The Department of Justice (DOJ) recently announced that the CEO of Indiana-based American Senior Communities (ASC) was sentenced to over 9 years in federal prison for his involvement in a “massive fraud, kickback, and money laundering conspiracy.” This is the latest in a series of cases in which federal authorities have held health care executives personally liable for corporate misconduct.
James Burkhart pleaded guilty to three federal felony offenses: conspiracy to commit fraud, conspiracy to violate the anti-kickback statute and money laundering. Burkhart and his co-conspirators funneled nearly $19.4 million in fraud and kickbacks to themselves through a web of shell companies, with most of the money originating from Indiana’s public health system. Burkhart then used this money to purchase property, vacations, jewelry and even gold bars.
The DOJ press release reported that Burkhart once told a vendor, who would later become an informant, “I’ll get mine, I always told ya, I’ll get mine one way or another.” Burkhart and his co-conspirators asked the vendor to inflate his bills by 30 percent and pay the overage to one of their shell companies. The vendor refused and went to the FBI, which then launched an investigation along with the IRS and HHS-OIG.
The personal liability trend began with the DOJ’s publication of the “Yates Memo” in September 2015. Named after former Deputy Attorney General Sally Yates, the memo directed DOJ attorneys to follow six “key steps” for the prosecution of individuals when reviewing corporate fraud and abuse. Prior to the Yates Memo, there was an average of 5-6 settlements per year where individuals were personally named. In 2017, there were at least 33.
In addition to jail time, Burkhart’s gold bars and other seized assets will be criminally forfeited, and he will be required to pay full restitution and serve three years of supervised release following his prison sentence. His co-defendants are being sentenced in four separate hearings this month.