George D. Houser, 64, of Sandy Springs, Georgia, was sentenced 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.
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