I noted when I read the ARDC complaint filed against me that there was a coincidence that was too obvious to ignore. Count 2 coincided very closely with my compelling A & W to appear for depositions. At these depositions A & W made admissions and disclosed that the nursing home industry has been reimbursed what could be billions of dollars that they were not entitled to. The state is entitled to every dime back.
I also know that the Fed hauled Mr. K*** and Mr. R*** before a grand jury as they were allegedly overcharging for transportation. ReHab Assist (another of these companies) billed Gloria for looking in on her mother’s dog. Looking at their billing to Gloria, if its consistent, they should qualify for a Nobel prize in literature (fiction).
The following is my rough note to myself as to the generics of what I learned. The next step is analysis. I will see that Law enforcement gets a copy for two reasons. If the ARDC complaint was intended to intimidate me, I have to act on my intimidation, and now there is no further reason to intimidate me –
To whom it may concern:
Re: current information concerning nursing home investments.
The key person is Morris Esformes. Mr. Esformes, N. Draiman, and others it appears in the 1960’s developed a sure fire money making scheme. They bought, or otherwise acquired nursing homes of a decent size. These facilities were 100 beds or more, usually in 150 to 250 size. With the advent of medical insurance, insurance was now available to cover costs that heretofore had been paid by the family with great hardship. This situation also facilitated the public sector in the form of the State of Illinois to house welfare and other patients in these facilities rather than in State run or private hospital. Esformes and the other nursing home operators (all of whom had some relationship to each other) gleaned onto this opportunity.
As the businesses were subject to regulation and corners were cut on a regular basis, the life expectancy of a particular operation was about ten years. The new owners were all in some manner related to Esformes of the patron saint. For instance, subsequent general partners were spouses, children, ex-spouse’s mates etc. A & W (Newman vs. A & W) both worked for Esformes. W was hired to shepherd Ms. Esformes and ultimately became her second husband. Some similar relationships are documented.
Real Estate financing was fairly routine. A Bank would provide a first mortgage. The venture was financed by inducing co-religionists (at first) to provide the capital. This was done by a series of limited partnerships. The partners in spite of the terms of the partnership agreement would actually be lenders sans a note. The limited partners would be promised a ‘return on investment.’ Come ‘hell’ or high water the general partners would see that the limiteds would get a yearly sum of money equal to the return. For instance, if there was promised 10% return, the limited would receive 10% Principal would be paid when the real estate was sold.
Sequence of events:
Investor A would be induced to purchase an interest. For $2500 a bed he could become a part of the transaction. If there were 100 beds in the facility he would have a 1% interest. The general partner would induce up to 35 similarly situated person to purchase beds until 100% were sold. The general partners would obtain a certain number of beds for their expertise and the management of the partnership.
When the first deal was set, the Generals would contact Mr. Esformes and Esformes would determine the deal. It was a take it or leave it transaction. All the documents were uniform and word to word similar. The documents were:
· An offering statement. This document had to be returned to the general partners and when inquiry is made for it, no one has a copy.
· Partnership agreement (entitled limited partnership agreement) This is a procrustean document intended to protect the general partners and paragraph 13 written to cure any conflict of interests problems and allow the general partners to adjust the earnings of the partnership so that government and the limited partners were satisfied (in whatever way they had to be satisfied).
· Option agreement
· Master lease.
The partnership would lease (with option to purchase) one of the Esformes nursing homes. Immediately the facility would engage an administrator. The administrator had to be licensed by the State of Illinois and took care of the daily rote items such as hiring and firing. (The general partners appeared periodically to pick up a check). As the administrator is a professional and licensed the nursing home usually met State standards. Periodically state inspectors were greased and a constant flow of cash was maintained.
After about ten years the facility had acquired a substantial number of skeletons and it was time to move on. The generals having taken unearned management fees and a share of the distributions were now well heeled and it was time to move on. Thus, a second group of investors was brought in to lease the premises. This second group agreed to pay rents to the limited partners. The partnership continued in operation as a real estate investor, but exercised no control over the nursing home. The delay was used to obviate the rotten taste of the generals taking very substantial sums for not managing the business. The new lease was a net, net, net lease and therefore, from this point on the partnership waited for the statute of limitations to expire as to any miscreant conduct that had occurred. In the meantime the rental provided funds to pay the juice to the limiteds. (This operation was similar to a Madoff scheme except so far the bubble has not burst)
When the transaction had been cleansed sufficiently that the generals felt safe, they exercised their option and took title to real estate. Sometimes the exercise of the option was simultaneous with the new lease being signed. (Key money and down stroke were paid at this point in time – these were based upon the number of beds) When the sale occurred with or without winding up the partnership the transaction ended. (NB As I mentioned previously it appears to me that instead of cash or checks ‘beds’ were the currency in which these individuals dealt – One of my clients suggested to me that there was also another currency, but he would not or could not disclose to me what the currency) While the USA does tax barter, I do not believe that the alternative currency is taxed . For instance, it is my understanding that certain professional fees are paid in beds! This group works in Illinois, Florida, California and Arizona.
I have an idea that second currency is opportunity. Some of the occupants of the nursing home have money but may not have close family – or have family such as exists in Sykes. Thus, relatives of the nursing home turn up as the beneficiaries of estate planning documents, or we have Sykes, or we have the Florida inheritance sham that the ‘Rabbi’s wife’ alerted me.
Operation of the partnership venture.
The nursing home operation was cut and dry. The administrator was a professional and licensed. In addition services of a Rothner owned company appear to have been engaged to deal with the various problems that arose. These services were built into the budget of the venture and assured that someone who knew what he was doing was actually at the controls. The same people were induced to be limited partners over and over again and they were a source of easy financing and ‘great cover.’
It also appears that as the transactions evolved government regulations and activities (such as removing mentally ill ) ran into conflict with the primary goal of these facilities – making money. Thus, to adjust costs every service that could be separated out was! Nursing services were provided by a separate provider, as where pharmacy, transportation, cleaning, utilities, social service (ReHab Inst.) etc. All these separate companies follow the Les On Drug format. A youngster just out of school was engaged to be the CEO at a very attractive salary. He was the front! The real managers were the nursing home operators who stayed very far in the background.
The costs were thusly adjustable. For instance, if a particular facility were to generate too heavy a profit, adding some utility costs was undetectable. No one could back check to determine if John Doe was transported to the hospital be private car of ambulance! Four of five nurses could be assigned to a particular facility if an inspection was due, and removed the next day. The one draw back was that as long as operations continued, a partnership had to maintain records as their were limited partners out there who would get upset that ‘gas bills’ were about double the usage as Multiut or some similar company was billing (and getting paid) for natural gas not delivered. (The limited partners actually believed that they were partners).
The State aided an abetted a fraud on itself, as large campaign donations were regularly reported and it was not usual for the entire nursing home population to all vote by absentee ballot for a particular candidate for public office. The state reimbursed the facility for various costs. The A & W case highlights management costs:
A & W elected to appoint a manager (administrator), thus, making paragraph 13 of the limited partnership agreement inapplicable. Like all of the other general partners during the period of operation of the nursing home operation they continued to ‘double dip’ and receive a remuneration called a management fee for not managing anything. This management fee was charged to the State and reimbursement from the State was requested and paid. It is basic under partnership law that 1) the general partner cannot obtain any remuneration for managing the partnership – it received It fee upfront with an enhanced ownership interest. And 2) as a fiduciary the general was not entitled to a remuneration for services not performed. Thus, knowing that their management fee was illegal the request to the State of Illinois for reimbursement was similarly illegal. The state is entitled to reimbursement for 100% of the management fee reimbursement charged to it.
A & W went one step further – they charged a management fee for the period in which they leased the property to the next successor in interest. It is unknown if these fees were reimbursed by the State of Illinois.
1) To end a partnership the partnership must be wound up. This means an accounting to the limited partners, distribution of all assets, and payment of all creditors
2) The general partners committed a series of frauds. The most serious is over-charging the State of Illinois
Last night when I figured out the amount of money that is involved in this entire process it occurred to me that if I did not lay this all out to law enforcement so that they would not have to reinvent the wheel, I might have to get a big dog and an even bigger gun. Now with this memo I am once again ‘small potatoes’ and more trouble than I am worth. It is even too late for the ARDC to silence me.