A $105 million federal lawsuit filed last week — one possibly set to be dismissed quickly — shows the growing threats nursing home operators face to justify their right to collect and spend COVID relief funds.
A civil whistleblower lawsuit filed Wednesday in U.S. District Court for the Southern District of New York alleged that the owner of nursing homes, home health care and recruitment agencies in at least four states “fraudulently obtained the CARES Act disaster relief through fraudulent certifications of eligibility.”
GNGH2, which claimed to be making its allegations on behalf of the federal government, accused New York-based Citadel Care Centers and its affiliates of wrongfully accepting forgivable loans from the Paycheck Protection Program. The 2020 program was intended to help small businesses and was funded by the Coronavirus Aid, Relief, and Economic Security Act, or CARES, Act.
A total of 15 Citadel-linked companies, including four nursing homes in New York and six in Florida, linked to owner Leopold Friedman received individual loans ranging from $164,000 to $9.1 million.
GNGH2, a New Jersey company led by David Abrams, the attorney who filed the lawsuit, said the combined loans totaling $35.3 million violated the CARES Act’s $10 million per company cap.
“Looking at the concern as a whole, defendants and related entities had far more than the maximum assets, payroll size and earnings for qualification,” Abrams said in his filing. “Thus, the defendants necessarily made false statements when they executed [a PPP loan application].”
A request for comment from Citadel Care Centers was not acknowledged prior to the production deadline.
While the CARES Act limited receipt of PPP loans to businesses with 500 or fewer employees, small nursing homes and other health care providers would have been eligible to apply, said Donna Fudge, a civil attorney who serves as counsel. in tort for the Florida Health Care Association.
“EHPAD and ALF [assisted living facilities] would have been eligible to receive PPP loans provided they met government eligibility criteria,” said Fudge, of Fudge BRoadwater, PA. “The long-term care industry has been one of the hardest affected by the negative impacts of COVID-19 on their cost of doing business…and their incomes (decrease in new admissions, decrease in resident census levels) falling.
“In short, in my opinion, long-term care businesses were the exact type of business that the PPP loan was designed and intended to help weather the COVID-19 storm.”
Before learning that Abrams planned to withdraw the False Claims case, Fudge said it would lead the industry into “uncharted waters”. But providers face many pressures to document and report provider relief funds, and related auditing activities by health and human services and the Department of Justice are intensifying.
But Fudge said she was not aware of any similar whistleblower claims against long-term care providers regarding relief qualifications or expenses.
It was unclear how GNGH2 could have had visibility into the company’s operations or otherwise know that it was in violation of qualification rules. Asked about the company’s status as a whistleblower on Friday, Abrams said McKnight Long Term Care News that he anticipated that “the case will be voluntarily dismissed shortly, that is, it will not proceed”.
He declined to comment further.
It is unclear what type of business GNGH2 provides, but it was founded by Abrams in early 2020. The government declined to intervene in the Citadel lawsuit but had asked the court to keep it informed of any dismissals or settlement.
Abrams filed a similar lawsuit against a group of New Jersey nursing homes late last year; he requested and obtained the voluntary dismissal of this case in September.
But in at least one case, a company agreed to a financial settlement after GNGH 2 filed a similar whistleblower claim. The government intervened in the case, and Milwaukee Target Public Relations paid $2.25 million to resolve the allegations. He did not admit any wrongdoing.