SavaSeniorCare is one the biggest and most profitable nursing home chains in the U.S owned and operated by entities controlled by New York tycoons Murray Forman and Leonard Grunstein.  Last week, a jury in Colorado punished the billion dollar chain with a verdict of $3.7 million. $3.5 million in punitive damages against Belmont Lodge Health Care Center and $200,000 to be awarded to Margaret Smith for her pain and suffering.
See articles at KOAA, The Denver Channel, and KRDO.

Sava run Belmont Lodge Health Care Center in Pueblo caused the wrongful death of 88-year-old Janet Smith in May 2011.  Smith served as a nurse in World War II and the Korean War.  Denver-based attorney Jordan Levine represented Smith’s daughter, Margaret, who sued after her mother’s condition rapidly deteriorated resulting in her death shortly after entering Belmont Lodge for rehabilitation of two broken ankles in April 2011. As a result, she was outfitted with a foley catheter so that she could urinate.  Defendants’ reckless conduct and neglect related to the monitoring and care for that catheter by Belmont Lodge staff led to a severe urinary tract infection, resulting in Janet’s death.

 

 

 

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The Times News reported the closing of Sava owned and operated Brian Center of Weber City with an extensive history of compliance problems after the federal government finally took action to terminate its ability to accept Medicaid and Medicare reimbursements.  The facility is now known as Continium Care of Weber City.

“According to a nursing home license application filed with the Virginia Department of Health Office of Licensure and Certification in October 2010, the facility is managed by Continium Health Care Management LLC located at 10800 Biscayne Blvd., Suite 810, Miami, Fla. The LLC’s president/chairman is listed as Avi Klein of Miami.”  Klein’s partners include Abraham Shaulson, Murray Forman, and Leonard Grunstein.  I’m sure they bled the facility dry before closing the facility down.  In October 2010, the facility, which was then known as the Brian Center, was investigated by the Internal Revenue Service for possible violations of wire fraud, mail fraud, health care fraud and money laundering.

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Michael Stratton of Stratton Faxon wrote a great article on their blog The Connecticut Legal Examiner on how private investment groups use corporate shells to hide from liability and accountability.  Below is a reprint of the article.

“Private investment groups are replacing ‘mom and pop’ nursing home owners. Plaintiff lawyers may need to dig through the resulting complex ownership and management structures to identify – and hold accountable-the corporate entities that have harmed their clients

Private equity enterprise and large public companies are operating more nursing homes today, replacing the more traditional operators, individuals, and faith-based enterprises that are sensitive to the plight of the elderly.

With the continuing increase in demand for elder-care resources, these entrepreneurs are often more concerned with profits than resident care. And because occupancy levels in nursing homes are already high and government reimbursement rates are capitated, some ”vulture capitalists” try to increase their bottom line by lowering costs. This usually translates into cutting staff, since labor is the largest cost-component of the nursing home budget.

Because the nursing home business is primarily service oriented, cutting staff usually means cutting service. That, in turn, translates into poor resident care. When the quality of care suffers, the nursing home operator’s liability increases in both the civil and administrative arenas, to mitigate their exposure for potential liability, nursing home operators resort to complex corporate strategies to limit their liability.

The cornerstone of the nursing home industry’s “escape and evasion” strategy is creating an amalgamation of single purpose enterprises (SPEs) to prevent litigants from obtaining judgments against people or entities other than the nursing home licensee. The licensee is typically just a shell company. Nursing home operators have found that numerous SPEs are less attractive defendants than a single company with multiple operating interests and multiple real estate holdings.

Under the SPE structure, nursing home revenues are often placed into centralized accounts under the parent company’s control. Payments are made from those accounts on behalf of the individual nursing homes without regard to the revenues a particular facility generates. Monies are used for myriad purposes unrelated to resident care, including acquiring new facilities and servicing the debts of the parent and affiliated companies. Dividends are rarely paid to the parent by its subsidiaries because the parent has unlimited access to the funds in the centralized account.

Identifying the real culprit at the root of nursing home abuse is no easy task. It requires hard work, determination, and perseverance. Focus your case on the misconduct of these corporate predators. Even with the advent of more stringent disclosure provision, the nursing home industry will continue to obfuscate when it comes to identifying the parties that are truly responsible for the management and operational decisions in nursing homes.”

 

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The Commercial Observer had an interesting article on the recent litigation involving Sava owners and operators and how expert accountants were needed to explain the complex web of corporate shell games. Two top forensic accountants were retained in a decisive battle in a legal war for control of about 170 nursing homes.

The trial in New York Supreme Court had its origins eight years ago, when real estate investor Ruby Schron teamed up with his lawyer, Leonard Grunstein, in a labyrinthine $1.3 billion leveraged buyout that created SavaSeniorCare. At issue for the two expert witnesses: the exact whereabouts of $100 million.”  In the nursing home case, the accounting helped determine that Mr. Schron could acquire the company without any further investment by simply assuming the debt. On Mr. Schron’s side was Harvey R. Kelly. Providing expert testimony for Defendants was David S. Williams. The rival accountants’ task was to sort out transactions among some 30 people and entities involved in the buyout, as well as the movement of money through an escrow account from entities on Mr. Schon’s side of the deal to Mr. Grunstein and his companies, to establish whether, and how much of, the money was lent.  The case, which hinged on how much money from a $100 million loan by Mr. Schron actually found its way to Sava. The accountants in Schron v. Grunstein were more than $110 million apart in their estimates of how much money was lent.

“In 2004, Mr. Grunstein and investment banker Murray Forman approached Mr. Schron with a proposal to buy Mariner Health Care Inc., a public company that operated more than 250 nursing homes and owned real estate associated with about 170 of them.”  “Grunstein and Forman proposed a complex transaction employing a ‘PropCo/OpCo’ structure whereby Old Mariner’s real estate would be separated from the nursing home operations.”

A newly formed company, National Senior Care Inc., bought all of the shares of Old Mariner, then sold the real estate to one of Schron’s companies, SMV. That entity then leased the properties to another newly formed company, SavaSeniorCare, controlled by Mssrs. Grunstein and Forman. National Senior Care retained the operations of about 100 nursing homes located on properties that were leased from third parties.

While neither Mr. Grunstein nor Mr. Forman put any of his own money into the deal, Mr. Schron raised about $1.1 billion in financing, acquiring real estate valued at about $800 million. According to documents signed at closing, the financing included a $100 million loan to the owner of Sava that gave him an option to acquire the company, the judge wrote.

Mr. Kelly said a promissory note signed by both sides at the time of closing—and amended and restated in 2006 when a second, $20 million loan was made—was the best evidence that the loan existed. And he said documents showed that the nursing home company had made use of the money, including making a $65 million loan to the “New Mariner” entity on the day of the transaction.

Documents included “audited financial statements of SavaSeniorCare that an outside independent audit firm rendered the opinion that [an entity controlled by Mr. Grunstein] had contributed $100 million,” he said. “So, you’ve got years’ worth of very consistent documents demonstrating that. I find that the most credible evidence.”

The biggest problem Murray Forman and Leonard Grunstein had was their obvious lack of credibility.  “Apart from the fact that all of the documentary and non-party witness evidence contradict their testimony, their evasive answers and manner on the witness stand left the court with a firm belief that both gave testimony that was less than candid,” the judge wrote. He ordered the defendants to proceed with the transfer of control of the company “without further delay.”

 

The child of a deceased long-term care resident is not bound to an arbitration agreement because she signed it on behalf of her mother — not herself — an Illinois court ruled.

Following the death of her mother, Joyce Gott, at Odin Healthcare Center, Sue Carter filed a wrongful death claim and sought damages for negligent care against the parent company, SSC Odin Operating Company, LLC. Odin countered that Carter and Gott had signed binding arbitration agreements in 2005 and 2006.  The court, however, agreed with lower courts that Carter “cannot be compelled to arbitrate the wrongful-death claim against defendant.”

Plaintiff, as Gott’s personal representative in the wrongful-death action, is merely a nominal party, effectively filing suit as a statutory trustee on behalf of the next of kin,” Judge Mary Jane Theis wrote. “Plaintiff is not prosecuting the wrongful-death claim on behalf of Gott, and thus plaintiff is not bound by Gott’s agreement to arbitrate for purposes of this cause of action.”

 

Below is Dechert’s press release about the recent lawsuit involving Murray Forman and Leonard Grunstein for ownership and operational control of the national for profit chains Sava Senior Care, Mariner Health Care, Inc., and Fundamental Long Term Care.

“Following a two-week bench trial before Justice O. Peter Sherwood of the New York Supreme Court, Dechert achieved a victory today on behalf of Rubin Schron and Cammeby’s Equity Holdings with the court’s ruling that Cam Equity may acquire SavaSeniorCare LLC, a national nursing-home company, through the assumption of $100 million in outstanding debt.  In so doing, Justice Sherwood rejected the claims of Sava’s owners, Leonard Grunstein and Murray Forman, that Schron had fallen $120 million short on his lending commitments as a “prevarication” and concluded that the “mendacity of Grunstein and Forman” entitled their story to be given no weight.

In its decision, the court ruled that Cam Equity “is entitled to reap the benefit of its bargain now” and ordered Grunstein, Forman, and their companies “without further delay” to move forward with transferring control of the company to Cam Equity.

The trial ruling represents the latest victory for Dechert in its longstanding representation of Schron, Cam Equity and affiliated companies in litigation regarding the control of a multi-billion nursing-home company and related fiduciary duty and malpractice claims brought by Schron against the operating company’s owners and Schron’s former attorneys and investment banker.

The victory follows a series of rulings that Dechert has won on behalf of Cam Equity and affiliated companies in seeking to vindicate their rights to acquire SavaSeniorCare and two other nursing-home companied controlled by Grunstein and Forman. Previously, the New York Supreme Court’s Appellate Division, First Department, affirmed an earlier victory before the New York Supreme Court (Commercial Division) upholding the validity of the Sava option. The First Department issued an order resolving another Schron-related lawsuit, concerning a separate option that a Schron company, Cammeby’s Funding LLC, has to acquire one-third of the shares of Fundamental Long Term Care Holdings LLC.  The New York Supreme Court has also granted summary judgment in favor of Cam Equity’s right to acquire two-thirds of Mariner Health Care, Inc.

“We are extremely pleased with the court’s decision,” said Dechert chairman and litigation partner Andrew J. Levander, who led the representation of Schron and Cam Equity along with partner Steven A. Engel. “Today’s ruling confirms that Mr. Schron fulfilled all of his commitments in connection with these transactions and squarely rejects the incredible stories that the defendants have advanced to obstruct Mr. Schron’s contractual rights. Per the court’s decision, Cam Equity should now be able to move forward with acquisition.”

Caption: Schron et al. v. Grunstein et al., case number 650702/2010, in the Supreme Court of the State of New York, County of New York.

Mercury News reported that Creekside Health Care and its parent corporation, Mariner Health Care in San Pablo, California is facing a lawsuit for understaffing which caused multiple problems at the facility.  Five families blame the lack of staff subjected residents to abusive and inhumane conditions.  The families allege that inadequate staffing levels at the facility caused residents to be neglected for long periods of time, often left to sit in their own feces and urine.  The staff, to compensate for the lack of staff, caused residents to be over medicated known as a chemical restraint. Nursing home workers were also unable to turn or reposition as needed so many residents developed pressure ulcers that would otherwise have been easily preventable.

The suit also explains that a lack of staff allowed a visitor to sexually assault four residents from as long as January until May 2010. The lawsuit states, “During the assaults, residents screamed for help, sometimes for more than thirty minutes, but no one came.”   It is outrageous that residents were screaming for someone to help them and no one was able or willing to intervene.

All too often national for-profit nursing home facilities controlled by corporate ownership are only motivated to generate greater profits.  This disregard of resident care is exemplified by by cutting labor costs and reducing staffing.

 

Speaking of shady corporate deals, Thomson Reuters News & Insight reported that a New York Court ruled against Leonard Grunstein and Murray Forman in their attempt to invalidate an agreement in a fight over ownership of Sava Senior Care, a national nursing home chain.  Grunstein and Forman argued that Rubin Schron didn’t fund a $100 million loan to the nursing home chain therefore the agreement giving him the option to buy the chain in exchange for cancelling the loan was invalid.  See Order here.

Grunstein and Forman, who co-own and operate Sava entities with Schron, were appealing several lower-court rulings. In a unanimous ruling, New York state’s Appellate Division, First Department, rejected the "tortured argument" that the two agreements were interdependent and that failure to fund the loan would void the option agreement.

"The (lower) courts correctly recognized that there was absolutely no language of condition making the funding of the loan an express condition precedent to the right to exercise the $100 million option," Associate Justice James Catterson wrote for the court.

The ruling is the latest in a tangled web of litigation between Schron, Grunstein and Forman, whose business dealings in nursing home companies have dissolved in a bitter legal battle. Their partnership appeared to go bad after they were sued in 2009 by the U.S. Department of Justice, which alleged they received kickbacks from Omnicare, a pharmacy that sells drugs to nursing home patients. In 2010 the three men — along with Sava and another nursing home chain, Mariner Health Care Inc, for which they served as principals — paid $14 million to settle the lawsuit.

The case is Schron et al v. Troutman Sanders et al, in the Supreme Court of the State of New York, Appellate Division: First Department, index nos. 650702/10 and 600736/10.

 

The Gaston Gazette reported that Gastonia Police were called to the Brian Center twice within four days.  Brian Center is owned and operated by Sava Senior Care.  According to Gastonia Police, the facility’s administrator reported a man called him over the phone and threatened to do him bodily harm. Brian Center Administrator Randy Smithey identified Cedric Eugene Dameron as the man who threatened him. Dameron was charged with communicating threats. The Gastonia man was charged with the same offense in 2010. 

Gastonia Police were also called to the facility when an employee reported a sexual assault involving a worker and a resident.  According to the incident report, a Brian Center nurse sexually assaulted a 54-year-old woman on Sunday at 1:42 a.m.

 

WLBT out of Jackson, Mississippi had a disturbing story of a former employee’s admission of abuse and neglect she witnessed at Brandon Nursing Home and Rehabilitation Center, a for profit nursing home.   Several people contacted WLBT sharing similar stories.

"Brandon Nursing Home and Rehabilitation Center employee who we’ll call "Ann" worked as a certified nursing assistant at the facility for about six weeks.  "While I worked there I reported several cases of abuse," said Ann.  She resigned after repeatedly seeing elderly patients neglected, left for hours in their waste and treated cruelly.  The 30 year old wife and mother said she told her supervisors about the abuses but nothing was ever done.

"I witnessed a gentleman fall out of his wheelchair and I witnessed one of the other aides that I was shadowing pull his shirt up over his head and when she did that his head bounced and hit the floor," said the certified nursing assistant.

Why isn’t this place getting investigated or shut down–the regulatory enforcement is lacking.