lawsuit regarding public nursing home deal

Joseph Schwartz, former owner of Skyline Management and a 90-plus nursing home empire whose collapse sent patients and workers scrambling in 2018, pleaded guilty Wednesday to his role in a $39 million fraud scheme.

US Attorney Philp R. Sellinger announced the guilty plea following a hearing before US District Judge Susan D. Wigenton in Newark. 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 faces 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. Sentencing is scheduled for May 22.

“As an employer, Schwartz was required to withhold trust fund taxes from his employees’ paychecks and then dutifully report and turn those monies over to the IRS,” Sellinger said in a statement. “Schwartz broke the law when he willfully withheld trust fund taxes from his employees but pocketed the money he had withheld rather than turning it over to the government; he will now be held accountable for his criminal tax violations.”

The cumulative IRS debt led to the collapse of the management firm and its Skyline Healthcare subsidiary. Skilled nursing facilities from Arkansas to Massachusttes were affected by Scwartz’s scheme, with state officials taking over many facilities through the receivership process when concerns about getting food and medicine to residents became evident.

The case drew widespread scrutiny from national media and left a stain on the sector and its private owners in particular. Some experts have surmised that the cases against Schwartz may have precipitated 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 initially been indicted on 22 counts related to $29.5 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, according to a press release issued by Sellinger’s office Wednesday.

Other allegations continue

Schwartz also has been criminally charged in Arkansas in a separate $3.6 million case of Medicaid fraud that could lead to his exclusion from government-funded healthcare programs. He also is charged with failing to pay more than $2 million withheld from his Arkansas employees’ paychecks to the state from July 2017 to July 2018, according to the Arkansas attorney general’s office. Schwartz has pleaded not guilty to those charges.

More than 20 of Skyline’s nursing homes were in Arkansas, and a trial there is scheduled for July 22, according to Arkansas Business.

Even without their former empire, Schwartz and his family members had continued to operate some nursing homes, including the troubled Limecrest Subacute and Rehabilitation Center in New Jersey.

Schwartz’s son, Louis, a former Skyline vice president, is 50% owner of that facility, which this fall faced a deadly COVID outbreak and now faces disqualification from the state’s Medicaid program. The Office of the State Comptroller’s Medicaid Fraud Division also announced this month that it planned to exclude the owners themselves from the New Jersey Medicaid program, an effort that has been stayed pending an appeal.

“Nursing home providers who fail to responsibly care for some of the state’s most vulnerable residents have no business being in the Medicaid program,” said Acting State Comptroller Kevin Walsh. “The State has an absolute duty to step in. That’s what we are doing, and we will continue to do.”