Preview
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
NYSCEF DOC. NO. 820 RECEIVED NYSCEF: 03/01/2024
EXHIBIT A
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU
PRE SENT: HON.LISA A. CAIRO
- - - - - X TRIAL/IASPART26
PEOPLE OF THE STATE OF NEW YORK by
LETITIA JAMES, ATTORNEY GENERAL OF THE DECISION AND ORDER
STATE OF NEW YORK, ON MOTION
Petitioner, INDEX No. 617709/2022
-against- Motion Seq. Nos. 005-017
COLD SPRING ACQUISITION, LLC D/B/A COLD
SPRING HILLS CENTER FOR NURSING &
REHABILITATION, COLD SPRING REALTY
ACQUISfflON, LLC, VENTURA SERVICES, LLC D/B/A
PHILOSOPHY CARE CENTERS, GRAPH MGA, LLC,
GRAPH MANAGEMENT, LLC, GRAPH INSURANCE
COMPANY A RISK RETENTION GROUP, LLC,
HIGHVIEW MANAGEMENT INC, COMPREHENSIVE
CARE SOLUTIONS, LLC, PHILIPSON FAMILY, LLC,
LIFESTAR FAMILY HOLDINGS, LLC, ROSS CSH
HOLDINGS, LLC, ROSEWELL ASSOCIATES, LLC,
B&L CONSULTING, LLC, ZBL MANAGEMENT, LLC
BENT PHILIPSON, AVI PHILIPSON, ESTATE OF
DEBORAH PHILIPSON, JOEL LEIFER, LEAH
FRIEDMAN, ROCHEL DAVID, ESTHER FARKOVITS,
BENJAMIN LANDA, DAVID ZAHLER, CHAYA
ZAHLER, CHAIM ZAHLER, JACOB ZAHLER,
CHESKEL BERKOWITZ, and JOEL ZUPNICK,
Respondents.
,_______,________ .x
Notice of Motion 005, Affidavits (Affirmations), Exhibits Annexed .......... 266-267
Reply .................................................................................. 435
Notice of Motion 006, Affidavits (Affirmations), Exhibits Annexed ........ 268-278, 374-381
Reply .................................................................................. 420
Notice of Motion 007, Affidavits (Affirmations), Exhibits Annexed ........ 279-285
Reply ................................................................................. 429
1
1 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
Notice of Motion 008, Affidavits (Affirmations), Exhibits Annexed ....... 306-309
Reply ................................................................................. 430
Notice of Motion 009, Affidavits (Affirmations), Exhibits Annexed....... 312-330
Reply ................................................................................. 417,439
Notice of Motion 010, Affidavits (Affirmations), Exhibits Annexed....... 331-335
Reply ................................................................................. 419
Notice of Motion 011, Affidavits (Affirmations), Exhibits Annexed ....... 336-345
Reply................................................................................. 423-426
Notice of Motion 012, Affidavits (Affirmations), Exhibits Annexed ........ 347-363
Reply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418, 440
Notice of Motion 013, Affidavits (Affirmations), Exhibits Annexed ........ 364-373
Reply .................................................................................. 431-432
Notice of Motion 014, Affidavits (Affirmations), Exhibits Annexed ........ 286-289
Reply .................................................................................. 421
Notice of Motion 015, Affidavits (Affirmations), Exhibits Annexed ........ 290-295
Reply .................................................................................. 422
Notice of Motion 016, Affidavits (Affirmations), Exhibits Annexed ........ 296-304
Reply .................................................................................. 428
Notice of Motion 017, Affidavits (Affirmations), Exhibits Annexed ........ 384-392
Reply .................................................................................. 438
Combined Opposition to Motions 005-017........................... .. . . . . . . . . .. 398-407
The Attorney General of the State of New York on behalf of the State commenced this
special proceeding pursuant to New York Executive Law § 63(12) by verified Petition on
December 16, 2022.
The Petition
The individual Respondents herein are co-owners, in varying configurations, of the
following entities: Cold Spring Hills Center for Nursing & Rehabilitation (CSH) a 588-bed
nursing home located in Woodbury, New York; Cold Spring Hills Realty Acquisition LLC (Cold
Spring Realty), the owner of the property on which the facility sits; and numerous service providers
to the CSH facility. The Petition asserts that since 2016, CSH has been owned, in name, by Avi
Philipson (24%) (son of Bent Philipson), the Estate of Deborah Philipson (1 %) (the deceased wife
2
2 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
of Bent Philipson), Esther Farkovits (25%) (daughter of Benjamin Landa), Rochel David (12.5%)
(daughter of David Zahler), Leah Friedman (12.5%) (daughter of David Zahler), and Joel Leifer
(25%). However, the State asserts that the true control persons have been Bent Philipson,
Benjamin Landa (until 2019), and David Zahler (until 2019), who each installed their children as
"straw" owners in order to deceive the DOH by, among other things, submitting a false Certificate
of Need (CON). Cold Spring Realty is owned by Benjamin Landa (25%), the Philipson Family
LLC (25%), Lifestar Family Holdings LLC (25%) (owned by members of the Zahler family), and
Cheskel Berkowitz (25%). The remaining corporate Respondents are owned by Bent Philipson
and members of the Philipson family, Benjamin Landa, the Zahler Family, Cheskel Berkowitz,
Joel Zupnick, and Joel Leifer.
Having devised a scheme of"up-front profit taking," the State alleges that the Respondents
converted millions of dollars, including government funds received from the New York Medicare
and Medicaid programs, from CSH. The State defines "up-front profit taking" as the practice of
making payments from the nursing home to Respondents under the "guise of pre-determined and
self-negotiated expenses" instead of using the funds to meet the duty of resident care. The Petition
states that "of the $42.4 million transferred from [CSH] to its owners and related parties,
Respondepts illegally converted over $22.6 million" through three primary schemes: (1) a
fraudulent rent scheme involving Cold Spring Realty; (2) a fraudulent promissory note through
Lending Partners, LLC with exorbitant 13% interest; and (3) a fraudulent management/consulting
company scheme through Ventura Services LLC, Highview Management, Inc. and Rosewell
Associates, LLC. In order to hide the conversion of funds from CSH, the State asserts that the
Respondents filed false documents and certifications with the New York Department of Health
(DOH), which documents concealed the true owners and operators of CSH.
The rent paid by CSH was allegedly pursuant to an exorbitant rental agreement with Cold
Spring Realty, which entity was owned and controlled by the Landa Family, the Philipson Family,
and the Zahler Family. The State alleges that by controlling both sides of the transaction,
"respondents converted over $15.3 million from 2016 through 2021." The payments from CSH
covered the entire cost of Cold Spring Realty's mortgage payment, insurance and real estate taxes
on the property but also required CSlI to pay an additional $4 million annually ($15.3 million over
five years) as "cash flow rental," which was distributed among Realty's shareholders. The State
indicates that this agreement placed CSH's ratio of rent to total operating revenue among the top
quarter in New York (91 out of 379 nursing facilities). The Petition further details how, in May
of 2020, the Philipson Respondents used these rental payments to transfer $1.2 million in Covid-
19 stimulus funds from CSH directly to the Philipson Family LLC.
With regard to the promissory note, the Petition asserts that to facilitate purchase of the
CSH real property, the owners of Cold Spring Realty created a corporate alter ego, Lending
Partners, and executed a promissory note in which Lending Partners loaned the Cold Spring Realty
owners $16 million at 13% interest. The State asserts that "Respondent Bent Philipson and other
owners of Cold Spring Realty caused Cold Spring Hills to pay their fraudulent promissory note
plus interest [in the amount of $5.6 million] to themselves .... " In addition, the Petition states
that in 2018, Cold Spring Realty refinanced its mortgage through Greystone, A HUD developer,
which included payoff of the original loans for the purchase of the property, the entire $16 million
3
3 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
promissory note and the remaining $2 million in interest, which Bent Philipson personally directed
be included in the payoff amount.
In addition, the State asserts that from 2016 through 2021, Respondents Bent Philipson,
Highview Management, Ventura, Avi Philipson, Joel Leifer, and Rosewell converted over $5.2
million through fraudulent management and consulting company plans. "These management and
consulting companies, owned by Bent Philipson and Joel Leifer, provided duplicative sham
services, but nonetheless received funds from [CSH] ...." The Petition details allegations of
"sham services" with respect to each of these Respondents.
Finally, the petition asserts that the Respondents extracted an additional $21.9 million from
CSH and transferred those funds to "related parties."
As a result of the taking of such "up-front profits," the State alleges failure to meet basic
care needs, provide proper wound care, provide proper feeding and weight monitoring, provide
care required under resident care plans, and communicate vital health information. The State
asserts that the Respondents have thereby violated "many" provisions of the Article 28 of the
Public Health Law, DOH Regulations, Medicare Regulations, and Federal HSS Regulations.
The Petition asserts that upon obtaining control of CSH in 2016, the Respondents
controlling CSH's expenses have created the appearance that operation of the nursing facility is
unprofitable while "extract[ing] millions of dollars each year in 'up front profit' through related
party transactions disguised as expenses." It is alleged that these Respondents have also certified
false and misleading cost reports to the DOH by failing to identify "Non-Arm's Length
Arrangement[s]" with related entities and filed false Medicaid Claims Certifications on behalf of
CSH.
In support of the Petition, the State submits nine witness affidavits providing accounts of
the conditions witnessed at CSH and detailing accounts of resident neglect, as well as affidavits
from Senior Auditor-Investigator Patrick Beltrani, with annexed exhibits, Detective Ryan Ricker,
with annexed exhibits and Medical Analyst Mary Conway, R.N. Additional documents in support
of the Petition are submitted with the Affirmation of Special Assistant Attorney General Christina
Pinnola.
The State seeks a declaration that the Respondents violated Executive Law § 63(12) and
were unjustly enriched in doing so, permanently enjoining Respondents from continuing to violate
the law and from making any self-dealing payments, loans or other transfers of excessive value to
themselves and related entities, appointing a financial monitor to oversee CSH financial
operations, appointing a healthcare monitor to oversee CSH healthcare operations, directing
restitution and disgorgement and enjoining Bent Philipson and Avi Philipson from all participation
atCSH.
The Petition asserts seven causes of action. The First, Second and Third causes of action
allege fraud under Executive Law § 63(12) against a subset of Respondents in connection with
each of the "three primary fraudulent schemes" described above. The Fourth and Fifth causes of
4
4 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
action allege "repeated and persistent illegality" as the term is used in the Executive Law against
a subset of Respondents and in connection with failure to comply with the obligations of patient
care imposed by state and federal law and applicable regulations. The Sixth cause of action alleges
misappropriation of government funds pursuant to Executive Law § 63-c against all Respondents
and the Seventh cause of action alleges uajust enrichment against all Respondents for having
received or retained Medicare and Medicaid payments in non-conformance with applicable rules.
Each of the Respondents has filed a motion to dismiss the Petition as asserted against them
on multiple grounds, detailed below. Respondents generally object to "group pleading" type
statements contained in the Petition where, in certain instances, references to "Respondents" are
not limited to the subset alleged to be involved in a particular activity. In addition, Respondents
seek an order converting this action to a plenary proceeding pursuant to CPLR § 103 and permitting
an answer and disclosure pursuant to CPLR § 404 and§ 408, respectively.
The Motions to Dismiss
By Motion Sequence No. S, Respondent Cold Spring Realty Acquisition, LLC (Cold
Spring Realty) argues that the Petition fails to adequately plead a claim for fraud against it because
there are no allegations of deceptive or misleading conduct by Cold Spring Realty. Cold Spring
Realty states that it is not a healthcare provider and never received Medicaid or Medicare
disbursements directly and thus could not have committed fraud on those entities. In addition,
Cold Spring Realty asserts that documentary evidence, to wit the 2014 lease as between CSH and
Cold Spring Realty, establishes a complete defense as the lease was fully vetted and approved by
the DOH, and reflected a ''rent to revenue ratio" consistent with the Nassau County region.
Further, Cold Spring Realty asserts that the State is estopped by operation of law from arguing
fraud based upon a duly approved lease agreement.
Cold Spring Realty argues that the claims for common law unjust enrichment must be
dismissed as the State fails to allege the requisite elements, inclnding enrichment at the State's
expense, and unjust enrichment cannot reasonably be maintained where written Medicaid and
Medicare provider agreements exist with CSH. Finally, Cold Spring Realty argues that relief
cannot be granted in this case under the Tweed Law (Executive Law § 63-c). In any event,
according to Cold Spring Realty, the injunctive relief sought by the Petition is not legally
authorized and would be impossible to implement.
By Motion Sequence No. 6, Ventura Services, LLC d/b/a Philosophy Care Centers,
Highview Management Inc., Philipson Family LLC, Bent Philipson, and the Estate of Deborah
Philipson (the Philipson Respondents) argue that the causes of action for fraud are not plead with
particularity against any of these movants. More specifically, these Respondents contend that the
Petition fails to allege any involvement of Highview, Ventura, or the Estate in the real property
transactions, conversion of State reimbursement for services, or submission of false records to the
DOH or Medicaid. These movants argue that the fraud claims under Executive law § 63(12)
should be dismissed in total because the statute is designed to protect consumers, not the DOH or
the State itself. To sustain such claims would permit the Attorney General to usurp the regulatory
and enforcement powers of the DOH concerning patient care and staffing standards. With respect
5
5 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
to Highview, specifically, movants assert that the payments cited in the Petition were properly
made to reimburse for legal fees in an Onieda County lawsuit naming CSH as a party. With respect
to Ventura, movants argue that the State acknowledges its prominent role in the operation and
management ofCSH but inconsistently states that it brought little value to the facility. Movants
contend that no allegations are made against the late Deborah Philipson directly and, in any event,
the Executor of the Estate is the only proper party subject to jurisdiction by the court. In addition,
the Philipson Respondents argue that as none of the entities are liable for specific wrongdoing,
neither is their control person, Bent Philipson. Finally, no adverse inference can be drawn from
Bent Philipson's repeated invocation of the Fifth Amendment privilege during an open
investigation deposition that carried the possibility of criminal charges at the time.
By Motion Sequence No. 7, Joel Leifer and Rosewell Associates LLC argue that the
Petition "casts a wide net of speculation without making specific allegations of wrongful conduct
regarding Leifer and Rosewell." The movants assert that because payments to Rosewell were
reported to the Department of Health as "related party transactions," causes of action for fraud
cannot be maintained against these parties and there is no allegation of ongoing fraud relating to
these parties as is required for a § 63(12) action. In addition, these movants argue that any
allegations under the Public Health Law, for misappropriation of Medicaid funds, and for unjust
enrichment are insufficiently pied with respect to these Respondents and are time-barred because
Leifer's involvement with CSH and payments to Rosewell ceased as of December 15, 2019 and
the petition was filed on December 16, 2022.
By Motion Sequence No. 8, Respondent Comprehensive Care Solutions, LLC likewise
argues that there are no adequately pied allegations with respect to it and the bare assertion that it
is an entity "affiliated with Respondent David Zahler'' does nothing to impute liability. Movants
assert that "(t]he (Attorney General's] only substantive allegation concerning Comprehensive is
that it was paid approximately $8.1 million for the goods it sold to Cold Spring from 2016 to
2021." Indeed, the Petition alleges the transfer of $8.1 million for "purported food, laundry,
housekeeping, and supply services." But, according to Comprehensive, there is no allegation that
the goods and services were not sold or supplied for fair market value.
By Motion Sequence No. 9, Respondents Graph MGA, LLC, Graph Management LLC,
Graph Insurance Company A Risk Retention Group, LLC (Graph Companies) argue that no relief
for unjust enrichment can be had against them as the Petition alleges only that they provided bona
fide insurance services to CSH and there are no allegations of a failure of consideration of that the
Graph Companies were paid more than fair market value. Moreover, the Graph Companies argue
that the State has no standing to recover payments made by CSH for such bona fide services. There
is no allegation in the Petition that the Graph Companies provided any healthcare services or
received Medicare or Medicaid payments directly. Accordingly, the Graph Companies assert that
the body of material presented by the State fails to make out a prima facie case with respect to
them and should be dismissed. These movants also echo the argument that the Tweed Law does
not create an independent cause of action but instead must be based upon a viable cause of action
at law or in equity.
6
6 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
In support of their motion, the Graph Companies submit the affidavit of Mary Vasquez,
who states that she is the Corporate Secretary for Graph Insurance Company a Risk Retention
Group LLC (RRG) and Managing Director of Graph Management LLC, which provides
management services to Graph MGA LLC (MGA). Ms. Vasquez states RRG is authoriz.ed to
underwrite policies of insurance in New York State and MGA is a licensed insurance agent which
obtains insurance for its clients an customers. MGA placed professional liability and general
liability insurance on behalf of CSH in 2019 through 2022. An organimtion known as Gallagher
Basset processes the claims for RRG and maintains a claims register. She attaches a copy of the
claims register, which she interprets as demonstrating claims paid, expenses and reserves for the
subject years in the amount ofSS,637,455.16. Accordingly, she asserts that RRG has lost money
on the CSH risk.
By Motion Sequence No. IO, Respondents Lifestar Family Holdings, LLC, David Zahler,
Chaya Zahler, Chaim Zahler, Jacob Zahler (the Zahler Respondents) assert that the Petition relies
on conclusory allegations and impermissible group pleading in an effort to sweep this group into
allegations that pertain only to other Respondents. In addition, these movants assert that there are
no substantive allegations against individuals Chaya, Jacob or Chaim Zahler. And passive,
minority interest in Cold Spring Realty is insufficient to impose liability against this respondent
group as there is no evidence whatsoever that they entered into any of the agreements or knowingly
engaged in a scheme to defraud. As all Zahler involvement with Cold Spring Realty ceased in
2019, these movants argue that the no Executive Law§ 63(12) relief can be sought without any
allegation of continuing misconduct. Finally, the Zahler Respondents argue that there are
insufficient allegations to pierce the corporate veil as no assertions of specific wrongdoing, abusing
the privilege of the corporate form or remaining necessary elements are set forth.
By Motion Sequence No. 11, Respondents Ross CSH Holdings, LLC, ZBL Management,
LLC, Cheskel Berkowitz and Joel Zupnick (ZBL Respondents) state that the Petition has not
alleged any wrongdoing on their part nor alleged that they were in any way involved with patient
care or had knowledge of any fraud or illegality. ZBL Respondents argue that a relationship
between the facility operator and property owners is not unusual in the nursing home industry and
the Certificate of Need in this case disclosed the relationship. In addition, the ZBL Respondents
assert that Executive Law § 63(12) does not create a standalone cause of action•, and to the extent
that it did, the claims thereunder are time-barred. Finally, The ZBL Respondents assert that the
State is estopped from asserting a claim for fraud upon a lease agreement that was approved by
State actors.
By Motion Sequence No. 12, counsel for Respondent Avi Philipson argues that the Petition
fails to allege facts that would constitute fraud or conversion of Medicaid or Medicare funds and
should be dismissed for all of the reasons set forth in the motion papers filed by Respondents
Highview Management Inc., Venture Services LLC, Philipson Family LLC, Bent Philipson, the
1
The ZBL Respondents argue that the 1st Department's holding in State v. Trump Entrepreneur Initiative was a
misinterpretation of the law and the individual elements of common law fraud must be alleged. For the reasons
that follow in the discussion section, induding the dear language of the statute, the court disagrees.
7
7 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
Estate of Deborah Philipson, the CSH Respondents, Cold Spring Realty, and the Graph
Companies.
By Motion Sequence No. 13, Cold Spring Acquisition, LLC d/b/a Cold Spring Hills Center
for Nursing & Rehabilitation (CSH) contend that there is no basis for the State to assert that the
$22 million demanded as restitution was paid from Medicaid or Medicare funds or that the
government has authority to control CSH's funds duly received for care previously rendered. And,
in any event, payment of actual expenses, including the real property lease, is not an "equity
withdrawal" under PHL § 2808(5Xc). Nor, according to CSH, does the lease on the propercy or
the promissory note issued by Lending Partners demonstrate any fraud or illegality. The lease
itself was fully vetted and approved by the DOH.
Further, CSH argues that the Office of the Attorney General is not the arm of the State
charged with the regulation of nursing facilities but those functions are reserved to the DOH under
Public Health Law Article 28, which entity has inspected CSH during the relevant period and has
taken no action toward revoking the facility's operating certificate. Indeed, CSH asserts that
during the relevant period, it received above-average ratings. CSH argues that the injunctive relief
sought would put the Attorney General in charge of the facility in derogation of the statutory
scheme. At most, the delegation to the State Attorney General under the federal law (42 USC
1396b(q) and 42 CFR § 1007.ll(a)(2)) is the power to investigate and prosecute criminal
violations resulting in the abuse or neglect of residents and "if the initial review does not indicate
a substantial potential for criminal protection, [the Attorney General will] refer the complaint to
the proper Federal, State, or local agency." CSH suggests that as the matters raised by the petition
are in the primary purview of administrative bodies, the court should decline to exercise
jurisdiction. In any event, CSH asserts newly enacted regulations concerning facility staffing
levels and expenditure of nursing home revenue moot the claims for injunctive relief.
Finally, CSH asserts that any claims for unjust enrichment or conversion are vitiated by
the contract between CSH and New York's Medicaid Program.
By Motion Sequence No. 14, Respondent B&L Consulting, LLC (B&L) contends that the
State has impermissibly utilized group pleading without specifying any wrongdoing on the part of
this Respondent, a consulting firm accepting payments from its client, Cold Spring Realty. In
addition, there is no link between B&L and any government funds as much of the revenue received
by CSH was from "other sources" as acknowledged by the State. B&L states that it had no
operations or involvement with the DOH and was not a party to any rent or promissory note fraud
scheme. Rather, B&L argues that the Attorney General takes aim at its owner, Benjamin Landa
personally, and at the for-profit nursing home model. B&L states that its payments were received
from Cold Spring Realty, the property owner, for services rendered. B&L also reiterates that the
Tweed Law does not create a separate cause of action and, in any event, funds received by B&L
were not unearned and the elements of unjust enrichment cannot be established. Finally, movant
asserts that because Landa and B&L 's involvement ceased in 2019, the claims of the Petition are
untimely under the controlling three-year statute of limitations.
8
8 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
By Motion Sequence No. 15, counsel for Respondent Ester Farkovits echoes the assertion
that the Petition utilizes impermissible group pleading lacking specificity as to individual
Respondents under CPLR 3016(b) and to circumvent the processes controlled by the relevant
regulatory authorities. In addition, Farkovits argues that the claims as against her are time-barred
and there is no basis to pierce the CSH "corporate veil" with respect to her as she had no power
over the day-to-day operations of the facility, took no action with respect to her 25% interest, and
received no funds therefrom.2 Thus, she cannot be liable under the Public Health Law. Further,
counsel for Farkovits argues that she did not participate in any of the alleged schemes asserted in
the Petition, and there are no allegations that she did. Finally, Farkovits argues that the Tweed
Law causes of action cannot be maintained as she received no state or other government funds and
has not been otherwise unjustly enriched.
By Motion Sequence No. 16, counsel for Respondent Benjamin Landa states that the action
against him arises from political motivations of the Attorney General and her dislike of the for-
profit nursing home model. Landa also argues that the fraud allegations of the Petition are
impermissible group pleadings and the claims as against him are time-barred. Landa asserts that
there is no basis to pierce the Cold Spring Realty "corporate veil" with respect to him because he
did not own or operate Cold Spring Hills, and after 2019, he no longer had any involvement with
Cold Spring Realty. He merely derived income as disbursements because of his minority
ownership of a real estate company and his disclosed role as a member of a consulting company.
Thus, he cannot be liable under the Public Health Law and the cited regulations. He faults the
Petitioner for failing to produce exculpatory documents, which would establish approval by the
State despite relationship between the parties and the companies they ran. Further, counsel for
Landa argues that he did not engage in any of the alleged schemes asserted in the Petition, and no
evidence is presented to link him to any traceable government funds. Toe loan made by Lending
Partners to Cold Spring Realty was not made to Cold Spring Hills and did not breach any directive
of the DOH. Finally, Landa argues that the Tweed Law causes of action cannot be maintained as
he received no state or other government funds and has not been otherwise unjustly enriched.
By Motion Sequence No. 17, counsel for Respondents Leah Friedman and Rochel David
argues that the first five causes of action are time-barred under a three-year statute of limitations.
In addition, these movants assert that there is no basis upon which to pierce the corporate veil with
respect to them and they have no liability under the Public Health Law because they are nominal
owners rather than control persons of the facility and were never involved in the day-to-day
operations. These movants argue that the Attorney General is without standing to bring a consumer
protection case on behalf of the DOH. Further, these movants assert that there has been no showing
of unjust enrichment as to them, as their involvement was non-existent and thereby too attenuated
to impose liability. Finally, movants argue that the Petition fails to allege that Friedman and David
intentionally deceived or had any knowledge of any alleged fraud. In the alternative, Friedman
and David state that to counter the use of group pleading in the Petition, the State should be
2
The court notes that the absence of financial distribution to this, or any "passive owner" Respondent, may
ultimately present a viable defense to the claims but notes that no affidavit or other cognizable evidentiary
material is submitted on the motions to dismiss in support of this assertion.
9
9 of 15
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023
617709/2022
NYSCEF DOC. NO. 820
441 RECEIVED NYSCEF: 03/01/2024
06/26/2023
required to provide these Respondents with a more definite statement of the allegations against
them specifically in accordance with CPLR 3024(a).
In opposition, the State argues that the Petition provides more than adequate support for its
claims against each of the Respondents individual in or beneficiaries of the alleged schemes and,
as Respondents submit documentary evidence in support of their motions the State, asks the court
to issue a summary ruling on the Petition.
DISCUSSION
"A respondent in a special proceeding 'may raise an objection in point of law by setting it
forth in [the] answer or by a motion to dismiss the petition, made upon notice within the time
allowed for answer.'" (Cardinale v. New York City Dept ofEduc., 204 AD3d 994 [2d Dept 2022]
[quoting CPLR § 404]). When a motion to dismiss is made at the pleading stage, only the Petition
is considered, all of its allegations are deemed true and the Petitioner is given the benefit of every
possible favorable inference. (Cardinale, 204 AD3d at 997-998; see also Leon v. Martinez, 84
NY2d 83, 87 [1994]). Bare legal conclusions are afforded no deference. (Cardinale, 204 AD3d
at 997-998).
Executive Law§ 63(12)
Executive Law § 63(12) provides in relevant part:
"Whenever any person shall engage in repeated fraudulent or illegal
acts or otherwise
Preview
FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 NYSCEF DOC. NO. 820 RECEIVED NYSCEF: 03/01/2024 EXHIBIT A FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU PRE SENT: HON.LISA A. CAIRO - - - - - X TRIAL/IASPART26 PEOPLE OF THE STATE OF NEW YORK by LETITIA JAMES, ATTORNEY GENERAL OF THE DECISION AND ORDER STATE OF NEW YORK, ON MOTION Petitioner, INDEX No. 617709/2022 -against- Motion Seq. Nos. 005-017 COLD SPRING ACQUISITION, LLC D/B/A COLD SPRING HILLS CENTER FOR NURSING & REHABILITATION, COLD SPRING REALTY ACQUISfflON, LLC, VENTURA SERVICES, LLC D/B/A PHILOSOPHY CARE CENTERS, GRAPH MGA, LLC, GRAPH MANAGEMENT, LLC, GRAPH INSURANCE COMPANY A RISK RETENTION GROUP, LLC, HIGHVIEW MANAGEMENT INC, COMPREHENSIVE CARE SOLUTIONS, LLC, PHILIPSON FAMILY, LLC, LIFESTAR FAMILY HOLDINGS, LLC, ROSS CSH HOLDINGS, LLC, ROSEWELL ASSOCIATES, LLC, B&L CONSULTING, LLC, ZBL MANAGEMENT, LLC BENT PHILIPSON, AVI PHILIPSON, ESTATE OF DEBORAH PHILIPSON, JOEL LEIFER, LEAH FRIEDMAN, ROCHEL DAVID, ESTHER FARKOVITS, BENJAMIN LANDA, DAVID ZAHLER, CHAYA ZAHLER, CHAIM ZAHLER, JACOB ZAHLER, CHESKEL BERKOWITZ, and JOEL ZUPNICK, Respondents. ,_______,________ .x Notice of Motion 005, Affidavits (Affirmations), Exhibits Annexed .......... 266-267 Reply .................................................................................. 435 Notice of Motion 006, Affidavits (Affirmations), Exhibits Annexed ........ 268-278, 374-381 Reply .................................................................................. 420 Notice of Motion 007, Affidavits (Affirmations), Exhibits Annexed ........ 279-285 Reply ................................................................................. 429 1 1 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 Notice of Motion 008, Affidavits (Affirmations), Exhibits Annexed ....... 306-309 Reply ................................................................................. 430 Notice of Motion 009, Affidavits (Affirmations), Exhibits Annexed....... 312-330 Reply ................................................................................. 417,439 Notice of Motion 010, Affidavits (Affirmations), Exhibits Annexed....... 331-335 Reply ................................................................................. 419 Notice of Motion 011, Affidavits (Affirmations), Exhibits Annexed ....... 336-345 Reply................................................................................. 423-426 Notice of Motion 012, Affidavits (Affirmations), Exhibits Annexed ........ 347-363 Reply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418, 440 Notice of Motion 013, Affidavits (Affirmations), Exhibits Annexed ........ 364-373 Reply .................................................................................. 431-432 Notice of Motion 014, Affidavits (Affirmations), Exhibits Annexed ........ 286-289 Reply .................................................................................. 421 Notice of Motion 015, Affidavits (Affirmations), Exhibits Annexed ........ 290-295 Reply .................................................................................. 422 Notice of Motion 016, Affidavits (Affirmations), Exhibits Annexed ........ 296-304 Reply .................................................................................. 428 Notice of Motion 017, Affidavits (Affirmations), Exhibits Annexed ........ 384-392 Reply .................................................................................. 438 Combined Opposition to Motions 005-017........................... .. . . . . . . . . .. 398-407 The Attorney General of the State of New York on behalf of the State commenced this special proceeding pursuant to New York Executive Law § 63(12) by verified Petition on December 16, 2022. The Petition The individual Respondents herein are co-owners, in varying configurations, of the following entities: Cold Spring Hills Center for Nursing & Rehabilitation (CSH) a 588-bed nursing home located in Woodbury, New York; Cold Spring Hills Realty Acquisition LLC (Cold Spring Realty), the owner of the property on which the facility sits; and numerous service providers to the CSH facility. The Petition asserts that since 2016, CSH has been owned, in name, by Avi Philipson (24%) (son of Bent Philipson), the Estate of Deborah Philipson (1 %) (the deceased wife 2 2 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 of Bent Philipson), Esther Farkovits (25%) (daughter of Benjamin Landa), Rochel David (12.5%) (daughter of David Zahler), Leah Friedman (12.5%) (daughter of David Zahler), and Joel Leifer (25%). However, the State asserts that the true control persons have been Bent Philipson, Benjamin Landa (until 2019), and David Zahler (until 2019), who each installed their children as "straw" owners in order to deceive the DOH by, among other things, submitting a false Certificate of Need (CON). Cold Spring Realty is owned by Benjamin Landa (25%), the Philipson Family LLC (25%), Lifestar Family Holdings LLC (25%) (owned by members of the Zahler family), and Cheskel Berkowitz (25%). The remaining corporate Respondents are owned by Bent Philipson and members of the Philipson family, Benjamin Landa, the Zahler Family, Cheskel Berkowitz, Joel Zupnick, and Joel Leifer. Having devised a scheme of"up-front profit taking," the State alleges that the Respondents converted millions of dollars, including government funds received from the New York Medicare and Medicaid programs, from CSH. The State defines "up-front profit taking" as the practice of making payments from the nursing home to Respondents under the "guise of pre-determined and self-negotiated expenses" instead of using the funds to meet the duty of resident care. The Petition states that "of the $42.4 million transferred from [CSH] to its owners and related parties, Respondepts illegally converted over $22.6 million" through three primary schemes: (1) a fraudulent rent scheme involving Cold Spring Realty; (2) a fraudulent promissory note through Lending Partners, LLC with exorbitant 13% interest; and (3) a fraudulent management/consulting company scheme through Ventura Services LLC, Highview Management, Inc. and Rosewell Associates, LLC. In order to hide the conversion of funds from CSH, the State asserts that the Respondents filed false documents and certifications with the New York Department of Health (DOH), which documents concealed the true owners and operators of CSH. The rent paid by CSH was allegedly pursuant to an exorbitant rental agreement with Cold Spring Realty, which entity was owned and controlled by the Landa Family, the Philipson Family, and the Zahler Family. The State alleges that by controlling both sides of the transaction, "respondents converted over $15.3 million from 2016 through 2021." The payments from CSH covered the entire cost of Cold Spring Realty's mortgage payment, insurance and real estate taxes on the property but also required CSlI to pay an additional $4 million annually ($15.3 million over five years) as "cash flow rental," which was distributed among Realty's shareholders. The State indicates that this agreement placed CSH's ratio of rent to total operating revenue among the top quarter in New York (91 out of 379 nursing facilities). The Petition further details how, in May of 2020, the Philipson Respondents used these rental payments to transfer $1.2 million in Covid- 19 stimulus funds from CSH directly to the Philipson Family LLC. With regard to the promissory note, the Petition asserts that to facilitate purchase of the CSH real property, the owners of Cold Spring Realty created a corporate alter ego, Lending Partners, and executed a promissory note in which Lending Partners loaned the Cold Spring Realty owners $16 million at 13% interest. The State asserts that "Respondent Bent Philipson and other owners of Cold Spring Realty caused Cold Spring Hills to pay their fraudulent promissory note plus interest [in the amount of $5.6 million] to themselves .... " In addition, the Petition states that in 2018, Cold Spring Realty refinanced its mortgage through Greystone, A HUD developer, which included payoff of the original loans for the purchase of the property, the entire $16 million 3 3 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 promissory note and the remaining $2 million in interest, which Bent Philipson personally directed be included in the payoff amount. In addition, the State asserts that from 2016 through 2021, Respondents Bent Philipson, Highview Management, Ventura, Avi Philipson, Joel Leifer, and Rosewell converted over $5.2 million through fraudulent management and consulting company plans. "These management and consulting companies, owned by Bent Philipson and Joel Leifer, provided duplicative sham services, but nonetheless received funds from [CSH] ...." The Petition details allegations of "sham services" with respect to each of these Respondents. Finally, the petition asserts that the Respondents extracted an additional $21.9 million from CSH and transferred those funds to "related parties." As a result of the taking of such "up-front profits," the State alleges failure to meet basic care needs, provide proper wound care, provide proper feeding and weight monitoring, provide care required under resident care plans, and communicate vital health information. The State asserts that the Respondents have thereby violated "many" provisions of the Article 28 of the Public Health Law, DOH Regulations, Medicare Regulations, and Federal HSS Regulations. The Petition asserts that upon obtaining control of CSH in 2016, the Respondents controlling CSH's expenses have created the appearance that operation of the nursing facility is unprofitable while "extract[ing] millions of dollars each year in 'up front profit' through related party transactions disguised as expenses." It is alleged that these Respondents have also certified false and misleading cost reports to the DOH by failing to identify "Non-Arm's Length Arrangement[s]" with related entities and filed false Medicaid Claims Certifications on behalf of CSH. In support of the Petition, the State submits nine witness affidavits providing accounts of the conditions witnessed at CSH and detailing accounts of resident neglect, as well as affidavits from Senior Auditor-Investigator Patrick Beltrani, with annexed exhibits, Detective Ryan Ricker, with annexed exhibits and Medical Analyst Mary Conway, R.N. Additional documents in support of the Petition are submitted with the Affirmation of Special Assistant Attorney General Christina Pinnola. The State seeks a declaration that the Respondents violated Executive Law § 63(12) and were unjustly enriched in doing so, permanently enjoining Respondents from continuing to violate the law and from making any self-dealing payments, loans or other transfers of excessive value to themselves and related entities, appointing a financial monitor to oversee CSH financial operations, appointing a healthcare monitor to oversee CSH healthcare operations, directing restitution and disgorgement and enjoining Bent Philipson and Avi Philipson from all participation atCSH. The Petition asserts seven causes of action. The First, Second and Third causes of action allege fraud under Executive Law § 63(12) against a subset of Respondents in connection with each of the "three primary fraudulent schemes" described above. The Fourth and Fifth causes of 4 4 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 action allege "repeated and persistent illegality" as the term is used in the Executive Law against a subset of Respondents and in connection with failure to comply with the obligations of patient care imposed by state and federal law and applicable regulations. The Sixth cause of action alleges misappropriation of government funds pursuant to Executive Law § 63-c against all Respondents and the Seventh cause of action alleges uajust enrichment against all Respondents for having received or retained Medicare and Medicaid payments in non-conformance with applicable rules. Each of the Respondents has filed a motion to dismiss the Petition as asserted against them on multiple grounds, detailed below. Respondents generally object to "group pleading" type statements contained in the Petition where, in certain instances, references to "Respondents" are not limited to the subset alleged to be involved in a particular activity. In addition, Respondents seek an order converting this action to a plenary proceeding pursuant to CPLR § 103 and permitting an answer and disclosure pursuant to CPLR § 404 and§ 408, respectively. The Motions to Dismiss By Motion Sequence No. S, Respondent Cold Spring Realty Acquisition, LLC (Cold Spring Realty) argues that the Petition fails to adequately plead a claim for fraud against it because there are no allegations of deceptive or misleading conduct by Cold Spring Realty. Cold Spring Realty states that it is not a healthcare provider and never received Medicaid or Medicare disbursements directly and thus could not have committed fraud on those entities. In addition, Cold Spring Realty asserts that documentary evidence, to wit the 2014 lease as between CSH and Cold Spring Realty, establishes a complete defense as the lease was fully vetted and approved by the DOH, and reflected a ''rent to revenue ratio" consistent with the Nassau County region. Further, Cold Spring Realty asserts that the State is estopped by operation of law from arguing fraud based upon a duly approved lease agreement. Cold Spring Realty argues that the claims for common law unjust enrichment must be dismissed as the State fails to allege the requisite elements, inclnding enrichment at the State's expense, and unjust enrichment cannot reasonably be maintained where written Medicaid and Medicare provider agreements exist with CSH. Finally, Cold Spring Realty argues that relief cannot be granted in this case under the Tweed Law (Executive Law § 63-c). In any event, according to Cold Spring Realty, the injunctive relief sought by the Petition is not legally authorized and would be impossible to implement. By Motion Sequence No. 6, Ventura Services, LLC d/b/a Philosophy Care Centers, Highview Management Inc., Philipson Family LLC, Bent Philipson, and the Estate of Deborah Philipson (the Philipson Respondents) argue that the causes of action for fraud are not plead with particularity against any of these movants. More specifically, these Respondents contend that the Petition fails to allege any involvement of Highview, Ventura, or the Estate in the real property transactions, conversion of State reimbursement for services, or submission of false records to the DOH or Medicaid. These movants argue that the fraud claims under Executive law § 63(12) should be dismissed in total because the statute is designed to protect consumers, not the DOH or the State itself. To sustain such claims would permit the Attorney General to usurp the regulatory and enforcement powers of the DOH concerning patient care and staffing standards. With respect 5 5 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 to Highview, specifically, movants assert that the payments cited in the Petition were properly made to reimburse for legal fees in an Onieda County lawsuit naming CSH as a party. With respect to Ventura, movants argue that the State acknowledges its prominent role in the operation and management ofCSH but inconsistently states that it brought little value to the facility. Movants contend that no allegations are made against the late Deborah Philipson directly and, in any event, the Executor of the Estate is the only proper party subject to jurisdiction by the court. In addition, the Philipson Respondents argue that as none of the entities are liable for specific wrongdoing, neither is their control person, Bent Philipson. Finally, no adverse inference can be drawn from Bent Philipson's repeated invocation of the Fifth Amendment privilege during an open investigation deposition that carried the possibility of criminal charges at the time. By Motion Sequence No. 7, Joel Leifer and Rosewell Associates LLC argue that the Petition "casts a wide net of speculation without making specific allegations of wrongful conduct regarding Leifer and Rosewell." The movants assert that because payments to Rosewell were reported to the Department of Health as "related party transactions," causes of action for fraud cannot be maintained against these parties and there is no allegation of ongoing fraud relating to these parties as is required for a § 63(12) action. In addition, these movants argue that any allegations under the Public Health Law, for misappropriation of Medicaid funds, and for unjust enrichment are insufficiently pied with respect to these Respondents and are time-barred because Leifer's involvement with CSH and payments to Rosewell ceased as of December 15, 2019 and the petition was filed on December 16, 2022. By Motion Sequence No. 8, Respondent Comprehensive Care Solutions, LLC likewise argues that there are no adequately pied allegations with respect to it and the bare assertion that it is an entity "affiliated with Respondent David Zahler'' does nothing to impute liability. Movants assert that "(t]he (Attorney General's] only substantive allegation concerning Comprehensive is that it was paid approximately $8.1 million for the goods it sold to Cold Spring from 2016 to 2021." Indeed, the Petition alleges the transfer of $8.1 million for "purported food, laundry, housekeeping, and supply services." But, according to Comprehensive, there is no allegation that the goods and services were not sold or supplied for fair market value. By Motion Sequence No. 9, Respondents Graph MGA, LLC, Graph Management LLC, Graph Insurance Company A Risk Retention Group, LLC (Graph Companies) argue that no relief for unjust enrichment can be had against them as the Petition alleges only that they provided bona fide insurance services to CSH and there are no allegations of a failure of consideration of that the Graph Companies were paid more than fair market value. Moreover, the Graph Companies argue that the State has no standing to recover payments made by CSH for such bona fide services. There is no allegation in the Petition that the Graph Companies provided any healthcare services or received Medicare or Medicaid payments directly. Accordingly, the Graph Companies assert that the body of material presented by the State fails to make out a prima facie case with respect to them and should be dismissed. These movants also echo the argument that the Tweed Law does not create an independent cause of action but instead must be based upon a viable cause of action at law or in equity. 6 6 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 In support of their motion, the Graph Companies submit the affidavit of Mary Vasquez, who states that she is the Corporate Secretary for Graph Insurance Company a Risk Retention Group LLC (RRG) and Managing Director of Graph Management LLC, which provides management services to Graph MGA LLC (MGA). Ms. Vasquez states RRG is authoriz.ed to underwrite policies of insurance in New York State and MGA is a licensed insurance agent which obtains insurance for its clients an customers. MGA placed professional liability and general liability insurance on behalf of CSH in 2019 through 2022. An organimtion known as Gallagher Basset processes the claims for RRG and maintains a claims register. She attaches a copy of the claims register, which she interprets as demonstrating claims paid, expenses and reserves for the subject years in the amount ofSS,637,455.16. Accordingly, she asserts that RRG has lost money on the CSH risk. By Motion Sequence No. IO, Respondents Lifestar Family Holdings, LLC, David Zahler, Chaya Zahler, Chaim Zahler, Jacob Zahler (the Zahler Respondents) assert that the Petition relies on conclusory allegations and impermissible group pleading in an effort to sweep this group into allegations that pertain only to other Respondents. In addition, these movants assert that there are no substantive allegations against individuals Chaya, Jacob or Chaim Zahler. And passive, minority interest in Cold Spring Realty is insufficient to impose liability against this respondent group as there is no evidence whatsoever that they entered into any of the agreements or knowingly engaged in a scheme to defraud. As all Zahler involvement with Cold Spring Realty ceased in 2019, these movants argue that the no Executive Law§ 63(12) relief can be sought without any allegation of continuing misconduct. Finally, the Zahler Respondents argue that there are insufficient allegations to pierce the corporate veil as no assertions of specific wrongdoing, abusing the privilege of the corporate form or remaining necessary elements are set forth. By Motion Sequence No. 11, Respondents Ross CSH Holdings, LLC, ZBL Management, LLC, Cheskel Berkowitz and Joel Zupnick (ZBL Respondents) state that the Petition has not alleged any wrongdoing on their part nor alleged that they were in any way involved with patient care or had knowledge of any fraud or illegality. ZBL Respondents argue that a relationship between the facility operator and property owners is not unusual in the nursing home industry and the Certificate of Need in this case disclosed the relationship. In addition, the ZBL Respondents assert that Executive Law § 63(12) does not create a standalone cause of action•, and to the extent that it did, the claims thereunder are time-barred. Finally, The ZBL Respondents assert that the State is estopped from asserting a claim for fraud upon a lease agreement that was approved by State actors. By Motion Sequence No. 12, counsel for Respondent Avi Philipson argues that the Petition fails to allege facts that would constitute fraud or conversion of Medicaid or Medicare funds and should be dismissed for all of the reasons set forth in the motion papers filed by Respondents Highview Management Inc., Venture Services LLC, Philipson Family LLC, Bent Philipson, the 1 The ZBL Respondents argue that the 1st Department's holding in State v. Trump Entrepreneur Initiative was a misinterpretation of the law and the individual elements of common law fraud must be alleged. For the reasons that follow in the discussion section, induding the dear language of the statute, the court disagrees. 7 7 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 Estate of Deborah Philipson, the CSH Respondents, Cold Spring Realty, and the Graph Companies. By Motion Sequence No. 13, Cold Spring Acquisition, LLC d/b/a Cold Spring Hills Center for Nursing & Rehabilitation (CSH) contend that there is no basis for the State to assert that the $22 million demanded as restitution was paid from Medicaid or Medicare funds or that the government has authority to control CSH's funds duly received for care previously rendered. And, in any event, payment of actual expenses, including the real property lease, is not an "equity withdrawal" under PHL § 2808(5Xc). Nor, according to CSH, does the lease on the propercy or the promissory note issued by Lending Partners demonstrate any fraud or illegality. The lease itself was fully vetted and approved by the DOH. Further, CSH argues that the Office of the Attorney General is not the arm of the State charged with the regulation of nursing facilities but those functions are reserved to the DOH under Public Health Law Article 28, which entity has inspected CSH during the relevant period and has taken no action toward revoking the facility's operating certificate. Indeed, CSH asserts that during the relevant period, it received above-average ratings. CSH argues that the injunctive relief sought would put the Attorney General in charge of the facility in derogation of the statutory scheme. At most, the delegation to the State Attorney General under the federal law (42 USC 1396b(q) and 42 CFR § 1007.ll(a)(2)) is the power to investigate and prosecute criminal violations resulting in the abuse or neglect of residents and "if the initial review does not indicate a substantial potential for criminal protection, [the Attorney General will] refer the complaint to the proper Federal, State, or local agency." CSH suggests that as the matters raised by the petition are in the primary purview of administrative bodies, the court should decline to exercise jurisdiction. In any event, CSH asserts newly enacted regulations concerning facility staffing levels and expenditure of nursing home revenue moot the claims for injunctive relief. Finally, CSH asserts that any claims for unjust enrichment or conversion are vitiated by the contract between CSH and New York's Medicaid Program. By Motion Sequence No. 14, Respondent B&L Consulting, LLC (B&L) contends that the State has impermissibly utilized group pleading without specifying any wrongdoing on the part of this Respondent, a consulting firm accepting payments from its client, Cold Spring Realty. In addition, there is no link between B&L and any government funds as much of the revenue received by CSH was from "other sources" as acknowledged by the State. B&L states that it had no operations or involvement with the DOH and was not a party to any rent or promissory note fraud scheme. Rather, B&L argues that the Attorney General takes aim at its owner, Benjamin Landa personally, and at the for-profit nursing home model. B&L states that its payments were received from Cold Spring Realty, the property owner, for services rendered. B&L also reiterates that the Tweed Law does not create a separate cause of action and, in any event, funds received by B&L were not unearned and the elements of unjust enrichment cannot be established. Finally, movant asserts that because Landa and B&L 's involvement ceased in 2019, the claims of the Petition are untimely under the controlling three-year statute of limitations. 8 8 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 By Motion Sequence No. 15, counsel for Respondent Ester Farkovits echoes the assertion that the Petition utilizes impermissible group pleading lacking specificity as to individual Respondents under CPLR 3016(b) and to circumvent the processes controlled by the relevant regulatory authorities. In addition, Farkovits argues that the claims as against her are time-barred and there is no basis to pierce the CSH "corporate veil" with respect to her as she had no power over the day-to-day operations of the facility, took no action with respect to her 25% interest, and received no funds therefrom.2 Thus, she cannot be liable under the Public Health Law. Further, counsel for Farkovits argues that she did not participate in any of the alleged schemes asserted in the Petition, and there are no allegations that she did. Finally, Farkovits argues that the Tweed Law causes of action cannot be maintained as she received no state or other government funds and has not been otherwise unjustly enriched. By Motion Sequence No. 16, counsel for Respondent Benjamin Landa states that the action against him arises from political motivations of the Attorney General and her dislike of the for- profit nursing home model. Landa also argues that the fraud allegations of the Petition are impermissible group pleadings and the claims as against him are time-barred. Landa asserts that there is no basis to pierce the Cold Spring Realty "corporate veil" with respect to him because he did not own or operate Cold Spring Hills, and after 2019, he no longer had any involvement with Cold Spring Realty. He merely derived income as disbursements because of his minority ownership of a real estate company and his disclosed role as a member of a consulting company. Thus, he cannot be liable under the Public Health Law and the cited regulations. He faults the Petitioner for failing to produce exculpatory documents, which would establish approval by the State despite relationship between the parties and the companies they ran. Further, counsel for Landa argues that he did not engage in any of the alleged schemes asserted in the Petition, and no evidence is presented to link him to any traceable government funds. Toe loan made by Lending Partners to Cold Spring Realty was not made to Cold Spring Hills and did not breach any directive of the DOH. Finally, Landa argues that the Tweed Law causes of action cannot be maintained as he received no state or other government funds and has not been otherwise unjustly enriched. By Motion Sequence No. 17, counsel for Respondents Leah Friedman and Rochel David argues that the first five causes of action are time-barred under a three-year statute of limitations. In addition, these movants assert that there is no basis upon which to pierce the corporate veil with respect to them and they have no liability under the Public Health Law because they are nominal owners rather than control persons of the facility and were never involved in the day-to-day operations. These movants argue that the Attorney General is without standing to bring a consumer protection case on behalf of the DOH. Further, these movants assert that there has been no showing of unjust enrichment as to them, as their involvement was non-existent and thereby too attenuated to impose liability. Finally, movants argue that the Petition fails to allege that Friedman and David intentionally deceived or had any knowledge of any alleged fraud. In the alternative, Friedman and David state that to counter the use of group pleading in the Petition, the State should be 2 The court notes that the absence of financial distribution to this, or any "passive owner" Respondent, may ultimately present a viable defense to the claims but notes that no affidavit or other cognizable evidentiary material is submitted on the motions to dismiss in support of this assertion. 9 9 of 15 FILED: NEW YORK COUNTY CLERK 03/01/2024 03:21 PM INDEX NO. 451549/2023 617709/2022 NYSCEF DOC. NO. 820 441 RECEIVED NYSCEF: 03/01/2024 06/26/2023 required to provide these Respondents with a more definite statement of the allegations against them specifically in accordance with CPLR 3024(a). In opposition, the State argues that the Petition provides more than adequate support for its claims against each of the Respondents individual in or beneficiaries of the alleged schemes and, as Respondents submit documentary evidence in support of their motions the State, asks the court to issue a summary ruling on the Petition. DISCUSSION "A respondent in a special proceeding 'may raise an objection in point of law by setting it forth in [the] answer or by a motion to dismiss the petition, made upon notice within the time allowed for answer.'" (Cardinale v. New York City Dept ofEduc., 204 AD3d 994 [2d Dept 2022] [quoting CPLR § 404]). When a motion to dismiss is made at the pleading stage, only the Petition is considered, all of its allegations are deemed true and the Petitioner is given the benefit of every possible favorable inference. (Cardinale, 204 AD3d at 997-998; see also Leon v. Martinez, 84 NY2d 83, 87 [1994]). Bare legal conclusions are afforded no deference. (Cardinale, 204 AD3d at 997-998). Executive Law§ 63(12) Executive Law § 63(12) provides in relevant part: "Whenever any person shall engage in repeated fraudulent or illegal acts or otherwise