The owner and Chief Executive Officer (CEO) and the company’s executive vice president (EVP) for a chain of Illinois nursing homes were recently charged and indicted in a U.S. District Court for allegedly operating a fraud scheme that involved misappropriating funds raised through the sale of membership interests in companies that the CEO created. The real purpose of the funds collected was to purchase and sell nursing homes and assisted living facilities, enriching the two accused men.
The indictment alleges the pair of intentionally misleading investors about the financial condition of the companies to facilitate the fraudulent raising of funds. The charges contend that the payments of returns to investors were funded through a Ponzi scheme that paid early investors with money raised from later investors. The accused men also used investor funds to make purchases or acquisitions of healthcare facilities for their own personal benefit.
The indictment seeks forfeiture from the CEO of $13.56 million, and from the EVP of $3.76 million.
The indictment charges the 50-year-old CEO with ten counts of wire fraud, and the 40-year-old EVP with one count of wire fraud. The CEO has pleaded not guilty to all counts. Arraignment for the EVP is set for Sept. 16, 2020, at 10:00 a.m., before a U.S. District Judge.
Compliance Perspective
Owners and officers of an organization operating nursing homes who participate in fraudulent schemes to raise funds for personal gain place the facilities at risk for exclusion from the Centers for Medicare & Medicaid Services (CMS) reimbursement programs, closure of the facilities with related negative impact on residents and staff, imprisonment of involved individuals, and fines for violating state and federal regulations.
Discussion Points:
- Review policies and procedures for ensuring that the governing body is actively overseeing the sound fiscal management of the facility and preventing any fraudulent fundraising schemes that could jeopardize the facilities’ eligibility to participate in Medicare and Medicaid reimbursement programs.
- Train all staff, including governing body members, regarding their fiduciary responsibility to ensure that the operations of facilities are fiscally sound and to prevent fraud, waste, or abuse of funds from occurring.
- Periodically audit the financial records of the organization and its facilities using a reputable independent CPA firm.
