South Carolina Nursing Home Blog : South Carolina Nursing Home Lawyer & Attorney : Poliakoff & Associates Law Firm : Elderly Care, Senior Care

The March 2005 article in Counsel to Counsel discusses the complex but supposedly legal transaction involving Mariner and other entities including National Senior Care.  The article mentions the complexity of the billion dollar transaction.   After all, the deal took nearly seven
months to complete; involved roughly 80 attorneys from a half-dozen law firms; and hinged on the sale and lease-back of Mariner’s most valuable assets—its skilled nursing facilities.  Through its operating subsidiaries, Mariner owned, leased or managed nearly 260 skilled nursing facilities in more than 20 states and over a dozen long-term acute care hospitals in four states.

NSC (Harry Grunstein, Defendant Leonard's brother from Israel) came calling in April 2004. NSC wanted to take the company private and made Mariner and its shareholders an offer that really was too good to refuse—$30 per share for a stock that was at that time trading in the low $20 range, plus the assumption of some $350 million in debt.  Specifically, the deal involved selling
170 of Mariner’s 260 skilled nursing facilities to a third party—SMV, a real estate investment company—to help NSC finance the merger. Under terms of the proposed agreement, SMV would lease the properties back to either Mariner (which by then would be an NSC subsidiary), or to another company, Sava SeniorCare. Further, after establishing a bridge loan to pay off Mariner’s shareholders, NSC would use the approximately $600 million realized by the sale of  the properties to finance the acquisition—including paying off both the bridge loan and Mariner’s
outstanding debt.

Executive compensation attorneys came in to review and restructure Mariner’s senior management agreements and benefit packages—including an employee retention plan
developed after NSC made it clear it wanted to keep the Mariner management  team in place.

Many readers may be wondering how this kickback scheme affects residents in a nursing home. Jim Edwards wrote on a blog recently that "The scariest wrinkle in the Omnicare kickback case is just how vulnerable old people in nursing homes are to schemes in which drug companies allegedly induce pharmacies to prescribe drugs they otherwise wouldn’t." Edwards cites one case where one patient cited by the government’s complaint received 67 — sixty-seven! – different drugs under Omnicare’s “care”. Those drugs included Cipro, Neurontin, Heparin, Pepcid, Oxycodone and Seroquel or their generics, according to the complaint.

Remember we as taxpayers pay for these medications and services to provide for the most vulnerable citizens in our country not to go into the pockets of corrupt and greedy corporate owners.

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My next three entries will discuss the exploits and complaints against OmniCare, Mariner, SavaSeniorCare, and Murray Foreman, Rubin Schron, and Leonard Grunstein who own and operate hundreds of nursing homes through a complex maze of corporate shenanigans, and were finally caught gaming the system to make millions and deprive our loved ones of the necessary care they deserve.  Our taxes are going into the pocket of these greedy corrupt men.

There have been numerous articles on these cases and I will try to organize, summarize, and paraphrase most of them in the next three days.  It is interesting that none of the article discusses Murray Foreman and Leonard Grunstein's ownership of Fundamental Long Term Care Company that owns and operates hundreds of other nursing homes using the THI name.

The Wall Street Journal wrote geriatric pharmacy company Omnicare Inc. will pay $98 million to settle charges that it engaged in several kickback schemes with drug makers and nursing homes.  The Justice Department alleged that Omnicare regularly paid kickbacks to nursing homes in order to induce the homes to refer their patients to Omnicare for pharmacy services.  Separately, the department said it was intervening in a lawsuit alleging that two nursing-home chains, Mariner Health Care Inc. and SavaSeniorCare Administrative Services, accepted kickbacks from Omnicare in return for pharmacy-service contracts.

Reuters had an article that added additional facts.   DOJ filed a complaint against two large nursing home chains, Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC, both of Atlanta, and their principals, Leonard Grunstein, Murray Forman, and Rubin Schron, for accepting a kickback from Omnicare in return for pharmacy services contracts.  The company allegedly solicited and received kickbacks in exchange for agreeing to recommend that physicians prescribe Risperdal, a  dangerous antipsychotic drug, to nursing home patients.

The government further alleged that Omnicare regularly paid kickbacks to nursing homes by providing consultant pharmacist services at rates below the company's cost and below the fair market value of such services in order to induce the homes to refer their patients to Omnicare
for pharmacy services.

The United States alleges that Omnicare, Mariner Health Care, SavaSenior Care, Grunstein, Forman, and Schron conspired to arrange for Omnicare to pay the nursing home chains $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare's largest customers. Defendants attempted to disguise the $50 million kickback as a payment to acquire a small Mariner Health Care business unit that had only two employees and was worth far less than $50 million.

After they became aware of the government's investigation, Grunstein, Forman, and Schron allegedly created false backdated documents in a further attempt to hide the kickback. These
allegations are detailed in a separate complaint that was unsealed recently.  Read the Complaint here.

More to come tomorrow.

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I am happy to report that Moody & Warner, P.C., an employment law firm in New Mexico, specifically Whitney Warner, got a verdict in federal court against various Fundamental/THI entities last week in a wrongful discharge case. Significantly, the verdict was against multiple THI/Fundamental entities because the jury found that they operated as a “single employer.” I think this is extremely important to all of us who try to hold these parent entities accountable.

Mr. Prendergast had been treated horribly by his employer THI/Fundamental entities which includes Fundamental Long Term Care Holdings, Fundamental Clinical Consulting, Fundamental Administrative Services, THI of Baltimore, Inc. and local operators in an elaborate corporate scheme. These entities are represented by Lori Proctor. This case was about the maintenance director, Mr. Prendergast, who was fired after “corporate” decided he was too concerned for the health of the residents, and complaining about unsafe and unsanitary practices such as having to paint over mold in the bathrooms, delays in approvals for repairs, and otherwise being aware and willing to talk about how dangerous and run down this facility was.   These kind of unsafe and unsanitary practices will lead to dangerously high infection rates.  The facility has thankfully been closed down.  

The Tenth Circuit weighs four factors in considering “whether two nominally separateentities constitute an integrated enterprise or single employer: (1) interrelations of operations; (2)common management; (3) centralized control of labor relations; and (4) common ownership andfinancial control.”   Here is the Order denying Defendants' Motion for Summary Judgment on the "single employer" rule or "integrated entity" enterprise.

Whitney Warner is a phenomenal lawyer who put a tremendous amount of thought and effort into this case.   Although this does not represent a huge damages award, the significance of this verdict is invaluable.

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WSOCTV.com had an article about a Rock Hill, S.C. charged with stealing money from patients at the nursing home where she worked.   Melissa Kelly was the business manager at Magnolia Manor on Murrah Drive in Rock Hill. She has been charged with one count of forgery, and one count of elder exploitation.  Magnolia Manor is part of the chain of THI and Fundamental nursing homes.

Kelly was fired from her job last fall after an internal audit uncovered more than $65,000 of company checks that were forged and then cashed. "The more we dug, the more blatant it became," said detective David Hanoka who spent four months investigating the case.

Hanoka said dozens of nursing home patients lost money since April of 2006 without ever knowing it.  Many of the nursing home residents on Medicaid or Medicare have small trust accounts used for spending money. The money is often petty cash that's used for small day to day items. Those are the accounts police say were stolen from.

"This money was never distributed to the individuals it should've been distributed to," Hanoka said.

Instead, police believe Kelly forged and cashed the checks. Police said it's not clear how much of the missing $65,000 she is responsible for. Police focused their investigation on just 14 cases they say took place in 2008.

The state attorney general's office will continue the investigation, and prosecute the case.

Joy Patterson, the administrator at Magnolia Manor, told the media that the company was not ready to release a statement yet, but would soon.

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On Jan. 9, 2009, Trans Healthcare, Inc. filed for bankruptcy and entered into a receivership.  It seems to apply only to facilities located in Ohio and Maryland.  Trans Healthcare, Inc. is a subsidiary to THI Holdings, L.L.C. and a "sister" company to THI of Baltimore, Inc.   I would imagine the next step will be bankruptcy for THI of Baltimore, Inc. 

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On Jan. 9, 2009, Trans Healthcare, Inc. filed for bankruptcy and entered into a recievership.  It seems to apply only to facilities located in Ohio and Maryland.  Trans Healthcare, Inc. is a subsidiary to THI Holdings, L.L.C. and a "sister" company to THI of Baltimore, Inc.   I would imagine the next step will be bankruptcy for THI of Baltimore, Inc. 

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