New York’s top prosecutor this week filed suit against a nursing home owner with a growing empire, accusing him and several co-owners of defrauding the government of more than $18 million while understaffing and neglecting residents. 

Attorney General Letitia James’ lawsuit was filed Tuesday and targets Ephram “Mordy” Lahasky and fellow owners of The Villages, a 120-bed facility in northwestern New York. The suit alleges quality dropped quickly at the facility in the months after Lahasky’s takeover, a time when the owners were busy creating related companies to which they paid rent and other fees. 

The lawsuit aims to remove Lahasky, David Gast and Sam Halper from ownership and managerial duties; shut down admissions until staffing levels rise to “appropriate standards”; make owners pay for a receiver, financial monitor and healthcare monitor; return any wrongfully gained funds from the fraud; and repay the state and federal government for investigation costs.

Lahasky and his affiliates are facing other complaints outside of New York. Lahasky was a partial owner, with Halper, of Brighton Rehab and Wellness Center in Western Pennsylvania, where state and federal officials this summer accused the operators of falsifying staff hours and overcharging for care.

Despite concerns from both consumer advocates and some within the nursing home sector, Lahasky has continued to quickly grow his business footprint. His facilities operate under a variety of business names, but he is widely believed to hold at least partial ownership in more than 100 nursing homes, including 61 he picked up in a deal for Diversicare last year.

He has avoided most media and even tried to avoid providing documentation about his ownership web when such details were requested through a state change of ownership process. While Lahasky and associates in 2021 abandoned an attempt to buy one-sixth of all nursing home beds in Vermont, he soon after made a 17-facility purchase in Ohio with little fanfare.

On Wednesday, a CMS ownership database linked an Ephram Lahasky to 268 facilities, though some of those are likely duplicates because Lahasky holds multiple roles at a single site. In many cases, he owns facilities or land in conjunction with family members.

In the New York case, James’ suit notes a decline in care quality at The Villages after Lahasky took it over. She cites a drop from three stars to one star in a federal rating system within a four-month period.

The 152-page suit lays the crux of that decline in the lap of a complicated fraud scheme that led to understaffing, dependency on highly regulated behavior-controlling drugs and negligence. James alleges that the owners created a related-party network that diverted nearly $19 million in funds from patient care.

In 2014, the group formed Telegraph Realty in order to buy the land underneath The Villages in 2015. The facility paid rent to Telegraph and also paid a company formed by the group for administrative services, including payroll, insurance billing and accounting.

From 2015 through 2021, The Villages received $86.4 million in funding, including millions from Medicare and Medicaid. A press release announcing the lawsuit said the owners used a large share of those funds for personal gain rather than patient care. Through payments to Telegraph and CHMS, and with transfers to themselves directly and indirectly, the owners diverted $18.6 million.

The suit also aims to discourage such behaviors in the future and specifically asks a judge to permanently enjoin those charged “from making self-dealing payments, loans, and other transfers of excessive value to the Respondents and related entities.”

The lawsuit is a result of the attorney general’s focus on nursing homes since the pandemic. In January, 2021, the office released a report that said many nursing homes were not prepared or equipped for the pandemic because of poor staffing levels and a lack of infection control protocols compliance.