of dollars in extra payments to “settle” matters.  The employees further testified regarding City Nursing’s billing of Medicare for services that were not provided, including treatment for individuals who were deceased.  Imo was also accused of billing millions of dollars for physical therapy services, despite having never hired a single licensed physical therapist to work at the facility and having “treatments” that authorities contend were predominantly limited to short massages and hot packs.

A City Nursing Services clinical staffer – an alleged sham bookkeeper – Joann M. White, also testified for the Government during Imo’s trial.  In limiting her sentence to 46 months in prison for the role she played in the conspiracy, the judge expressly considered her assistance to the Government in prosecuting Imo.

In addition to the prison sentence, Imo was ordered to pay $30.2 million in restitution to the Medicare and Medicaid programs.

Vanguard Healthcare

In November 2011, Vanguard Healthcare, LLC and its subsidiaries Vanguard Healthcare Ancillary Services, LLC and Vanguard Healthcare Services, LLC agreed to pay the Federal Government and the State of Tennessee $2 million to settle Federal and State False Claims Act allegations involving illicit billing practices and violation of the Anti-Kickback Statute.  The USAO for the Middle District of Tennessee asserted that Vanguard (i) double-billed Medicare and State Medicaid enteral feeding services and supplies to patients in nursing homes; (ii) submitted claims to Medicare for certain free items, namely pumps used to deliver nutritional products and IV poles that Vanguard had received at no cost from a third party supplier in order to induce referrals;[5] and (iii) wrongly billed Medicare for patients who were not eligible for the benefits provided.  In addition to the hefty fine, Vanguard agreed to enter into a 5-year comprehensive CIA with OIG.

The allegations against Vanguard were raised in a qui tam suit filed by a former Director of Operations at one of Vanguard’s skilled nursing facilities. Although it maintained its innocence throughout, Vanguard justified the settlement as a means of avoiding prolonged litigation.

Care Issues/Cover Up

Martha Bell; Ronald Reagan Atrium Nursing Home

The owner/administrator of a Pennsylvania nursing home received 3 separate prison sentences, over the course of 3 years, for charges ranging from healthcare fraud to manslaughter.  First, in 2006, Martha F. Bell, the founder and administrator of the Ronald Reagan Atrium I Nursing and Rehabilitation Center in Robinson, Pennsylvania, was convicted in Federal court for healthcare fraud and false statements, based on evidence showing that employees were directed to falsify medical records to conceal the nursing home’s deficiencies, thus defrauding Medicare and Medicaid.  In a judgment that was affirmed by the Third Circuit Court of Appeals, Bell was sentenced to 5 years in Federal prison plus 3 years of supervised release after prison and ordered to pay $50,000 in fines for her role in the home’s practice of billing Medicare and Medicaid for services provided to residents – most of whom suffered from Alzheimer’s disease – that either were not provided or were substandard.[6]

Then, in 2007, Bell was charged in Pennsylvania State court in the death of an elderly Alzheimer’s patient, Mabel Taylor, who died in October 2001 after being locked in an outdoor courtyard on a 40-degree night.  A jury convicted Bell of involuntary manslaughter, neglect of a care-dependent person, conspiracy and reckless endangerment for the incident and the ensuing cover-up attempt.  Investigators believe Taylor walked out a door that was propped open or where the alarm was deactivated so workers could go outside and smoke.  After Taylor’s death, prosecutors claim Bell ordered a supervisor to have Taylor’s body carried back into the home and to doctor records to make it appear Taylor died in her sleep.   She was sentenced to 22 to 44 months in State jail following her release from Federal prison.

Finally, in October 2008, an Allegheny County judge sentenced Bell to 6 to 12 months in jail, 14 years of probation and permanent exclusion from holding any position in any skilled nursing facility or nursing home for stealing from the home to pay her legal bills.

The nursing home, which was closed by the State in 2004, was ordered to pay a $490,000 fine and was placed on 5 years probation for the fraud charges.  By early 2008, the home was dissolved and a Receiver was appointed.  The investigations also revealed that the nursing home allegedly diverted – or ‘donated’ – approximately $1 million to another nonprofit company, which, in turn, paid Bell an exorbitant salary; this despite the home’s claims that it was unable to pay food and pharmaceutical vendors.

Although the AUSA acknowledged that Bell had built a “beautiful facility,” he cited harm incurred by vulnerable residents as a result of Bell’s greed the rationale for the authorities’ determination to bring her down.

Bell insisted throughout that she provided good care to residents and should not be blamed for trusting in former employees.  It is those individuals, she insisted, who bore culpability, for providing inferior care and falsifying medical records.

Highgate LTC Management; Northwoods Rehabilitation and Extended Care

A New York nursing home company was convicted in May 2008 on six counts of willful violation of health laws – relating to its criminal patient neglect – and three counts of falsifying business records in the second degree – relating to its subsequent falsification of documents to cover up the neglect – stemming from the substandard care provided to a 59-year-old comatose patient at Northwoods Rehabilitation and Extended Care in Fall 2007.  Highgate LTC Management, LLC was (i) sentenced to pay $15,000 in fines; (ii) (a) forced to surrender operations of the four facilities it owned pursuant to a receivership order and (b) barred from operating a nursing home, long-term care or other healthcare facility in New York for one year; and (iii) forced to accept responsibility for the patient neglect that occurred at Northwoods.

This case is particularly noteworthy, as it was the first conviction for patient neglect in New York proven by hidden cameras.[7]  The videos introduced at trial showed that several employees neglected the patient – leaving him to lie in his own waste for hours at a time while suffering from skin lesions, failing to turn and reposition him to prevent pressure ulcers for as long as nine times the required time and failing to provide proper maintenance for his feeding tube – and then falsifying paperwork to cover it up.[8]

Charges were also brought against five Highgate employees, including licensed practical nurses and certified nurse aides.  All five were convicted for patient neglect and falsifying records.

On appeal, the Appellate Division, Third Department, rejected Highgate’s argument that a limited liability company could not be held criminally liable for the acts of its employees committed within the scope of their employment and affirmed the aforecited convictions against the company.

Sheila Noe; Hazard Nursing Home

The administrator of a Kentucky nursing home and the company that owns the facility were criminally charged with failure to report the suspected sexual abuse of an elderly resident.  Sheila Noe, as administrator of Hazard Nursing Home, was made aware of two incidents of sexual abuse sustained by an 88-year-old resident suffering from Alzheimer’s disease perpetrated by two other residents and failed to report the incidents to the Cabinet for Health and Family Services, as required by law.  The Cabinet issued a Type A citation to the home, a reprimand issued when a nursing home has put the life or safety of a resident in danger through the violation of State regulations.

The AG’s Office of Medicaid Fraud and Abuse Control followed with a criminal investigation.  Criminal charges of failure to report – a Class B misdemeanor punishable by up to 90 days in jail and $250 in fines – were filed against Ms. Noe and the company ownership, First Corbin Long Term Care, which is owned by Forcht Group of Kentucky. In July 2011, the AG’s office and defendants reached a 6-month deferred prosecution agreement whereby the charges would be dropped if the defendants (i) pay $20,000 to Kentucky’s Civil Monetary Fund; (ii) have all of the owner’s nine nursing homes in the State conform to State policies regarding abuse and neglect; and (iii) have all employees in the nine homes undergo additional training on reporting abuse and neglect.

In addition, Noe was permanently excluded from the position of nursing home administrator[9]

Billing for Services that were Substandard, Worthless and/or Rendered in Violation of Law

Victor Napenas; Valley Rest Nursing Home

The owner of a Totowa, New Jersey nursing home was sentenced, in August 2010, to 30 days in jail; 3 years probation; and was ordered to pay $380,000 in restitution, penalties and back taxes after pleading guilty to Medicaid fraud relating to dubious billing practices and substandard care.  After State surveyors noted severe deficiencies in the care delivered to residents at Valley Rest Nursing Home, which resulted in the owner’s voluntarily closing of the facility in 2007, a tangential financial audit revealed numerous irregularities on the facility’s 2005 cost report submitted to Medicaid.  The criminal investigation that ensued exposed that Valley Rest owner Victor Napenas billed the Medicaid program more than $300,000 in improper and unsubstantiated costs, including more than $100,000 in personal expenses, and Napenas was charged with third-degree Medicaid fraud.  In addition to incarceration and monetary payments, Napenas was excluded from acting as a Medicaid provider for 8 years.

George D. Houser; Rhonda Washington Houser; Forum Healthcare Group

A Rome, Georgia couple awaits sentencing for an alleged healthcare fraud conspiracy involving the misappropriation of Government funds intended for the care of approximately 300 residents in the 3-facility group they owned and managed.  Beginning in at least 2004, when George and Rhonda Houser founded Forum Healthcare Group, Inc., and continuing until the State of Georgia closed down Moran Lake, Mount Berry and Wildwood Park Nursing and Rehabilitation Centers in 2007, the Housers allegedly conspired to defraud the Medicare and Medicaid programs of approximately $30 million by submitting claims for payments when the care they provided to the nursing home residents were so inadequate that they were worthless and harmful, thereby defrauding the programs of the money they received.  According to the April 2010 Federal indictment, the homes were inadequately staffed and residents lived in substandard conditions – with food shortages, broken air-conditioners and leaky roofs – while the couple profited roughly $8 million.

Federal authorities further alleged that Mr. Houser deducted Federal income taxes from his employees’ paychecks, but he failed to pay over $800,000 of such funds to the IRS.

The Housers’ motion to have the indictment dismissed was denied in May 2011 and a trial schedule was set for February 2012.  Then, in December 2011, Rhonda Houser entered into a plea agreement with prosecutors pursuant to which she pled guilty to a felony charge of failure to report healthcare fraud which she knew was ongoing – namely, that the home was collecting Government money while providing “worthless” services.  Ms. Houser further agreed to fully cooperate in the ongoing investigation of the alleged criminal activities of her husband.  Finally, she agreed to pay full restitution to all of the victims, exceeding $2.15 million.  In exchange, the Government agreed to dismiss additional charges against her and recommended a reduced sentence on the remaining fraud charge.

At George Houser’s trial, in response to the damning testimony of two Forum administrators, his attorneys insisted that, as owner of the business, he had a right to a profit and any issues brought to his attention were always resolved.  This argument was rejected, as Houser was found guilty on 11 charges — one count of health care fraud, 8 counts of willful failure to pay payroll taxes and 2 counts of failure to file income tax returns.  Notably, the fraud conviction marks the first time that a defendant has been convicted after a trial in federal court for submitting claims for payment for worthless services.[10]

Mr. Houser’s sentencing is scheduled for June 29, 2012.  The health care fraud charge carries a maximum sentence of 20 years in prison and a fine of $250,000; each of the 8 counts of failing to pay payroll taxes carry a maximum sentence of 5 years in prison and a fine of $10,000 and the charges for failure to file tax returns carry a maximum sentence of 1 year in prison and a fine of $25,000 each.

Rhonda Houser still awaits sentencing, facing up to 3 years in prison and $250,000 in fines in addition to the aforementioned multi-million dollar restitution she agreed to pay.

Grant Park Care Center

A Washington, D.C. 296-bed skilled nursing facility agreed in October 2008 to pay the United States and the District of Columbia $2 million to settle allegations of fraudulent billings to Medicare and Medicaid.  Grant Park Care Center – under the ownership and management of Centennial Healthcare Corporation and affiliates, which together constitute one the largest nursing home owners in the country – came under investigation by Federal and District authorities in 2002 as a result of a whistle-blower suit under the False Claims Act.  Grant Park allegedly violated the Federal and District of Columbia False Claims Acts by seeking reimbursement for services, including skilled nursing services, that were either so inadequate that they were, in essence, worthless, or were not provided altogether.

The Government’s investigations also revealed that (i) the care being provided to residents was further compromised by Centennial’s routine reduction of nursing staffing levels – including certified nurse aides, licensed practical nurses and registered nurses – at Grant Park; (ii) services to certain residents were either not rendered or were of a quality that failed to meet professionally recognized standards of health resulting in residents’ dehydration, malnutrition, increased infections and preventable pressure sores; and (iii) Grant Park failed to develop and follow resident care plans to meet the individual needs of each resident.

In addition to the $2 million payment, as part of the civil settlement, Grant Park and its management company agreed to enter into a 5-year CIA, as imposed by the OIG, which required Grant Park to establish and maintain an acceptable compliance program and to retain an independent monitor appointed by the OIG to assess and monitor the effectiveness of Grant Park’s internal quality control systems.

Ciena Healthcare Management

A Southfield, Michigan corporation that manages a chain of 30 long-term care/skilled nursing facilities, along with its owner, Mohammad Qazi, CFO, Anis Khan, and COO, Denise Mahnke-Pugh, entered into a $1.25 million settlement agreement relating to allegations of healthcare fraud for fraudulent billing practices and substandard care in August 2007.  In a qui tam lawsuit filed under the False Claims Act, Ciena Healthcare Management, Inc. was accused of improperly billing Medicare and Medicaid for inadequate care of and services to residents at four metro Detroit nursing homes.  Specifically, the settlement reached with Michigan’s AG and the USAO for the Eastern District of Michigan addresses the submission of claims to Medicare and Medicaid for services and treatments provided at the St. James Nursing Center, the Americare Convalescent Center, the Qualicare Nursing Home and Northfield Place Nursing Home between early 2000 and late 2006.  Those facilities allegedly failed to properly provide the following needs of residents: (i) nutrition and hydration; (ii) assessments and evaluations; (iii) care planning and nursing interventions; (iv) medication management; (v) fall prevention and  management; and (vi) pressure ulcer care.

The settlement also required the defendants to enter into a comprehensive, chain-wide 5-year CIA with the OIG, which required Ciena to undertake certain measures to promote compliance with the respective requirements of the relevant healthcare agencies (e.g. Medicare, Medicaid) in each of the 30 facilities it manages.  The AG announced that the CIA is expected to cost Ciena as much as $500,000 each year and will subject all of its operations to the scrutiny of an independent monitor.[11]

Villaspring of Erlanger Healthcare Center and Rehabilitation; Carespring Healthcare Management; Barry Bortz

The U.S. Attorney’s Office for the Eastern District of Kentucky filed a civil complaint in Federal Court in July 2011 against a nursing home, its parent company and its owner for alleged violations of the Federal False Claims Act.  Villaspring Healthcare Center, Carespring Healthcare Management and majority owner Barry Bortz were accused of failing to provide adequate care for residents, resulting in egregious harm and even the death of multiple residents.  Ostensibly, defendants thereby defrauded the Federal Medicare program and the Kentucky Medicaid program by seeking and receiving substantial reimbursements for care that was either non-existent or so inadequate as to be worthless.

The complaint alleges that from 2004 to 2008 numerous patients suffered serious injuries resulting from the worthless care – five of whom died as a result of their injuries.  The alleged inadequate care included failure to follow physicians’ orders, failure to treat wounds and pressure sores, failure to update resident care plans, and failure to monitor the blood sugar levels of diabetic residents.

Naming Bortz individually as a defendant, the complaint highlights that the majority owner signed the Medicare and Medicaid provider agreements on behalf of Villaspring, as well as multiple cost reports.

Being the first suit filed in Kentucky in which the Government claimed that a nursing home defrauded Medicare and Medicaid by submitting bills for reimbursement while providing systemically poor resident care, the USAO Kerry Harvey referred to the filing as “an important milestone in the effort to insure [sic] effective care for Medicare and Medicaid recipients in long term care facilities.”

The complaint stems from a five-year-old allegation thoroughly investigated by the Kentucky AG, who ultimately opted not to bring charges.  The home insists that it cooperated fully with the State investigators every step of the way to make whatever changes were needed to put them in full compliance and, as such, the Federal Government’s case lacks any merit.  Moreover, Villaspring moved to dismiss the “worthless services” claim on grounds that services to residents could not be “worthless” since they were billed on a per-diem basis and Villaspring provided room, board and at least some patient care.  The district court rejected this argument in December 2011 commenting that it “is not necessary to show that the services were completely lacking; rather, it is also sufficient to show that patients were not provided the quality of care which meets the statutory standard;” allowing the case to proceed under an “implied certification” theory for violations of the provider agreement signed by the facility’s CEO.

The parties were charged with violating the False Claims Act, committing common law fraud and unjust enrichment.  If found liable, the defendants face penalties between $5,500 and $11,000 per false claim and an order to repay Medicare and Medicaid three times the amount of the Government’s loss for the fraud.  The court has set a trial date of August 20, 2013.

Inadequate Care, Staffing and/or Supervision; Abuse, Neglect and/or Homicide

American Healthcare Management; Robert Wachter

A nursing home management company, its CEO and three of its nursing homes were sentenced in February 2007 on charges of conspiracy to defraud Medicare and Medicaid by providing inadequate staff at the nursing homes, thereby failing to provide proper care to elderly and disabled residents.  The USAO for the Eastern District of Missouri announced the sentencing, which included 18 months in Federal prison for the company’s CEO, asserting that the lack of adequate staffing at Claywest House Healthcare, LLC, Oak Forest North, LLC, and Lutheran Care Center, LLC caused numerous residents of the 3 nursing homes to suffer from dehydration, malnutrition and life-threatening bed sores.  One 88-year-old resident was left to sit in her own waste for hours and was allegedly found to have ants crawling all over her body.  There were also alleged instances of patients walking away from facilities and physical abuse by staff members.

The criminal charges followed on the heels of a civil settlement with State and Federal officials a year earlier, in which Wachter, American Healthcare and the nursing homes agreed to pay $1.25 million to resolve civil fraud claims pursuant to the False Claims Act.  Under that agreement, American Healthcare and the nursing facilities were permanently barred from participating in the Medicare and Medicaid programs and Wachter agreed to a 20-year exclusion.

In finding American Healthcare’s CEO culpable, the USAO relied on the role Wachter and American Healthcare played in determining the budget for the three nursing homes, which resulted in the staffing limitations that were implemented.  Specifically, the government alleged, staff shortages were mandated pursuant to a 40 percent formula for staffing imposed by Wachter, whereby staffing payroll could not exceed 40 percent of the Medicaid per diem.  While the facilities had insufficient nursing staff to meet the needs of the residents, Wachter and American Healthcare allegedly continued to bill Medicare and Medicaid for services that they knew were inadequate or not performed at all.

In addition to Wachter’s 18-month prison sentence, he was fined $29,000.  American Healthcare and the three nursing homes were each fined $180,250 and sentenced to 2 years probation.

Emmanuel Bernabe; Pleasant Care

In the first affirmative exclusion of an owner of a nursing home chain, the OIG announced in July 2009 that the owner of what was the second largest nursing home chain in the State of California had agreed to be excluded permanently from Federal healthcare programs – despite maintaining his innocence.  Emmanuel Bernabe, the owner of Pleasant Care Corporation, was accused of putting residents at his 30 nursing homes at risk by providing care that failed to meet professionally recognized standards by providing inadequate hydration and nutrition, failing to administer appropriate wound care and maintaining inadequate staffing levels.

Bernabe’s exclusion came after a multi-year investigation and followed the auctioning of each of the Pleasant Care facilities in 2007, which, in turn was preceded by Pleasant Care’s filing for bankruptcy protection.  Pleasant Care and Bernabe’s collective downfall was precipitated by a string of incidents that resulted in fines, penalties and accusations of elder abuse, including misdemeanor charges of elder care abuse and criminal negligence brought by then-State Attorney General Bill Lockyer in 2006.  One such incident involved the 2003 death of a resident who allegedly suffered a seizure while eating and began choking and could not be effectively aided by the nurse because the facility’s suction machines had not been kept in working order.  That case resulted in a plea of no contest, a detailed plan ordered by the court by which the quality of care in Pleasant Care’s 30 facilities would be dramatically and immediately improved and a $1.35 million settlement payment to the State ($1 million in civil penalties and $350,000 to reimburse the State for investigative costs).  Another incident related to a 2007 suit for elder abuse and negligence stemming from an 81-year-old resident’s hip fracture after her eighth fall in the Pleasant Care Convalescent of Riverside.  In the latter incident, it was alleged, the fracture was discovered after nearly two weeks of complaining of pain.  Furthermore, although the resident was obviously a high risk for falls, the facility never updated her Care Plan in order to identify or implement methods that might prevent her from falling, never investigated or assessed the source and cause of her pain, and never accurately or in a timely fashion informed her family or physician of these incidents.

Notably, Bernabe contested all allegations against him and his company and denied any and all liability.  Moreover, no judgment or finding of liability was ever made against Bernabe.  Nevertheless, the OIG based the exclusion on section 1128(b)(6)(B) of the Social Security Act,[12] a provision aimed at preventing the furnishing of healthcare services “of a quality which fails to meet professional recognized standards of healthcare[.]”

Rocky Lemon; TLC Healthcare

The USAO for the Western District of Texas announced in April 2007 that Rocky L. Lemon was sentenced to 42 months (3 ½ years) imprisonment as a result of his convictions for Healthcare Fraud and Money Laundering.  In addition to the prison term, Lemon was ordered to serve 3 years of supervised release after completing his imprisonment and pay over $4 million in restitution to Medicare and Medicaid.  The sentencing followed Lemon’s November 2006 guilty pleas for both offenses, relating to his actions between 1997 and 2001 as owner/operator of 4 Texas nursing homes – of the more than 50 nursing homes with which he was involved nationwide – through TLC Healthcare, Inc.

Five years prior to these proceedings, in what was the DOJ’s first-ever civil enforcement action against an owner/corporate operator of a nursing home for patient neglect and poor quality care, then-California Attorney General Bill Lockyer filed a civil complaint against TLC and Mr. Lemon, alleging 37 different categories of violations of State and Federal regulations that resulted in serious patient harm, such as major bed sores, dehydration, malnutrition, injuries from falls requiring surgery, and inadequate care resulting in poor personal hygiene.  Lemon abandoned the homes, leaving the State to take over operations.

Then, in late 2001, Lemon pleaded guilty to a class A misdemeanor of deadly conduct for the persistent neglect of a resident[13] – admitting to recklessly engaging in conduct that placed the victim in imminent danger of serious injury – and was sentenced to 2 years deferred adjudication, fined $4,000 and assessed $5,000 for investigative costs.  Lemon was also prohibited from applying for a license to operate a long-term care facility for the duration of his 2 years probation.[14]

In this criminal action, Lemon admitted to unlawfully diverting Medicare and Medicaid monies for personal use by, among other things, financing his purchase of nursing homes.  He then sold some of these homes for profit and funneled a substantial portion of the net proceeds into his personal bank and brokerage accounts.

Adelaida Guevarra-Tolentino; Grace Elderly Care Home

The former administrator of a Las Vegas nursing home was sentenced in July 2010 after being convicted of Neglect of Duty in Willful or Wanton Disregard of Safety of Person.  Adelaida Guevarra-Tolentino was ordered to serve 60 days in jail and suspended, with 1 year probation and preclusion from seeking employment as a licensed administrator or performing duties as an unlicensed administrator for at least 3 years for the commission of the gross misdemeanor offense.

The Nevada AG’s Medicaid Fraud Control Unit commenced an investigation of the living conditions at Grace Elderly Care Home in the summer of 2008 after a social worker responding to a complaint from one of the residents at the facility contacted Nevada’s Aging and Disabilities Service Division and its Bureau of Healthcare Quality and Compliance.  The AG determined that Ms. Guevarra-Tolentino was accountable for the neglectful living conditions.  The State agencies worked to transport residents out of the facility.

Prentiss Center for Skilled Nursing Care at MetroHealth; Virgen Caraballo; Christina Szatala

When a hidden camera installed by a resident’s son caught caregivers abusing his elderly mother in June 2011, the Ohio nursing home came under fire by the authorities for various quality of care and abuse issues and was ultimately fined $357,000 by CMS.   After the video went viral, Prentiss Center for Skilled Nursing Care at MetroHealth fired multiple staff members and disciplined others, several of whom face felony charges.

After the home ignored the four prior complaints, Steve Piskor, the son of a 78-year-old Alzheimer’s patient, hid a camera inside an air purifier on his mother’s dresser accompanied by a sign in her room warning of the camera’s presence.   Nevertheless, the abuse continued and Piskor handed over the tapes to the authorities.

One of the aides, Virgen Caraballo, who is seen in the videos throwing Piskor into a wheelchair and pushing a hand into her face, was sentenced in January 2012 to 10-and-a-half years in prison and lost her nursing aide license after pleading guilty to 7 counts of patient abuse, felonies of the fourth degree.  Meanwhile, as the investigation continues, the home and the administrator, Christina Szatala, potentially face civil and/or criminal charges.

Janice Burch; Skyview II

In April 2012, the owner/administrator of a Nevada nursing home was sentenced for 3 gross misdemeanor offenses for Neglect of Duty in Willful Disregard of Safety of Persons.  In addition to the community service she must perform and the fine she must pay, Janice Burch has been excluded from participation in healthcare programs.

A full scale investigation of Skyview II was commenced after a caregiver filed a complaint with the Las Vegas Metropolitan Police Department that she had been instructed to forge daily medication documentation, as if the residents were appropriately receiving their medications when in fact they had not.  Various law enforcement agencies participated in the investigation and ultimately found that the home had faulty operational documentation and inadequate toileting facilities.  The Skyview residents were removed from the facility and transferred to other nursing homes and the Nevada Attorney General charged Burch for her “fail[ure] to provide oversight and direction for staff members to ensure adequate services and supervision of residents … and fail[ure] to ensure that the facility was in compliance with applicable regulations.”

Burch received credit for time served and was required to perform 120 hours of community service and pay a $1,000 fine.  She is prohibited from owning, being employed by or having any connection with institutions that provide any personal care services.

Cathedral Rock Nursing Homes; C. Kent Harrington

In January 2010, an entity that operated five nursing homes in the St. Louis area pleaded guilty to felony healthcare fraud and its majority owner entered into a criminal deferred prosecution agreement relating to charges of Medicare and Medicaid fraud involving understaffing and substandard care.  Cathedral Rock Corp., a Texas Corporation which operates nursing homes in Texas, Illinois, Missouri and New Mexico, along with its majority owner, C. Kent Harrington, agreed to jointly pay the United States $1 million in criminal fines and penalties relating to the inadequate care provided to Medicare and Medicaid residents in the Cathedral Rock homes.  Moreover, Cathedral Rock agreed to cease operating nursing facilities in the State of Missouri.  Mr. Harrington, individually, entered into a two-year deferred prosecution agreement with the USAO and agreed to implement a rigorous compliance program in each of the facilities he owns or operates to insure that residents receive quality care.  Since Harrington duly complied with the conditions of the agreement for the prescribed two year period, the criminal felony complaint against him was dismissed in January 2012.

As part of the plea deal, the nursing homes admitted to: (i) failing to sufficiently staff the nursing homes to provide adequate nursing care; (ii) failing to provide residents with wound care; (iii) failing to provide residents with medication as prescribed; (iv) falsifying medical records – including a “charting party” in which records were doctored en masse; and (v) submitting fraudulent claims to Medicare and Medicaid for services that were either not provided or unwarranted.

In addition, Cathedral and Harrington entered into a civil settlement with the Federal government to pay $628,000 to settle civil claims of (i) violations of the False Claims Act by submitting false and fraudulent claims to Medicare and Medicaid for care that was not provided; and (ii) (a) lack of adequate and properly trained staff; and (b) widespread falsification of residents’ medical records, which resulted in numerous residents suffering from malnutrition, dehydration, weight loss, preventable pressure sores (some of which resulted in amputations), preventable side effects from not receiving their medications, and the endangerment of residents’ well-being when they wandered from the homes unnoticed.  The United States further alleged that Cathedral Rock failed to meet basic needs of residents including feeding, toileting, bathing and turning of bed-ridden residents.[15]

Aside from ceasing operations altogether in Missouri, the civil settlement required Cathedral Rock and Harrington to enter into a 5-year CIA, which included extensive quality-of-care provisions and required Cathedral Rock to retain, at its own expense, an independent monitor appointed by the OIG to assess and oversee the effectiveness of compliance efforts in its remaining nursing facilities.

Mabel and Salvador Mangano; St. Rita’s Nursing Home

In what was the only criminal action against individuals directly related to Hurricane Katrina, the owners of St. Rita’s Nursing Home in Violent, Louisiana, Mabel and Salvador Mangano, were charged with negligent-homicide and cruelty to the infirm stemming from the drowning deaths of 35 residents during Hurricane Katrina’s catastrophic floods.  The negligent-homicide counts each carried a maximum penalty of 5 years in prison and a $5,000 fine, while the cruelty counts each carried a maximum sentence of 10 years and a $10,000 fine.

The Manganos were accused of ignoring warnings and failing to evacuate the facility as the hurricane approached in August 2005.  Prosecutors relied, in part, on evidence that three other nursing homes in St. Bernard Parish evacuated as the storm approached.[16]

Although a jury ultimately acquitted the Manganos of criminal charges in 2007, more than 30 wrongful-death and personal-injury lawsuits filed on behalf of the St. Rita’s residents against them ensued.

Verdugo Valley Skilled Nursing Wellness Center; Phyllis Paver

A Southern California skilled nursing facility and its former administrator were charged in July 2011 with felony abuse and neglect in the suicide of a mentally ill patient.  When Charles Morrill was admitted to Verdugo Valley Skilled Nursing Wellness Centre in January 2009, the home lacked staff and training to care for mentally ill patients.  Mr. Morrill, who was suicidal and had a history of mental illness was admitted nonetheless.

Morrill allegedly attempted suicide twice in his first month at the facility – once by firing a fire extinguisher into his mouth and once by wheeling himself out into a street, trying to be hit by a car.  Each time, he was hospitalized and then accepted back at the facility.  A short time later, Morrill again fired a fire extinguisher in his mouth and succeeded in taking his own life.

In charging the home and its former administrator, Phyllis Paver, the indictment accused the two of proximately causing Morrill’s death by permitting him to be placed in a situation in which his health was endangered.

While the charges against Ms. Paver – which carried a jail term of up to six years and fines of up to $6,000 – were dropped in 2012, the home may still lose its license to operate as it negotiates an injunction with the AG whereby its operations would be monitored.

Cynthia Gentz; Abington on Grand

The former administrator of an Ames, Iowa nursing home faces licensing charges including professional incompetence and negligence in the practice of the profession, relating to several of her actions and inactions during her tenure as administrator from November 2008 to January 2011.  The charges, brought in February 2012, hold Cynthia Gentz responsible for substandard care provided at Abington on Grand under her watch.

The first basis for the action relates to multiple failures to adequately assess residents’ needs and provide proper care while Gentz was administrator.  Failure to address a resident’s severe emotional response to the loss of a spouse, lack of a care plan dealing with the sexually inappropriate behavior of two residents, failure to notify a resident’s family of adverse changes in condition and failure to report to the State Department of Inspections and Appeals an accident causing injury within 24 hours of its occurrence are among the specified allegations.  Charges were also brought against the administrator for the home’s failure to have policies and procedures in place addressing resident-on-resident abuse and failure to report such abuse, specifically referencing circumstances surrounding three residents who were engaged in sexual activity with one another throughout 2010.

Concluding that the aforementioned offenses “indicate global problems with the [administrator’s] supervision and management of the facility” and scheduled a hearing for May 2012 to adjudicate the matter.  Gentz faces disciplinary actions including the possible revocation of her administrator’s license.

Abington on Grand is owned by American Healthcare Investment of Oklahoma, which manages 10 state-licensed care facilities in Iowa.  Its president and sole shareholder is Brian Hoyle, a California real estate broker and banker.

Dean Lerner, the former director of the state agency that regulates nursing homes, lauded the action saying that it’s “high time” the state held administrators — as well as nursing home owners and medical directors — accountable for negligence and incompetence that results in poor quality care.  “The responsibility for these events … should be laid at the feet of executives interested only in profits,” he said.

Wrongful Taking/Financial Exploitation

Marc Korn; Fairchild Manor Nursing Home; Batavia Nursing Home

In July 2012, a Federal grand jury added multiple charges of bank fraud and failure to pay overtaxes to the five-count indictment it had returned in December 2011 against the owner of the operating company of two nursing homes in Western New York on charges of wire fraud and making false statements to law enforcement, relating to an embezzlement and fraud scheme.  Marc Korn – who had once served as a gubernatorial appointee on a council that helped to determine State policies on nursing homes – now faces up to 20 years in prison and a $250,000 fine on accusations of stealing at least $317,000 from a charity, from patient trust accounts at his nursing homes and from employee payroll accounts.  The superseding indictment also alleges that Korn evaded federal taxes, defrauded one of his lenders and lied to bank officials about the value of one of his properties.

In his capacity as Chairman of a charity overseas, Korn is accused of writing checks totaling over $150,000 to himself for personal use.  The indictment further alleges that Korn caused over $167,000 from nursing home equipment leasing agreements to be deposited into a bank account in the name of one of his business entities, Health Care Alliance, Inc.  Korn is also accused of skimming from patient trust funds and his alleged theft from payroll accounts prevented several employees of his Fairchild Manor Nursing Home and Batavia Nursing Home from cashing their paychecks.  These illicit funds were purportedly used to support what Federal authorities call an “extravagant lifestyle” – including a $710,000 Amherst home.  Korn insists that he is innocent and that the checks he wrote to himself were reimbursement for expenses incurred on behalf of the charity.

In addition, Korn is accused of making false statements to investigating agents during a June 2010 interview, when he allegedly told agents the deposits into Health Care Alliance were commissions.

Shortly after the criminal complaint was filed in July 2011, the New York Department of Health approved a plan for Fairchild Manor to close and cease operations and relocate residents to other nursing home facilities.  The proceedings against Mr. Korn remains in the pre-trial stage.

Melissa Elaine Webster; Alternative Personal Care Home

The administrator of an Ocean Springs, Mississippi nursing facility was sentenced to 8 years in prison on March 29, 2012 for stealing roughly $62,000 from a resident over a 33-day period in 2010.  The sentencing, which includes 2 years of post-release supervision and restitution payments, follows Melissa Elaine Webster’s guilty plea in January to three counts of exploitation of a vulnerable person in an agreement to drop 5 of the 8 original charges.  In the 33 days in which the 82-year-old victim Donald Dahl – a World War II veteran – resided at Alternative Care Personal Care, Webster deposited Social Security and Veterans Administration checks into her personal account.  Prior to accepting the plea deal, Webster faced up to 80 years in prison and up to $80,000 in fines.

Perry Vandeventer; Shepherd of the Valley

On March 8, 2012, the former CFO of a Wyoming non-profit nursing home was sentenced to 4 to 6 years in prison and ordered to pay $41,000 in restitution after pleading guilty to one count of obtaining property by false pretenses for stealing roughly $52,000 from the facility over a nearly 3 year period beginning in March 2008.  Perry Vandeventer admitted to allegations that he acquired fraudulent expense reimbursements totaling almost $24,000 – receiving the money by (i) submitting fake receipts for contractors who never did any work, (ii) obtaining cash advances for travel of trips he did not take, (iii) education expenses and (iv) obtaining money for purposes unrelated to the facility.  He also used two of Shepherd of the Valley’s credit cards to purchase personal items – including a computer, books, a cell phone, meals, vehicle repairs and fuel – totaling more than $28,000.

The discovery of the crime occurred in January 2011, as the financial crisis threatened the viability of the home and led to a closer look at financial records.  After Vandeventer abruptly went missing in early January, the facility’s CEO, Jill Hult, and the nursing home’s accountant submitted reports to the police about numerous financial discrepancies found during an audit.  The ensuing inspections revealed the fraud.

Shepherd of the Valley, Wyoming’s largest nursing facility with approximately 150 residents, was sold by Luthercare, Inc. to for-profit Mission Healthcare in February 2011.

Facing up to 10 years in prison on the initial charges brought against him, the 65-year-old Vandeventer changed his original plea of not-guilty and agreed to the prosecutor’s deal, which included the dropping of two felony counts of larceny.

Kye Giacalone; Maple Glenn Nursing Home

On June 22, 2012, the Maywood Police Department re-arrested a director of a New Jersey nursing home, adding nine counts to the original charges relating to her alleged theft form a resident.  Kye Giacalone was originally arrested on June 15, 2012 for stealing an estimated $100,000 from a resident the Maple Glenn Nursing Home whom she befriended after becoming his power of attorney.  Ms, Giacalone now faces multiple counts of theft of entrusted funds, theft by deception, credit card theft, forgery and false impersonation.

Giacalone allegedly opened credit cards in the 82-year-old resident’s name after getting power of attorney on Sept. 11, 2010, police said.  She allegedly made personal purchases on the cards and paid the bills with money taken from the victim’s account.  Authorities say that Giacalone continued to misuse the victim’s funds even after the victim was moved to another nursing home.

After being released on $20,000 bail a week earlier, further investigation revealed that amount of money Mrs. Giacalone had embezzled was far greater than originally believed.  This led local police to re-arrest Giacalone and send her back to Bergen County Jail.  The investigation is ongoing.

Linda Sullivan; Loving Care Nursing Center

The former administrator of a Pennsylvania nursing home was sentenced to 23 months of house arrest after pleading no contest to stealing money from an elderly resident.  After her conviction on three counts of felony theft and one count of misappropriation of property for stealing more than $20,000 from Francis Simonoski, a resident of the facility who has since died, Linda Sullivan was granted a new trial due to errors made in her defense.  Ms. Sullivan then delivered a no-contest plea to one count of theft in exchange for dismissing the other charges.

Antonio Giordano; John Montecalvo; Mount St. Francis Health Center; Coventry Health Center; Hillside Health Center; Coventry Health Center Associates

The owner and chief financial officer of 3 Rhode Island nursing homes were sent to Federal prison in 2006 after pleading guilty to misuse of the homes’ funds, embezzlement and conspiracy in violation of their HUD regulatory agreement barring the taking of funds when the facility was “insolvent” as defined in the HUD Agreement.  Antonio Giordano and John Montecalvo admitted to diverting millions of dollars from Mount St. Francis Health Center, Coventry Health Center and Hillside Health Center, in violation of an agreement with the U.S. Department of Housing and Urban Development (HUD).  Allegedly as a result of the “skimming practices,” Mount St. Francis and Coventry were operating in the red, defaulted on their HUD-backed mortgages and ultimately went into receivership.  Hillside simply closed down.

Giordano was sentenced to 2½ years in Federal prison and Montecalvo to 2 years on the Federal charges of misuse of funds.  Regarding the state charges of embezzlement and conspiracy to which they admitted as well, the two agreed to pay $1.1 million in fines and restitution but avoided additional jail time.

Then, in December 2009, the Federal government, on behalf of HUD, brought suit against Giordano and Montecalvo – as well as Coventry Health Center Associates, limited partnership set up by Giordano – seeking $12.1 million in restitution for defendants’ enriching themselves at the homes’ expense.  This suit was put on hold when, in October 2011, Giordano filed for Chapter 7 Bankruptcy protection, claiming that he was unable to pay nearly $800,000 he owes to the IRS.  The Bankruptcy Trustee pursued an investigation of Giordano’s assets and funds, including a trust Giordano created for his children that gave him $10.2 million from 2004 to 2007.  Giordano claims that he owes the trust over $10 million for payments to cover his legal bills and living expenses.

In April 2012 IRS attorneys moved ahead with its $8 million claim, rejecting Giordano’s argument the federal government already exhausted its claim for the unpaid unemployment taxes during Mount St. Francis’ receivership proceedings.  This torpedoed the bankruptcy settlement Giordano seemed to be nearing with his creditors.  The proceedings continue.

Mary Burroughs; Riverview Health & Rehabilitation Center

In May 2011, a former Savannah, Georgia nursing home administrator was sentenced to 40 months in Federal prison and ordered to pay more than $583,000 in restitution after pleading guilty to 8 counts of stealing and embezzling money from the non-profit home.  Mary Burroughs admitted to (i) causing Riverview to issue multiple checks from its various bank accounts, totaling $235,000, which she then used to purchase cashier’s checks made payable to a family-owned heating company; (ii) using a Riverview credit card in the name of a former employee to make thousands of dollars of unauthorized personal charges; and (iii) instructing others to rip out hundreds of thousands of dollars’ worth of copper piping and other metal objects from a Riverview building to be sold as scrap metal.

The felony counts to which Burroughs pleaded guilty – 7 counts of embezzlement from a program receiving Federal funds and 1 count of credit card fraud – carried a maximum prison sentence of 80 years.  However, citing the 67-year-old defendant’s age, her deteriorating health and the fact that “[h]er career is effectively over,” the judge reduced her sentence below the 46-month minimum advisory sentence guideline to only 40 months.

In a related case, Burroughs’ son, Aaron Burroughs, pleaded guilty to obstructing the Federal grand jury investigation of his mother and was sentenced to 6 months in prison and fined $1,000.

Joel Logan; Todd Logan; Elihu White Nursing & Rehabilitation Center; Pond Meadow Healthcare Facility, Inc.; Atrium Nursing and Rehabilitation Center; Logan Nursing & Rehabilitation Center; Crestview Healthcare Facility

Two brothers pled guilty to multiple felony charges related to their ownership and operation of 5 Massachusetts nursing homes in July 2008.  An investigation of Joel Logan and Todd Logan, as well as their 5 facilities, by the Attorney General’s Office began in March 2003 after the matter was referred by the Massachusetts Office of Medicaid.  Within a couple of months, 4 of the 5 facilities – Elihu White Nursing & Rehabilitation Center, Pond Meadow Healthcare Facility, Inc., Atrium Nursing and Rehabilitation Center and Logan Nursing & Rehabilitation Center – were forced into court-ordered receivership.  The final home, Crestview Healthcare Facility, Inc., went into receivership a year later.  Ultimately, 3 of the former Logan nursing homes were sold to other nursing home operators and 2 were closed by the Receiver.

The indictments of the Logans followed a 3-year investigation conducted by the MFCU and the Fair Labor and Business Practices Division, both part of the State AG’s Business and Labor Protection Bureau, with assistance from the U.S. Department of Labor’s Employee Benefits Security Administration.

The Logans and their nursing home corporations admitted to an array of illicit acts, including: (i) converting funds received under the State’s Medicaid program for their own personal use; (ii) stealing $82,000 from the statutorily regulated Patients Needs Accounts (PNA) for 3 of the homes for purposes unrelated to the residents’ own use; (iii) embezzling approximately $55,000 in deductions withheld from employee wages for the purpose of funding the employer-sponsored 401(k) Plan; (iv) failure to pay over $22,000 in employee wage withholdings intended to fund insurance plans; and (v) failure to provide patients in the homes necessary goods and services such as food, medicine, sanitary conditions and bed linens, as required under the Medicaid program.  The money was allegedly used by the men to fund various personal expenditures, including horse racing activities and luxury boats.

Messrs. Logan ultimately pleaded guilty to charges of larceny, medical assistance fraud by a provider, conspiracy, fiduciary embezzlement, and neglect of patients in long-term care facilities.  Norfolk Superior Court Judge Janet Sanders sentenced both Joel and Todd Logan to 5 years probation on each charge and ordered the men to pay $150,000 in restitution.  Pursuant to their probation, the defendants were prohibited from working in any capacity within the healthcare industry and were unable to serve as an administrator in any capacity of an employee benefit plan.  Furthermore, Joel Logan was permanently forbidden from seeking reinstatement of his revoked nursing administrator’s license.

Ruby Weston; Marcus Garvey Nursing Home; Ruby Weston Manor

In April 2012, the former CEO and long-time administrator of two Brooklyn, NY nursing homes agreed to pay $871,000 to settle claims of excessive and unauthorized compensation and breach of fiduciary duties, concluding an 8-year saga.  Ruby Weston, now 85-years-old, also agreed never again to become an officer or director of any New York nonprofit organization.

Ms. Weston’s questionable financial dealings were first brought to light in a NY Daily News exposé in 2004, which was followed by a prolonged investigation spanning two NY attorneys general.  The indictments concern Ms. Weston’s annual salary and benefits package which peaked at $500,000 and her hiring of several family members – including payments to her son totaling approximately $1 million for IT services since 1997 – when she served as the administrator and director of Marcus Garvey Nursing Home in Crown Heights and Ruby Weston Manor in East New York.  According to the AG, Weston failed to obtain competitive bidding for the computer consulting work and designated a close personal friend as the board chair for both nursing homes for the alleged purpose of circumventing board oversight.

The settlement amount includes an $821,000 repayment to the Marcus Garvey home and a $50,000 fee to the AG’s office to defray taxpayer costs for the litigation.

In addition, since the investigation revealed quality-of-care issues and operational deficiencies at the Marcus Garvey home, the facility – now Marcus Garvey Residential Rehab – has been designated a Special Focus Facility and must implement a series of specified reforms (including stricter financial controls, independent and objective surveys in connection with compensation decisions for its senior officers, periodic training for directors on the governance and management of not-for-profit corporations and successful completion of intensive courses by its director of nursing and key nursing supervisors) and hire an acceptable consultant to help improve health outcomes.

Ruby Weston Manor is now in the hands of a Department of Health-approved receiver and is expected to be sold to another nursing home operator.

Gary Romine; Christian Care Home

A Missouri nursing home chief financial officer was sentenced in February 2011 to 5 years of probation and a 15-year suspended prison sentence for embezzling more than $58,000.  Gary Romine pleaded guilty to diverting funds for personal use from the Christian Care Home where he had been CFO from February 2008 through July 2009.  Romine was reportedly also ordered to pay back the stolen money to the nursing home, complete a financial management course, and avoid all contact with the home or its employees.

Earle Lerner; Marathon Healthcare Group

In June 2011, the Commissioner of the Department of Social Services (DSS) issued a 10-year exclusion from the State Medicaid program against the former owner of 6 Connecticut nursing homes, as well as his healthcare company, for allegedly submitting false and misleading information for payment to the DSS.

Following an investigation spearheaded by the Connecticut AG, it was determined that Earle Lerner obtained $700,000 in 2005 in advance payments from DSS by way of making false and misleading statements and misrepresentations.  It was further found that most of the money was used by Lerner to complete the purchase of another nursing home in Springfield, Massachusetts.  Again, in July 2006, Lerner received an additional $771,000 advance payment from DSS based on his false claim of needing the money to pay for increased nursing costs at his Connecticut nursing homes.  The charges stress that Lerner failed to disclose that he needed the money to pay debts still owed because of the Springfield purchase.

Furthermore, the Commissioner found that Lerner’s failure to deduct personal costs in the cost reports submitted to DSS from 2005 through 2007 – in violation of State law – resulted in DSS paying more than $30,000 for Lerner’s personal residence renovations through an increase in Marathon Healthcare Group’s per diem Medicaid rates.

All of the nearly $1.5 million in advances was returned to Connecticut Medicaid.

Lerner’s six Connecticut nursing homes in New Haven, Norwalk, Prospect, Torrington, Waterbury, and West Haven – with nearly 730 beds in total – were sold to Paradigm Healthcare Development out of receivership in 2009 for a mere $350,000.

For the next decade, Lerner is forbidden from owning or working for any Connecticut healthcare provider that receives Medicaid funds.

Raymond Termini; Haven Healthcare

The CEO of a now-defunct 24-nursing home chain headquartered in Middletown, Connecticut, was sentenced in April 2010 to 12 months and 1 day of imprisonment, followed by 3 years of supervised release, for his role in a scheme to defraud a Maryland real estate investment firm.  Raymod Termini pleaded guilty in January 2010 to one count of conspiracy to commit wire fraud and one count of unlawful monetary transaction in property derived from wire fraud for scheming to defraud Omega Healthcare Investors related to improvements to the fire sprinkler systems in certain facilities.[17]

Omega owned several nursing homes in Connecticut, Vermont, and New Hampshire, which it leased to Haven Healthcare to operate and manage.   In 2007, Omega agreed to provide funding to Haven Healthcare for capital improvements to the fire sprinkler systems at two of its facilities, Haven Health Center of Jewett City and Haven Health Center Soundview in West Haven.  Omega agreed to reimburse Haven Healthcare for “Actual Costs” of the improvements up to $2 million.  Termini admitted, however, that he and others misappropriated over $955,000 from Omega and did not – nor did they ever intend to – use the money for the sprinklers at the facilities.  Instead, Termini said that he used nearly half the money to pay State nursing home taxes.[18]

Also, in 2005, Termini obtained a $6 million loan from Allied Capital Corporation on behalf of Haven Healthcare to reduce its debt.  Termini admitted to siphoning off the cash for other purposes, including purchasing real estate in his wife’s name and through an LLC controlled by her.

In addition to incarceration and supervised release, United States District Judge Stefan R. Underhill imposed a $6,000 fine and ordered the forfeiture of $500,000 to the government.  Furthermore, in explaining the relatively light prison sentence, Judge Underhill cited Termini’s repayment of most of the almost $7 million he received.

Gregory McDanels; Altenheim Skilled Nursing Facility

The former CEO of an Ohio nursing home agreed to pay $290,000 in restitution and to serve to 2 to 3 years in prison after pleading guilty to one count of third degree felony theft of $500,000 in March 2011.  Gregory McDanels, who headed Altenheim Skilled Nursing Facility from 2001 until early 2009, admitted to giving himself unauthorized bonuses, altering records and issuing unauthorized reimbursement checks.

The majority of the offenses, which were discovered after McDanels left his job in February 2009, stem from using the company’s credit card for ‘personal expenses,’ including car repairs and clothing.  He also allegedly stole $4,100 from a resident fund, in which residents deposit money for expenses.

Glenn Wade Muir, III; Quality of Life Management; Saxton’s Christian Care and Investments

The CFO of the operator of several Missouri nursing was sentenced to 46 months (almost 4 years) in Federal prison after his March 2011 guilty plea to bank fraud related to a scheme to steal more than $769,000.  Quality of Life Management, Inc. and Saxton’s Christian Care and Investments, Inc. operate several subsidiaries that operate several nursing homes and in-home care providers in the St. Joseph, Missouri area.  Glenn Wade Muir, III admitted to writing checks from the Saxton company accounts to himself and his creditors.  He forged the names of the owners on these checks.  Furthermore, Muir’s attempts to conceal his theft by falsely reporting that he paid corporate taxes to the IRS caused the Saxton companies to suffer interest and penalties for unpaid taxes in the amount of almost $240,000.  In addition to the prison term, Muir was ordered to pay full restitution.

James Tackett; Golden Years Rest Home

On February 23, 2012, following his agreement to a 2-year Federal prison term, the 70-year-old former administrator of a non-profit personal care home was sentenced to 10 years probation and ordered to pay $340,000 in restitution after pleading guilty to related State charges of theft, exploitation of a vulnerable adult and income tax fraud.  James Tackett admitted to stealing more than $300,000 in Federal and State funds that were to be used for the care of the residents at Golden Years Rest Home in Jenkins, Kentucky, with more than $60,000 stolen from one resident.  Tackett further admitted that he failed to report any of the stolen income on his State income tax returns for a five-year period.

The AG’s Department of Criminal Investigations launched an investigation at Golden Years after a complaint was received by a local ombudsman in 2009 that several residents of the facility had not received the $250 stimulus check that was sent to most Social Security recipients as part of the American Economic Recovery Act.

A judge appointed a Receiver for Golden Years in June 2011, citing the home’s inability to account for a significant amount of personal funds of its residents either because that money was misappropriated or because there were no records detailing what happened to some residents’ money, as well as poor living conditions.  Golden Years has since been closed and its residents have all been moved to alternate facilities.

Tackett agreed to a sentence of 2 years and 2 days in prison on the Federal charges. He also agreed to repay the $113,547 that he admitted taking from residents.  Regarding the sentence issued by the State circuit court, Tackett paid $100,000 of the restitution order in conjunction with the sentence and will pay the remaining $240,000 while on probation.  The probation term will begin upon the completion of Tacket’s time in Federal prison, which will begin in April 2012.

Serena Sylvia; Haven Healthcare Management

The regional accounts receivable manager of a Connecticut-based nursing home company was sentenced to 18 months in Federal prison, followed by 2 years supervised release, in April 2011 after pleading guilty to one count of Federal healthcare fraud and one count of filing a false Federal income tax return.  Serena Sylvia of Haven Healthcare Management, LLC admitted to embezzling funds from nursing home resident trust fund accounts from facilities in West Haven, Jewett City, Norwich and Waterford from 2005 to 2008.  In all, Sylvia took more than $53,000 from the trust fund accounts and failed to pay income tax on the money she stole.

As part of her sentence, Sylvia was ordered to pay back taxes and applicable penalties and interest to the government.

Then, in a separate action, Ms. Sylvia pleaded guilty to State charges of perjury and second-degree forgery – both class D felonies – for her role in a scheme to present false evidence in a State court civil action and was sentenced to a total effective sentence of 10 months imprisonment.[19]   After Haven admitted a resident to its Jewett City nursing home in July 2007 without having him sign a Resident Admissions Agreement and the patient was discharged with $36,000 in unpaid costs, Sylvia allegedly forged his signature on a backdated collection document.  She then lied about the forgery while testifying in the lawsuit Haven brought seeking collection of the money.

Loving Care Nursing Center

A Pennsylvania nursing received a $100,000 fine in February 2011 after being found guilty of 8 counts of theft and misappropriation of entrusted property involving about $32,000 of a former resident.  Loving Care Nursing Center in Snyder County was found guilty for stealing the funds from resident Francis Simonoski, as the home was held responsible for the actions of its administrator.  In addition, the vice president of the nursing home was found guilty of using nearly $30,000 of a resident’s money for the nursing home, though that conviction was later reversed.

At the sentencing, the home’s president, Thomas Pregant, expressed his concern that the home is now in jeopardy of closing; the property was in foreclosure and the business up for sale.[20]  This prompted to District Attorney to have Pregent held financially liable for the home’s fines due to the alleged manner in which he co-mingled his business and personal affairs.  This attempt to pierce the corporate veil endures.

Following the convictions, Loving Care had its license to operate the facility revoked by the State Department of Public Works.

Kickbacks

John Henderson; Medical Facilities of America, Inc.

On March 14, 2012, a former director at a nursing home operator of facilities throughout Virginia and North Carolina pleaded guilty to accepting kickbacks and evading taxes.  John Henderson, who served as director of corporate maintenance and renovations at Medical Facilities of America Inc. (MFA) admitted to two separate bid-rigging schemes whereby he steered contracts for repair, maintenance and renovations for some of the more than 40 facilities operated by MFA in exchange for hundreds of thousands of dollars.  Henderson pocketed an estimated $650,000 in kickback payments and the scheme cost the company more than $500,000.

As part of the ruse, Henderson conspired with contractors to defraud MFA by circumventing MFA’s competitive procurement process, creating fictitious competitive bids that were higher than the ones submitted by his cohorts.  He then instructed subordinates to solicit quotes only from the contractors involved.

Facing two counts of conspiracy to commit mail and honest services fraud and two counts of tax evasion, Henderson decided to cooperate with the DOJ’s investigation in hopes of a reduced punishment.  Each of the two fraud charges carries a maximum penalty of 20 years in prison and a $250,000 criminal fine and each of the two tax evasion charges carries a maximum penalty of 5 years in prison and a $250,000 criminal fine, together with the cost of prosecution.  The maximum fines for each of these charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximums.  Henderson awaits sentencing by a District Judge in Roanoke, Virginia later this year.

Henderson is the fifth individual to plead guilty in connection with this conspiracy.  One of the contractors, Edward Fodrey, was sentenced to 37 months in prison and was ordered to pay $326,799 in restitution on January 31, 2012.

Kelvin Washington; Sugar Land Healthcare Center

The unlawful receipt of $22,000 could land the administrator of a south Texas nursing home in Federal prison for the rest of his life, in addition to millions of dollars in fines.  In December 2011, a Houston jury convicted Kelvin Washington on multiple counts of healthcare fraud, violating the anti-kickback statute, and conspiracy for receiving illegal payments involving a scheme to unlawfully bill Federal healthcare programs for ambulance transport.  Washington was found guilty of receiving payments for the referral of dialysis patients to a Texas ambulance transport service – Americare Ambulance Service – between 2003 and 2007.  Additionally, Washington conspired with others to have unsuspecting doctors sign transport prescriptions for dialysis patients never admitted to the Sugar Land Healthcare Center where he worked.

The plethora of agencies involved – including the USAO for the Southern District of Texas, Texas’ AG, OIG, FBI and the Texas Medicaid Fraud Unit – alleged that Washington received about $22,000 for his role in the scheme that resulted in $1.2 million being billed to Medicare and Medicaid and $450,000 paid.

At trial, an undercover video and audio tape showed one of the Americare managers bribing a patient to ride with the ambulance company, for which the ambulance company would later bill Medicare based on the false script provided by Mr. Washington.

Sentencing is scheduled for June 2012.  Washington faces up to 15 years in prison for the anti-kickback violations and up to 5 years for conspiracy to commit healthcare fraud.  In addition, he faces up to 10 years for each of the 6 convictions of healthcare fraud.  Each of the 10 counts for which he was convicted also carries a possible $250,000 fine; for a total of up to $2.5 million.

Notably, the owners of the now-defunct Americare Ambulance Service – Mazem and Wesam Abdallah, two brothers from New Orleans who came to Houston after Hurricane Katrina – were each sentenced in 2009 to 30 months in Federal prison for conspiracy to commit healthcare fraud after a jury found that patients’ medical conditions did not qualify them for Medicare-reimbursed ambulance transport.

Health Systems, Inc.; Rehab Systems of Missouri; RehabCare Group, Inc.

In a lawsuit that was transferred to the U.S. District Court in St. Louis, Missouri in May 2012, federal charges were brought against a nursing home and a therapy provider for a services arrangement that allegedly violated the Federal Anti-Kickback Statute.  The Complaint alleges that RehabCare Group, Inc. paid kickbacks to Rehab Systems and its affiliate Health System, Inc., who owned approximately 60 nursing homes in Missouri, in order to gain access to a lucrative stream of referrals of therapy services from Medicare and Medicaid beneficiaries.

The Department of Justice joined what was originally a whistleblower lawsuit brought in 2007 by Health Dimensions Rehabilitation, a competitor of RehabCare.  The Federal investigation that ensued revealed that RehabCare paid more than $10 million in kickbacks to Health Systems in exchange for the referral of business.  Specifically, the Complaint claims, RehabCare made a one-time payment of $600,000 to Rehab Systems in 2006 and agreed to give Rehab System’s a 5-year contract guaranteeing Rehab Systems a portion of RehabCare’s revenue—RehabCare would charge Rehab Systems/Health Systems only 70% of the Medicaid reimbursement amount, while they, in turn, billed the government for 100% reimbursement.  The organizations then split that 30% difference.  Essentially, the DOJ surmised, in exchange for directing the therapy business at the nursing homes to RehabCare, Rehab Systems received an up-front payment and was guaranteed over 10% of the revenue from the ongoing contract therapy operations.  And, the Complaint highlights, aside from continuing to deliver the business to RehabCare, Rehab Systems provided no services and no value in return.  This arrangement allegedly defrauded the federal Medicare and Medicaid programs of millions of dollars.

RehabCare insists that the allegations are conclusory and incorrect and that the alleged $600,000 payment was actually closer to $400,000 and was a reasonable fair market value recruiting fee.

Interestingly, the Complaint asserts that RehabCare was originally interested in purchasing Rehab Systems but correctly determined that paying a purchase price that took into account the value of the referrals from nursing homes controlled by Rehab System’s majority owner, James Lincoln, would violate the Anti-Kickback Statute.

The lawsuit seeks treble damages plus civil penalties of up to $50,000 per false claim.

Jay Canastra; The Wealshire

The director of admissions at an Illinois nursing home was charged, in September 2011, with one count of violating the anti-kickback statute for accepting a cash payment in exchange for referring nursing home residents to a home healthcare agency.  Jay Canastra allegedly accepted a $1,600 payment in December 2009 from an unnamed individual at an unnamed agency in West Dundee, in exchange for referring Medicare recipients who were residents at The Wealshire, a nursing home in Lincolnshire, Illinois.

This case was part of a nationwide take-down by the Medicare Fraud Strike Force, the DOJ and the DHHS. The greater investigation led to charges against 91 defendants for schemes to collectively submit more than $295 million in fraudulent claims to Medicare.

At the time the charges were filed, there were no allegations that the nursing home or any other facility officials were aware of the illegal behavior.  The investigation is ongoing.

After pleading guilty, Canastra was sentenced in February 2012 to 2 years probation and ordered to compensate the Government $2,800.

SavaSeniorCare and Mariner Healthcare; Leonard Grunstein; Murray Forman; Rubin Schron

Two nursing home chains and their principals agreed to pay the Federal and several States’ governments $14 million to settle kickback allegations.  The whistle-blower lawsuit filed in March 2009 under the False Claims Act accused Atlanta-based Mariner Healthcare Inc. and its subsidiary SavaSeniorCare, LLC, as well as their principals Leonard Grunstein, Murray Forman and Rubin Schron, as the landlord with a participatory lease,[21] of soliciting kickback payments of $50 million from Omnicare, the nation’s largest pharmacy, in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for 15 years.  The kickback payment was allegedly disguised as a payment to acquire a small Mariner business that was worth far less than $50 million.  Moreover, Federal prosecutors allege that after the government issued subpoenas about the transaction in 2006, the defendants created phony business transactions and backdated documents to the hide the kickback.

The scheme was exposed in a qui tam complaint filed in Massachusetts by Adam Resnick, a Chicago-based healthcare entrepreneur who served time in prison for his role in the collapse of a Chicago bank in 2002.  After investigating the allegations, the government intervened in the case, which was handled by the DOJ, OIG, FBI and USAO of Massachusetts.

Aside from the defendants’ $14 million payment, Mariner entered into a CIA with the OIG, requiring Mariner to put in place procedures and reviews to avoid – and promptly detect – illicit conduct.  The OIG also expressly reserved its right to exclude Sava, Grunstein, Forman and Schron from participating in Medicare, Medicaid and all other Federal healthcare programs.[22]

Facing its own civil liability, Omnicare entered into a $98 million settlement with the Federal and multiple States’ governments.

As part of the fallout, the relationship among the individual defendants – which had, in the preceding decade, brought under its alliances more than 300 nursing homes – soured and multiple lawsuits ensued.  In 2010, Forman and Grunstein – who was a partner in a large international law firm, Troutman Sanders LLP, and headed its real estate investments and capitalization practice group until he was placed on administrative leave in November 2009 as a result of the events discussed herein – brought suit against Schron, accusing him of misappropriating more than $100 million from the companies, keeping false and inaccurate books and records, and refusing to provide members with audited financials as required under the relevant Operating Agreements.  Grunstein further claims that the nursing-home deal, which he, as the attorney, helped devise, enriched Schron to the tune of hundreds of millions of dollars, mostly from taxpayers via Medicare and Medicaid.  Schron, in turn, filed an action against Grunstein and Foreman for hundreds of millions of dollars, claiming that it was they were stealing from the company and breached their fiduciary duties in cheating Schron.

Obstruction

Rose Munoz Rodriguez; The Rose Home

The owner of several small nursing home facilities in Bryan, Texas was arrested in June 2011 and charged with 3 counts of aggravated perjury and 1 count of fabricating evidence related to her testimony in a civil trial.  Rose Munoz Rodriguez owned – and, for a period, operated – The Rose Home nursing homes in Bryan-College Station neighborhoods of Texas, some of which were vacated earlier in the year.  In the indictment, Rodriguez is accused of lying several times during a January 3, 2011 deposition in a civil case filed by the family members of a deceased former resident of The Rose Home, Danese Medders Maxwell, accusing the nursing home owner of improper care.  Rodriguez allegedly lied about incorrect information in Maxwell’s records and intentionally cited the records despite knowing that they contained data that had been made up to thwart her being tied to any wrongdoing.[23]  The allegations were compounded, as the indictment proceeds to assert that these crimes were committed to sway the outcome of the case and investigation.[24]

The case is scheduled to be heard by a Texas jury in June 2012.  If convicted of these third-degree felonies, Rodriguez faces up to 10 years in prison and a $10,000 fine for each charge.[25]

Kimberly Boccacio; Haven Health Center

The administrator of a Connecticut nursing home was sentenced in May 2011 to 3 years probation after pleading guilty to one count of obstruction of a Federal healthcare fraud investigation.  Kimberly Boccacio, administer of Haven Health Center of Jewett City was interviewed on July 14, 2008, by Federal agents concerning the forging of the signature of a former resident on a Resident Admissions Agreement – a document agreeing to pay any costs not covered by Medicare or other insurance.  She provided materially false information to the agents, stating that she had witnessed the patient sign the agreement when, in fact, she knew that the signature was a forgery.

This matter was conducted by multiple Federal agencies as part of a larger investigation into the frauds committed by Haven Healthcare, which resulted in the convictions of several individuals in the Haven businesses.[26]

Employment Practices: Excluded Persons; Workers’ Compensation; Prevailing Wages; Payroll Taxes

American Senior Communities of Indianapolis

In January 2011, an Indiana nursing home agreed to pay more than $376,000 to resolve allegations that it employed individuals who were excluded from participation in Federal healthcare programs.  An initial investigation by the Indiana Attorney General’s MFCU found that American Senior Communities (ASC) of Indianapolis employed seven individuals who were excluded from participation in Federal healthcare programs and subsequently billed Medicaid for services provided by these employees.

The OIG determined that ASC “knew or should have known” that the employees were excluded from participation in any Federal healthcare programs and imposed the civil monetary penalty.

The settlement also calls for the screening of all prospective owners, officers, directors, employees, contractors and agents before engaging their services and an annual screening of all current staff.[27]

The OIG has continuously encouraged owners and operators to utilize its List of Excluded Individuals/Entities which is constantly updated and posted online.[28]

Helen (Chayie) Sieger; Kingsbridge Heights Care Center

The owner of the largest nursing home in the Bronx was arrested and charged with a felony for illegally failing to secure workers’ compensation insurance for hundreds of employees.  Helen (Chayie) Sieger, chief executive of the 400-bed Kingsbridge Heights Care Center, was the first person arrested and charged under New York’s 2007 workers’ compensation law, which made the failure of an employer of more than five people to cover employees through this insurance a class E felony, punishable by up to 4 years in prison.

Because the New York State Workers’ Compensation Board (“NYSWCB”) covers the claims of employees whose employers do not have workers’ compensation by using funds collected from all employers with workers’ compensation coverage (thus driving up the costs of the entire system), the State has a policy of penalizing those employers that fail to procure such insurance.  Indeed, in the period in which Sieger and Kingsbridge Heights failed to cover their employees – from May 31, 2007 to June 26, 2008 – six employees claimed injuries that went to the NYSWCB.

It was only after the NYSWCB issued a stop work order – which would have involved the immediate closing of the nursing home and emergency removal of the patients – and ordered Sieger to pay the Board $38,000 in fines that Sieger obtained workers’ compensation coverage.

The New York State Department of Health revoked Ms. Sieger’s license to operate Kingsbridge Heights and placed the nursing home into receivership.

Then, in 2009, Sieger was arrested on first degree grand larceny charges for allegedly bribing hospital officials in exchange for referrals to her nursing home and then billing Medicaid for their care, falsely claiming that they rendered services to those patients in accordance with the law.  And in a third, unrelated charge, Sieger was accused of looting $9 million from Kingsbridge Rehab by allegedly taking a personal loan she never returned.  Caught skipping bail on those charges, she was rearrested in Miami Beach after racking up a bill of thousands of dollars at the Eden Roc hotel under an assumed name.  She was extradited to New York and was transferred to Riker’s Island.

Sieger reportedly died in custody on April 18, 2011 of a gastrointestinal hemorrhage.  She was 57.

Jack Easterday; Employee Equity Administration; Silled Logic; Homewood Care Center

Jack Easterday, the President of Employee Equity Administration, Inc. and Skilled Logic, Inc. – and owner of 8 nursing homes – was convicted in March 2007 by a Federal jury in California on 107 counts of failing to pay $9.6 million in payroll taxes.  Mr. Easterday was sentenced to 30 months (2 ½ years) in prison and ordered to pay more than $8.7 million in restitution and a special assessment of $10,700 for his willful failure to pay the IRS employment taxes withheld from his employees in his nursing homes between 1998 and 2005.[29]

The same day Easterday was convicted, State health officials levied their most severe sanctions – a $100,000 fine and an “AA” citation – against Easterday’s Homewood Care Center in San Jose for poor patient care that led to the October death of a 67-year-old resident, Harold Schreifels.

The Ninth Circuit upheld Easterday’s conviction, holding that it is no longer necessary for prosecutors to establish, as an element of willfulness, that, at the time payment was due, the taxpayer had sufficient funds to enable him to meet his obligation.  Thus, the court embraced the “lenient” view that the relevant willfulness element simply means a voluntary, intentional violation of a known legal duty; there is no requirement that the government prove evil motive or improper purpose and want of justification.

VMT Long Term Management Inc.; Solanges Vivens; Washington Center for Aging Services; J.B. Johnson Nursing Center

The longtime manager of Washington, D.C.’s two publicly-owned nursing homes – Washington Center for Aging Services; J.B. Johnson Nursing Center – is entrenched in legal turmoil after an OIG audit determined that it improperly used public funds.  After being ordered in 2008 to pay $1.9 million for failing to comply with federally-mandated prevailing wages and health benefits requirements – while the management firm’s owner, Sloanges Vivens, earned $1.8 million in income, doubling her salary from the previous year – VMT Long Term Management Inc. was the subject of an audit by the OIG, as part of the agency’s efforts to reign in unnecessary expenditures from the District’s cash-strapped Medicaid program.  The audit found that VMT used District funds to pay the fine.  In addition, VMT allegedly used $195,000 in taxpayer money to fund its legal defense in the Federal investigation and to fend off a fierce unionization campaign; failed to bill the Federal government for $2.8 million worth of Medicare-eligible services from January 2008 to April 2010 for Aging Services, resulting in a loss of $1.9 million to the District; and “excessively” paid a subcontractor for Medicare services billing – despite the District’s Office on Aging affirmation that such practice was common in the industry.  The audit surmised that VMT “used its experience and assertive management style to execute questionable hiring practices and exercise improper account management.”

VMT’s owner adamantly rejected the OIG’s findings, insisting that her facilities are well-run, consistently receive high marks from Federal evaluators and that her staff is happy.  Regarding the use of funds for employee pay specifically, she averred, the U.S. Labor Department assessment was not a fine, but rather employee back-pay ordered by regulators – pointing to the fact that payment was made to the employees; not the Government.  As such, use of Medicaid funds was as appropriate as it is for any payment to personnel.  Indeed, Vivens said she would “gladly” appear in front of the council to answer questions.

Nevertheless, authorities have already recovered the money paid for legal fees – by, inter alia, withholding payments to VMT – and the Office of Aging pledges to work with the AG to recoup the remainder of the lost money.

Stacey Lee Williams; Jewish Home for the Elderly

A licensed practical nurse pleaded guilty to felony fraud charges and the skilled nursing facility for which she worked agreed to a civil settlement agreement relating to the submission of false claims to Medicare and Medicaid.  Stacy Lee Williams successfully renewed her LPN license in Connecticut after checking “no” when asked if she had been convicted in the last year of a felony – this despite being sentenced to two years probation and 30 hours of community service after pleading guilty to one felony count of forgery in Arizona.  Shortly thereafter, in early 2009, Williams was hired as a full-time employee of the Jewish Home for the Elderly, which receives funding from Medicare and Medicaid, after again falsely claiming in her application to have no felony convictions.

Ms. Williams pleaded guilty to one count of submitting false claims to Medicare and Medicaid, a felony which carries a maximum term of 5 years in prison and a fine of up to $250,000.[30]

Although Williams never disclosed her excluded status to the Jewish Home for the Elderly during her five months of employment there, the USAO did not refrain from pursuing claims against them for violating the False Claims Act vis-à-vis the submission of claims to Medicare and Medicaid for services provided by Williams.  In the end, though not admitting liability, the Jewish Home for the Elderly agreed to pay damages on the portion of Williams’ salary attributable to Federal healthcare programs in the amount of $28,542 to resolve these allegations.[31]  The Jewish Home for the Elderly also agreed to enter into a certification promising that it had established policies and procedures to check that neither prospective nor current employees are excluded from Federal healthcare programs.

Conclusion

These instances of prosecution are ominous of an evolving course of action and may be regarded as the opening of the proverbial floodgates of legal proceedings against nursing home owners and operators—offering yet another reason a makeshift compliance and ethics program is unsatisfactory.  It is essential that long term care providers have a multidisciplinary team of professionals with a thorough understanding of the healthcare industry as well as the controlling laws and regulations to help navigate in today’s climate of heightened law enforcement activity.  The staggering enhancement of enforcement tools and punishments at the disposal of law enforcement agencies coupled with the multiplied resources being invested into utilizing these tools and the extraordinary willingness to hold individuals responsible makes the potential peril of prosecution too great to nonchalantly discount.  The time to act is now.



[1] This compilation was authored by RYTES Company’s Aaron Lichtman and Adam Ostreicher.  Please visit www.rytescompany.com for professional bios and information about services provided.

[2] The MFCU was assisted by the Delaware Medicaid Program’s Reimbursement Team, as well as several law enforcement offices.

[3] See entry regarding Cathedral Rock Nursing Homes and its majority owner, C. Kent Harrington, in the Standard of Care section, who faced prosecution for conducting “charting parties,” among other things.

[4] The cost of the monitor was estimated to be $300,000.

[5] This allegation exhibits the synthesis between two operative statutes, as the alleged violation of the Anti-Kickback Statute taints the claim, rendering the subsequent submission to Medicare a violation of the False Claims Act.

[6] When asked after the trial to explain the reason for her decision to convict Bell, one juror reasoned that “an administrator knows what is going on in her home.”

[7] The patient’s family consented to the camera being installed in the patient’s room.

[8] New York’s Attorney General’s office proudly leads the nation in the increasingly popular use of hidden cameras and other recording devices to investigate the abuse and neglect of patients at nursing homes.  To date, at least 30 convictions have been achieved in New York nursing home prosecutions based on surveillance recordings.

[9] A spokesperson for the AG’s office responded to widespread criticism for letting the defendants off “too lightly” by explaining that since this home was the only one in Hazard, a guilty plea would have required CMS to stop funding the facility, thereby forcing it to close and leaving the town without a nursing home.

[10] Atlanta Special Agent in Charge Brian Lamkin remarked: “The level of greed and lack of compassion for others that was seen in this case reflect the very reason why the FBI, in working with its many and varied law enforcement partners, dedicates vast investigative resources to combating health care fraud.”

[11] Although each of the defendants denied the allegations – as expressly stated in the settlement agreement – they agreed to settle the matter “to avoid the delay, uncertainty, inconvenience and expense of protracted litigation.”

[12] This provision was brought into force in 1997 as part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

[13] The lowered charge to which he pleaded guilty replaced the original charge of a third degree felony – a crime punishable by up to 10 years in prison and a $10,000 fine.

[14] Commenting on this case, then-Texas Attorney General (now Texas Senator) John Cornyn said, “This case goes to show that top corporate officers in this industry can’t shun responsibility, hide behind some perceived cloak of official immunity and recklessly endanger elderly residents.”

[15] Under the False Claims Act, the whistle-blowers were entitled to a $94,200 share of the civil settlement.

[16] Nursing homes’ emergency preparedness and evacuation procedures remain on the authorities’ radar.  In fact, it is one of the few issues included in the OIG’s Work Plan for 2012.

[17] Termini’s guilty plea came two months after his former employee, Fredrick Dalicandro Jr., a director of cash management at Haven Healthcare, pleaded guilty to one count of wire fraud for his role in the scheme.

[18] Termini eventually installed sprinklers in West Haven but was unable to do so in Jewett City due to local water pressure issues.

[19] The 10 months in State jail is to run concurrently to the Federal sentence.

[20] Though the fine was reduced to $68,000 in July 2011 due to the home’s inability to pay, attorneys for Loving Care maintain that it remains unable to pay the fine.

[21] The deal by which the nursing home chain was acquired had Mr. Schron own a real estate company which owned the land on which the homes resided and Messrs. Grunstein and Forman control the operating company, Sava, which paid rent to Mr. Schron for the right to operate those homes.

[22] Related legal actions stemming from this illicit kickback arrangement seems to be far from over; as recently as October 21, 2011, Mariner and Sava agreed to pay approximately $140,000 to the Maryland Medicaid program for harm suffered due to the scheme.

[23] See entry regarding Martha Bell in the Billing and Record-Keeping Practices section, who was sentenced to 22 to 44 months in State jail for directing an attempted cover-up of the death of a resident.

[24] See entry regarding Highgate LTC Management in Standard of Care section, which was charged with falsifying records.

[25] Rodriguez was also charged with an unrelated theft allegation related to a series of checks she issued for cash.  For that charge, she faces up to 2 years in State jail.

[26] See entry regarding Serena Sylvia, Haven’s regional AR manager, in the Wrongful Taking section.  Apart from a prosecution and prison sentence for embezzlement, Ms. Sylvia pleaded guilty to State charges of perjury and second-degree forgery for her role in the scheme for which Ms. Boccacio was prosecuted.  Sylvia was sentenced to a total effective sentence of 10 months imprisonment.

[27] In a similar case in New York, a former aide at the Rome Memorial Hospital Residential Healthcare Facility of Rome, New York, was found guilty in 2007 of raping and sexually assaulting a 90-year-old resident of the nursing home.  William Morrison was convicted of first degree rape, first degree sexual abuse and endangering the welfare of a vulnerable elderly person and was sentenced to 25 years in State prison followed by 5 years post-release supervision.  After being employed by Rome Memorial Hospital for several months, Mr. Morrison was transferred to the hospital’s nursing home.  The attack was committed two weeks after the transfer, before the nursing home’s criminal background check – which would have revealed, inter alia, Morrison’s previous felony drug conviction – was completed.  Then-New York Attorney General Andrew Cuomo chastised the facility, as “Mr. Morrison’s history should have been discovered before putting him near vulnerable residents.”  Following an investigation into the matter, the AG ultimately refrained from bringing an action against the home.

[28] The issue of hiring employees with criminal records remains, despite requirements in all but eight states of some type of criminal background checks for nursing home employees.  A recent OIG study released in March 2011, based on an analysis of criminal records maintained by the FBI, revealed that 92% of nursing homes employed at least one individual with at least one criminal conviction. Nursing Facilities’ Employment of Individuals with Criminal Convictions (OEI-07-09-00110).

[29] See entry regarding George Houser in the Wrongful Taking section, who is facing up to 5 years in prison and a fine of up to $10,000 per count for failure to pay more than $800,000 of over payroll taxes to the IRS.

[30] U.S. District Judge Ellen Bree Burns sentenced Williams to three years of probation, the first six months of which she was ordered to serve in home confinement, as well as 100 hours of community service.

[31] Because no program payments may be made for items or services furnished by an excluded individual or entity, in order to avoid such potential liability, healthcare providers are advised to check the List of Excluded Individuals/Entities on the HHS-OIG web site referenced herein.