The former owner of a collapsed national nursing home chain who ran more than 100 facilities out of a tiny office above a New Jersey pizzeria has pleaded guilty in federal court in connection with what prosecutors called a $38 million payroll tax fraud scheme.
Joseph Schwartz, whose Skyline Healthcare nursing home chain was the subject of an NBC News investigation, pleaded guilty to failing to pay the IRS employment taxes withheld from his employees and failing to file annual financial reports with the federal Labor Department.
If the court accepts his plea agreement, he will be sentenced to a year in prison and three years’ supervised release, with a requirement to pay $5 million in restitution. A sentencing hearing is scheduled for May.
“Joseph Schwartz admitted to defrauding the United States by failing to pay the IRS more than $38 million in payroll taxes,” New Jersey U.S. Attorney Philip R. Sellinger said. “Schwartz broke the law when he willfully withheld trust fund taxes from his employees but pocketed the money he had withheld rather than turning it over to the government; he will now be held accountable for his criminal tax violations.”
Kevin Marino, Schwartz’s attorney, did not immediately respond to a request for comment.
Court documents show that Schwartz operated Skyline Healthcare using an intricate web of more than 190 limited liability companies, or LLCs, nationwide that oversaw facilities across 11 states.
The rapid rise and fall of the Skyline chain from 2017 to 2019 resulted in more than a dozen Skyline-operated nursing homes’ shutting down, throwing residents, vendors, employees and state regulators into chaos.
The chain was also the subject of documented reports of abuse and neglect by state and local authorities that captured headlines.
The state of Arkansas issued Skyline facilities more than $200,000 in civil fines for neglect, preventable falls, failure to bathe residents and the presence of maggots in a resident’s personal medical equipment.
In September 2017, Skyline had taken over Ashton Place, a nursing home in Memphis, Tennessee. Less than two months later, a resident found lying in feces was taken to a hospital, where nurses discovered maggots and gangrene in his leg, according to a police report obtained by NBC affiliate WMC.
The neglect case led to a state investigation that resulted in federal regulators’ shutting down three Skyline nursing homes in Tennessee.
Even after Skyline’s collapse, problems continued to plague nursing homes linked to Schwartz.
In the first few weeks of the Covid pandemic, a New Jersey facility that was run by Louis Schwartz, a former Skyline executive, was found to have 15 bodies stuffed into a four-person morgue and 83 resident deaths from Covid. After an investigation, the state sought to take over the facility, but before plans were finalized the federal government terminated funding for the nursing home in August 2022, and residents were relocated to new skilled nursing homes. Louis Schwartz is Joseph Schwartz’s son. Both men have denied allegations of abuse and neglect.
Skyline’s collapse has often been cited as an example of why the federal government should scrutinize rapid changes in nursing home ownership. In September, the White House announced that new nursing home owners would be required to provide fingerprints for background checks and disclose more information about their ownership structures and their investors.
Schwartz still faces felony Medicaid and tax charges in Arkansas related to eight nursing homes he owned in the state.
Schwartz 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 as required by law, according to documents filed by the state attorney general.
He has pleaded not guilty. A hearing is scheduled for May.
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