A former owner of five Arkansas nursing homes seized last year by the state now faces a felony charge accusing him of spending thousands from residents' personal accounts to cover business costs, court filings show.
Medicaid fraud investigators accused Keith Head of transferring more than $43,000 from the resident trust fund account at Prescott Manor to the nursing home's accounts for payroll, operating costs and petty cash. It's not clear from documents charging Head whether the money has been repaid.
Head, 69, of Conway, was booked at 9:32 a.m. Monday at the Nevada County jail, according to the jail's website. He faces a felony property theft charge that carries a potential sentence of five to 20 years.
[DOCUMENT: Nursing home operator arrest warrant » arkansasonline.com/728warrant/]
Head bonded out Monday afternoon, but his bail amount had not yet been entered into the jail's computer system, a detention officer said.
The arrest comes 10 months after the state Department of Human Services took "receivership" of five homes operated by Head amid financial woes. The takeover prompted a pledge from state officials to pay closer attention to nursing home operators' finances.
Martha Deaver, who has advocated for Arkansas nursing home residents for nearly 40 years, said she doesn't remember a nursing home owner ever being arrested in the state.
"Theft of trust fund accounts is more prevalent than most people think, and I hope this sends a message to other nursing home owners and administrators," Deaver said. "These owners [and] these administrators are rarely prosecuted for their actions. That's why this is a good day."
Trust fund accounts include Social Security payments of about $40 per month for nursing home residents enrolled in Medicaid, Deaver said. The stipend is what's left over after the payments cover room and board, she said. Residents typically spend the money on snacks, clothes, hairstyling, and other supplies and services.
Residents are not required to store their money in trust accounts managed by nursing homes, but many choose to. In those cases, facilities can pool the funds as long as they keep detailed ledgers on how much money belongs to each resident, investigators said.
State monitors in the Department of Human Services' Office of Long Term Care in September flagged irregularities in trust fund accounts at the homes operated by Head. The monitors went to Head's facilities after a Facebook post suggested one of his homes was struggling to make payroll.
Investigators in Attorney General Leslie Rutledge's unit over Medicaid fraud accused Head of transferring more than $43,000 from Prescott Manor's trust fund account for residents into business accounts, according to an affidavit signed by senior investigator Laurie Jo Stowers.
"Head was responsible for the safekeeping of patient funds in the facilities; however, he knowingly took unauthorized control of the property of [76] long term care facility residents by using their funds without their consent, totaling $43,475.00," the affidavit says.
Head was the only person affiliated with the homes who had the authority to make electronic transfers of the trust fund accounts, Stowers' affidavit says.
From April to September 2019, money was transferred from the trust fund account into business accounts 27 times, the affidavit says. Money was transferred from the business accounts back into the trust fund account 17 times, it says.
In total, 76 residents at Prescott Manor suffered losses, ranging from "pennies" to more than $2,300, the affidavit says.
As of Sept. 30, 2019, the trust fund ledger balance for all residents was at $43,740.48, but the bank account held only $265.48.
Head did not respond to multiple phone messages Monday. An attorney who has represented Head in civil matters said he was unaware of the arrest and unable to comment.
Asked whether the trust fund account had since been replenished, a spokeswoman for Rutledge said it is among "facts yet to be determined."
Head also operated homes in Jonesboro, Ola, Star City and Trumann before the state took control of the properties amid financial problems last fall. The Ola and Jonesboro homes have since closed.
The charging document does not mention any issues involving trust fund accounts at the other four properties.
It was only the second time the state used its emergency "receivership" tool since the 1980s, and the ordeal prompted state officials to pledge better financial oversight of nursing home operators.
In 2018, the state took control of two of 21 Arkansas nursing homes operated by New Jersey-based Skyline Health Care. That firm rapidly rose from obscurity to acquire more than 100 properties nationwide before it cratered, with its owners claiming financial insolvency.
The state intervened in Head's homes in September 2019 after discovering the Facebook post. The Arkansas Department of Human Services' Office of Long Term Care, which licenses and inspects nursing homes, began intensive monitoring of the properties.
Monitors found payroll issues, utility shut-off notices, dwindling medical supplies and a lack of cash on hand at the properties, which combined were licensed to house 466 people.
The Arkansas Democrat-Gazette later reported on several warning signs of financial stress that Head and his former business partner Cathy Parsons faced for years. (Parsons has said in court filings that she hasn't been involved in the homes since the spring of 2018.)
The pair was ordered to sell a different home's license in 2018 for not paying rent, faced several lawsuits alleging unpaid bills and owed the state more than $560,000 in unpaid fees and penalties, according to reports.
New officials over the Arkansas Department of Human Services' Office of Long Term Care, which licenses and inspects nursing homes, said in October that they would work with industry lobbyists and Rutledge's office to tighten financial oversight over incoming and existing nursing home operators.