Preview
FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023
NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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PEOPLE OF THE STATE OF NEW YORK by
LETITIA JAMES, Attorney General of the
State of New York,
Petitioner, AFFIDAVIT OF AUDITOR-
INVESTIGATOR
-against-
ABRAHAM OPERATIONS ASSOCIATES
LLC d/b/a BETH ABRAHAM CENTER
FOR REHABILITATION AND NURSING,
DELAWARE OPERATIONS ASSOCIATES LLC
d/b/a BUFFALO CENTER FOR REHABILITATION
AND NURSING, HOLLIS OPERATING CO., LLC
d/b/a HOLLISWOOD CENTER FOR REHABILITATION
AND HEALTHCARE, SCHNUR OPERATIONS
ASSOCIATES LLC d/b/a MARTINE
CENTER FOR REHABILITATION AND NURSING,
LIGHT PROPERTY HOLDINGS ASSOCIATES LLC,
DELAWARE REAL PROPERTY ASSOCIATES LLC,
HOLLIS REAL ESTATE CO., LLC,
LIGHT OPERATIONAL HOLDINGS ASSOCIATES LLC,
LIGHT PROPERTY HOLDINGS II ASSOCIATES LLC,
CENTERS FOR CARE LLC d/b/a CENTERS HEALTH CARE,
CFSC DOWNSTATE, LLC, BIS FUNDING CAPITAL LLC,
SKILLED STAFFING, LLC, KENNETH ROZENBERG,
BETH ROZENBERG, JEFFREY SICKLICK,
LEO LERNER, AMIR ABRAMCHIK, DAVID GREENBERG,
ELLIOT KAHAN, SOL BLUMENFELD, ARON GITTLESON,
AHARON LANTZITSKY,
JONATHAN HAGLER, MORDECHAI “MOTI” HELLMAN,
and DARYL HAGLER
Respondents.
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State of New York )
) ss.:
County of New York )
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KIZZY-ANN WALDROPT, being duly sworn, deposes and says:
1. I am a Principal Auditor-Investigator employed by the Office of the New York
State Attorney General, Medicaid Fraud Control Unit (“MFCU”), in the New York City Regional
Office. I have been an Auditor-Investigator with MFCU for over 17 years and have participated
in over 50 investigations into the activities of Medicaid providers.
2. The Attorney General, through MFCU, is conducting an investigation of Centers
for Care LLC d/b/a Centers Health Care (“Centers”) and certain skilled nursing facilities affiliated
with Centers, including Beth Abraham Center for Rehabilitation and Nursing (“Beth Abraham”),
located at 612 Allerton Avenue, Bronx, New York.1 Beth Abraham is registered with New York
State Department of Health (“DOH”) as a Medicaid provider, and is also a Medicare provider.
MFCU’s investigation also encompasses certain individuals and entities that are related to Centers
and Beth Abraham, including Light Operational Holdings Associates LLC (“Light Operational”)
and Light Property Holdings Associates LLC (“Light Property”).
3. Since May 4, 2020, I have been assigned to work on the financial and staffing
analyses pertaining to Beth Abraham for this investigation. I have personally examined the records
of Medicaid and Medicare payments made to Beth Abraham, as well as the Medicaid enrollment
data submitted by Beth Abraham to DOH when it enrolled in New York State’s Medicaid program.
4. This affidavit and the facts stated herein are based upon my personal knowledge
and upon information and belief. The sources of this information and bases for this belief are
specified herein.
1
The other skilled nursing facilities being investigated are Delaware Operations Associates LLC d/b/a Buffalo Center
for Rehabilitation and Nursing (“Buffalo Center”), Holliswood Operating Co. LLC d/b/a Holliswood Center for
Rehabilitation and Healthcare (“Holliswood” or “Holliswood Operating Co.”) and Schnur Operations Associates LLC
d/b/a Martine Center for Rehabilitation and Nursing (“Martine Center”). These facilities, along with Beth Abraham,
shall, at times hereinafter, be referred to collectively as the “Nursing Homes.”
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Cost Reports and Certifications Regarding Related Party Transactions
5. Nursing home providers are required to file annual “Cost Reports” to report income,
expenses, assets, liabilities, and statistics to DOH pursuant to 10 NYCRR Part 86-2. The data is
used by DOH, in part, to develop Medicaid rates. Nursing home operators must certify that the
Cost Report is “true and complete,” and they must execute the following certifications as part of
the completion of the Cost Report:
Certification Statement
Misrepresentation or falsification of any information contained on
this form may be punishable by fine and/or imprisonment under
New York State Law and Federal Law.
Certification of Operator
I also certify that all salary and non-salary expenses presented in the
RHCF-4 [cost report] with the exception of those expenses
attributable to Research Physicians’ Offices and other Rentals, Gift
Shop, Public Restaurant, Fund Raising and Sold Services
considering the adjustments contained in the Part II and the
recoveries of expenses detailed in Exhibit I of the Part IV were
incurred to provide patient care in the facility.
(Emphasis added.)
6. The Cost Report and the instructions thereto also require, at several points, the
disclosure of “related companies”—companies with which the Operator has “Non-Arm’s Length
Arrangements,” as defined by Schedule 16:
An arrangement between the operator of a facility and an
organization related to the common ownership and or control for the
furnishing of services, facilities, or supplies; An arrangement where
there is a family relationship between the operator and the
organization, and where services, facilities, or supplies are furnished
and in instances where the operator and the organization are
involved in any other business.
In this affidavit, I refer to a company that meets the above definition as a “Related Party,” and
multiple such companies as “Related Parties.”
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7. Schedule 16 and the instructions thereto further require that every nursing home
identify and list each Related Party. Additionally, every nursing home is required to submit Part
III of the Cost Report and an audited financial statement for each Related Party identified.
Conditions of Participation in the Medicaid Program
8. Beth Abraham is a registered “Provider” with DOH, subject to program regulations
and a Medicaid Provider Agreement that explicitly makes the New York State Medicaid
Regulations the foundation of the relationship between the State and the provider.
Electronic Billing Certification
9. To receive reimbursement from Medicaid in New York State, all providers who
participate in electronic billing must sign a Certification Statement for Provider Utilizing
Electronic Billing (the “Medicaid Electronic Certification”).
10. The Medicaid Electronic Certification reads, in pertinent part:
I (or the entity) have furnished or caused to be furnished the care,
services and supplies itemized and done so in accordance with
applicable federal and state laws and regulations. . .
In submitting claims under this agreement I understand and agree
that I (or the entity) shall be subject to and bound by all rules,
regulations, policies, standards, fee codes and procedures of the
New York State Department of Health as set for in title 18 of the
Official Compilation of Codes, Rules and Regulations of New York
State and other publications of the Department, including Medicaid
Management Information Systems Provider Manuals and other
official bulletins of the Department. . .
(Emphasis added).
Beth Abraham’s Ownership
11. Kenneth Rozenberg purchased Beth Abraham’s operations through Abraham
Operations Associates LLC, d/b/a Beth Abraham Center for Rehabilitation and Nursing
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(“Abraham Operations”). The 98% majority member2 of Abraham Operations is Light
Operational. Light Operational, in turn, is owned by Kenneth Rozenberg and Rivka Rozenberg,
whose ownership interests are 95% and 5%, respectively.3 Daryl Hagler purchased Beth
Abraham’s real property through Light Property, a company owned by Daryl Hagler (99%) and
his son Jonathan (1%). See Waldropt Exh.14, pp. 1, 14.
12. On February 19, 2016, Abraham Operations and Light Property entered into
agreements with Beth Abraham’s former owner and landlord to purchase Beth Abraham’s
operations for $30,305,600 and the real property for $25 million. See Waldropt Exh.2 pg. 1.
13. In February 2016, Rozenberg submitted a Certificate of Need (“CON”) application
to obtain approval from DOH to become the new operator of Beth Abraham. In support of the
CON application, Abraham Operations submitted the following proposed financing narrative
whereby it represented to DOH how the $30,305,600 purchase price for the operations would be
funded:
• $6,301,400 would be raised through equity contributions by members of Abraham
Operations;
• $5,100,000 would come from a deposit already paid by Abraham Operations; and
• $18,904,200 would be provided through a bank loan from Greystone Funding
Company LLC ("Greystone”), with Kenneth Rozenberg as the Guarantor, at an
interest rate of approximately 5%.
See Beth Abraham CON Application and Supporting Documents, attached as Waldropt Exh 2.
2
Initially, Jeff Sicklick was a 2% member, but he transferred his membership to Beth Rozenberg in 2018 (see Waldropt
Exh. 27). Thereafter, in or about April 2023, the 2% ownership interest was transferred to Rivka Rozenberg (see
Budimir Aff., Exh. 62).
3
Initially, Beth Rozenberg was the 5% owner of Light Operational. However, in or about April 2023, her 5%
ownership interest was transferred to Rivka Rozenberg (see Budimir Aff., Exh. 62).
4
Due to the voluminous nature of Beth Abraham’s Certificate of Need (CON) and supporting documents, I have
only attached the relevant portions, but MFCU will make the entire document available upon request.
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14. The $25 million purchase of the real property would also be funded through a
Greystone loan at the interest rate of 5%.5 See Waldropt Exh. 3, p. 29.
15. On June 2, 2016, DOH approved Abraham Operations’ CON application for Beth
Abraham (see 6/2/16 PHHPC letter, attached as Waldropt Exh. 4).
16. However, Abraham Operations did not follow the funding narrative it submitted to
DOH. Rather, on March 15, 2017, Light Property took out a loan from TD Bank in the amount
$45,918,976 at LIBOR plus 2.9% interest (the “TD Bank-Light Property Loan”). I reviewed the
loan term agreement between Light Property and TD Bank, which shows that this loan was taken
to finance Light Property’s purchase of the Beth Abraham real estate (land and building). Beth
Abraham is the guarantor on the loan (attached here as Waldropt Exh. 5)
17. In addition to the TD Bank-Light Property Loan, on March 15, 2017, Light
Property also took out an $11,497,744 loan from Rozenberg (the “Rozenberg-Light Property
Loan”). According to Light Property’s yearly financial statements from 2017 to 2020, the
Rozenberg-Light Property Loan did not have any interest or repayment terms and was payable to
an “unrelated party.” However, the note itself (attached here as Waldropt Exh. 6) states that it has
an annual interest rate of 7% and is due in five years. Light Property’s annual financial statements
from 2017 to 2020 do not show any repayments on the Rozenberg-Light Property Loan, and each
year’s financial statement notes that “[t]he Company does not anticipate making any repayments
during” that year.
5
Abraham Operations also notified DOH of its intention to obtain a working capital loan of $4,463,841 from Rockland
Capital Funding LLC (“Rockland Capital”) at an interest rate of 5% over five years. The commitment letter from
Rockland Capital which set forth this financing arrangement was signed by Beverly Schiffer, who was Hagler’s wife
at the time. The familial relationship between Hagler and Rockland Capital was not disclosed as part of the Beth
Abraham CON process. See Waldropt Exh. 2.
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18. Light Property used $26,647,262 of the proceeds from these loans to acquire Beth
Abraham’s real property, including paying closing costs. See Winslow Aff., Exh. 58.
19. Light Property also used the loan proceeds it received to lend $22,850,000 to its
Related-Party tenant, Abraham Operations (the “Light Property-Abraham Operations Note”). I
reviewed the promissory note entered into by Beth Abraham. Rozenberg signed the promissory
note and amendment on behalf of Light Operational, as managing member of Beth Abraham, and
Hagler signed the amendment to the promissory note, as managing member of Light Property. See
Waldropt Exh. 7.
20. This promissory note initially had a 5-year term with a 12% interest rate, which
equated to approximately $229,630 in monthly interest charges. For 2017, Beth Abraham paid
$685,500.03 in principal and $2,181,489.51 in interest on the Light Property-Abraham Operations
Note. The Light Property-Abraham Operations Note was amended and the interest rate dropped
to 4% as of January 1, 2018.
21. I reviewed financial documents related to the purchase of Beth Abraham by
Respondents, which were produced by a CPA who prepared financial statements for Light
Property. These documents indicate that, prior to closing, Beth Abraham and the seller of the
nursing home agreed to closing cost adjustments. As a result, Beth Abraham owed $22.85 million
to the seller at closing. Beth Abraham obtained that $22.85 million from the loan discussed in the
previous paragraphs. See Waldropt Exh. 7.
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22. The chart below shows the transactions on March 15, 2017, the date Abraham
Operations Associates, LLC closed on its purchase of Beth Abraham:
23. Had Rozenberg not loaned $11,497,744 to Hagler through the Rozenberg-Light
Property Loan, Rozenberg could have used those funds directly in Beth Abraham’s acquisition of
Beth Abraham. Had he done so, Beth Abraham would have borrowed less under the Light
Property-Abraham Operations Note, and between 2017 and 2021, Beth Abraham would have had
a lower interest expense by approximately $2,755,566.
24. Had Rozenberg funded his acquisition directly through a commercial lender rather
than through the Light Property-Abraham Operations Note, it would have likely saved Beth
Abraham hundreds of thousands of dollars in interest expenses. From March 2017 through
December 2017, Beth Abraham owed $2,181,489.51 in interest on the Light Property-Abraham
Operations Note. As noted, during that same period, the interest on the TD Bank-Light Property
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Loan was approximately 4%. Had Abraham Operations paid the same interest rates, it would have
saved Beth Abraham around $1,454,326.
25. Light Property used the remainder of the loan proceeds it received to issue a note
to CBO Funding LLC6 (“CBO Funding”) for $7,883,969.7
26. On July 6, 2020, Light Property applied for a HUD-backed loan through Greystone
to refinance the TD Bank-Light Property Loan. An attorney for Greystone informed MFCU that
Beth Abraham’s application to refinance is still pending.
Rozenberg Is Beth Abraham’s Operator
27. I reviewed the Account Opening documents (attached as Waldropt Exh. 8) and
statements for the Beth Abraham Operating Account—the bank account from which the nursing
home’s day-to-day expenses are paid—and the account bears the name Kenneth Rozenberg as
“Authorized Representative/Signor” and “Member” of Beth Abraham.
28. I also reviewed a Consulting Services Agreement entered into on January 1, 2017,
between Beth Abraham and Centers8, whereby the companies agreed that Centers would provide
management services, including accounting, payroll, clinical consulting, marketing, and staffing.
Kenneth Rozenberg signed the Consulting Services Agreement on behalf of both parties.
29. Next, I reviewed the Operating Agreement of Light Operational Holdings LLC
(“Light Operational”), attached as Waldropt Exh. 9, the entity that is the majority owner of Beth
6
As set forth in the Affidavit of Principal Supervising Auditor-Investigator Ann Winslow, (the “Winslow Aff.”), CBO
Funding is a New York limited liability company that is jointly owned by Rozenberg and Hagler (see Winslow Aff.
at ¶ 92).
7
This amount excludes the $17,489.02, which Light Property paid to TD Bank for the Martine Center mortgage
origination fee (see Winslow Aff. ¶ 90, Exhs. 58-59).
8
Beth Abraham’s Consulting Services Agreement is attached to Regional Chief Auditor-Investigator Dejan Budimir’s
affidavit as Budimir Exh. 1a.
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Abraham, dated December 15, 2015, which states that Kenneth Rozenberg is the 95% owner of
Light Operational.
30. Additionally, in Beth Abraham’s 2018 Cost Report (Waldropt Exh. 10, p.3),
Respondents list Kenneth Rozenberg as an operator and 98% owner of Beth Abraham.
31. In Beth Abraham’s 2019, 2020 and 2021 Cost Reports (Waldropt Exhs. 11, 12, and
13, p. 3), Respondents list “Light Operating holding [sic]” (seemingly meaning Light Operational)
as the 98% owner of Beth Abraham.
32. Finally, I reviewed a lease agreement that Light Operational, as managing member
of Beth Abraham. entered into with Beth Abraham’s landlord, Light Property in 2018. This
agreement is attached as Waldropt Exh. 14. Kenneth Rozenberg’s signature appears on this
document, on behalf of Light Operational.
Beth Abraham’s Medicaid Provider Enrollment
33. In 2018 through 2022, Shia Deutsch, an employee of Beth Abraham’s management
company, Centers for Care LLC (“Centers”), signed its Medicaid Electronic Certification
statements, attached as Waldropt Exh. 15.9 Centers is owned by Kenneth Rozenberg and Daryl
Hagler.10
34. DOH’s Medicaid data indicates that Beth Abraham’s unique Medicaid Provider
number was 00310756 and its National Provider Identification number is 1053767848.
9
Deutsch signed on behalf of “Centers Business Office,” which is an assumed name of Centers.
10
My basis for this statement is Daryl Hagler’s June 23, 2022 testimony, appended to MFCU’s petition.
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Beth Abraham’s Cost Report Certifications
35. As the operator of Beth Abraham, Kenneth Rozenberg was required to execute and
submit Cost Report certifications swearing that the statements contained in the Cost Reports are
true and accurate, and his name and signature is reflected on such certifications, dated August 17,
2018; July 28, 2019; September 15, 2020; August 19, 2021; and August 4, 2022. I have examined
these certifications and they are attached as Waldropt Exh.16.
Financial Records Review
36. I have personally reviewed the following financial records produced to MFCU by
Beth Abraham, its Related Parties, financial institutions, and other third parties, including: (a)
Beth Abraham’s general ledger, cash disbursement journal, lease, mortgage, and contracts and
invoices with third parties; (b) Beth Abraham’s accountant’s work papers (c) bank records for
bank accounts held by Beth Abraham and other persons listed below, for the time periods
indicated parenthetically:
• Abraham Operations Assoc. LLC d/b/a Allerton Center for Rehabilitation HUD Operating
Account – TD Bank xxx3900 (1/1/2019—4/30/2022) (“Medicaid/Medicare Account”);
• Abraham Operations Assoc. LLC d/b/a Allerton Center for Rehabilitation Operating
Account – TD Bank xxx3851 (1/1/2019—4/30/2022) (“Beth Abraham Operating
Account”);
• Light Property Holdings Associates LLC – TD Bank xxx3934 (1/1/2017—4/30/2022)
(“Light Property Account”);
• BIS Funding Capital LLC – M&T Bank xxx3701 (10/11/2019—7/31/2021) (“BIS Funding
Account”);
• Daryl Hagler – Popular Bank xxx8287 and Popular Bank xxx6338 (12/19/2016—
7/19/2021) (“Hagler Personal Accounts”);
• Remittance Statements for TD Bank Loan Account ending xxx9001 (3/17/2017-
3/23/2021) (“Light Property Loan Account”).
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37. Based upon my review of the Medicaid/Medicare Account and the Beth Abraham
Operating Account, for services purportedly rendered from January 1, 2019 through April 30,
2022, the New York State Medicaid Program paid Beth Abraham $104,900,767.29.
38. Based on my review of the Beth Abraham Cost Reports for 2018 through 2021,
attached here as Waldropt Exhs. 10-13, p. 23, in that period, Medicaid paid Beth Abraham
$124,125,887. In the same period, Medicare paid Beth Abraham $47,303,344.
Beth Abraham Resident Deaths in 2020
39. I reviewed the information published on DOH’s website from 2020 through
February 4, 2021, which reflects the number of nursing home residents Beth Abraham reported
as “confirmed” or “presumed” COVID-19 deaths. As of February 4, 2021, Beth Abraham had
reported a total of 54 COVID-19 related deaths. This number consists of 9 confirmed COVID-
19 deaths in the nursing home, 16 presumed COVID-19 deaths in the nursing home, and 29
COVID-19 deaths of Beth Abraham residents in hospitals.11
40. Also, I compared the information about census (the number of residents at the home
at any given time) from Beth Abraham’s Cost Reports for 2018 and 2019, to the death certificates
issued in 2018, 2019, and 2020, by the New York City Department of Health and Mental Hygiene
where the place of death was listed as Beth Abraham and/or where the last address of the decedent
was 612 Allerton Avenue, Bronx, New York,12 which I reviewed.
41. For 2018 and 2019, the death certificates show 74 and 64 deaths, respectively, for
an average of 69 deaths per year. In 2020, the death certificates document 144 deaths, which
11
In addition to the DOH death data and the death certificates, I also reviewed death tracking forms completed by
Beth Abraham staff and submitted to MFCU. Beth Abraham reported different numbers of deaths in each of those
sources. For the purposes of this affidavit and its related papers, when discussing COVID-19 deaths, MFCU used the
totals reported to DOH.
12
I have not attached the death certificates because they contain PHI, but MFCU will make them available for an in
camera review upon request.
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amounts to an increase of 75 deaths, or, in other words, a 108.70% increase over the baseline
amount from 2018 and 2019.
42. Based on the average census, listed in the 2018 and 2019 Cost Reports, and these
death certificates, I calculated the average percent of Beth Abraham’s population who died during
these years to be 6.41%.
43. I did the same calculation, based on the average census listed in the 2020 Cost
Report and the death certificates for people who died at Beth Abraham in 2020, and I determined
that the average percent of Beth Abraham’s population who died rose in 2020 to 11.16%.
Analysis of Beth Abraham CMS Ratings
44. The U.S. Centers for Medicaid and Medicare Services (“CMS”) publishes a CMS
Staffing Rating for each nursing home in the nation on the “CMS Care Compare” website. The
Staffing Rating is also a component of the rating CMS publishes as the “Overall Rating” of a
facility, along with two other separate ratings.
45. The CMS Staffing Rating specifically reflects the number of staffing hours in the
nursing department of a nursing home relative to the number of its residents, adjusted for the
health needs of the residents. This ratio is expressed as a star rating.13
46. CMS calculates the CMS Staffing Rating by calculating both the total HPRD (as
defined in ¶53, below) delivered to a nursing home’s residents by all direct care staff, including
RNs, LPNs, and CNAs, as well as the HPRD provided by RNs. In addition, CMS separately
publishes a star rating for the RN staffing level at each nursing home (the “CMS RN Staffing
Rating”).
13
For a more detailed explanation of CMS’s star rating system, see Budimir Aff. at ¶¶ 65-72.
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47. Beth Abraham’s CMS Staffing Rating was 1 Star when Respondents purchased the
facility in March 2017. Since March 2017, Beth Abraham’s Staffing Rating has fluctuated from
“Much Below Average,” or 1 Star, to “Average,” or 3 Stars. From January 2021 through April
2022, Beth Abraham had a 1 Star Staffing Rating. In July 2022, CMS increased the Staffing Rating
to 3 Stars. See https://data.cms.gov.
48. Beth Abraham’s CMS RN Staffing Rating reflects a similar trend. In April 2018,
CMS reduced Beth Abraham’s RN staffing rating from three to two stars. In January 2020,
immediately before the pandemic, CMS reduced Beth Abraham’s RN staffing rating to one star.
During the pandemic, in April 2020, CMS increased the rating to two stars, but then in January
2021, CMS again reduced it to one star. CMS did not issue an RN Staffing Rating in July 2022.
49. When Respondents purchased Beth Abraham, the facility had an Overall Rating of
4 Stars. Although that Overall Rating has fluctuated over the past few years, it has been 2 Stars
since July 2022. See https://data.cms.gov.
50. The chart below displays three CMS star ratings, Overall Rating, Staffing Rating,
and RN Staffing Rating, for Beth Abraham for January 2015 through July 2022:
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Analysis of Beth Abraham Staffing Records from 2018-2021
51. When I reviewed Abraham Operating Associates, LLC’s CON application
(Waldropt Exh. 17 p. 2), I found a letter dated March 17, 2016, that counsel for Abraham
Operations Associates LLC submitted to DOH in connection with its purchase of Beth Abraham.
This letter states that Abraham Operating Associates, LLC planned to increase capital and to
change the Beth Abraham staffing model once they purchased Beth Abraham by reducing: the
number of registered nurses and aides; salaries; and expenses.
52. As part of the staffing analysis I conducted for Beth Abraham, I have personally
examined the Payroll-Based Journal (“PBJ”) staffing records for Beth Abraham, from January
2018 through December 2021, which are maintained by CMS and made publicly available at
https://data.cms.gov/quality-of-care/payroll-based-journal-daily-nurse-staffing.
53. CMS uses Hours Per Resident Day (“HPRD”) as a staffing metric. HPRD is
calculated by dividing a nursing home’s daily staff hours by the number of residents in the facility,
adjusted by the acuity (or medical complexity) of the residents’ medical needs. For example, a
nursing home averaging 300 total nursing staff hours and 100 residents per day would have a 3.0
Total Nurse Staff HPRD (300/100 = 3.0).
54. In 2001, CMS released a report that identified 4.1 HPRD for long-term residents as
the staffing threshold below which quality of care was compromised (“CMS 4.1 HPRD
Threshold”). CMS noted that the closer a nursing home gets to 4.1 HPRD (2.8 HPRD for CNAs
and 1.3 HPRD for licensed nursing staff, specifically including .75 HPRD from RNs), the greater
the improvements in quality care (see discussion of this study in Budimir Aff. ¶ 54).
55. New York State recently enacted a law requiring minimum staffing at a nursing
home of 3.5 HPRD of direct care staffing (“NYS Staffing Minimum”), with additional
requirements that, of the total HPRD, 1.1 HPRD comes from nurses (“NYS LPN/RN Staffing
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Minimum”), and 2.2 HPRD comes from Certified Nursing Assistants (“NYS CNA Staffing
Minimum”). See New York Public Health law 2895-B.
56. Beth Abraham’s PBJ data14 showing its monthly average HPRD is plotted in the
chart below, against the CMS 4.1 HPRD Threshold, as well as the NYS Staffing Minimum:
57. During the height of the pandemic—the second quarter of 2020—Beth Abraham’s
HPRD was at a low of 3.3. However, the HPRD did increase over the course of the year. As 2021
began, direct care nursing HPRD stayed within a 3.3-3.5 level. Direct care nursing HPRD then
declined again in mid-2021.
58. The table that follows displays the quarterly average HPRD by type of staff.
According to my analysis of the PBJ Data, in 2018 through 2020, Beth Abraham maintained the
NYS CNA Staffing Minimum of 2.2 HPRD. In 2021, the facility went under the NYS CNA
Staffing Minimum.
14
Beth Abraham’s PBJ data excludes the first quarter of 2020 because CMS did not require nursing homes to submit
the data during the height of the COVID-19 pandemic.
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Beth Abraham Paid Money to Related Parties Owned or Controlled by Kenneth Rozenberg
and Daryl Hagler
59. I reviewed the bank records associated with the Beth Abraham Operating Account,
the Medicaid/Medicare Account, and the Light Property Loan Account. I focused my analysis on
Medicaid funds paid to Beth Abraham, and subsequent payments that Beth Abraham made during
that period to Related Parties, for the period January 1, 2019, through April 30, 2022. These
Related Parties are entities that are owned, in part or whole, by Kenneth Rozenberg and/or his
associate, Daryl Hagler.
60. Based on my review of the Medicaid/Medicare Account and the Beth Abraham
Operating Account, the documents revealed that, between January 1, 2019, and April 30, 2022,
Medicaid paid Beth Abraham a total of $104,900,767.29 in reimbursement for claims submitted
by Beth Abraham under provider number 00310756; and Medicare paid Beth Abraham over
$32,190,685.87 in reimbursement for claims submitted. Over 99% of these Medicaid funds,
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$104,608,119.29, were deposited into the Medicaid/Medicare Account. The Medicaid/Medicare
Account is held in the name Abraham Operations Associates LLC d/b/a Allerton Center for Rehab
HUD Operating account, with signer Kenneth Rozenberg, and with an account address of 4770
White Plains Road, Bronx, NY 10470 (see Account Opening Documents, attached as Waldropt
Exh. 18).
61. The records from the Medicaid/Medicare Account also show that the
$104,608,119.29 from the Medicaid program, and the $32,190,685.87 from the Medicare program,
were subsequently transferred to the Beth Abraham Operating Account. Each time Medicaid or
Medicare funds were deposited into the Medicaid/Medicare account, Beth Abraham moved those
funds over to the Beth Abraham Operating Account almost immediately.
62. I reviewed the Beth Abraham Operating Account.15 A review of the records
revealed that, in addition to the Medicaid and Medicare funds mentioned above, Beth Abraham
also received over $80,767,346 from other sources of revenue, including other Medicaid and
Medicare Managed Care Plans, for a total of $217,566,151 credited to the account from January
1, 2019, through April 30, 2022.
Payments from Beth Abraham to Kenneth Rozenberg’s Entities
63. In the same time frame of January 1, 2019 and April 30, 2022, Beth Abraham
transferred $26,380,910 out of its Operating Account to Related Parties, including Centers, other
Centers-owned nursing homes, and Centers Labs—all of which are affiliated with Kenneth
Rozenberg (see Budimir Aff. ¶¶ 20-27).
15
As these documents are voluminous and contain personal identifying information, I have not attached them to this
Affidavit.
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64. Beth Abraham’s payments to Kenneth Rozenberg’s entities that are Related Parties,
described above, are reflected in the below table:
See Budimir Aff. ¶ 29.
65. Of Beth Abraham’s payments to Skilled Staffing, Skilled Staffing issued 10
invoices for “management fees” to Beth Abraham between January 2020 and October 2021
totaling $247,725. See Waldropt Exh. 19.
Payments from Beth Abraham to Hagler’s Entities
66. In addition to the above transfers, Beth Abraham transferred $27,971,656 to entities
owned and/or controlled by Daryl Hagler, who is the 50% owner and Chief Financial Officer of
Centers, as reflected on the below table:
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See Budimir ¶ 29.
67. According to my review of Beth Abraham’s 2019 Cost Report, the Light Property
Account, and the lease agreement between Beth Abraham and Light Property, Daryl Hagler is the
owner of Light Property, which owns the land and building that houses Beth Abraham.
68. On December 31, 2015, Rozenberg and Hagler executed two leases between
Abraham Operations and Light Property. One lease had a $6 million annual minimum rent. Beth
Abraham submitted this lease to DOH as part of its CON application (see Waldropt Exh. 20). The
second lease, also executed on December 31, 2015, had a $1.3 million annual minimum rent, and
is attached as Waldropt Exh. 21.
69. On January 1, 2018, Rozenberg and Hagler caused Beth Abraham to enter into an
amended lease with Light Property, with a $2.6 million annual minimum rent. The amended lease
is attached as Waldropt Exh. 14.
70. According to Beth Abraham’s 2021 Cost Report, its annual rent is $6 million – the
amount on the original lease. However, there is no mention of a lease amendment for that amount
in the 2021 Cost Report (whereas the amended lease was disclosed in the 2018 Cost Report).
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71. From 2017 to 2021, according to Abraham Operation’s financial statements
(Waldropt Exh. 2216), Beth Abraham’s total rent obligation to its landlord, Light Property, was
$23,164,229.67, of which it paid $17,216,056.64, leaving $5,948,173.03 in unpaid back rent.
Thus, Abraham Operations back rent is approximately 26% of its total rent obligation.
72. During this same period, Abraham Operations paid Light Property $9,817,765.02
to service the unnecessary, inflated Light Property-Abraham Operations Note. Had these funds
instead been used to pay rent, Beth Abraham would not owe any back rent.
73. Based on my review of the Beth Abraham Operating Account, the Light Property
Account, and the loan documents related to the Light Property Loan Account, from January 1,
2019, through April 30, 2022, Beth Abraham paid Light Property $21,450,849, of which
$11,164,419 was used to pay down the Light Property Loan Account, mentioned above. Most of
the remaining funds were transferred from the Light Property Account into the Hagler Personal
Accounts. Those accounts show that Daryl Hagler received three lump sum payments in 2020,
2021 and 2022 of $1,000,000, $2,500,000, and $6,460,000, respectively, from Light Property.
These payments are reflected in the chart below:
16
Rent obligation calculation is summarized from the 2007-2020 Trial Balances obtained from Facility’s accounting
firm and notes to 2021 Cost Report
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74. Although Beth Abraham transferred the sums described in the prior paragraph very
early in January during the years 2020, 2021, and 2022, I reviewed invoices for the 2020 and 2021
transfers that indicated that these payments had actually been billed the prior year. Specifically,
the invoice for the $1,000,000 transfer is dated December 31, 2019; the invoice for the $2,500,000
transfer is dated December 31, 2020. See Waldropt Exh. 23. MFCU does not have an invoice for
the 2022 transfer. Because the 2020 and 2021 payments had been billed during December of the
prior years, in my analysis, I have attributed each of these three large lump sum payments
(including 2022, for which MFCU does not have the invoice) to the prior year’s rent obligation.
In total, from 2017 through April of 2022, Abraham Operations transferred $27,860,073 to Light
Property. Light Property then transferred $17,827,676 to TD Bank to pay down the TD Bank-
Light Property Loan. Thus, the $9,960,000 that Hagler transferred from Light Property to his
personal bank account represents about 36% of every dollar Beth Abraham paid to Light Property.
75. Based on my review of the Beth Abraham Operating Account, I created the
following cash flow chart that shows the sources of funds coming into Beth Abraham, as well as
the recipients of transfers out of Beth Abraham, from January 1, 2019, through April 30, 2022. As
the chart depicts (in yellow), Hagler obtained even more money from Beth Abraham than was
Preview
FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------------------------------------X PEOPLE OF THE STATE OF NEW YORK by LETITIA JAMES, Attorney General of the State of New York, Petitioner, AFFIDAVIT OF AUDITOR- INVESTIGATOR -against- ABRAHAM OPERATIONS ASSOCIATES LLC d/b/a BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING, DELAWARE OPERATIONS ASSOCIATES LLC d/b/a BUFFALO CENTER FOR REHABILITATION AND NURSING, HOLLIS OPERATING CO., LLC d/b/a HOLLISWOOD CENTER FOR REHABILITATION AND HEALTHCARE, SCHNUR OPERATIONS ASSOCIATES LLC d/b/a MARTINE CENTER FOR REHABILITATION AND NURSING, LIGHT PROPERTY HOLDINGS ASSOCIATES LLC, DELAWARE REAL PROPERTY ASSOCIATES LLC, HOLLIS REAL ESTATE CO., LLC, LIGHT OPERATIONAL HOLDINGS ASSOCIATES LLC, LIGHT PROPERTY HOLDINGS II ASSOCIATES LLC, CENTERS FOR CARE LLC d/b/a CENTERS HEALTH CARE, CFSC DOWNSTATE, LLC, BIS FUNDING CAPITAL LLC, SKILLED STAFFING, LLC, KENNETH ROZENBERG, BETH ROZENBERG, JEFFREY SICKLICK, LEO LERNER, AMIR ABRAMCHIK, DAVID GREENBERG, ELLIOT KAHAN, SOL BLUMENFELD, ARON GITTLESON, AHARON LANTZITSKY, JONATHAN HAGLER, MORDECHAI “MOTI” HELLMAN, and DARYL HAGLER Respondents. --------------------------------------------------------------------X State of New York ) ) ss.: County of New York ) -1- 1 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 KIZZY-ANN WALDROPT, being duly sworn, deposes and says: 1. I am a Principal Auditor-Investigator employed by the Office of the New York State Attorney General, Medicaid Fraud Control Unit (“MFCU”), in the New York City Regional Office. I have been an Auditor-Investigator with MFCU for over 17 years and have participated in over 50 investigations into the activities of Medicaid providers. 2. The Attorney General, through MFCU, is conducting an investigation of Centers for Care LLC d/b/a Centers Health Care (“Centers”) and certain skilled nursing facilities affiliated with Centers, including Beth Abraham Center for Rehabilitation and Nursing (“Beth Abraham”), located at 612 Allerton Avenue, Bronx, New York.1 Beth Abraham is registered with New York State Department of Health (“DOH”) as a Medicaid provider, and is also a Medicare provider. MFCU’s investigation also encompasses certain individuals and entities that are related to Centers and Beth Abraham, including Light Operational Holdings Associates LLC (“Light Operational”) and Light Property Holdings Associates LLC (“Light Property”). 3. Since May 4, 2020, I have been assigned to work on the financial and staffing analyses pertaining to Beth Abraham for this investigation. I have personally examined the records of Medicaid and Medicare payments made to Beth Abraham, as well as the Medicaid enrollment data submitted by Beth Abraham to DOH when it enrolled in New York State’s Medicaid program. 4. This affidavit and the facts stated herein are based upon my personal knowledge and upon information and belief. The sources of this information and bases for this belief are specified herein. 1 The other skilled nursing facilities being investigated are Delaware Operations Associates LLC d/b/a Buffalo Center for Rehabilitation and Nursing (“Buffalo Center”), Holliswood Operating Co. LLC d/b/a Holliswood Center for Rehabilitation and Healthcare (“Holliswood” or “Holliswood Operating Co.”) and Schnur Operations Associates LLC d/b/a Martine Center for Rehabilitation and Nursing (“Martine Center”). These facilities, along with Beth Abraham, shall, at times hereinafter, be referred to collectively as the “Nursing Homes.” -2- 2 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Cost Reports and Certifications Regarding Related Party Transactions 5. Nursing home providers are required to file annual “Cost Reports” to report income, expenses, assets, liabilities, and statistics to DOH pursuant to 10 NYCRR Part 86-2. The data is used by DOH, in part, to develop Medicaid rates. Nursing home operators must certify that the Cost Report is “true and complete,” and they must execute the following certifications as part of the completion of the Cost Report: Certification Statement Misrepresentation or falsification of any information contained on this form may be punishable by fine and/or imprisonment under New York State Law and Federal Law. Certification of Operator I also certify that all salary and non-salary expenses presented in the RHCF-4 [cost report] with the exception of those expenses attributable to Research Physicians’ Offices and other Rentals, Gift Shop, Public Restaurant, Fund Raising and Sold Services considering the adjustments contained in the Part II and the recoveries of expenses detailed in Exhibit I of the Part IV were incurred to provide patient care in the facility. (Emphasis added.) 6. The Cost Report and the instructions thereto also require, at several points, the disclosure of “related companies”—companies with which the Operator has “Non-Arm’s Length Arrangements,” as defined by Schedule 16: An arrangement between the operator of a facility and an organization related to the common ownership and or control for the furnishing of services, facilities, or supplies; An arrangement where there is a family relationship between the operator and the organization, and where services, facilities, or supplies are furnished and in instances where the operator and the organization are involved in any other business. In this affidavit, I refer to a company that meets the above definition as a “Related Party,” and multiple such companies as “Related Parties.” -3- 3 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 7. Schedule 16 and the instructions thereto further require that every nursing home identify and list each Related Party. Additionally, every nursing home is required to submit Part III of the Cost Report and an audited financial statement for each Related Party identified. Conditions of Participation in the Medicaid Program 8. Beth Abraham is a registered “Provider” with DOH, subject to program regulations and a Medicaid Provider Agreement that explicitly makes the New York State Medicaid Regulations the foundation of the relationship between the State and the provider. Electronic Billing Certification 9. To receive reimbursement from Medicaid in New York State, all providers who participate in electronic billing must sign a Certification Statement for Provider Utilizing Electronic Billing (the “Medicaid Electronic Certification”). 10. The Medicaid Electronic Certification reads, in pertinent part: I (or the entity) have furnished or caused to be furnished the care, services and supplies itemized and done so in accordance with applicable federal and state laws and regulations. . . In submitting claims under this agreement I understand and agree that I (or the entity) shall be subject to and bound by all rules, regulations, policies, standards, fee codes and procedures of the New York State Department of Health as set for in title 18 of the Official Compilation of Codes, Rules and Regulations of New York State and other publications of the Department, including Medicaid Management Information Systems Provider Manuals and other official bulletins of the Department. . . (Emphasis added). Beth Abraham’s Ownership 11. Kenneth Rozenberg purchased Beth Abraham’s operations through Abraham Operations Associates LLC, d/b/a Beth Abraham Center for Rehabilitation and Nursing -4- 4 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 (“Abraham Operations”). The 98% majority member2 of Abraham Operations is Light Operational. Light Operational, in turn, is owned by Kenneth Rozenberg and Rivka Rozenberg, whose ownership interests are 95% and 5%, respectively.3 Daryl Hagler purchased Beth Abraham’s real property through Light Property, a company owned by Daryl Hagler (99%) and his son Jonathan (1%). See Waldropt Exh.14, pp. 1, 14. 12. On February 19, 2016, Abraham Operations and Light Property entered into agreements with Beth Abraham’s former owner and landlord to purchase Beth Abraham’s operations for $30,305,600 and the real property for $25 million. See Waldropt Exh.2 pg. 1. 13. In February 2016, Rozenberg submitted a Certificate of Need (“CON”) application to obtain approval from DOH to become the new operator of Beth Abraham. In support of the CON application, Abraham Operations submitted the following proposed financing narrative whereby it represented to DOH how the $30,305,600 purchase price for the operations would be funded: • $6,301,400 would be raised through equity contributions by members of Abraham Operations; • $5,100,000 would come from a deposit already paid by Abraham Operations; and • $18,904,200 would be provided through a bank loan from Greystone Funding Company LLC ("Greystone”), with Kenneth Rozenberg as the Guarantor, at an interest rate of approximately 5%. See Beth Abraham CON Application and Supporting Documents, attached as Waldropt Exh 2. 2 Initially, Jeff Sicklick was a 2% member, but he transferred his membership to Beth Rozenberg in 2018 (see Waldropt Exh. 27). Thereafter, in or about April 2023, the 2% ownership interest was transferred to Rivka Rozenberg (see Budimir Aff., Exh. 62). 3 Initially, Beth Rozenberg was the 5% owner of Light Operational. However, in or about April 2023, her 5% ownership interest was transferred to Rivka Rozenberg (see Budimir Aff., Exh. 62). 4 Due to the voluminous nature of Beth Abraham’s Certificate of Need (CON) and supporting documents, I have only attached the relevant portions, but MFCU will make the entire document available upon request. -5- 5 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 14. The $25 million purchase of the real property would also be funded through a Greystone loan at the interest rate of 5%.5 See Waldropt Exh. 3, p. 29. 15. On June 2, 2016, DOH approved Abraham Operations’ CON application for Beth Abraham (see 6/2/16 PHHPC letter, attached as Waldropt Exh. 4). 16. However, Abraham Operations did not follow the funding narrative it submitted to DOH. Rather, on March 15, 2017, Light Property took out a loan from TD Bank in the amount $45,918,976 at LIBOR plus 2.9% interest (the “TD Bank-Light Property Loan”). I reviewed the loan term agreement between Light Property and TD Bank, which shows that this loan was taken to finance Light Property’s purchase of the Beth Abraham real estate (land and building). Beth Abraham is the guarantor on the loan (attached here as Waldropt Exh. 5) 17. In addition to the TD Bank-Light Property Loan, on March 15, 2017, Light Property also took out an $11,497,744 loan from Rozenberg (the “Rozenberg-Light Property Loan”). According to Light Property’s yearly financial statements from 2017 to 2020, the Rozenberg-Light Property Loan did not have any interest or repayment terms and was payable to an “unrelated party.” However, the note itself (attached here as Waldropt Exh. 6) states that it has an annual interest rate of 7% and is due in five years. Light Property’s annual financial statements from 2017 to 2020 do not show any repayments on the Rozenberg-Light Property Loan, and each year’s financial statement notes that “[t]he Company does not anticipate making any repayments during” that year. 5 Abraham Operations also notified DOH of its intention to obtain a working capital loan of $4,463,841 from Rockland Capital Funding LLC (“Rockland Capital”) at an interest rate of 5% over five years. The commitment letter from Rockland Capital which set forth this financing arrangement was signed by Beverly Schiffer, who was Hagler’s wife at the time. The familial relationship between Hagler and Rockland Capital was not disclosed as part of the Beth Abraham CON process. See Waldropt Exh. 2. -6- 6 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 18. Light Property used $26,647,262 of the proceeds from these loans to acquire Beth Abraham’s real property, including paying closing costs. See Winslow Aff., Exh. 58. 19. Light Property also used the loan proceeds it received to lend $22,850,000 to its Related-Party tenant, Abraham Operations (the “Light Property-Abraham Operations Note”). I reviewed the promissory note entered into by Beth Abraham. Rozenberg signed the promissory note and amendment on behalf of Light Operational, as managing member of Beth Abraham, and Hagler signed the amendment to the promissory note, as managing member of Light Property. See Waldropt Exh. 7. 20. This promissory note initially had a 5-year term with a 12% interest rate, which equated to approximately $229,630 in monthly interest charges. For 2017, Beth Abraham paid $685,500.03 in principal and $2,181,489.51 in interest on the Light Property-Abraham Operations Note. The Light Property-Abraham Operations Note was amended and the interest rate dropped to 4% as of January 1, 2018. 21. I reviewed financial documents related to the purchase of Beth Abraham by Respondents, which were produced by a CPA who prepared financial statements for Light Property. These documents indicate that, prior to closing, Beth Abraham and the seller of the nursing home agreed to closing cost adjustments. As a result, Beth Abraham owed $22.85 million to the seller at closing. Beth Abraham obtained that $22.85 million from the loan discussed in the previous paragraphs. See Waldropt Exh. 7. -7- 7 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 22. The chart below shows the transactions on March 15, 2017, the date Abraham Operations Associates, LLC closed on its purchase of Beth Abraham: 23. Had Rozenberg not loaned $11,497,744 to Hagler through the Rozenberg-Light Property Loan, Rozenberg could have used those funds directly in Beth Abraham’s acquisition of Beth Abraham. Had he done so, Beth Abraham would have borrowed less under the Light Property-Abraham Operations Note, and between 2017 and 2021, Beth Abraham would have had a lower interest expense by approximately $2,755,566. 24. Had Rozenberg funded his acquisition directly through a commercial lender rather than through the Light Property-Abraham Operations Note, it would have likely saved Beth Abraham hundreds of thousands of dollars in interest expenses. From March 2017 through December 2017, Beth Abraham owed $2,181,489.51 in interest on the Light Property-Abraham Operations Note. As noted, during that same period, the interest on the TD Bank-Light Property -8- 8 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Loan was approximately 4%. Had Abraham Operations paid the same interest rates, it would have saved Beth Abraham around $1,454,326. 25. Light Property used the remainder of the loan proceeds it received to issue a note to CBO Funding LLC6 (“CBO Funding”) for $7,883,969.7 26. On July 6, 2020, Light Property applied for a HUD-backed loan through Greystone to refinance the TD Bank-Light Property Loan. An attorney for Greystone informed MFCU that Beth Abraham’s application to refinance is still pending. Rozenberg Is Beth Abraham’s Operator 27. I reviewed the Account Opening documents (attached as Waldropt Exh. 8) and statements for the Beth Abraham Operating Account—the bank account from which the nursing home’s day-to-day expenses are paid—and the account bears the name Kenneth Rozenberg as “Authorized Representative/Signor” and “Member” of Beth Abraham. 28. I also reviewed a Consulting Services Agreement entered into on January 1, 2017, between Beth Abraham and Centers8, whereby the companies agreed that Centers would provide management services, including accounting, payroll, clinical consulting, marketing, and staffing. Kenneth Rozenberg signed the Consulting Services Agreement on behalf of both parties. 29. Next, I reviewed the Operating Agreement of Light Operational Holdings LLC (“Light Operational”), attached as Waldropt Exh. 9, the entity that is the majority owner of Beth 6 As set forth in the Affidavit of Principal Supervising Auditor-Investigator Ann Winslow, (the “Winslow Aff.”), CBO Funding is a New York limited liability company that is jointly owned by Rozenberg and Hagler (see Winslow Aff. at ¶ 92). 7 This amount excludes the $17,489.02, which Light Property paid to TD Bank for the Martine Center mortgage origination fee (see Winslow Aff. ¶ 90, Exhs. 58-59). 8 Beth Abraham’s Consulting Services Agreement is attached to Regional Chief Auditor-Investigator Dejan Budimir’s affidavit as Budimir Exh. 1a. -9- 9 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Abraham, dated December 15, 2015, which states that Kenneth Rozenberg is the 95% owner of Light Operational. 30. Additionally, in Beth Abraham’s 2018 Cost Report (Waldropt Exh. 10, p.3), Respondents list Kenneth Rozenberg as an operator and 98% owner of Beth Abraham. 31. In Beth Abraham’s 2019, 2020 and 2021 Cost Reports (Waldropt Exhs. 11, 12, and 13, p. 3), Respondents list “Light Operating holding [sic]” (seemingly meaning Light Operational) as the 98% owner of Beth Abraham. 32. Finally, I reviewed a lease agreement that Light Operational, as managing member of Beth Abraham. entered into with Beth Abraham’s landlord, Light Property in 2018. This agreement is attached as Waldropt Exh. 14. Kenneth Rozenberg’s signature appears on this document, on behalf of Light Operational. Beth Abraham’s Medicaid Provider Enrollment 33. In 2018 through 2022, Shia Deutsch, an employee of Beth Abraham’s management company, Centers for Care LLC (“Centers”), signed its Medicaid Electronic Certification statements, attached as Waldropt Exh. 15.9 Centers is owned by Kenneth Rozenberg and Daryl Hagler.10 34. DOH’s Medicaid data indicates that Beth Abraham’s unique Medicaid Provider number was 00310756 and its National Provider Identification number is 1053767848. 9 Deutsch signed on behalf of “Centers Business Office,” which is an assumed name of Centers. 10 My basis for this statement is Daryl Hagler’s June 23, 2022 testimony, appended to MFCU’s petition. - 10 - 10 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Beth Abraham’s Cost Report Certifications 35. As the operator of Beth Abraham, Kenneth Rozenberg was required to execute and submit Cost Report certifications swearing that the statements contained in the Cost Reports are true and accurate, and his name and signature is reflected on such certifications, dated August 17, 2018; July 28, 2019; September 15, 2020; August 19, 2021; and August 4, 2022. I have examined these certifications and they are attached as Waldropt Exh.16. Financial Records Review 36. I have personally reviewed the following financial records produced to MFCU by Beth Abraham, its Related Parties, financial institutions, and other third parties, including: (a) Beth Abraham’s general ledger, cash disbursement journal, lease, mortgage, and contracts and invoices with third parties; (b) Beth Abraham’s accountant’s work papers (c) bank records for bank accounts held by Beth Abraham and other persons listed below, for the time periods indicated parenthetically: • Abraham Operations Assoc. LLC d/b/a Allerton Center for Rehabilitation HUD Operating Account – TD Bank xxx3900 (1/1/2019—4/30/2022) (“Medicaid/Medicare Account”); • Abraham Operations Assoc. LLC d/b/a Allerton Center for Rehabilitation Operating Account – TD Bank xxx3851 (1/1/2019—4/30/2022) (“Beth Abraham Operating Account”); • Light Property Holdings Associates LLC – TD Bank xxx3934 (1/1/2017—4/30/2022) (“Light Property Account”); • BIS Funding Capital LLC – M&T Bank xxx3701 (10/11/2019—7/31/2021) (“BIS Funding Account”); • Daryl Hagler – Popular Bank xxx8287 and Popular Bank xxx6338 (12/19/2016— 7/19/2021) (“Hagler Personal Accounts”); • Remittance Statements for TD Bank Loan Account ending xxx9001 (3/17/2017- 3/23/2021) (“Light Property Loan Account”). - 11 - 11 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 37. Based upon my review of the Medicaid/Medicare Account and the Beth Abraham Operating Account, for services purportedly rendered from January 1, 2019 through April 30, 2022, the New York State Medicaid Program paid Beth Abraham $104,900,767.29. 38. Based on my review of the Beth Abraham Cost Reports for 2018 through 2021, attached here as Waldropt Exhs. 10-13, p. 23, in that period, Medicaid paid Beth Abraham $124,125,887. In the same period, Medicare paid Beth Abraham $47,303,344. Beth Abraham Resident Deaths in 2020 39. I reviewed the information published on DOH’s website from 2020 through February 4, 2021, which reflects the number of nursing home residents Beth Abraham reported as “confirmed” or “presumed” COVID-19 deaths. As of February 4, 2021, Beth Abraham had reported a total of 54 COVID-19 related deaths. This number consists of 9 confirmed COVID- 19 deaths in the nursing home, 16 presumed COVID-19 deaths in the nursing home, and 29 COVID-19 deaths of Beth Abraham residents in hospitals.11 40. Also, I compared the information about census (the number of residents at the home at any given time) from Beth Abraham’s Cost Reports for 2018 and 2019, to the death certificates issued in 2018, 2019, and 2020, by the New York City Department of Health and Mental Hygiene where the place of death was listed as Beth Abraham and/or where the last address of the decedent was 612 Allerton Avenue, Bronx, New York,12 which I reviewed. 41. For 2018 and 2019, the death certificates show 74 and 64 deaths, respectively, for an average of 69 deaths per year. In 2020, the death certificates document 144 deaths, which 11 In addition to the DOH death data and the death certificates, I also reviewed death tracking forms completed by Beth Abraham staff and submitted to MFCU. Beth Abraham reported different numbers of deaths in each of those sources. For the purposes of this affidavit and its related papers, when discussing COVID-19 deaths, MFCU used the totals reported to DOH. 12 I have not attached the death certificates because they contain PHI, but MFCU will make them available for an in camera review upon request. - 12 - 12 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 amounts to an increase of 75 deaths, or, in other words, a 108.70% increase over the baseline amount from 2018 and 2019. 42. Based on the average census, listed in the 2018 and 2019 Cost Reports, and these death certificates, I calculated the average percent of Beth Abraham’s population who died during these years to be 6.41%. 43. I did the same calculation, based on the average census listed in the 2020 Cost Report and the death certificates for people who died at Beth Abraham in 2020, and I determined that the average percent of Beth Abraham’s population who died rose in 2020 to 11.16%. Analysis of Beth Abraham CMS Ratings 44. The U.S. Centers for Medicaid and Medicare Services (“CMS”) publishes a CMS Staffing Rating for each nursing home in the nation on the “CMS Care Compare” website. The Staffing Rating is also a component of the rating CMS publishes as the “Overall Rating” of a facility, along with two other separate ratings. 45. The CMS Staffing Rating specifically reflects the number of staffing hours in the nursing department of a nursing home relative to the number of its residents, adjusted for the health needs of the residents. This ratio is expressed as a star rating.13 46. CMS calculates the CMS Staffing Rating by calculating both the total HPRD (as defined in ¶53, below) delivered to a nursing home’s residents by all direct care staff, including RNs, LPNs, and CNAs, as well as the HPRD provided by RNs. In addition, CMS separately publishes a star rating for the RN staffing level at each nursing home (the “CMS RN Staffing Rating”). 13 For a more detailed explanation of CMS’s star rating system, see Budimir Aff. at ¶¶ 65-72. - 13 - 13 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 47. Beth Abraham’s CMS Staffing Rating was 1 Star when Respondents purchased the facility in March 2017. Since March 2017, Beth Abraham’s Staffing Rating has fluctuated from “Much Below Average,” or 1 Star, to “Average,” or 3 Stars. From January 2021 through April 2022, Beth Abraham had a 1 Star Staffing Rating. In July 2022, CMS increased the Staffing Rating to 3 Stars. See https://data.cms.gov. 48. Beth Abraham’s CMS RN Staffing Rating reflects a similar trend. In April 2018, CMS reduced Beth Abraham’s RN staffing rating from three to two stars. In January 2020, immediately before the pandemic, CMS reduced Beth Abraham’s RN staffing rating to one star. During the pandemic, in April 2020, CMS increased the rating to two stars, but then in January 2021, CMS again reduced it to one star. CMS did not issue an RN Staffing Rating in July 2022. 49. When Respondents purchased Beth Abraham, the facility had an Overall Rating of 4 Stars. Although that Overall Rating has fluctuated over the past few years, it has been 2 Stars since July 2022. See https://data.cms.gov. 50. The chart below displays three CMS star ratings, Overall Rating, Staffing Rating, and RN Staffing Rating, for Beth Abraham for January 2015 through July 2022: - 14 - 14 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Analysis of Beth Abraham Staffing Records from 2018-2021 51. When I reviewed Abraham Operating Associates, LLC’s CON application (Waldropt Exh. 17 p. 2), I found a letter dated March 17, 2016, that counsel for Abraham Operations Associates LLC submitted to DOH in connection with its purchase of Beth Abraham. This letter states that Abraham Operating Associates, LLC planned to increase capital and to change the Beth Abraham staffing model once they purchased Beth Abraham by reducing: the number of registered nurses and aides; salaries; and expenses. 52. As part of the staffing analysis I conducted for Beth Abraham, I have personally examined the Payroll-Based Journal (“PBJ”) staffing records for Beth Abraham, from January 2018 through December 2021, which are maintained by CMS and made publicly available at https://data.cms.gov/quality-of-care/payroll-based-journal-daily-nurse-staffing. 53. CMS uses Hours Per Resident Day (“HPRD”) as a staffing metric. HPRD is calculated by dividing a nursing home’s daily staff hours by the number of residents in the facility, adjusted by the acuity (or medical complexity) of the residents’ medical needs. For example, a nursing home averaging 300 total nursing staff hours and 100 residents per day would have a 3.0 Total Nurse Staff HPRD (300/100 = 3.0). 54. In 2001, CMS released a report that identified 4.1 HPRD for long-term residents as the staffing threshold below which quality of care was compromised (“CMS 4.1 HPRD Threshold”). CMS noted that the closer a nursing home gets to 4.1 HPRD (2.8 HPRD for CNAs and 1.3 HPRD for licensed nursing staff, specifically including .75 HPRD from RNs), the greater the improvements in quality care (see discussion of this study in Budimir Aff. ¶ 54). 55. New York State recently enacted a law requiring minimum staffing at a nursing home of 3.5 HPRD of direct care staffing (“NYS Staffing Minimum”), with additional requirements that, of the total HPRD, 1.1 HPRD comes from nurses (“NYS LPN/RN Staffing - 15 - 15 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Minimum”), and 2.2 HPRD comes from Certified Nursing Assistants (“NYS CNA Staffing Minimum”). See New York Public Health law 2895-B. 56. Beth Abraham’s PBJ data14 showing its monthly average HPRD is plotted in the chart below, against the CMS 4.1 HPRD Threshold, as well as the NYS Staffing Minimum: 57. During the height of the pandemic—the second quarter of 2020—Beth Abraham’s HPRD was at a low of 3.3. However, the HPRD did increase over the course of the year. As 2021 began, direct care nursing HPRD stayed within a 3.3-3.5 level. Direct care nursing HPRD then declined again in mid-2021. 58. The table that follows displays the quarterly average HPRD by type of staff. According to my analysis of the PBJ Data, in 2018 through 2020, Beth Abraham maintained the NYS CNA Staffing Minimum of 2.2 HPRD. In 2021, the facility went under the NYS CNA Staffing Minimum. 14 Beth Abraham’s PBJ data excludes the first quarter of 2020 because CMS did not require nursing homes to submit the data during the height of the COVID-19 pandemic. - 16 - 16 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 Beth Abraham Paid Money to Related Parties Owned or Controlled by Kenneth Rozenberg and Daryl Hagler 59. I reviewed the bank records associated with the Beth Abraham Operating Account, the Medicaid/Medicare Account, and the Light Property Loan Account. I focused my analysis on Medicaid funds paid to Beth Abraham, and subsequent payments that Beth Abraham made during that period to Related Parties, for the period January 1, 2019, through April 30, 2022. These Related Parties are entities that are owned, in part or whole, by Kenneth Rozenberg and/or his associate, Daryl Hagler. 60. Based on my review of the Medicaid/Medicare Account and the Beth Abraham Operating Account, the documents revealed that, between January 1, 2019, and April 30, 2022, Medicaid paid Beth Abraham a total of $104,900,767.29 in reimbursement for claims submitted by Beth Abraham under provider number 00310756; and Medicare paid Beth Abraham over $32,190,685.87 in reimbursement for claims submitted. Over 99% of these Medicaid funds, - 17 - 17 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 $104,608,119.29, were deposited into the Medicaid/Medicare Account. The Medicaid/Medicare Account is held in the name Abraham Operations Associates LLC d/b/a Allerton Center for Rehab HUD Operating account, with signer Kenneth Rozenberg, and with an account address of 4770 White Plains Road, Bronx, NY 10470 (see Account Opening Documents, attached as Waldropt Exh. 18). 61. The records from the Medicaid/Medicare Account also show that the $104,608,119.29 from the Medicaid program, and the $32,190,685.87 from the Medicare program, were subsequently transferred to the Beth Abraham Operating Account. Each time Medicaid or Medicare funds were deposited into the Medicaid/Medicare account, Beth Abraham moved those funds over to the Beth Abraham Operating Account almost immediately. 62. I reviewed the Beth Abraham Operating Account.15 A review of the records revealed that, in addition to the Medicaid and Medicare funds mentioned above, Beth Abraham also received over $80,767,346 from other sources of revenue, including other Medicaid and Medicare Managed Care Plans, for a total of $217,566,151 credited to the account from January 1, 2019, through April 30, 2022. Payments from Beth Abraham to Kenneth Rozenberg’s Entities 63. In the same time frame of January 1, 2019 and April 30, 2022, Beth Abraham transferred $26,380,910 out of its Operating Account to Related Parties, including Centers, other Centers-owned nursing homes, and Centers Labs—all of which are affiliated with Kenneth Rozenberg (see Budimir Aff. ¶¶ 20-27). 15 As these documents are voluminous and contain personal identifying information, I have not attached them to this Affidavit. - 18 - 18 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 64. Beth Abraham’s payments to Kenneth Rozenberg’s entities that are Related Parties, described above, are reflected in the below table: See Budimir Aff. ¶ 29. 65. Of Beth Abraham’s payments to Skilled Staffing, Skilled Staffing issued 10 invoices for “management fees” to Beth Abraham between January 2020 and October 2021 totaling $247,725. See Waldropt Exh. 19. Payments from Beth Abraham to Hagler’s Entities 66. In addition to the above transfers, Beth Abraham transferred $27,971,656 to entities owned and/or controlled by Daryl Hagler, who is the 50% owner and Chief Financial Officer of Centers, as reflected on the below table: - 19 - 19 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 See Budimir ¶ 29. 67. According to my review of Beth Abraham’s 2019 Cost Report, the Light Property Account, and the lease agreement between Beth Abraham and Light Property, Daryl Hagler is the owner of Light Property, which owns the land and building that houses Beth Abraham. 68. On December 31, 2015, Rozenberg and Hagler executed two leases between Abraham Operations and Light Property. One lease had a $6 million annual minimum rent. Beth Abraham submitted this lease to DOH as part of its CON application (see Waldropt Exh. 20). The second lease, also executed on December 31, 2015, had a $1.3 million annual minimum rent, and is attached as Waldropt Exh. 21. 69. On January 1, 2018, Rozenberg and Hagler caused Beth Abraham to enter into an amended lease with Light Property, with a $2.6 million annual minimum rent. The amended lease is attached as Waldropt Exh. 14. 70. According to Beth Abraham’s 2021 Cost Report, its annual rent is $6 million – the amount on the original lease. However, there is no mention of a lease amendment for that amount in the 2021 Cost Report (whereas the amended lease was disclosed in the 2018 Cost Report). - 20 - 20 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 71. From 2017 to 2021, according to Abraham Operation’s financial statements (Waldropt Exh. 2216), Beth Abraham’s total rent obligation to its landlord, Light Property, was $23,164,229.67, of which it paid $17,216,056.64, leaving $5,948,173.03 in unpaid back rent. Thus, Abraham Operations back rent is approximately 26% of its total rent obligation. 72. During this same period, Abraham Operations paid Light Property $9,817,765.02 to service the unnecessary, inflated Light Property-Abraham Operations Note. Had these funds instead been used to pay rent, Beth Abraham would not owe any back rent. 73. Based on my review of the Beth Abraham Operating Account, the Light Property Account, and the loan documents related to the Light Property Loan Account, from January 1, 2019, through April 30, 2022, Beth Abraham paid Light Property $21,450,849, of which $11,164,419 was used to pay down the Light Property Loan Account, mentioned above. Most of the remaining funds were transferred from the Light Property Account into the Hagler Personal Accounts. Those accounts show that Daryl Hagler received three lump sum payments in 2020, 2021 and 2022 of $1,000,000, $2,500,000, and $6,460,000, respectively, from Light Property. These payments are reflected in the chart below: 16 Rent obligation calculation is summarized from the 2007-2020 Trial Balances obtained from Facility’s accounting firm and notes to 2021 Cost Report - 21 - 21 of 34 FILED: NEW YORK COUNTY CLERK 06/28/2023 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 284 RECEIVED NYSCEF: 06/28/2023 74. Although Beth Abraham transferred the sums described in the prior paragraph very early in January during the years 2020, 2021, and 2022, I reviewed invoices for the 2020 and 2021 transfers that indicated that these payments had actually been billed the prior year. Specifically, the invoice for the $1,000,000 transfer is dated December 31, 2019; the invoice for the $2,500,000 transfer is dated December 31, 2020. See Waldropt Exh. 23. MFCU does not have an invoice for the 2022 transfer. Because the 2020 and 2021 payments had been billed during December of the prior years, in my analysis, I have attributed each of these three large lump sum payments (including 2022, for which MFCU does not have the invoice) to the prior year’s rent obligation. In total, from 2017 through April of 2022, Abraham Operations transferred $27,860,073 to Light Property. Light Property then transferred $17,827,676 to TD Bank to pay down the TD Bank- Light Property Loan. Thus, the $9,960,000 that Hagler transferred from Light Property to his personal bank account represents about 36% of every dollar Beth Abraham paid to Light Property. 75. Based on my review of the Beth Abraham Operating Account, I created the following cash flow chart that shows the sources of funds coming into Beth Abraham, as well as the recipients of transfers out of Beth Abraham, from January 1, 2019, through April 30, 2022. As the chart depicts (in yellow), Hagler obtained even more money from Beth Abraham than was