A U.S. District Court judge recently ordered a former nursing home operator who is facing federal and state criminal charges to pay $7.7 million to a medical supplies company, making it the second multimillion-dollar judgment against the New York businessman this year.
Joseph Schwartz, 62, of Suffern, New York, had signed a personal guarantee with Twin Med LLC of Santa Fe Springs, California, which shipped medical supplies and other equipment to Schwartz’s nursing homes, including about two dozen in Arkansas starting in late 2016 or early 2017, according to a lawsuit filed in 2019 in federal court in Little Rock. Schwartz’s Arkansas nursing homes were listed as defendants.
Twin Med said it was owed $5.1 million for outstanding invoices and sued Schwartz and his companies for breach of contract.
Following a ruling on a motion for summary judgment, U.S. District Judge James M. Moody Jr. on Aug. 18 awarded Twin Med $5.1 million for damages, $2.4 million for interest and $145,000 for attorneys fees and costs. Twin Med is represented by attorneys Karen Baker and Richard Donovan of the Rose Law Firm of Little Rock.
The judgment was the latest blow to Schwartz, a former insurance agency owner who began operating nursing homes in 2005. Schwartz’s Skyline Health Care LLC ran more than 100 facilities in 11 states and operated above a pizza parlor in Wood-Ridge, New Jersey.
In Arkansas, Skyline Health Care was in charge of 21 nursing homes with locations in Batesville, West Memphis, Little Rock and Fort Smith, among other cities.
In December, the Arkansas attorney general’s office said in a news release that Schwartz submitted false statements in cost reports and other documentation to the state’s Medicaid program. His former company, Skyline Health, allegedly exaggerated its costs by $6.3 million and was overpaid by $3.6 million. Schwartz is also charged with failing to pay more than $2 million withheld from his Arkansas employees’ paychecks to the state from July 2017 to July 2018, the news release said.
Schwartz also received tens of millions of dollars in gross income from his Arkansas facilities in 2018 and 2019 but failed to file an Arkansas tax return, resulting in a charge of failure to pay or file a tax return, the news release said.
The jury trial is scheduled for March 28 through April 7 before Pulaski County Circuit Judge Karen Whatley.
In January, Schwartz was indicted in federal court in New Jersey on 22 criminal counts that include benefit plan fraud and failing to pay $29.5 million in payroll and unemployment taxes.
During a Zoom arraignment on Feb. 7, Schwartz pleaded not guilty to all the charges. He was released on a $2 million bond. As of last week, a trial date had not been set.
Schwartz also received a $10 million judgment against him in a civil case in U.S. District Court in Little Rock stemming from the death of a 52-year-old woman at one of his nursing homes in 2018. Schwartz did not appeal that judgment.
Twin Med began working with Schwartz and his various companies in late 2016 or early 2017.
Schwartz and his nursing homes also signed an agreement according to which they would buy supplies exclusively from Twin Med for three years, and Schwartz personally guaranteed the contract.
Between May 2017 and January 2019, Twin Med supplied Schwartz’s nursing homes with medical supplies. Twin Med sued Schwartz and his companies in 2019 for unpaid invoices that totaled $5.1 million.
In May 2018, Skyline announced it was leaving the nursing home business weeks after the Arkansas Department of Human Services filed lawsuits to put Skyline’s Spring Place Health & Rehab in Hazen and Dierks Health & Rehab into receivership after concerns surfaced over the company’s finances and its ability to provide food to residents. Regulators also took over Skyline facilities in South Dakota, Kansas, Nebraska and Pennsylvania.
Schwartz “lost millions while operating the skilled nursing facilities in Arkansas,” according to his filing in the Twin Med case.
But during the case, Twin Med in its filing accused Schwartz and his companies of “engaging in every maneuver in the book to avoid complying with their discovery obligations.”
Twin Med said that “for almost three years it has had to file numerous motions to attempt to force Defendants to comply with their most basic discovery obligations.”
It also complained that it had not been able to get Schwartz, who is a key figure in the case, “to sit for his deposition and answer basic questions,” the filing said.
Schwartz’s attorney, Robert Fedor of Westlake, Ohio, had asked the judge to stay the case until after Schwartz’s criminal trials were over. Fedor also said in the filings that if Schwartz sat for a deposition, he would have to invoke his Fifth Amendment right against self-incrimination until the criminal matters are resolved.
Fedor didn’t return messages for comment last week.
Moody denied Schwartz’s request and ordered that his deposition be taken. Moody also said in the order that Schwartz’s criminal proceedings may not be completed for several years. “An extensive delay is particularly problematic here because the case has [been] pending for nearly three years,” he wrote in March. “Further, the probability that Plaintiff will be able to recover damages from Schwartz after he has paid years of criminal defense fees is minimal.”
Schwartz’s deposition was taken in April. “Schwartz testified that while he did not remember signing the [personal guarantee] in this particular matter, it was his practice to never sign a personal guarantee for any vendor,” Schwartz’s attorney wrote in a May motion.
Before the case reached a jury, Moody ruled in favor of Twin Med’s motion for summary judgment.
Moody’s order said that Schwartz didn’t deny that he signed the personal guarantee, and he didn’t deny that Twin Med provided products to Schwartz’s nursing homes.
“Defendants have failed to provide proof that there is a genuine issue of material fact as to Plaintiff’s breach of contract or breach of guarantee claims,” the order said.
Donovan, Twin Med’s attorney, told Arkansas Business last week that his client was pleased with the judgment.
He said, however, that he didn’t know what the likelihood was of collecting the judgment. “But we will register the judgment in any jurisdiction where this guy has property … and do our best to collect,” Donovan said.