Atlanta Man Convicted of Billing $32.9 Million for Worthless Services While Operating “Horrendous” Nursing Homes

Atlanta Man Convicted of Billing $32.9 Million for Worthless Services While Operating “Horrendous” Nursing Homes 
Defendant Bought Real Estate and Planned to Build a Hotel While Residents Went Without Food

U.S. Attorney’s OfficeApril 03, 2012

Northern District of Georgia(404) 581-6000

ROME, GA—George Dayln Houser, 63, of Atlanta, has been convicted on charges of conspiring with his wife to defraud the Medicare and Medicaid programs by billing them for “worthless services” in the operation of three deficient nursing homes between July 2004 and September 2007. Medicare and Medicaid paid Houser more than $32.9 million during that time for food, medical care, and other services for nursing home residents that he either did not provide or that were so deficient that they were worthless. 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 by 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 a bench trial, which Judge Murphy conducted from January 30, 2012 through February 28, 2012. In addition to the health care fraud 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.

“It almost defies the imagination to believe that someone would use millions of dollars in Medicare and Medicaid money to buy real estate for hotels and a house while his elderly and defenseless nursing home residents went hungry and lived in filth and mold,” said United States Attorney Sally Quillian Yates. “We will continue to aggressively protect our most vulnerable citizens and hold accountable those who prey on the elderly and steal precious healthcare dollars.”

Brian D. Lamkin, Special Agent in Charge, FBI Atlanta Field Office, stated, “While the FBI works tirelessly to protect the federally funded Medicare and Medicaid programs from abuse, we are also working hard to protect those that these much needed health care programs were intended to serve. The Housers’ actions have left an indelible mark on all of those individuals who assisted in bringing this matter forward. The level of greed and lack of compassion for others that was seen in this case reflect the very reason that the FBI, in working with its many and varied law enforcement partners, dedicates vast investigative resources in combating health care fraud.”

“To see nursing homes residents subjected to such horrendous conditions, while Mr. Houser used Medicare and Medicaid funds as his personal piggy bank, is a travesty,” 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. “The Office of Inspector General and our law enforcement partners will aggressively investigate and then bring these criminals to justice.”

“The guilty verdict in this case is an important victory for the American taxpayer,” said Rodney E. Clarke, IRS Criminal Investigation Special Agent in Charge. “The IRS, along with our law enforcement partners, will vigorously pursue individuals who victimize the less fortunate in our society while holding positions of trust. I believe justice has been served in this case, and the defendant will now be held accountable for his actions.”

According to United States Attorney Yates, the charges, and other information presented in court, or contained in Judge Murphy’s findings of fact and conclusions of law: Houser and his wife ran 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 ran a 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 $39.4 million, and they paid him $32.9 millionm 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 sharp contrast to the pretenses under which Houser accepted Medicare and Medicaid payments, the court concluded that the evidence 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 “the supposed ‘care’ defendant provided to residents during the relevant time period was so deficient that the bundle of services had no medical value.”

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 let the insurance lapse for non-payment, leaving many employees with large unpaid medical bills for surgery and treatment. The payroll and insurance problems and unpaid garnishments prompted many employees to seek work elsewhere and discouraged new applicants.

Inadequate physical environments: The roofs in two 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. Employees also bought nursing supplies for the residents and cleaning supplies for the homes, and they also washed the residents’ laundry in laundromats or their 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 (DHR) Office of Regulatory Services (ORS) received many complaints about the Housers’ nursing home 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 wrote worthless checks to the IRS worth hundreds of thousands of dollars at the same time that he was using the nursing homes’ funds to buy real estate. Houser was also convicted of failing to file personal income tax returns for 2004 and 2005.

Houser and his wife Rhonda Washington Houser, 48, of Atlanta, were indicted on April 14, 2010 and charged with conspiring to defraud Medicare and Medicaid in the operation of two nursing homes in Rome, Georgia and another in Brunswick, Georgia. Rhonda Washington Houser pleaded guilty to misprison of the felony of health care fraud in December 2011, and she awaits sentencing. Houser’s sentencing is tentatively scheduled for June 2012.

The health care fraud charge against Houser carries a maximum sentence of 20 years in prison and a fine of $250,000. The eight counts that charge Houser with failing to pay over payroll taxes to the IRS each carry a maximum sentence of five years in prison and a fine of $10,000 per count. The charges that Houser failed to file tax returns carries a maximum sentence of one year in prison and a fine of $25,000. In determining the actual sentence, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

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 Baker and William Traynor are prosecuting the case.