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Nursing home operator from Chicago jailed as feds allege $1 billion scheme
For years, wealthy nursing home operator Philip Esformes seemed to live in perpetual motion, using private jets to travel between his Water Tower Place condominium and his mansions in Miami and Los Angeles.
Now federal authorities are applying extraordinary court pressure to keep Esformes locked in a Florida detention cell where he awaits trial for allegedly orchestrating an unprecedented $1 billion Medicaid and Medicare bribery and kickback scheme.
"This is the largest single criminal health care fraud case ever brought against individuals by the Department of Justice," Assistant Attorney General Leslie Caldwell said at a July 22 news conference announcing the charges.
Arrested at one of his $2 million estates on the Miami Beach waterfront that morning and placed in immediate detention, Esformes has been denied bond despite a barrage of court pleas that include letters of support from nursing home patients and the recipients of his philanthropy.
His confinement in the Miami Federal Detention Center marks a new challenge for a business family that has withstood two decades of Justice Department probes and Tribune investigations into allegations of patient abuse, corruption and substandard conditions at their Illinois, Florida and Missouri nursing home facilities.
From their Lincolnwood offices, Esformes and his father and business partner, Morris Esformes, took in millions of dollars annually from federal programs for the sick and disabled.
Both have cultivated reputations as prominent philanthropists. Morris Esformes has an endowed medical professorship named for him at the University of Chicago, and they have given millions of dollars to synagogues, schools and medical facilities in the United States and Israel.
The Esformeses sold their Illinois nursing facilities about four years ago but kept their headquarters in the Chicago suburbs as they continued to operate 20 or so homes in Florida, government records and Tribune interviews show.
The new federal indictment alleges that Philip Esformes and a handful of Miami co-conspirators bilked Medicaid and Medicare for 14 years by cycling some 14,000 patients through various Esformes facilities, where many received unnecessary or even harmful treatments. Drug addicts were allegedly lured to the facilities with promises of narcotics, and prosecutors say some received OxyContin and fentanyl without a physician's order to entice them to stay.
In recent court filings, prosecutors have gone beyond the allegations of the indictment to reveal new claims of patient harm and corruption.
One patient, listed as "S.J." in court documents, told agents she was offered a bed at Esformes' Oceanside Extended Care Center "because she was homeless and looking for a place to stay."
"S.J. did not get or even need the skilled nursing services that were billed to Medicare on her behalf by Oceanside Extended Care," federal authorities wrote. "Instead, the Esformes Network fed her narcotic addiction in order to use S.J. as a pawn to steal from Medicare."
In another example, Esformes allegedly instructed a co-conspirator to "bribe a state (Florida) regulator" so Esformes could learn in advance which facilities inspectors planned to visit, and "modify and falsify files at his facilities before state regulators inspected."
And when authorities raided one Esformes nursing facility on the day of his arrest, a resident approached the agents and said she had been "punched in the stomach when she made a complaint about the poor services rendered at the facility."
As part of the kickbacks exchanged between Philip Esformes and corrupt medical professionals, the Justice Department alleged, "high-end escorts" were flown to Orlando and chauffeured in limousines for liaisons with Esformes at the Ritz-Carlton Hotel.
This is the largest single criminal health care fraud case ever brought against individuals by the Department of Justice. — Assistant Attorney General Leslie Caldwell Esformes, 47, who drove a $1.6 million Ferrari Aperta and published a blog with fitness tips for busy executives, now faces a potential life sentence if convicted on charges of fraud, conspiracy and obstruction of justice, government records show.
He has strenuously protested his innocence, arguing that nonstop labor and uncompromising honesty account for his reported $78 million in personal assets — with no debts or liabilities.
"Philip Esformes is fighting hard to obtain his release on bond and to clear his name," his attorney Michael Pasano told the Tribune. "Mr. Esformes stands by his lifelong record of hard work and success, of providing quality service to people in his nursing homes, and of helping persons in need. He adamantly denies any wrongdoing and promises to fight vigorously to show the truth behind the lies being brought against him."
In a letter to Miami U.S. District Judge Joan A. Lenard, former classmate and current school principal Rabbi Eli Samber described Esformes as a devoted student at the Arie Crown Hebrew Day School in Skokie. Later, "when both of us were in our twenties and both newly married, Philip and I had a fixed time during the week that we would study Bible together," Samber's letter said. "This experience enabled me to see the depth of his character."
Morris Esformes, 70, has not been charged in the case. He helped round up affidavits from 30 Florida families who pledged homes worth more than $3 million to collateralize a bond for Philip Esformes, records and interviews show. Eight were relatives, but many others live in a small community where Morris Esformes built a community center and day school.
Morris Esformes also offered his own substantial wealth to post bond for his son. He did not respond to requests for comment.
In a bid to win his own release, Philip Esformes proposed to the court to live under home confinement with 24-hour monitoring by a staff of off-duty police paid at his expense, highly restricted visitations limited to family and religious leaders, and no internet or cellphones.
But Lenard on Wednesday issued a final ruling ordering Esformes held without bond after prosecutors argued that he might try to flee or obstruct justice if he was released pending trial. To underscore their point, the Justice Department last month made an unusually early disclosure of key evidence by filing a 200-page transcript of a secretly recorded conversation in which Esformes allegedly offered to fund a co-conspirator's flight from the United States so the man could avoid trial.
Medical supply company owner Guillermo "Willy" Delgado, who had pleaded guilty to illegally distributing powerful pain medicines in exchange for kickbacks, was cooperating with authorities and wearing a wire during their two-hour conversation.
As they spoke on that afternoon in June, Esformes explained how he could siphon off federal health care dollars to help Delgado flee the U.S. by inflating the costs of new furnishings at a nursing home, the transcript and other government records show.
In the recorded conversation, Esformes referred to African-Americans with a racist epithet. A substantial number of residents in his Illinois and Florida facilities have been black, according to government records.
Esformes' attorney, Pasano, said the government has misinterpreted the tape and should not be relying on Delgado, who "insinuated" himself into Esformes' life, made up claims against him and "took advantage of him." Delgado "agreed to cooperate and point fingers at Mr. Esformes" in an effort to shorten his own sentence, Pasano said.
Separate from the pending federal indictment, the Tribune found that families have filed 20 wrongful death lawsuits since 2013 against seven of Esformes' facilities in Miami-Dade County. Four were on Florida's watch list of troubled facilities — among a total of only 11 nursing facilities in that area.
In one of those cases, patient Donald Reiff allegedly was attacked last year by a fellow resident at North Dade Nursing and Rehabilitation Center, then sent to another Esformes facility, Fountain Manor Health and Rehabilitation Center. Staff there allegedly neglected to assist or supervise Reiff, and he quickly suffered a catastrophic fall and died of a brain injury, according to a pending civil lawsuit filed by Reiff's family.
In addition, inspectors from Florida's Agency for Health Care Administration cited Esformes facilities for safety violations in two separate instances last year when patients wandered away and died.
One of the patients, a 75-year-old man who walked slowly with a cane, drowned in a nearby lake; the facility could not explain to inspectors how he got out. The other resident, who suffered from a severe mental disorder, wandered into traffic and was fatally struck by a car; the facility failed to alert police or relatives to his elopement, inspectors said.
Police and court records also document a series of patient-care failures at Esformes' South Dade Nursing & Rehabilitation Center that led to tragedy early on April 10, 2013.
A nurse walked into Room 306 at 7 a.m. to find 73-year-old hospice patient Robert Lee Verser beaten to death, with his 41-year-old roommate, Michael Poole, standing calmly nearby, according to Miami police and Florida health agency reports.
"I saw Robert in the bed. His face was full of blood and there was blood on the bed also," nurse Eric Richard told detectives, according to police reports examined by the Tribune. "Michael was in the room standing up in front of his bed with his hands down, full of blood. ... He's looking at me but saying nothing."
A lawsuit filed by Verser's family alleges that the bedbound invalid, who had lung and heart conditions and had a life expectancy of less than six months, should not have been housed with a younger man who had a record of violence.
During the previous days, state inspectors wrote, facility staff failed to notify Poole's psychiatrist that Poole had repeatedly refused to take his antipsychotic medications.
In and out of prisons for drug crimes and violence, Poole had psychotic episodes in which he saw visions and heard voices, state records show. He had recently discharged himself from another Esformes facility, but authorities picked him up at a nearby gas station, intoxicated and in an "altered mental status" and brought him to South Dade Nursing, a state inspection report shows.
The facility's final patient-safety infraction came after the discovery of Verser's corpse, when Poole walked out of the room unattended by staff and rode an elevator down to a smoking patio. Letting the suspected killer roam unwatched gave him access to other vulnerable residents, placing them in "immediate jeopardy," Florida inspectors said in one citation of the facility.
Poole awaits trial on charges of second-degree murder.
The facilities are disputing the various civil lawsuits. "These facilities take care of very sick people who in addition to medical problems often have behavior issues — that is a very difficult population," said Harvey Tettlebaum, an attorney who represents the facilities.
The facilities currently operate in substantial compliance with Florida and federal laws, Tettlebaum added.