Attorney General James Sues Orleans County Nursing Home for Years of Fraud and Resident Neglect - New York State Attorney General

Owners of The Villages Allegedly Misused More Than $18 Million in Government Funds 

Disinvestment Led to Chronic Understaffing, Inhumane Conditions, and Harm to Residents

NEW YORK – New York Attorney General Letitia James today filed a lawsuit against Comprehensive at Orleans LLC doing business as The Villages of Orleans Health and Rehabilitation Center (The Villages), a nursing home in Albion, New York, for years of financial fraud that resulted in significant resident neglect and harm. Following an extensive investigation conducted by the Office of the Attorney General (OAG), the lawsuit — filed against the owners, operators, and related companies (owners) — demonstrates how the owners took advantage of the state's Medicaid program to increase their personal profits, rather than use those funds for the intended purposes of staffing and patient care.

"Every individual deserves to live out their golden years in comfort and with dignity," said Attorney General James. "Yet the abject failure of The Villages and its owners to uphold their duty under the law caused residents to suffer inhumane treatment, neglect, and harm. Instead of investing in staffing and resources, the owners allegedly disregarded laws designed to protect residents. I will continue to monitor nursing homes and residential care facilities statewide to ensure the safety of our most vulnerable communities. I encourage anyone who has witnessed alarming conditions, resident neglect, or abuse at a nursing home to contact my office." 

Under New York law, owners of nursing homes have a "special obligation" to provide a high level of care and quality of life for residents, and to ensure the facility is sufficiently staffed so as to provide that care. The Villages' owners failed in their duty to residents by engaging in a scheme to divert funds away from the facility to increase their own personal profit, drastically cutting staffing at The Villages to do so. With this lawsuit, OAG seeks to compel the owners to return all funds fraudulently received, to appoint a receiver and financial monitor to stop the self-dealing and a healthcare monitor to improve care, and to require The Villages to stop admitting new patients until further notice.

The owners wove a complicated web of fraud, using their ownership stakes in multiple companies to turn The Villages into a profit machine. The named respondents in the complaint are The Villages of Orleans LLC; Telegraph Realty LLC (Telegraph), which owns the real property where The Villages is; CHMS Group LLC (CHMS), which provides administrative services to The Villages; and ML Kids Holdings LLC (ML Kids), which received over $1.5 million in cash transfers from Telegraph. Also named are individual owners, including the sole official owner of The Villages, his three sons-in law, his daughter-in-law; three undisclosed owners of The Villages; and the owners of Telegraph Realty LLC. Together, these individuals are referred to as the "owners."

Financial Scheme

In January 2014, the owners formed Telegraph for the sole purpose of buying the real property on which The Villages sits, which they did a year later in January 2015. The Villages has since paid "rent" to Telegraph. CHMS was formed in January 2015, and The Villages has since paid CHMS for administrative services, including accounting, insurance billing, and payroll.

From 2015 through 2021, The Villages received $86.4 million in funding, including millions in taxpayer dollars from Medicare and Medicaid, intended to provide quality healthcare to vulnerable residents. Instead, the owners cut staffing to increase their personal profits. By making payments to Telegraph and CHMS, and by making other transfers to themselves directly and indirectly, the owners were able to divert $18.6 million — more than 20% of The Villages' operating budget. When the Villages was owned by Orleans County, the facility's nursing home rating from the Centers for Medicare & Medicaid Services (CMS) was three out of five stars. In April 2015, just four months after the owners purchased The Villages, CMS decreased the rating to one star, the lowest possible rating.

Devastating Consequences

The OAG asserts in the suit filed today that The Villages' reprehensible history of insufficient staffing and low quality of care is directly traceable to the owners' financial scheme. Residents were subject to repeated abuse and neglect as the most basic functions of care were abandoned. Residents were forced to sit in their own urine and feces for hours; suffered malnourishment and dehydration; developed sepsis, gangrene, and other infections due to gaping bed sores and inadequate wound care; endured medical toxicity and unexplained doping; and sustained falls and other physical injuries. Some of these abuses, including other unmonitored or undocumented circumstances, resulted in hospitalization and even death. 

The lawsuit's allegations include: 

• A woman was admitted to The Villages in January 2021 with a Stage II bed sore which was not treated for more than two weeks. Six months later, in June 2021, she suffered from two Stage III bed sores and an external wound care consultant ordered a new treatment, which The Villages did not implement until a week later. By July, both wounds had advanced to the point of being "unstageable." A friend of the woman told OAG she received more than 1,000 texts asking for help with basic necessities like using the restroom or getting food and water. One text reported she had been "lying in a dirty diaper for hours," and another lamented, "I just need a glass of water." The Villages gave the resident psychotropic medications for severe anxiety, though there was no such diagnosis in her medical records. She was found unresponsive on July 13 and sent to the hospital, where she died.
• A woman admitted to The Villages in January 2020 for rehabilitation of a broken leg soon began refusing her food and medication and spoke of wanting to die. An external psychological consult determined she was at high-risk for self-harm, and ordered staff check on her every 30 minutes. The Villages failed to monitor the woman, and she was found dead in early February 2020, less than a month after she was admitted. Her death was not reported to the New York State Department of Health (DOH) as required by law. 
• A man was admitted to The Villages in November 2020 to rehabilitate after a leg amputation, so he could gain enough strength to use his prosthetic and live independently. During his three months at The Villages, he had only a handful of physical therapy sessions, during which he was often left to sit without exercise or assistance. Due to his amputation, he required help with cleaning and caring for himself, but staff frequently failed to change his diaper in a timely manner, leaving him to often spend hours sitting in his own urine. He now resides in a different facility and is making great progress.

COVID-19 Pandemic

Residents' low quality of life and unacceptable level of care further worsened with the onset of the COVID-19 pandemic as The Villages' already stretched thin staff was forced to work even longer hours. Notably, management at The Villages tried to keep positive COVID-19 cases secret, and either delayed or entirely neglected to enforce proper protocols for quarantining infected residents. The owners forced staff to report to work even when they were sick, provided little to no personal protective equipment, failed to implement infection or isolation protocols, and did not report positive COVID-19 cases, resulting in unnecessary and preventable deaths. 

A Licensed Practical Nurse (LPN) at The Villages disclosed that the facility had its first COVID-19 case on March 30, 2020. Though the individual's chart noted he'd had a fever for three days before he tested positive, nothing was done to prevent further spread of the virus. The Villages was so short staffed that employees were caring for residents who were both positive and negative for COVID-19 without following any quarantine protocols. As the pandemic progressed, COVID-19 positive employees, forced to report to work despite being sick, mixed with COVID-19 negative residents, and all residents intermingled regardless of infection status. Employees were told that if their temperature check indicated they had a fever, they were to go outside for an hour and come back to take their temperature again.  

Rather than hire enough medical staff qualified to deliver the level of care that nursing homes are required to provide, the owners instead expected Certified Nursing Assistants to perform work they were not licensed to handle. Staff and other witnesses reported times when The Villages was dangerously understaffed, such as an overnight shift where just four employees were on hand to care for all residents in the 120-bed facility. Despite this, the owners prioritized increasing resident admissions at The Villages in order to drive up revenue — even when the facility was providing substantially fewer hours of nursing care per resident than the state's safety average, adding to the dangerous environment.  

Remedies

The OAG found that the owners engaged in repeated and persistent fraud and illegality in operating The Villages, including a systemic, intentional pattern of understaffing. These actions stripped residents of their dignity and caused physical and emotional harm, while enabling the owners to reap enormous profits. In her lawsuit filed today, Attorney General James seeks to: 

• Remove David Gast, Sam Halper, and Ephram Lahasky from their ownership and managerial roles at The Villages;  
• Prohibit The Villages from admitting any new residents unless and until staffing levels meet appropriate standards;  
• Require The Villages to engage and pay for a receiver and a financial monitor to oversee the facility's financial operations; 
• Require The Villages to engage and pay for a healthcare monitor to oversee the facility's healthcare operations and ensure residents' outcomes improve;  
• Direct each respondent to fully disgorge any and all funds wrongfully received as part of the scheme; and  
• Order all respondents with the exception of The Villages to reimburse New York state and the United States for the cost of the investigation. 

Respondents

The named respondents in the complaint are Bernard Fuchs, supposed sole official owner of The Villages, his son and daughter-in-law Gerald and Tova Fuchs, and his sons-in-law Joel Edelstein and Israel Freund; David Gast, undisclosed owner of The Villages; Sam Halper, undisclosed owner of The Villages; Ephram Lahasky, undisclosed owner of The Villages; Benjamin Landa and his son-in-law Joshua Farkovits; and Teresa Lichtschein and her daughter-in-law Debbie Korngut. Together, these individuals are referred to as the "owners." 

Also named are Villages of Orleans LLC, which is controlled by Gast; Telegraph Realty LLC (Telegraph), which owns the real property where The Villages is; CHMS Group LLC (CHMS), which provides administrative services to The Villages; and ML Kids Holdings LLC (ML Kids), which received over $1.5 million in cash transfers from Telegraph and is controlled by Ephram Lahasky. Though all official paperwork associated with The Villages represents the facility is owned entirely by Bernard Fuchs, OAG's investigation revealed he had a very limited role. In reality, David Gast, Ephram Lahasky, and Sam Halper owned, managed, and controlled The Villages.

Attorney General James has been investigating nursing homes throughout New York state based on concerns of patient neglect and other conduct that may have jeopardized the health and safety of residents and employees, both before and during the COVID-19 pandemic. In January 2021, Attorney General James released a report revealing that many nursing homes were ill-equipped and ill-prepared to deal with this crisis because of poor staffing levels and a lack of compliance with infection control protocols. Today's lawsuit is a direct result of those investigations, some of which are still ongoing. 

Attorney General James encourages anyone with information or concerns about alarming nursing home conditions, resident abuse, or neglect to file confidential complaints online or call the MFCU hotline at (833) 249-8499. 

The investigation was conducted by a multi-disciplinary team from the Medicaid Fraud Control Unit, including Assistant Attorneys General Maura O'Donnell, Soo-Young Chang, Kathryn Heim Harris, Jared W. Goldman, and Thomas Schlief; Medical Analyst Jennifer Cronkhite, RN; Detective Supervisor James Zablonski and Detective Jaimie Krzyskoski, supervised by Deputy Chief William Falk; Principal Auditor-Investigators Milan Shah, Karin Flynn, and Christopher Magin, and Regional Chief Auditors Mary Henry and Dejan Budimir; Legal Support Analysts Danielle Vercelli and Natalie Tamblyn, eDiscovery Support Specialist Jenna Pardi, Confidential Systems Analyst Heather Baker, Confidential Administrative Assistant Deborah Bagley, and Research Analyst Brandon Andrews; the investigative teams were supervised by Assistant Attorneys General Alee N. Scott and Thomas O'Hanlon; MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. MFCU is a part of the Division for Criminal Justice, which is led by Chief Deputy Attorney General José Maldonado and overseen by First Deputy Attorney General Jennifer Levy.

Attorney General James thanks the New York State Department of Health and Human Services Commissioner Mary T. Bassett; the United States Department of Health and Human Services, Office of the Inspector General (Special Agent Kirin Hage); and the Orleans County Sheriff's Department for their assistance in this investigation.

MFCU's total funding for federal fiscal year (FY) 2023 is $65,717,936. Of that total, 75 percent, or $49,288,452, is awarded under a grant from the U.S. Department of Health and Human Services. The remaining 25 percent, totaling $16,429,484 for FY 2023, is funded by New York state. Through MFCU's recoveries in law enforcement actions, it regularly returns more to the state than it receives in state funding. 

A memorandum of law was filed in this matter.

To access the affidavits and exhibits:
Part 1
Part 2
Part 3
Part 4

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