Contractor Kickbacks Result in Prison Sentence for Former Nursing Home Executive

320px-Roanoke_VA.jpegA former executive with a nursing home company based in Roanoke, Virginina has been sentenced to just over five years in prison after pleading guilty to multiple counts involving mail fraud and tax evasion. He was accused of receiving more than half a million dollars in kickbacks from contractors, awarding contracts based on payments rather than on bids, and falsifying tax returns in order to conceal such income. Four contractors have also faced prosecution for payment of kickbacks. The case is important to advocates for victims of nursing home abuse and negligence because of the importance of maintaining adequate facilities for the care of nursing home residents. Kickbacks and other forms of corruption compromise the ability of nursing home administrators to effectively care for their patients.

Roanoke-based Medical Facilities of America (MFA) operates over forty nursing homes located around North Carolina and Virginia. John D. Henderson worked for MFA as its director of maintenance and renovations. According to prosecutors, he demanded and received $541,821 in kickbacks from three or more companies between 1998 and 2006. Those companies then received more than $5 million in contracts from MFA for construction work at its facilities. Henderson allegedly created false records of higher bids from competitors to create the appearance of a competitive bidding process. He was also accused of filing fraudulent tax returns to conceal over $400,000 in income. MFA fired Henderson in 2006 after learning about the kickback scheme.

Prosecutors charged Henderson with conspiracy to commit mail fraud and tax evasion, alleging that Henderson defrauded his employer to its financial detriment. In March 2012, he pleaded guilty to two counts of conspiracy and two counts of tax evasion. At his sentencing hearing on July 19, the court imposed a sentence of five years and three months in prison. It also ordered Henderson to pay restitution totaling almost $700,000.

Four contractors accused of paying kickbacks to Henderson also pleaded guilty to related charges. Three of them reportedly claimed that Henderson demanded payment “as the cost of doing business.” They received probation. A fourth contractor was sentenced to thirty-seven months in prison. In denying a request from Henderson’s attorney for a lighter sentence, similar to those received by the contractors, the judge called Henderson the “hub” of the kickback scheme and said none of it would have happened without him.

The case is relevant to nursing home resident and patient safety because it affects how nursing homes make repairs and improvements. The normal bidding process is supposed to allow a facility to balance good service with affordable cost. Awarding contracts based solely on payment of kickbacks puts a facility at risk, even if the contractors are unwitting participants in the scheme.

Nursing homes have a duty to provide diligent care and a safe environment for their residents, and people injured when they breach this duty may be entitled to damages. The Maryland nursing home lawyers at Lebowitz and Mzhen help obtain compensation for people injured due to abuse or neglect by nursing home staff. Contact us today online or at (800) 654-1949 for a free and confidential consultation.

More Blog Posts:

Drug Tampering by Nurses Reveals Problems in Regulation and Hiring, Maryland Nursing Home Lawyer Blog, December 21, 2011
Maryland Home Health Care System Settles Medicaid Fraud Allegations, Maryland Nursing Home Lawyer Blog, November 3, 2011
Nursing Facility Fall Leads to Death of Escaping Resident, Maryland Nursing Home Lawyer Blog, April 28, 2011
Photo credit: ‘Roanoke VA’ by Bckdraft911 (Own work) [CC-BY-3.0], via Wikimedia Commons.

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