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INDIANAPOLIS, Ind. — One year after FBI agents and state investigators raided a series of homes and a corporate headquarters of a central Indiana healthcare management company, a federal grand jury has returned a 32-count indictment against four men alleging a massive fraud and kickback scheme with illegal profits in excess of $16 million.
Listed on the indictment are the former CEO of American Senior Communities James Burkhart, ex-ASC COO Daniel Benson, contractor Steven Ganote and Joshua Burkhart who is accused of profiting from the fraud allegedly lead by his brother.
The four men appeared in federal court for an initial hearing late Wednesday afternoon. They entered not guilty pleas and were released under supervision, as is common in white-collar crime.
The federal probe uncovered a complex series of billings and agreements stretching back to early 2009 that involved inflated costs and invoices claiming markups typically as high as 40% and kickbacks that enriched the accused conspirators and allowed them to buy vacation property from central Indiana to Marco Island, Florida, and the acquisition of gold bars, Krugerrands, Rolex watches and diamond jewelry.
Money funneled through 20 shell companies included payment for gambling junkets, the use of a private plane and even unspecified political contributions.
Evidence includes the verbatim conversation between one accused conspirator and a contractor being shaken down for a bribe and various emails, payment reports, bank records and statements.
4 Fast Facts
- Former CEO, three others face federal charges
- They’re accused of fraud and other offenses involving millions of dollars
- Federal authorities raided several locations last year
- The company’s CEO was then fired
“It was a member of the public who stepped forward after being approached about some of the arrangements that you read in the indictment and taking a look and saying, ‘You know, this doesn’t sound right,’” said Nick Linder, Assistant U.S. Attorney.
ASC is a privately held company that manages approximately 70 nursing home and senior care facilities in Indiana, many of them owned by the Marion County Health & Hospitals Corporation.
Health & Hospitals, Medicare and Indiana Medicaid are listed as victims of the fraud, as is the federal Medicare system.
American Senior Communities released a statement about the case saying it cooperated with the investigation and will continue to do so until the case reaches its conclusion:
American Senior Communities is grateful to the United States Attorney’s Office and the federal agencies whose hard work and dedication resulted in today’s indictment. ASC has actively cooperated in this investigation and will continue to cooperate until the prosecutions are concluded. ASC was the victim of a betrayal of trust by two of its former officers.
ASC continues its strong tradition of providing excellent care, which has made ASC a valued and respected provider of senior care in Indiana. Nothing in the investigation or this prosecution involves resident care. ASC’s primary focus continues to be exceptional resident care.
ASC appreciates the commitment of its employees and continued support of its families.
ASC has emerged from this process a stronger, more vital organization. ASC has implemented many safeguards, and strengthened the organization with new leadership under the direction of CEO Donna Kelsey. ASC skilled nursing and residential facilities continue to enjoy quality ratings that exceed state and national averages.
Criminal charges include mail fraud, wire fraud, health care fraud, money laundering and conspiracy to circumvent an anti-kickback statute.
The U.S. Attorney claims that virtually any item or service required to run a health care facility, from medical supplies to landscaping to American flags to t-shirts for an Alzheimer’s memory walk, were subject to outrageously inflated prices that led to excessive profits that were ultimately kicked back to the participants of the scheme.
Discounts and rebates that were due to ASC often found their way in the pockets of the four men, according to the indictment.
Joshua Burkhart is accused of creating a company called Heartland Flag LLC which sold American, Indiana and ASC brand flags to ASC at a 150% markup and often replaced the flags several times a year.
“That’s one that certainly stuck in my craw,” said U.S. Attorney Josh Winkler.
Ganote is accused of creating Indiana Uniform Company LLC to sell ASC discharge packages, embroidered uniforms, seasonal door wraps, luggage carts and t-shirts at a 200% markup.
One furniture company CEO told investigators Ganote requested inflated invoices of up to 25% with the overcharge to be paid back to a shell company he owned, advising the furniture maker, “just between you and me…(James Burkhart’s) a part of that LLC. That’s all you need to know.”
Upon conviction, the fraud and conspiracy counts carry 20-year prison sentences plus ten years for money laundering and five years for conspiracy to violate the Anti-Kickback Statute, and the investigation into the roles of other possible ASC employees, including the chief financial officer, continues as the federal authorities promise a second round of indictments.
“These men are alleged to have stolen from the most vulnerable in our society,” said Winkler. “They 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.”
ASC fired Benson and James Burkhart within days of the FBI raids more than a year ago.
Federal investigators said they expect a second round of arrests in the probe, as vendors who went along with the kickback scheme will likely face charges.
In fact, authorities filed one count of Conspiracy to Commit Mail, Wire, and Health Care Fraud on Wednesday against David Mazanowski, the owner of Mainscape, Inc, an Indiana-based landscape company, alleging the vendor was in on the scheme.
The Indiana Health Care Association/Indiana Center for Assisted Living released the following statement about the case:
The Indiana Health Care Association/Indiana Center for Assisted Living learned of the charges against Mr. Burkhart and others this morning. American Senior Communities (ASC) is a valued member of the association, an employer of thousands of people across the state of Indiana, and a caregiver to thousands of Hoosiers.
We understand ASC has made robust leadership changes and these disappointing events have not impacted their abilities to provide excellent care. Our highest priority continues to be the care of Hoosiers in our more than 350 member centers statewide and the challenges they face that include significant regulatory changes and hiring and retaining quality staff.
Health & Hospital Corporation of Marion County weighed in as well:
Health & Hospital Corporation of Marion County (HHC) is aware of the federal indictments of James G. Burkhart, former CEO of American Senior Communities, as well as former ASC Chief Operating Officer Dan Benson, Josh Burkhart and Steve Ganote.
HHC has cooperated fully with federal authorities in their investigation. The federal authorities consistently advised HHC that it was a victim of the alleged schemes. At no time has HHC or any of its employees been a target or subject of the investigation.
The health and welfare of residents were never at risk as a result of the alleged schemes. Residents and their welfare are always our top priority, and resident care was never affected.
American Senior Communities is one of the largest nursing home management companies in the state of Indiana. HHC has contracted with ASC to manage nursing home facilities owned by HHC.
Expensive vacation homes, golf junkets, gambling, diamonds, gold bars, Rolex watches, etc. was part of the $16 million taken from medicare/medicaid funds–and the FBI admits these are the most needy of the US population and the most deserving of protection. The American Community Center involved kickbacks with a number of vendors to generate kickbacks. 4 men received $16 million from fraud and kickbacks to finance a life of luxury. What I don’t understand is that their base pay was $1 million, but they had to have more. Dozens of items were subject to the kick back scheme, including medical supplies, landscaping, pharmacy services, electronics, furniture, tshirts and even American Flags. Marion County hospital would pay the claims and then were funneled through 20 shell companies.
Vendors will also be likely indicted, says the FBI and on the day of the report, the landscaping CEO had been indicted too.
It should be noted that in the Press Release from the FBI and other agencies, it was noted that the theft, embezzlement and fraud of $16 million from 2009 to 2016 turns out to be more than all the bank robberies combined in Southern Indiana in the last 2 decades!
The investigation came from an anonymous tip from a citizen who said that something was out of place and he just had to report it. To him something did not add up.
I’m still trying to figure out how 1) $16 million could be missing over 7 years and the government auditors never noticed it in the reports that must have been filed by both ASC and the Hospital (Marion Hospital) paying the claims, 2) why weren’t routine government audits tracking these 16 shell companies used to launder the money; 3) why doesn’t the government require that every corporation it deal with be required to reveal the “true owner” of the company, that is who is taking all or the vast majority the profits either from dividends and/or salary.
I also want to know why 4 individuals who master minded this scheme and walked off with $16 million–more than all the bank robberies in that area in 20 years, got bail to walk.
They took $16 million and have homes all over the world, for sure. Who doesn’t think they are a flight risk, as Esformes was? I think the US govt and taxpayers have 16 million reasons to revoke bail until this shameful case is over. I wonder if the dozens of bank robbers for much less in the area got no bail because of their money they were considered a flight risk? Were all the pass ports pulled by the FBI, from the 4 in house executives stealing $16 million to each vendor charging medicare/medicaid an inflated price.