NYAG sues LI nursing home for alleged massive fraud

New York Attorney General Letitia James has filed a lawsuit against Cold Spring Hills Center for Nursing and Rehabilitation for alleged financial fraud and abuse of its residents. 

The lawsuit claims the owners of the Cold Spring Hills facility in Woodbury diverted over $22.6 million in Medicaid and Medicare funds from resident care through a fraudulent network of companies that were used to conceal up-front profit taking. The alleged self-dealing led to “severe understaffing and resident neglect and harm,” according to a statement from the AG’s office. 

The lawsuit alleges that long before the COVID-19 pandemic, the owners repeatedly cut staffing at the 588-bed facility, which created poor working conditions and endangered residents. Through the lawsuit, the attorney general seeks to prevent new residents from entering the facility, install monitors to oversee the facility’s operations and finances, and ban existing and hidden owners from their roles. 

The operators of Cold Spring Hills used 13 companies to create the appearance that they were paying for services for the nursing home but were in fact diverting Medicaid and Medicare funds to themselves as up-front profit instead of using the funds for resident care, according to the statement. The network of companies was also used to hide the real owners of the nursing home and to orchestrate multiple deceptive schemes to extract funds for their personal financial benefit, while disregarding the nursing home’s duty to provide required care, the lawsuit alleges. 

From 2017 through 2021, Cold Spring Hills received over $157 million from New York’s Medicaid program and over $88 million from Medicare to provide critical care to its elderly and disabled residents. The AG’s lawsuit alleges that the facility’s operators used three primary fraudulent schemes to siphon over $22.6 million in Medicaid and Medicare funds from Cold Spring Hills, including paying more than $15.3 million in fraudulent “rent” to Cold Spring Realty, which is owned by the same individuals who operate the nursing home. 

The lawsuit alleges that the respondents paid more than $5.2 million to several deceptive entities for supposed “consulting” and that the respondents engaged in a $2 million fraudulent promissory note scheme when they purchased the facility. The lawsuit claims the Cold Spring Hill facility’s owners also funneled another $10.6 million in concealed self-dealing transactions through what were ostensibly insurance companies, and another $8.1 million through an entity that purportedly provided services and supplies to Cold Spring Hills. In total, the respondents transferred over $42.4 million to its owners and related parties from 2016 to 2021, according to the AG’s statement. 

“Cold Spring Hills’ owners put profits over patient care and left vulnerable New Yorkers to live in heartbreaking and inhumane conditions,” James said in the statement. “From Buffalo to Long Island, every nursing home in New York must abide by laws that require the best care for New Yorkers. As attorney general, I am determined to use the full force of my office to hold nursing homes to that standard, and ensure New Yorkers are protected. I encourage anyone who has witnessed alarming conditions, resident neglect, or abuse at a nursing home to contact my office.” 

In addition to the alleged financial fraud, the lawsuit maintains that residents of the Cold Spring Hills facility were abused and neglected. Testimony from staff and family members of residents describe bleak conditions at the facility. Family members of residents often observed that the facility was unclean and that critical care equipment, such as wheelchairs, beds, shower chairs, and air conditioners, were broken, according to the statement.  

The AG said that residents were routinely left sitting in soiled briefs and were not bathed for long periods of time and that Cold Spring Hills repeatedly failed to provide proper wound care and prevention for residents, causing wounds to develop and existing wounds to deteriorate, leading to infections. 

In addition, Cold Spring Hills’ staff confirmed that insufficient staffing was a problem at the facility before the pandemic, and that it continued into 2022, according to the AG’s office. From March 1, 2020 to June 4, 2020, 166 residents of Cold Spring Hills died, 98 from COVID-19 and 68 from other causes. Cold Spring Hills fraudulently failed to report 51 of those 98 COVID-19 deaths to DOH, underreporting by 52 percent, according to the statement. 

The companies named in the lawsuit are Cold Spring Hills, the actual facility; Cold Spring Realty Acquisition, LLC (Cold Spring Realty), which owns the property where the nursing home is located; Ventura Services, LLC, Highview Management Inc., B&L Consulting, LLC, all of which claim to provide consulting services to nursing homes; Graph MGA, LLC, Graph Management, LLC, Graph Insurance Company A Risk Retention Group, which purportedly act as insurance brokerages; Philipson Family, LLC, which is a partial owner of Cold Spring Realty; Lifestar Family Holdings, which is a partial owner of Cold Spring Realty; Comprehensive Care Solutions, LLC, which purported to provide services and supplies; and Ross CSH Holdings, LLC, Rosewell Associates, LLC, and ZBL Management, LLC, all pass-through companies.  

Also named in the suit is the principal owner, Bent Philipson, whose role was allegedly concealed, Benjamin Landa, whose ownership is also alleged to have been concealed; Joel Leifer; David Zahler, his wife Chaya Zahler, their adult children Rochel David, Leah Friedman, Chaim Zahler, and Jacob Zahler, Avi Philipson (Bent Philipson’s adult son), Esther Farkovits (Benjamin Landa’s adult daughter), Rochel David and Leah Friedman (the Zahlers’ daughters) who were straw owners of the nursing home, allegedly put in place to conceal their fathers’ control. Also named in the suit is Cheskel Berkowitz, Joel Zupnick, and the Estate of Deborah Philipson. 

The lawsuit respondents were unable to be reached for comment. 

In the lawsuit filed today, Attorney General James seeks to prohibit Cold Spring Hills from admitting any new residents unless and until staffing levels meet appropriate standards; require Cold Spring Hills to engage and pay for a financial monitor to oversee the facility’s financial operations; and require Cold Spring Hills to engage and pay for an independent healthcare monitor to oversee the facility’s healthcare operations and ensure residents’ outcomes improve. 

The AG also seeks to remove Bent Philipson, Avi Philipson, Joel Leifer, Esther Farkovits, Rochel David, and Leah Friedman, and any of their related entities, from further serving or having any role at Cold Spring Hills; direct all respondents to fully disgorge any and all funds wrongfully received as part of the scheme; and direct all respondents corporate and individual to pay restitution and penalties.