November 3, 2009, BOSTON, MASSACHUSETTS -- Omnicare Inc., the nation's largest pharmacy for nursing homes, will pay the federal government and several states $98 million to settle Medicare and Medicaid fraud charges -- partially due to a businessman whose gambling habit nearly destroyed his life.
Adam Resnick, a Chicago-based healthcare entrepreneur represented by Phillips & Cohen LLP, exposed through a "qui tam" (whistleblower) lawsuit a kickback deal between Omnicare and the owners of a nursing home chain. As part of today's settlement, Omnicare will pay $19.8 million to the government to resolve Resnick's qui tam case.
Naftional Senior Care Inc. and prominent New York real estate investor Rubin Schron - who together purchased the Mariner Health Care Inc. nursing home chain. - as well as Leonard Grunstein, a New York real estate lawyer who was Schron's agent in the deal, remain defendants in the case and also are liable for many millions of dollars in damages.
Resnick will use a substantial amount of his reward money, as provided to whistleblowers under the False Claims Act, to pay restitution to the U.S. government for an unrelated matter -- his role in the collapse of a Chicago bank in 2002 due to his pathological gambling addiction. He served time in prison.
"Adam Resnick is continuing to repay his debt to American taxpayers," said Mary Louise Cohen, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistleblower. "By bringing this wrongdoing to the attention of federal prosecutors, he has helped the government recover twice the amount the government lost due to the bank failure."
Resnick's qui tam lawsuit, which the government joined, alleged that Omnicare paid a $50 million kickback to Mariner Health Care disguised as a purchase of a small business unit of Mariner.
On the same day that Omnicare paid Mariner $50 million for a business unit that had only $2 million to $3 million in assets, Mariner signed a 15-year contract with Omnicare to refer all of its nursing home patients to Omnicare for the patients' drug purchases, including drug purchases covered by Medicare and Medicaid.
"This was a sophisticated kickback scheme," attorney Cohen said. "The companies tried to mask the payment through the use of numerous shell companies and complicated ownership structures."
The government alleges in its complaint that Mr. Schron, with the help of Mr. Grunstein and other associates, fabricated and backdated documents to hide the fraudulent nature of the transaction after they learned the government was investigating their deal with Omnicare.
"In all likelihood, the government never would have uncovered this scheme without the assistance and persistence of Mr. Resnick," Cohen said.
Resnick quit gambling seven years ago and is using his experience to help others avoid ruining their lives because of addiction. In his book, Bust: How I Gambled and Lost a Fortune, Brought Down a Bank - and Lived to Pay For It, Resnick recounts the double-life he led as a successful businessman devoted to his family and a compulsive gambler who secretly and obsessively won and lost millions on blackjack and sports bets.
"I believe this settlement is a testimonial to what I have always stood for and is proof that addicts can make mistakes but certainly can turn their lives around," Resnick said "Kickback deals can hurt Medicare and Medicaid patients because they influence decisions to provide drugs that could be medically unnecessary, of poor quality or even harmful."
Resnick said his background was an obstacle to the case at first.
"It was difficult because of my circumstances to convince the government in the beginning about my knowledge of the health care industry and this fraud in particular," Resnick said. "I am pleased that the government investigated my case and did such excellent work."
Attorney Cohen praised the government's lawyers -- particularly Assistant U.S. Attorney Gregg Shapiro and Department of Justice Senior Trial Attorney Laurie Oberembt -- and the talented team of investigators from the Department of Justice and other agencies for their work on the case.
The government complaint provides the details of the kickback scheme and the charges against Omnicare, Rubin Schron, Leonard Grunstein and their associates.
Phillips & Cohen filed the qui tam lawsuit on Resnick's behalf in 2006 in federal district court in Boston, Massachusetts. The government intervened in the case last year. Omnicare's settlement resolves Resnick's qui tam lawsuit, three separate qui tam lawsuits brought by other whistleblowers and government fraud charges.
The False Claims Act allows private citizens to file qui tam lawsuits against companies and individuals defrauding the government and recover funds on the government's behalf. Whistleblowers are entitled to 15 percent to 25 percent of the amount recovered as a result of their lawsuits.
For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.