Jackson Free Press had an interesting and scary article about presidential contender Haley Barbour’s flip flopping on Medicare and history as a lobbyist and Tom Delay’s indictment for illegal campaign donations. When Haley Barbour was head of the Republican National Committee from 1993 to 1997, he loathed Medicare, and tried to gun it down in the GOP “Contract with America.” By 2000, Barbour had returned to his lobbyist job at Barbour Griffith & Rogers, and had dramatically flip-flopped on Medicare, then lobbying for more federal tax dollars to be directed into the program.
The Alliance for Quality Nursing Home Care Inc. was formed in 2000 as a corporate coalition of 14 of the country’s largest for-profit nursing home companies to help ease the way for the corporate consolidation of the nursing-home industry. The coalition opposed Medicare cuts and government regulation of nursing-home standards and consolidation, and, perhaps most vitally, wanted low caps on the lawsuit damages the companies had to pay for abusing and neglecting nursing-home residents. The coalition paid top dollar to ensure the election of candidates who agreed with its agenda. It directed impressive campaign donations to mostly Republican candidates around the country who would, in turn, honor the wishes of one of the country’s most tenacious industries.
That resolve is how a check for $100,000 written three years ago this week ended up illegally funding Republican candidates for the Texas statehouse. That’s also how that canceled check ended as a primary exhibit in the case of State of Texas v. Thomas Dale Delay et al.
Unlike Mississippi, the state of Texas has long taken campaign-finance violations seriously, especially donations coming from outside the state to try to tell Texans what to do, and how to vote. Violation is a felony, punishable by hefty fines and up to life in prison.
Rep. Tom Delay appears to have put considerable effort into circumventing that law. The former bug exterminator from Sugar Land became majority leader of the U.S. House of Representatives by his complicated web of political friends and family members including his own wife, Christine, and daughter, Danielle Ferro.
Delay has run a creative maze of schemes since the mid-1990s to get Republicans elected to office and “keep Republicans in lockstep,” using “threats and incentives,” as The Wall Street Journal characterized his style in June 2004. He has been investigated five times and brought before the House Ethics Committee for his strong-arming of fellow members of Congress, trying to use donations to a children’s charity for a donor cruise, rewarding check-writers with face time with GOP stars, and other irregularities.
What prompted a grand jury of his home-state peers to indict him in September and again earlier this month on conspiracy and money laundering charges was his Texans for a Republican Majority Political Action Committee, known as TRMPAC. Delay used the PAC to collect illegal corporate contributions (a third-degree felony) from January 2001 through the end of 2002 from corporations and then slip the money to 2002 candidates for the Texas statehouse (a first-degree felony). Much of the money was used to fund a last-minute campaign blitz—another violation of Texas law.
In return, the donors had a laundry list of demands—including tort reform and a blind eye to their consolidation plans. The nursing-home industry, with its heavy reliance on government payouts for profits, is ripe for exploitation. And stories about the internal workings of nursing-homes aren’t exactly sexy enough for front page news.
“What we have seen is these corporations evolve to trying to shield themselves from liability or from paying taxes in such a way to finagle the law in ways no one imagined just a few years ago,” said Mississippi Rep. Jamie Franks, a lawyer and Democrat from Mooreville who is leading an effort to more closely monitor Mississippi’s nursing home industry. “It’s amazing what high-dollar lawyers and high-dollar accountants can do.” He added: “And high-dollar lobbyists. You can throw that in there, too.”
What those high-dollar strategists did in 2000 was form the Alliance for Quality Nursing Home Care Inc., so that the industry giants—for-profit nursing homes that were members of the American Health Care Association—could pool their resources to overcome regulations regarding standard of care and limit lawsuit damages in as many states as possible and, ultimately, on the federal level in order to supersede state law.
The Alliance heavily lobbied the federal government to increase Medicare payments because for-profit nursing homes take more money from Medicare than Medicaid, which tends to sustain their competitors, the non-profit nursing homes.
In October 2002, the Alliance invested in Delay’s scheme to pack the Texas statehouse (and thus Congress) writing a check for $100,000 to TRMPAC, dated Oct. 18 and signed by Alliance leader Stephen L. Guillard of Harborside Healthcare Corp. in Boston. On Oct. 21, Chris Winkle—then the chief executive of Mariner Health Care in Atlanta—met state Rep. Tom Craddick, R-Midland. They talked about the need to limit liability in lawsuits against nursing homes; then Winkle presented Craddick with the check, which TRMPAC deposited two days later. On Oct. 24, the Alliance contributed another $300,000 to the Texas Association of Business, an employers’ group that is now also under indictment in Texas for allegedly helping collect and launder illegal contributions.
After the 2002 election, in which 21 additional Republicans were elected to the Texas statehouse, Craddick became speaker of the Texas House of Representatives, and the Legislature quickly gave industry its desired “tort reform”—including $250,000 in non-economic damage caps and special provisions to shield nursing homes—that would become the model for industry efforts in other states, such as Mississippi in 2004 (which ended up compromising on $500,000 damage caps).
Ironically, it was one of the alleged conspirators who exposed the scam. The Texas Association of Business, or TAB, could hardly contain its glee over its success, reporting in a newsletter to members that it “blew the doors off the Nov. 5 election, using an unprecedented show of muscle that featured political contributions and a massive voter education drive.” And as the Wall Street Journal reported, its president, Bill Hammond, a former Texas legislator, bragged to the media that the group had used corporate money to finance a $2 million advertising campaign backing Delay’s slate of candidates.
Watchdog groups like Texans for Public Justice in Austin took notice and started following the money, ultimately finding that TRMPAC’s tax return showed that it had raised $1.5 million to help with the state races—and that $600,000 had come from corporate donations. Travis County District Attorney Ronnie Earle started investigating TRMPAC’s activities after Texans for Public Justice filed a complaint based on the revelations on the tax returns.
In September 2004, the indictments began when a Travis County grand jury handed down 32 indictment counts against TRMPAC and TAB and their leaders, as well as against eight companies that had supplied corporate funds, including State Farm Insurance, AT&T, the Union Pacific Railroad and the Alliance for Quality Nursing Home Care. On May 25, 2005, District Judge Joe Hart ruled in a civil case brought by 2002 Democratic candidates against TRMPAC that the use of corporate funds had violated the Texas Election Code.
On Sept. 28, 2005, the grand jury indicted Tom Delay and associates Jim Ellis and John Colyandro for conspiracy in the illegal scheme, and then on Oct. 3, a different grand jury indicted Delay on two new charges of money laundering.
Other friends of TRMPAC and its donors, such as now-Gov. Haley Barbour—who lobbied for the Alliance until he left his hefty stock in Barbour Griffith & Rogers in a reversible blind trust so he could take over the governor’s mansion in Mississippi—are distancing themselves from the beleaguered Alliance, if not from Delay. It is not in dispute, that Barbour was lobbying in his client’s interest to block Medicare cuts at the same time that his client was presenting a $100,000 check to Craddick. (The $300,000 check from the Alliance to TAB followed a few days later.)
Andrew Wheat, the research director of Texans for Public Justice, balks at the idea that Barbour was not privy to the Alliance’s agenda—especially since his lobbying firm represented three of the corporate TRMPAC donors (the Alliance, Kindred Healthcare and Reliant Energy)—lobbying contracts worth $440,000 to Barbour Griffith & Rogers in 2002 alone. Barbour’s clients gave more money to TRMPAC than any of the other 10 lobbying firms who were represented. He was CEO of Barbour Griffth & Rogers and representing the nursing homes when the Alliance was created in 2000.
The Alliance’s agenda is one that is wreaking havoc in states like Texas, Arkansas and Mississippi, where its members control much of the nursing-home business and are now getting their way, thanks to a nationwide corporate realignment, consumer advocates say. The changes in the historically tightly regulated nursing-home industry are profound.
Franks points to the December 2004 sale of Mariner Health Care for $1.05 billion to National Senior Care, owned by New York real estate investor Harry Grunstein. Harry is Leonard Grunstein’s brother. Leonard Grunstein is partners with Murray Forman. Harry sold Mariner’s assets to cover the costs of the acquisition, reducing the worth and assets of Mariner to $12 million and, critics say, operating the nursing homes more like rental units. “It basically became a real-estate transaction rather than a group caring for vulnerable adults,” Franks said. He added that, now, the nursing homes seem to be escaping accountability with these transfers. “There is no background check to find out whether they are financially solvent, or good corporate citizens. They simply transfer the license,” he said.
Because it is the licensee that is regulated, the process of stripping that licensee of its assets is essentially a tricky end run, allowing the real-estate owners, such as Grunstein, to escape liability. This, combined with the increased “tort reform” damage caps sought by the Alliance, insulates the corporate owners from the regulatory safeguards that are meant to protect patients and the elderly. In turn, those licensees are now defaulting on money owed to vendors in states like Mississippi. And because assets are being ripped away from the nursing homes themselves, they end up with little to be sought in lawsuits brought by the vendors looking to be repaid.
One unpaid Mississippi vendor is the law firm Brunini, Grantham, Grower & Hewes in Jackson, which is suing Mariner for $951,915.17 in legal fees for defending the nursing homes. In the complaint, filed in Hinds County Chancery Court, Brunini describes Mariner’s “leveraged buyout” scheme, which it alleges is “fraudulent.” Franks points to hearings in Arkansas, called by a Republican and a Democrat, that just concluded that the state has ended up with “no” regulatory power over these companies, due to their maneuvering. “This is not partisan,” Franks said. “It’s a consumer issue. It’s about protecting vulnerable citizens and our tax dollars.”
1621 Galleria Boulevard
Brentwood, TN 37027
William R. Council, III, President and CEO
Alden Management Services, Inc.
4200 West Peterson Avenue
Chicago, IL 60646
Floyd A. Schlossberg, CEO/President
P.O. Box 6159
Kingston, NC 28501
N. Randy Uzzell, President
CommuniCare Health Services
4700 Ashwood Drive, Suite 200
Cincinnati, OH 45241
Stephen L. Rosedale, Chairman & CEO
Complete Health Care Resources
200 Dryden Road, Suite 2000
Dresher, PA 19025
Peter J. Licari, President and CEO
Consulate Health Care, LLC
800 Concourse Parkway South, Suite 200
Maitland, FL 32751
Joe Conte President and CEO
Direct Supply, Inc.
6767 N. Industrial Road
Milwaukee, WI 53223
Robert J. Hillis, President and CEO
111 W. Michigan St., 5th Floor
Milwaukee, WI 53203
Timothy L. Lukenda, President & CEO
930 Ridgebrook Road
Sparks, MD 21152
Mark L. Fulchino, President and CEO
Genesis HealthCare Corporation
101 East State Street
Kennett Square, PA 19348
George Hager, Chairman and CEO
HCR Manor Care Corp.
333 North Summit Street
P.O. Box 10086
Toledo, OH 43699-0086
Stephen L. Guillard, Executive Vice President and COO
680 South Fourth Avenue
Louisville, KY 40202
Paul Diaz, President & CEO
Medical Facilities of America
P.O. Box 29600
2917 Penn Forest Blvd.
Roanoke, VA 24018
W. Heywood Fralin, Chairman and CEO
NHS Management, LLC
931 Fairfax Park
Tuscaloosa, AL 35406
Norman Estes, President
Sun Healthcare Group, Inc.
18831 Von Karman, Suite 400
Irvine, CA 92612
Richard K. Matros, Chairman and CEO
1626 Jeurgens Court
Norcross, GA 30093
Neil L. Pruitt, Jr., Chairman and CEO