Gavel with money
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A federal judge has rejected a plea deal involving a former nursing home operator who admitted his role in a nearly $39 million fraud scheme that led to the financial collapse of dozens of facilities.

US District Court Judge Susan D. Wigenton on Thursday said she had decided to disallow the plea agreement after reviewing a pre-sentencing report for Joseph Schwartz, the former owner of Skyline Management and its one-time portfolio of 90-plus nursing homes.

“The Court has had an opportunity to review the presentence report,” the judge wrote in a brief order. “The Court hereby rejects the plea agreement dated November 20, 2023, and is therefore not required to adhere to the terms of the plea agreement. The case may be disposed of less favorably toward the Defendant than the plea agreement contemplated.” 

Sentencing in the case had originally been scheduled for May 22, but was postponed to July due to scheduling conflicts ahead of Wigenton’s Thursday announcement.

Courtroom observers had previously told McKnight’s Long-Term Care News that the judge did not seem pleased with Schwartz’s deal, which was announced by the US Attorney’s Office in a victorious-sounding press release in January.  

Schwartz admitted his guilt on two counts of willfully failing to pay employment taxes withheld from employees of his New Jersey-based company and willfully failing to file an annual financial report with the Department of Labor for his employees’ 401K Benefit Plan.

He had initially faced a maximum of five years in prison and a $250,000 fine for the tax fraud, as well as another 10 years and $250,000 fine for failure to file critical paperwork related to the retirement plan. The agreement called for a year and a day in prison and a $5 million restitution payment.

The judge’s rejection of that agreement could mean a harsher sentence for Schwartz, or he could opt to withdraw his plea by June 21, 2024. Without a withdrawal, a new sentencing date has been set for July 17.

McKnight’s Long-Term Care News reached out to Schwartz’s attorney Friday morning but had not heard back by publication deadline.

Schwartz’s alleged actions drew widespread scrutiny from national media and left a stain on the sector and its private owners in particular. Skyline-managed nursing homes in multiple states fell into receivership, their staff unable to pay for food or medicine for patients in some cases.

Some experts have surmised that the cases against Schwartz led to the Biden Administration’s pursuit of aggressive new long-term care regulations and transparency requirements.

In New Jersey, where Skyline was notoriously based in an underwhelming office above a pizza parlor, Schwartz had originally been indicted on 22 counts related to $29.5 million in unpaid employee taxes.

An insurance broker until 2015, Schwartz quickly built Skyline off the back of proceeds from the original business. The Department of Justice alleged his failures to pay employment and unemployment taxes affected more than 15,000 employees at 95 facilities in 11 states. That was updated to $38.9 million.

While Schwartz had been on house arrest for nearly two years, court records reviewed by McKnight’s this week show he had been placed instead on a curfew in January. In late March, the court agreed to lift the curfew and remove Schwartz from electronic monitoring.