Alzheimer Center Founder Accused of Stealing Funds

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Fraud Probe Dogs Entrepreneur

Alzheimer Center Founder Accused of Stealing Funds

By KATE BERRY

Staff Reporter

For years, Beverly Hills lawyer and health care entrepreneur Robert Kasirer has fought off a string of fraud accusations and monetary judgments that resulted when his business ventures went sour.

While bond investors and lenders have sought repayment, Kasirer the son of a philanthropist and health care executive has continued to live a lifestyle that costs, by his estimate, $122,000 a month. Despite his admitted business setbacks, Kasirer serves on research boards at both UCLA and at the University of Pennsylvania, where he and his wife also chair the parents’ volunteer program committee.

The good days may finally be numbered.

Earlier this month, Kasirer was subpoenaed by a federal grand jury in Los Angeles investigating Medicare fraud. His lawyers, citing the possibility of a criminal indictment, were able to place on hold a lawsuit seeking class action status that alleges he defrauded hundreds of municipal bond investors, according to documents filed in the civil case.

Many of those investors had already been victimized once, by Alzheimer’s disease, by the time they encountered Kasirer, according to documents in the 273-page lawsuit, filed in U.S. District Court for Central District of California.

Kasirer is involved in numerous other legal scrapes, some related to the non-profit operator of the Alzheimer’s facilities, Heritage Healthcare of America, and some not. He has created dozens of companies under various names, and has been the subject of investigations by the Justice Department, the Internal Revenue Service and the Securities and Exchange Commission.

“We have all the evidence to prove Kasirer is a crook who defrauded elderly bond investors,” said Brian Barry, a lawyer representing hundreds of bondholders. “There were kickbacks to all of the parties involved, his wife was on the payroll and then the lawyer in the case simply destroyed all of the documents. The whole scheme was deliberate and detailed.”

Kasirer’s current civil attorney, Gary Kurtz, would not comment on the lawsuit, nor would his criminal defense attorney, Jack DiCanio. Calls to Kasirer’s home were not answered.

Justice Department officials declined to discuss the grand jury case.

Paper trail

Beginning in 1996, Kasirer began purchasing shuttered hospitals from HCA Inc., then called Columbia/HCA, a hospital operator that was facing its own allegations of fraud.

His plan was to open a string of centers to treat Alzheimer’s disease, according to court filings. He formed Heritage Healthcare and related entities to buy the facilities he already owned at a considerable mark-up, and recruited municipalities to issue the bonds to fund the deals.

According to Barry, Heritage drew elderly investors, many of whom were related to Alzheimer’s patients. The lawsuit alleges that Kasirer pocketed millions from $130 million in proceeds that were raised to open 10 Alzheimer’s facilities in four states.

Only five of the facilities eventually opened, and all have since been closed. The only one in California, Rancho Hospital in Rancho Cucamonga, was shuttered in August 2000 after the government asserted it had engaged in Medicare fraud.

As much as $20 million of the bond proceeds cannot be accounted for, according to the complaint filed in U.S. District Court. “These bonds should never have been issued,” Barry said. “Investors were deceived.”

Court filings raise questions on other fronts.

Earlier this year, Kasirer and his wife Debra were sued by Alliance Bank of Culver City for failing to make payments on a $750,000 loan they received in 2001.

In a declaration in that lawsuit, filed in L.A. Superior Court, Kasirer said the bank gave him the loan for personal reasons.

After using about $150,000 for construction work and furnishing of a second home, and lending another $250,000 to a friend, Kasirer said he had used “the rest of the money for my living expenses, as I am between career opportunities and my last business venture was not successful.”

He went on to cite a minimum of $122,208 in monthly living expenses, including: $16,000 for his gated house on the 600 block of Canon Drive in Beverly Hills; $7,600 for a ski house in Park City, Utah; $4,350 for auto expenses; $5,100 in religious dues and donations; $12,000 for his children’s tuition; and $45,000 for legal fees.

Kasirer’s personal spending patterns pop up frequently in the allegations involving Heritage Healthcare.

The investors’ complaint alleges that he “caused the improper transfer of bond monies to himself, his wife and/or his companies,” even while he was paid a salary of $920,000 a year from 1997 to 2000.

Debra Kasirer also received more than $1 million in salary and consulting fees from Heritage Healthcare through her own company, Mishkan Healthcare, which lists the couple’s Beverly Hills home as its business office.

Robert’s father, Jacob Kasirer, is an executive at Golden State Health Centers Inc. in Sherman Oaks and an active philanthropist who donated enough money to Bais Yaakov High School on Beverly Boulevard to get his name engraved on the building. His company was paid at least $198,000 in consulting fees by Heritage Healthcare and was listed as a supervisory manager in one of the bond offerings, according to the complaint.

Jacob Kasirer, who is not a defendant in the lawsuit, did not return calls.

Health care history

Kasirer graduated from St. John’s University School of Law in 1973 and became a member of the New York bar, according to court papers, then affiliated with Golden State, his father’s company, for a decade. Starting in 1988, Kasirer began working on his own as a real estate promoter of retirement housing and health care facilities.

It’s been a checkered history. In 1990, he was president of Retirement Housing Corp., which planned to develop and manage three six-story assisted living apartments buildings in Lincolnwood, Ill. In 1991 he was president of CongreCare Inc., a developer of a proposed retirement complex for military officers in Colorado Springs, Colo. called Liberty Heights. Both those deals involved bond offerings that are still under investigation by the IRS, according to news reports.

According to a 1992 story in the Los Angeles Times, Kasirer was president of Beverly Hills Medical Holdings, which purchased Beverly Hills Hospital and became the subject of several lawsuits.

That same year, Kasirer borrowed $3 million from Johnson & Johnson Finance Corp., the financing unit of Johnson & Johnson. He defaulted the following year, and the lender obtained a $4.4 million judgment against him in 1996. According to the investors’ complaint, Kasirer used a $300,000 loan from Heritage Healthcare to settle the judgment, a loan that was never repaid.

According to the federal lawsuit, Heritage Healthcare of America which raised the bond money in 12 separate offerings was part of a family of companies that included the for-profit Heritage Housing Development. The plaintiffs allege he controlled all the companies, even though he wasn’t an officer of the non-profit.

The lawsuit alleges that Kasirer, his associates, his wife and his father collected millions of dollars in consulting fees and illegal payments, such as feasibility studies, that ultimately caused the Alzheimer’s facilities to run out of money and collapse.

The suit names nearly 50 other defendants that were somehow involved in Heritage Healthcare. They include U.S. Trust, the wealth management division of Charles Schwab & Co., which served as the custodian of the bonds’ proceeds; and underwriter Miller & Schroeder, a now-bankrupt Minneapolis bond firm with an office in Solana Beach.

Miller & Schroeder’s San Diego attorney, Joel Boehm, claims he lost all the files related to the bond offerings, according to the attorneys representing his current law firm.

Other corporate defendants include law firm Foley & Lardner, which acted as bond counsel for one offering; Berman & Associates of Los Angeles, an inspecting architect on several of the deals; and Sobelman Cohen & Sullivan, a Woodland Hills accounting firm that prepared Heritage’s tax returns.

Early warning signs

Even as Heritage’s ability to make the bond payments was being questioned, the companies continued to raise money for new facilities through new bond offerings, according to the complaint.

“Rather than shore up their balance sheets with responsible and honest business practices, they instead opted to make up operating shortfalls by poaching proceeds of new bond issues,” it alleges.

An attorney for U.S. Trust did not return calls.

The bonds were unrated and each was issued by a small municipal entity that received fees from the offerings but was not liable for the bonds themselves. From the beginning there were problems.

The first offering of $13 million was issued by the city of Desert Hot Springs for Rancho Hospital. The city agreed to act as municipal issuer in order to pocket $70,000 in fees, said its lawyer, Charles Green. Desert Hot Springs eventually filed for bankruptcy.

But the lawsuit alleges that in 1996, as the Rancho Hospital offering was about to close, “Robert and Debra Kasirer decided to use the bondholders’ money to pay for a trip to Hawaii for themselves” by arranging for a board meeting to be held on Maui.

At the meeting, board members discussed the numerous costs overruns and delays at each of the company’s Alzheimer’s facilities. The overruns ultimately caused a commingling of the bond monies, which is prohibited by bond covenants, according to the lawsuit.

Eventually, Rancho Hospital was accused by the federal government of Medicare fraud that totaled between $10 million and $20 million, according to the suit. Some $2.3 million in Medicare reimbursements were billed for services that were purportedly rendered in a part of the facility that was never operational, according to the lawsuit.

Other facilities had problems too.

In 1999, the Texas Department of Human Services conducted an investigation of a Heritage facility in Houston where “residents requiring an incontinence program did not receive help, residents were abusing each other without repercussions and a raging scabies epidemic was not contained,” according to the lawsuit.

A Sarasota, Fla., facility was apparently built on a flood plain, causing an employee to complain that alligators often roamed the grounds and were a safety concern to the elderly patients, the lawsuit states.

By 2000, Heritage was unable to make debt service payments on the bonds and accounting irregularities were being uncovered at its assisted living facilities, according to the lawsuit.

At the same time, Medicare allegedly was disallowing charges for management fees and program costs at the Rancho Hospital and the SEC had launched its own investigation. Bondholders were then notified by U.S. Trust that Heritage had defaulted on the bonds.

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