Defendant
Spent Millions on Real Estate While Nursing Home Residents Went without Food
and Lacked Basic Necessities
ROME, GA—George D. Houser, 64, of Sandy
Springs, Georgia, was sentenced today by United States District Judge Harold L.
Murphy to serve 20 years in federal prison on charges of conspiring with his
wife to defraud the Medicare and Georgia Medicaid programs by billing them for
“worthless services” in the operation of three nursing homes. Medicare and
Medicaid paid Houser more than $32.9 million between July 2004 and September
2007 for food, medical care, and other services for nursing home residents. This
is the first time that a defendant has been convicted after a trial in federal
court for submitting claims for payment for worthless services.
Houser was convicted after a bench trial
before United States District Judge Harold L. Murphy, who issued an order with
findings of fact and conclusions of law on Monday, April 2, 2012. Houser had
requested the trial before the judge instead of the jury, and Judge Murphy
conducted the trial from January 30, 2012, through February 28, 2012. In
addition to the health care fraud conspiracy count, Houser was also convicted
of eight counts of failing to pay over $800,000 in his nursing home employees’
payroll taxes to the IRS and failing to file personal income tax returns in
2004 and 2005.
“Senior citizens in nursing homes are
among our most vulnerable citizens. This defendant stole millions of dollars in
Medicare funds to fund his luxurious lifestyle, while the nursing home
residents entrusted to his care went without food or medicine. He will now
spend the next 20 years in prison,” said United States Attorney Sally Quillian
Yates.
“Criminals don’t need to be lip readers
to get this message. Provide horrendous care, while at the same time wallowing
in luxury, and you will be punished—severely,” said Derrick L. Jackson, Special
Agent in Charge of the U.S. Department of Health and Human Services, Office of
Inspector General for the Atlanta region. “Working with other law enforcement
agencies, we will continue to aggressively investigate and prosecute these
taxpayer-funded, worthless services cases.”
“Business owners have an inescapable
obligation to withhold employment taxes from their employees and remit those
taxes to the Internal Revenue Service,” stated Donald B. Yaden, Special Agent
in Charge with IRS-Criminal Investigation. “Those who fail to do so, in order
to reap personal benefit at the expense of their employees, will be prosecuted
to the fullest extent of the law.”
Houser was sentenced to 20 years in
prison, to be followed by three years of supervised release. Houser was also
ordered to pay $6,742,807.88 in restitution to Medicaid and Medicare, and
$872,515 in restitution to the Internal Revenue Service.
According to United States Attorney
Yates, the charges, and other information presented in court: Houser, assisted
by his wife Rhonda Washington Houser, 49, also of Sandy Springs, operated two
nursing homes in Rome, Georgia, between July 2004 and July 2007, known as Mount
Berry and Moran Lake. Each home had approximately 100 residents. They also
operated a nursing home known as Wildwood in Brunswick, Georgia, from September
2004 until September 2007, and it had the capacity for 204 residents. Between
July 2004 and September 2007, Houser billed Medicare and Medicaid approximately
$41 million, and was paid $32.9 million—based on his certifications and
promises that he was providing the residents with a safe, clean physical
environment, nutritional meals, medical care, and services that would promote
or enhance the residents’ quality of life.
In contrast to the pretenses under which
Houser accepted Medicare and Medicaid payments, the court concluded that the
evidence presented at trial showed “a long-term pattern and practice of
conditions at defendant’s nursing homes that were so poor, including food
shortages bordering on starvation, leaking roofs, virtually no nursing or
housekeeping supplies, poor sanitary conditions, major staff shortages, and
safety concerns, that, in essence, any services that defendant actually
provided were of no value to the residents.” The court further found that
“defendant was well aware that ongoing jeopardy conditions existed at the
nursing homes during this time. Rather than make a good faith effort to remedy
the glaring issues impacting the residents’ health and welfare, the evidence shows
that defendant chose instead to divert significant nursing home funds for his
real estate development ventures and for other personal expenses and that
defendant intentionally attempted to cover up and conceal from the surveyors
the nursing homes’ issues and his diversion of funds.”
During the trial, the government
introduced evidence that instead of providing sufficient care for the nursing
home residents, Houser diverted slightly more than $8 million of Medicare and
Medicaid funds to his personal use. Houser spent more than $4.2 million on real
estate for a hotel complex that he planned to build in Rome, and he also had
plans to develop hotels in Atlanta and Brunswick. Houser also bought his
ex-wife a house in Atlanta for $1.4 million, and, instead of paying her
alimony, he paid her a salary as a nursing home employee, though she never
worked at any of the homes. Houser also used the nursing homes’ corporate bank
accounts for personal expenses, such as Mercedes-Benz automobiles, furniture,
and vacations.
The trial evidence showed several
examples of the deficiencies at Houser’s nursing homes, including:
Inadequate staffing: Houser failed to
maintain a nursing staff that was sufficient to take proper care of the
residents. Staffing shortages started plaguing the homes after Houser started
writing bad paychecks to his employees, which resulted in numerous staff
resignations. Houser also withheld health insurance premiums from his
employees, but sometimes let the insurance lapse for non-payment, leaving many
employees with large unpaid medical bills for surgery and treatment. The
payroll and insurance problem, and unpaid garnishments prompted many employees
to seek work elsewhere and discouraged new applicants.
Inadequate physical environments: The
roofs in two of the homes were so leaky that employees used 55-gallon barrels
and plastic sheeting to catch and divert the rainwater. The leaks worsened over
time, but Houser never replaced the roofs, nor did he repair or replace broken
air conditioning and heating units. Fiberglass ceiling tiles would become
saturated with water until they fell out of the ceiling, occasionally on
residents’ beds. The residents kept their windows open to vent the foul odors
in the homes, but flies, other insects, and rodents easily entered the homes
through ill-fitting screens and doors. The insect problems were aggravated by
mounds of rotting garbage, which piled up around the dumpsters near the homes
because Houser failed to pay the trash collection services. The moisture and
inability to control the humidity in the homes gave rise to rampant mold and
mildew growth.
Failure to pay vendors: The Medicare and
Medicaid programs require nursing homes to provide sufficient dietary,
pharmaceutical, and environmental service to care for their residents’ needs.
Houser failed to provide these services, in part by failing to pay food
suppliers and vendors of pharmacy and clinical laboratory services, medical
waste disposal, trash disposal, and nursing supplies, and in part by failing to
repair washing machines and dryers, water heaters, air conditioners, and
leaking roofs. The nursing homes suffered continual food shortages, and
employees spent their own money to buy milk, bread, and other groceries so that
residents would not starve, but the employees were rarely reimbursed by Houser.
Employees also bought nursing supplies for the residents and cleaning supplies
for the homes, and they regularly had to wash the residents’ laundry in
laundromats or their own homes. One nursing home resident testified that
residents used to pass the time by making bets on which service or utility
would be the next to be cut off for nonpayment.
The Georgia Department of Human
Resources Office of Regulatory Services (ORS) received many complaints about
Houser’s nursing homes from families, staff, and vendors. After giving the
nursing homes many opportunities to correct deficiencies, the ORS closed the
two nursing homes in Rome in June 2007, and it closed the Brunswick home in
September 2007. One state surveyor inspected the Moran Lake home in Rome in
late May 2007, and she testified that the heat, flies, filth, and stench made
for an environment best described as “appalling” and “horrendous.”
In addition to the health care fraud
count, Houser was convicted of eight counts of deducting $806,305 in federal
payroll taxes from his employees’ paychecks but not paying that money over to
the IRS. Houser was also convicted of failing to file personal income tax
returns for 2004 and 2005.
Houser and his wife were indicted on
April 14, 2010. Rhonda Washington Houser pleaded guilty to misprision of the
felony of health care fraud in December 2011, and her sentencing date has not
yet been scheduled.
This case was investigated by special
agents of the Federal Bureau of Investigation; Health and Human Services,
Inspector General; and IRS-Criminal Investigation.
Assistant United States Attorneys Glenn
D. Baker and William G. Traynor are prosecuting the case.
For further information please contact
the U.S. Attorney’s Public Information Office at USAGAN.Pressemails@usdoj.gov
or (404) 581-6016. The Internet address for the HomePage for the U.S.
Attorney’s Office for the Northern District of Georgia is
www.justice.gov/usao/gan.
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