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Health care executives bought Rolex watches and vacation homes in fraud scheme, prosecutors say

Justin L. Mack
justin.mack@Indystar.com
The FBI, Treasury and other law enforcement officers conduct an investigation at the Carmel home of American Senior Communities CEO James Burkhart on Sept. 15

Private planes, vacation homes and gold bars are just a few of the items that federal prosecutors say were purchased by four men in a fraud scheme that netted $16 million.

U.S. Attorney Josh J. Minkler announced the indictments on Wednesday. Two defendants worked as executives for American Senior Communities, one of Indiana's largest nursing home management companies: former CEO James Burkhart, 51, and former chief operating officer Daniel Benson, 51. Also indicted were Burkhart's friend and associate Steven Ganote, 42, and his brother Joshua Burkhart, 42, who worked for the accounting firm that prepared cost reports for the defrauded health care companies.

Together they face 32 counts — including conspiracy to commit mail fraud, wire fraud, money laundering and conspiracy to violate the federal Anti-Kickback Statute — on acts alleged to have occurred between January 2009 and September 2015.

Minkler said the men, two of whom already earned seven-figure salaries from American Senior Communities, lived a life of gratuitous luxury complete with perks like golf junkets, diamond jewelry, Rolex watches and gambling trips in Las Vegas.

"The allegations in this indictment are serious and consequential and they don't paint a pretty picture," he said. "The four men ... engaged in a six-year scheme, which is characterized by unbridled greed, deceit and theft from programs we all count on to care for the elderly, the poor, the disabled and the weak.

"Nothing was off the table for these four individuals."

All four men were released from custody after an initial court appearance Wednesday afternoon where not guilty pleas were entered for each of them. No additional court hearings were set. Calls to each of their attorneys were not returned by Wednesday evening.

According to the federal indictment, the defendants conspired to defraud American Senior Communities, the Health & Hospital Corp. of Marion County and health care programs, namely Medicare and Indiana Medicaid. Court documents allege that their goal was to "solicit, receive and conceal kickbacks and other payments for their personal benefit."

The defendants are accused of using more than 20 shell companies to falsify and inflate costs to American Senior Communities and Health & Hospital Corp. — which operates the Marion County Public Health DepartmentEskenazi HealthEskenazi Health FoundationIndianapolis EMS and Long Term Care — for goods and services so they could steal discounts and rebates that belonged to the two entities, according to court documents. The shell companies also were used to conceal sizable kickbacks.

Court documents said the men received $5.5 million in kickbacks disguised as marketing fees from pharmacy companies; $825,000 disguised as payments to a food provider; $325,000 labeled as consulting fees from a home health care company; and $140,000 labeled as consulting fees from a hospice company.

They also took advantage of the sheer scale of American Senior Communities, court documents said. With more than 70 nursing homes and thousands of patients, the facilities required the use of numerous vendors to supply services like landscaping, food, patient therapies and more.

The defendants were able to exploit those vendor relationships and cut side deals to launder millions of dollars for their personal gain, according to court documents. The side deals involved overcharging the health care companies for vendor services and funneling the overcharged amounts back to the defendants through shell companies.

For example, court documents allege that James Burkhart directed a landscaping vendor to inflate its invoices to American Senior Communities by 45 percent. After the invoices were paid, the vendor paid the 45 percent overcharge back to one of James Burkhart’s shell companies, which he then split with the landscaping vendor’s shell company.

False and inflated invoices through the landscaping vendor allegedly defrauded American Senior Communities and the Health & Hospital Corp. out of more than $2.3 million, officials said. While the landscaping company and its CEO weren't named in Wednesday's indictment, Assistant U.S. Attorney Cindy Cho said the CEO was charged Wednesday morning.

In some cases, vendors paid kickbacks to the defendants in exchange for doing business with American Senior Communities. The $5.5 million kickback from a pharmacy company was the result of this type of arrangement.

The money laundering counts outline transactions totaling more than $3.45 million. Included in the list was a $1.43 million wire transfer from a shell company's account to purchase real estate adjacent to James Burkhart's Northern Indiana vacation home on Lake Wawasee in Kosciusko County.

Vendors that questioned the overcharges and kickbacks were turned down, court documents said. James Burkhart, Benson and Ganote approached a company about installing new nurse call systems in all American Senior Communities facilities, and told the company to mark up their prices by 30 percent and pay the overcharged amount back to a shell company.

When the company declined to inflate its prices, James Burkhart ended negotiations and moved on to a second company, which agreed to the deal, court documents said.

After the nurse call systems were installed, this second company was used again for electrical contracting, such as generators at the facilities. In total, these overcharges totaled more than $3.7 million.

Assistant U.S. Attorney Nick Lender said a tip from a concerned citizen with knowledge of the arrangements helped investigators crack the case.

"It was a tip from a member of the public who stepped forward after being approached with some of the arrangements … in the indictment and taking a look and saying, 'You know what, this doesn't sound right.'"

Minkler said additional charges could be filed against vendors and other co-conspirators.

If convicted, the defendants would face up to 20 years in prison for conspiracy to commit mail, wire and health care fraud. They also face 20 years in prison for each mail or wire fraud count; 20 years in prison for certain money laundering counts; and 10 years in prison for other money laundering counts.

Additionally, James Burkhart, Benson and Ganote each face up to five years in prison for conspiracy to violate the Anti-Kickback Statute.

In response to the charges, American Senior Communities said it has emerged from the investigation as a "stronger, more vital organization." It was "the victim of a betrayal of trust," according a statement released Wednesday afternoon.

"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," the statement said. "ASC has actively cooperated in this investigation and will continue to cooperate until the prosecutions are concluded."

In September 2015, federal agents raided Burkhart's Carmel home and the southeast-side headquarters of American Senior Communities at 6900 Gray Road. The company later fired Burkhart and Benson. A third executive — former chief financial officer Roger Werner — also submitted his resignation at the time, but he hasn't been charged with a crime.

An internal review concluded that the federal investigation "does not touch upon the operation of any nursing home serviced by ASC," according to statement issued at the time of the September raid.

American Senior Communities manages nearly 100 senior care facilities. Among those are 60 sites, including skilled nursing facilities and assisted living facilities throughout the state, that the company manages under a contract with Marion County’s public health agency.

The organization also serves more than 6,600 seniors and employs more than 8,200 people, according to its website.

IndyStar reporter Holly V. Hayes and The Associated Press contributed to this report. Call IndyStar reporter Justin L. Mack at (317) 444-6138. Follow him on Twitter: @justinlmack.