United States Attorney Josh J. Minkler announced the indictment of four individuals for their roles in a vast fraud, kickback, and money laundering scheme involving Indiana nursing home chain American Senior Communities (ASC). Those charged include James Burkhart, 51, of Carmel, who formerly served as ASC’s Chief Executive Officer, and Daniel Benson, 51, of Fishers, who served as Chief Operating Officer. The four men charged are alleged to have personally pocketed millions in kickbacks and fraudulent overcharges, which they spent on vacation homes, private plane flights, golf trips, expensive jewelry, gold bullion, and casino chips.
The thirty-two count indictment charges Burkhart and Benson, along with Burkhart friend and associate Steven Ganote, 42, of North Salem, and Burkhart’s brother Joshua Burkhart, 42, of Fishers, with one count of conspiracy to commit mail, wire, and health care fraud, along with multiple other counts of mail fraud, wire fraud, and money laundering. Additionally, the indictment charges James Burkhart, Benson, and Ganote with one count of conspiracy to violate the federal Anti-Kickback Statute.
“These men are alleged to have stolen from the most vulnerable in our society,” said Minkler. “They took advantage of a system entrusted with the care of this state’s elderly, sick and mentally challenged allowing them to live a lifestyle of gratuitous luxury, fraught with unbridled greed.”
ASC is one of Indiana’s largest nursing home chains. It manages the daily operations of approximately 70 senior care facilities throughout Indiana on behalf of the Health & Hospital Corporation of Marion County (Health & Hospital), a public health organization that administers hospitals, like Eskenazi Health, as well as nursing homes. To manage the facilities, ASC purchases and refers patients to a wide variety of products and services provided by outside companies. Nearly all of these products and services are paid for with money from Medicare and Medicaid.
According to the indictment, between 2009 and 2015, James Burkhart and his co-conspirators engaged in side deals with many of these outside vendors for their own personal benefit – unbeknownst to, and at the expense of Health & Hospital and ASC’s owners. These side deals often involved intentionally overcharging ASC and Health & Hospital for the products and services the vendors provided and then funneling the overcharged amounts back to themselves through a web of shell companies. For example, the indictment alleges that James Burkhart directed a landscaping vendor to artificially inflate its invoices to ASC by 45%. After James Burkhart had ASC pay the invoices, the landscaping vendor paid the 45% 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 ASC and Health & Hospital out of over $2.3 million.
In other instances, the vendors simply paid kickbacks to James Burkhart, Benson, and Ganote in exchange for doing business with ASC. For example, the indictment alleges that the vendor who provided pharmacy services at ASC-managed facilities paid three of Ganote’s shell companies over $5.5 million in two years for purported “marketing” services. Ganote regularly split this money among James Burkhart, Benson, and himself.
Furthermore, according to the indictment, vendors that questioned the overcharges and kickbacks were turned down. For example, James Burkhart, Benson, and Ganote approached a company about installing new nurse call systems in all ASC facilities. They told the company to mark up their prices by 30% and pay the overcharged amount back to a shell company. The company declined to inflate its prices. James Burkhart immediately terminated negotiations and moved on to a second company, which agreed to the inflated-invoice deal. After the nurse call systems were installed, this second company was used again and again for big-ticket electrical contracting, such as generators at ASC facilities. In total, these overcharges allegedly came to over $3.7 million.
The defendants’ scheme allegedly capitalized on much more than ASC’s need for landscaping, pharmacy, and nurse call systems. The indictment contains allegations concerning food supplies, medical supplies, patient lifts, patient therapies, interior decorations furniture, office supplies, scent products, American flags, patient discharge packages, uniforms, and Alzheimer’s Memory Walk t-shirts.
The indictment alleges that the fraudulent proceeds and kickbacks were laundered through over 20 shell companies and bank accounts, and then divided among the four men for their personal use and benefit. Some of the illegal proceeds, for example, were allegedly used to pay for real estate on Lake Wawasee, Indiana, and Marco Island, Florida, elaborate diamond jewelry, Rolex watches, multiple gold bars, dozens of gold coins, gambling chips at Caesars Palace Las Vegas, extensive use of a private plane, and political contributions. In total, the indictment alleges that the defendants received over $16 million from their fraud and kickback scheme.
This case was jointly investigated by the Federal Bureau of Investigation, the Department of Health and Human Services, Office of Inspector General, the Internal Revenue Service-Criminal Investigation and the Indiana Attorney General’s Medicaid Control Fraud Unit.
“Today’s arrests are the culmination of a detailed and thorough investigation which uncovered excessive fraud,” said Special Agent in Charge W. Jay Abbott. “Over the course of the past year, the FBI Indianapolis Office, in partnership with IRS and HHS-OIG, diligently investigated kickback schemes, inflated bills and overbilled invoices. Together, we held these American Senior Communities executives arrested today accountable for funneling illicit profits and passing these costs along to Indiana Medicaid. I want to commend the hard work and diligence by Special Agents Victoria Madtson and Joe Weston of the FBI, who worked in close collaboration with our Forensic Accountants Ron Winings and Chris Knight. Their investigation illuminated the greed exhibited by these individuals who lined their own pockets at the expense of Hoosiers around the state. The individuals arrested today violated the trust of those they were meant to serve. These illegal actions, and the levels of greed uncovered by this investigation, are not to be tolerated. Working with our colleagues, the FBI is committed to investigate complex financial crimes in Indiana as a priority today and in the future.”
“The payment of kickbacks in exchange for the referral of patients covered by federal health care programs is illegal,” said Lamont Pugh III, Special Agent in Charge – Chicago Region, U.S. Department of Health & Human Services, Office of Inspector General. “These improper arrangements exploit our healthcare system and increase the costs for obtaining services for all program participants. The OIG will continue to work with our federal, state and local law enforcement partners to uncover these types of schemes and hold those who execute them accountable.”