On October 12, 2016, the Department of Justice announced that four former nursing home executives have been indicted for their roles in a vast fraud, kickback and money laundering scheme involving Indiana nursing home chain American Senior Communities.  The former CEO of American Senior Communities, James Burkhart and former COO Daniel Benson are among those charged.  American Senior Communities is one of Indiana’s largest nursing home chains and manages the daily operations of approximately 70 senior care facilities throughout Indiana.  American Senior Communities manages these nursing home facilities on behalf of the Health and Hospital Corporation of Marion County (Health and Hospital), a public health organization that administers hospitals and nursing homes.  To manage the facilities, American Senior Communities purchases and refers patients to a wide variety of products and services provided by outside companies.  Nearly all of these products and services are paid for with money from Medicare and Medicaid.

The thirty-two count indictment details an elaborate scheme in which Burkhart, Benson and co-defendants Steven Ganote and Joshua Burkhart personally pocketed over $16 million in kickbacks and fraudulent overcharges which they spent on vacation homes, private plane flights, golf trips, jewelry, gold bullion and casino chips.

According to the indictment, between 2009 and 2015, James Burkhart and his co-conspirators engaged in side deals with many of the nursing home chain’s outside vendors for their own personal benefit and at the expense of Health & Hospital, American Senior Communities’ owners and the taxpayers.  These side deals often involved intentionally overcharging American Senior Communities and Health & Hospital for the products and services the vendors provided and then funneling the overcharged amounts back to themselves through a web of shell companies.  For example, the indictment alleges that James Burkhart directed a landscaping vendor to artificially inflate its invoices to American Senior Communities by 45%.  After James Burkhart had American Senior Communities pay the invoices, the landscaping vendor paid the 45% overcharge back to one of James Burkhart’s shell companies, which he then split with the landscaping vendor’s shell company.  The landscaping vendor’s inflated invoices allegedly defrauded American Senior Communities and Health & Hospital out of over $2.3 million.

Vendors often paid kickbacks to James Burkhart, Benson, and Ganote just for doing business with ASC.  For example, the indictment alleges that the vendor who provided pharmacy services at ASC-managed facilities paid three of Ganote’s shell companies over $5.5 million in two years for purported “marketing” services.  Ganote regularly split this money among James Burkhart, Benson, and himself.  Furthermore, vendors that questioned the overcharges and kickbacks were turned down.  For example, the defendants approached a company about installing new nurse call systems in all ASC facilities.  They told the company to mark up their prices by 30% and pay the overcharged amount back to a shell company.  The company declined to inflate its prices and James Burkhart immediately terminated negotiations and moved on to a second company, which agreed to the inflated-invoice deal.

The defendants’ scheme capitalized on all aspects of the the nursing home chain’s operations.  In addition to landscaping, pharmacy and nurse call systems, the indictment contains allegations of fraud and kickbacks concerning food supplies, medical supplies, patient lifts, patient therapies, interior decorations, furniture, office supplies, scent products, American flags, patient discharge packages, uniforms, and Alzheimer’s Memory Walk t-shirts.

“These men are alleged to have stolen from the most vulnerable in our society,” said United States Attorney for the Southern District of Indiana Josh J. Minkler.  “They took advantage of a system entrusted with the care of this state’s elderly, sick and mentally challenged allowing them to live a lifestyle of gratuitous luxury, fraught with unbridled greed.”

The indictment alleges that the fraudulent proceeds and kickbacks were laundered through over 20 shell companies and bank accounts, and then divided among the four men for their personal use and benefit.  In total, the indictment alleges that the defendants received over $16 million from their fraud and kickback scheme.

James Burkhart, Benson, Ganote, and Joshua Burkhart, if convicted, each face up to 20 years in prison for charges of conspiracy to commit mail, wire, and health care fraud, 20 years in prison for each mail or wire fraud count, 20 years in prison for certain money laundering counts, and 10 years in prison for other money laundering counts.  Additionally, James Burkhart, Benson, and Ganote, if convicted, each face up to 5 years in prison for conspiracy to violate the Anti-Kickback Statute.

The cases against these defendants are criminal cases.  However, under the qui tam provisions of the False Claims Act, whistleblowers with information about similar fraud against the government may bring a civil case on behalf of the United States. If successful, the government can recover three times the amount the defendants fraudulently billed the government.  The whistleblower, who originally filed the case, is entitled to 15-30% of the government’s recovery as well as their attorney’s fees.