BOSTON, Massachusetts, Feb. 26, 2010 -- Two prominent figures in the New York City real estate market, a Long Island associate and two Atlanta-based nursing home chains have paid the federal government and certain state Medicaid programs a total of $14 million to settle a whistleblower lawsuit brought by Phillips & Cohen LLP alleging Medicare and Medicaid fraud involving a kickback and a cover-up.
The defendants in today's settlement are:
- Rubin Schron, a New York real estate investor who along with National Senior Care Inc., bought Mariner Health Care Inc., which is at the center of the kickback scheme.
- Leonard Grunstein, a New York real estate attorney who was a partner with the law firm, Troutman Sanders. He was Schron's agent in the purchase of Mariner Health Care Inc. and in the alleged kickback scheme.
- Murray Forman, an associate of Grunstein's and Schron's who also is president of a Long Island school board.
- Mariner Health Care Inc., a Delaware corporation with headquarters in Atlanta, Georgia, that operates nursing homes and, according to the government's complaint in this case, is controlled by Schron.
- SavaSeniorCare Administrative Services LLC, a privately held Delaware company with headquarters in Atlanta, Georgia, also reportedly controlled by Schron. Sava affiliates lease and operate nursing homes.
The "qui tam" (whistleblower) lawsuit and the U.S. Department of Justice make two major allegations:
- Schron, Grunstein and Forman allegedly solicited and accepted a nearly $50 million kickback from Omnicare, the nation's largest provider of pharmacy services for nursing homes, in return for contracts with the nursing home chains.
- Once they learned they were under government investigation, Mr. Schron, with the help of Mr. Grunstein and Mr. Forman, allegedly tried to cover-up the kickback by creating false documents and backdating them.
Under the terms of the settlement agreement, Schron, Grunstein, Forman and the nursing home chains have paid $7.8 million to the federal government and $6.1 million to certain states that lost Medicaid funds as a result of the fraud. Omnicare paid $19.8 million in November to settle its portion of the whistleblower lawsuit for its role in the scheme.
"As outlined in the government's complaint, Rubin Schron, Leonard Grunstein and Murray Forman tried to disguise an unlawful kickback payment," said Mary Louise Cohen, a Washington, DC, attorney with Phillips & Cohen LLP, which represents the whistleblower. "Omnicare's $50 million payment for a small unit of Mariner Health Care -- which had less than $3 million in assets and only two employees -- just didn't add up without figuring out what else Omnicare was getting as part of the deal."
On the same day that Omnicare bought the Mariner unit, Mariner signed a 15-year contract with Omnicare to refer all of its drug purchases by nursing home patients to Omnicare, including drug purchases covered by Medicare and Medicaid.
Adam Resnick, a Chicago-based healthcare entrepreneur, exposed the scheme in the qui tam lawsuit Phillips & Cohen filed on his behalf in 2006 in federal district court in Boston, Massachusetts. After investigating the allegations, the government intervened in the case in December 2008. The government's complaint is posted here.
Under the False Claims Act, whistleblowers are entitled to a reward of 15 percent to 25 percent of the amount the government recovers as a result of their qui tam lawsuits. The reward in this case hasn't been decided yet.
Resnick served time in prison for his role in the collapse of a Chicago bank in 2002 due to his pathological gambling addiction. The settlement announced today furthers his compelling seven years of successful recovery and positive life changes. He will use a substantial amount of his reward from this case to pay restitution to the government for his role in the bank collapse.
Resnick recently wrote an op-ed that explains how society benefits from giving people such as himself a second chance. He co- authored a memoir called Bust: How I Gambled and Lost a Fortune, Brought Down a Bank - and Lived to Pay For It, which tells his story of being a successful businessman and devoted family man while secretly and obsessively winning and losing millions on blackjack and sports bets.
"I really appreciate the tenacious work the government attorneys did on this case," Resnick said. "If nursing homes take kickbacks, decisions they make about drugs for their residents ultimately may be based on financial benefits to the nursing homes rather than medical benefits for their patients."
Attorney Cohen praised Resnick and government attorneys for their work on the case.
"Without Adam Resnick, the government was unlikely to have uncovered this kickback scheme," Cohen said. "This was a complicated matter, which was successfully resolved in large part as a result of the skill and diligence of Assistant U. S. Attorney Gregg Shapiro and Department of Justice Senior Trial Attorney Laurie Oberembt."
For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.