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Failed nursing home chain owner, wanted in Arkansas, arrested on federal charges in New Jersey

Former nursing home chain owner, accused in Arkansas, charged in N.J. by Lisa Hammersly | January 22, 2022 at 3:29 a.m.

The former owner of failed nursing home chain Skyline Health Care, already charged with Medicaid fraud and tax violations in Arkansas courts, now faces federal charges in New Jersey.

Joseph Schwartz of Suffern, N.Y., was arrested and charged in federal court in Newark on Thursday with failing to pay $29.5 million in payroll and unemployment taxes in addition to benefit plan fraud, according to a federal indictment.

He was released on $2 million bond under home confinement after a video hearing Friday, according to a U.S. attorney's office spokesman. No plea was entered. Schwartz's attorney for the federal charges, Robert Fedor of Ohio, could not be reached immediately late Friday.

The 62-year-old Schwartz is scheduled for a first appearance on the Arkansas charges in Pulaski County District Court in Little Rock on Wednesday, according to a spokesman for Attorney General Leslie Rutledge. The U.S. attorney's spokesman in New Jersey said Schwartz is scheduled to go to Little Rock for that hearing.

Schwartz's Skyline Health Care LLC and Skyline Management Group LLC owned and operated as many as 114 nursing homes in 11 states, including 21 facilities in Arkansas, until the operation failed financially in 2018, according to court documents and past interviews with company officials.

Reports of resident neglect and abuse at some facilities, including cases tied to lack of money or staffing, have surfaced in court cases since.

The federal charges in New Jersey include 18 counts of willful failure to pay employment taxes, totaling $29.1 million; two counts of evasion of unemployment taxes, totaling $367,027; and two counts of failing to file annual financial reports for an employee 401K benefit plan.

Schwartz was charged in state court in Pulaski County last month with eight counts of Medicaid fraud involving facilities in this state and two counts of tax violations. He is expected to plead innocent, his Little Rock attorney Bill James said last month.

Allegations against Schwartz include submitting false cost reports and other documents to the Arkansas Medicaid program, resulting in federal and state Medicaid over-payment to his company in 2018 of more than $3.6 million, according to a statement from Attorney General Leslie Rutledge and court affidavits for arrest warrants.

The documents list eight Arkansas nursing homes in connection with the Medicaid fraud allegations: Batesville Health and Rehab, Broadway Health and Rehab in West Memphis, Creekside Health and Rehab in Yellville, Jonesboro Health and Rehab, Magnolia Health and Rehab, Mine Creek Health and Rehab in Nashville, Searcy Health and Rehab and White Hall Health and Rehab.

Skyline also failed between July 2017 and March 2018 to pay the state more than $2 million that had been withheld from employees' paychecks for state taxes, court documents allege. And Schwartz is accused of failing to file required state income tax returns in 2018 and 2019.

A longtime insurance broker, Schwartz founded Skyline in 2005 and ran the company from a small office atop a New Jersey pizza parlor, according to news reports.

Skyline's nursing home portfolio contained just six properties for the first decade. Schwartz rapidly expanded the company starting in 2015, acquiring more than 70 nursing homes, most of them over a one-year period, according to a document he provided Pennsylvania regulators.

The federal indictment in New Jersey says Schwartz ran an operation in 2016 that involved 15,000 employees.

In the span of a week in spring 2018, government officials in Kansas and Nebraska seized a combined 36 Skyline nursing homes after reports surfaced that the properties were unable to make payroll. South Dakota and Pennsylvania followed shortly afterward, taking control of a combined 28 Skyline nursing homes.

Arkansas seized two of 21, getting court orders to place the pair in receivership -- the first time the state took over a nursing home in nearly 30 years. The two homes had lost access to credit, while the 19 other homes still had credit lines.

Schwartz later sold his Arkansas properties. Most were divided between an out-of-state firm and a newly incorporated Arkansas nonprofit. Both the nonprofit and the out-of-state company had ties to Schwartz and Skyline, and Rutledge's office objected to the transfers.

The collapse of the company led to the introduction and passage of legislation and regulations in at least three states (Ohio, Kansas and Arkansas) to require increased vetting of new nursing home owners before they obtain licenses.

Print Headline: Ex-Skyline head faces U.S. counts

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