Loyola University Chicago School of Law, J.D. 2018
Two former executives of American Senior Communities and two accomplices have been indicted on numerous charges by the Department of Justice. The two former executives: CEO James Burkhart and Daniel Benson were arraigned on charges of health care fraud and conspiracy to violate the anti-kickback statute, among many others. Steven Ganote and Joshua Burkhart were also indicted on the charges.
Who was Affected?
American Senior Communities is one of the largest nursing home facilitators in Indiana with approximately 70 senior care facilities. To manage these facilities, American Senior Communities relied on many outside companies to provide a wide range of products from landscaping to food products to bedding. Almost all of these products were paid for with money from Medicare and Medicaid.
The four co-conspirators are accused of creating over 20 shell companies that were responsible for holding money and falsifying and overinflating prices to American Senior Communities.
According to the Department of Justice, the scheme to defraud Medicare and Medicaid on both the federal and state level ran between 2009 and 2015. It is alleged that Burkhart and Benson received over $5.5 million in kickbacks for doing business with American Senior Communities, during the course of the scheme. The Department of Justice further contends that the vendor who was primarily responsible for the pharmaceutical services at the facilities that American Senior Communities managed, paid over $5.5 million to three of Steven Ganote’s shell companies for “marketing services.” This money was then purportedly split between James Burkhart, Daniel Benson and Ganote.
Furthermore, it is alleged that the four defendants not only took millions of dollars in kickbacks but also turned down companies that were not willing to participate in the kickback scheme. The indictment alleges specific examples including when “James Burkhart, Benson, and Ganote approached a company about installing new nurse call systems in all ASC facilities. They told the company to mark up their prices by 30% and pay the overcharged amount back to a shell company. The company declined to inflate its prices.” This allegation is according to the Department of Justice indictment. However, the defendants were able to find a second company who did end up participating in the kickback scheme. The defendants are accused of receiving over $3.7 million in overcharges from this company.
In total, the defendants are accused of receiving over $16 million in fraudulent kickbacks and overcharges. The Department of Justice alleges that the four defendants used the money to buy a wide variety of items for themselves. These items include: Rolex watches, gold bars, and vacation homes in Florida.
How was the Scheme Uncovered?
According to Nick Linder, Assistant U.S. Attorney, a member of the public came forward and spoke with the Department of Justice. This person worked at one of the companies that was turned away by the defendants for an unwillingness to participate in the kickback scheme. There was then a joint investigation by members of the Federal Bureau of Investigations, Internal Revenue Service and U.S. Department of Health & Human Services, Office of Inspector General.
Lamont Pugh III, Special Agent in Charge – Chicago Region, U.S. Department of Health & Human Services, Office of Inspector General did not mince words when talking about the indictment. Pugh III said “These improper arrangements exploit our healthcare system and increase the costs for obtaining services for all program participants. The OIG will continue to work with our federal, state and local law enforcement partners to uncover these types of schemes and hold those who execute them accountable.”
Furthermore, United States Attorney Josh J. Minkler said that the defendants “took advantage of a system entrusted with the care of this state’s elderly, sick and mentally challenged allowing them to live a lifestyle of gratuitous luxury, fraught with unbridled greed.”
While it is likely that a sound compliance program would have caught the egregious issues that went on for upwards of six years, it is not readily apparent whether American Senior Communities had a compliance program. After a look at the leadership structure at American Senior Communities, it appears that they still do not have a compliance program or a compliance officer. It is possible that American Senior Communities will enact a compliance program in the future to try to detect these types of problems in the early stages.