Philip Esformes, an obsessive businessman who built an empire of healthcare facilities in Miami-Dade, was found guilty Friday of 20 charges, including paying bribes and kickbacks, in a scheme to generate streams of Medicare patients for his businesses.
The wealthy Miami Beach executive managed his chain of skilled-nursing and assisted-living facilities with an iron hand, with prosecutors arguing he had billed $1 billion to the federal health insurance program for questionable services that patients largely didn’t need or even receive.
Esformes faced 26 charges overall. The 12-person federal jury, after three full days of deliberation, came back with guilty verdicts on most of them in what was touted as the biggest Medicare fraud case in the country — in the reputed capital of such criminal activity, Miami. Jurors, however, did not reach a verdict on the main count — that Esformes had conspired to defraud the taxpayer-funded Medicare program.
Esformes, 50, went to trial alone in February because two key conspirators — a physician’s assistant and a former Larkin Hospital administrator who recycled patients for cash — had pleaded guilty. Several other healthcare associates charged with Medicare fraud in related cases had also pleaded guilty and cooperated with federal prosecutors, including some who testified against him.
Esformes, who was arrested in July 2016 and has been held without bond at the federal detention center, could spend the rest of his life in prison, even without a healthcare fraud conspiracy conviction. He faces a forfeiture hearing before the jury on Monday. No sentencing date has been set before U.S. District Judge Robert Scola.
One of Esformes’ defense attorneys, Roy Black, focused on the fact that the jury was hung on the indictment’s main conspiracy count of defrauding the Medicare program.
“For three years, they [prosecutors] have touted this case as a $1 billion healthcare fraud and they failed to prove it,” Black said.
“The jury was unable to reach a verdict on that and several other counts; however, they did obviously find him guilty of a number [of other counts],” Black added. “It’s certainly a mixed bag.”
The deadlocked verdict on the main conspiracy count was puzzling to some legal observers because jurors found Esformes guilty of bribery and paying and receiving kickbacks to generate Medicare patients for his facilities as well as those of other healthcare operators. It is possible that some of the jurors believed Esformes’ facilities provided healthcare services to patients and therefore did not technically fleece the federal program.
Despite the mixed results, especially on the hung healthcare fraud count, the Justice Department declared total victory.
“Philip Esformes orchestrated one of the largest healthcare fraud schemes in U.S. history, defrauding Medicare and Medicaid to the tune of over a billion dollars,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “I commend our dedicated prosecutors and law enforcement partners for their professionalism and unyielding pursuit of justice on behalf of American taxpayers and vulnerable beneficiaries who, as a result of Esformes’ crimes, were denied the level of care that they needed and deserved.”
At trial, convicted healthcare operators, the former hospital administrator and an ex-Ivy League basketball coach testified that Esformes paid them and various doctors hundreds of thousands of dollars in bribes to buy and sell patients as well as to get his son into the University of Pennsylvania. Esformes himself made $38 million from Medicare and Medicaid payments between 2010 and 2016.
“Ladies and gentlemen, the amount of cash was staggering,” Justice Department lawyer Allan Medina said in a packed Miami federal courtroom during closing arguments last week. “When you commit fraud of this magnitude, it’s a win-win for all the partners in crime. Philip Esformes has a commodity, the patients. Philip Esformes has the doctors to do what he wants them to do.”
A fellow prosecutor, James Hayes, later described Esformes as a “vampire” who preyed on hospital patients to fill the beds in his chain of 16 nursing homes and ALFs. Hayes’ inflammatory description prompted the defense to call for a mistrial at the end of closing arguments, but Judge Scola denied the request while reprimanding the prosecutor.
At trial, Esformes’ defense team tried to show that his patients, whether coming out of hospital surgery or suffering from mental illness, received the care they needed in his facilities under Medicare and Medicaid coverage. His principal defense lawyer, Black, described Esformes as an “obsessive” businessman who never paid a single doctor for referring Medicare patients to his chain of facilities and never sold any of his patients to other healthcare operators to bilk the federal insurance program for the elderly, disabled and poor.
Black argued that the prosecution’s 40 hours of undercover recordings of Esformes by two healthcare operators — Guillermo and Gabriel Delgado, who later pleaded guilty — showed that he was clean because he never uttered a word about bribes, kickbacks or other criminal activity.
“They had plenty of time where they discussed the case,” Black told the jurors, describing the interactions of Esformes and the Delgado brothers. “But never once, not once ... is there any evidence of Philip Esformes defrauding Medicare or Medicaid. ... So what’s on the 40 hours? There’s nothing about paying doctors, [there’s] nothing about paying kickbacks, there’s nothing about receiving kickbacks, there’s nothing about receiving cash.”
Jurors apparently disagreed after weighing two months’ worth of evidence — undercover recordings, financial documents, text messages and testimony from convicted associates — in a case built mostly upon conspiracy charges involving healthcare fraud, bribery, paying and receiving kickbacks, money laundering, and obstruction of justice. Esformes was convicted of 20 of those charges, excluding the healthcare fraud count.
Even by the standards of Miami’s rampant Medicare rackets, Esformes’ case sticks out for its sheer size. Before his assets were frozen after his arrest in July 2016, the Chicago transplant owned dozens of local healthcare businesses that billed $1 billion to Medicare and Medicaid over the past decade. Esformes, who went through a messy divorce, also acquired pricey real estate in Miami Beach and drove a Ferrari sports car. With his conviction, prosecutors will now go after his substantial assets traceable to his crime in a forfeiture action.
With his corporate and personal assets frozen, Esformes’ father, Morris, paid for the son’s costly defense, which has included lawyers from Black’s high-profile law firm and other attorneys. The father, with his son’s assistance, had amassed a fortune in the healthcare field in Chicago before they set their sights on Miami, where they got into trouble with the law for the first time in 2006. Back then, the Esformes family and the owners of Larkin Hospital paid $15.4 million to the U.S. government in a Justice Department settlement to resolve a civil violation of recycling patients between the hospital and the family’s nursing-home facilities and ALFs — a precursor to the current criminal case.
Since then, according to the Justice Department’s indictment, Esformes used his network of 16 Miami-Dade skilled-nursing and ALFs to defraud the Medicare and Medicaid program by filing false claims for services that were not necessary or not provided over the decade leading up to his arrest.
Larkin Hospital in South Miami referred some of the thousands of Medicare patients to Esformes’ network as a result of bribery payments that he made to physicians and other medical professionals, according to trial evidence.
Esformes was also accused of referring his own network of patients to convicted healthcare-fraud offenders, including Guillermo and Gabriel Delgado, who are serving prison time. The brothers, both licensed nurses, admitted swindling Medicare for mental-health, prescription-drug, and home-healthcare services, and they ultimately helped federal investigators target the Miami Beach executive.
Both testified that they paid kickbacks for Esformes’ patients by disguising them as payments for escort services for Esformes as well as related travel and hotel expenses, including at the Ritz-Carlton in Orlando. The brothers also testified that they paid Esformes cash.
Gabriel Delgado, who described himself as a right-hand man to Esformes, testified that he turned on Esformes after the healthcare mogul suggested he kill himself rather than face charges together.
Esformes was also charged with obstructing justice because prosecutors say he plotted in 2015 with the Delgado brothers to help one of them leave Miami for Israel to avoid trial. Unbeknown to Esformes, the co-conspirators, who had already been charged with sharing Medicare patients with him in the alleged kickback scheme, recorded a two-hour conversation with him before Esformes was indicted the following year. The secret recording was carried out as part of the brothers’ cooperation deal with the feds to plead guilty.
Esformes was also accused of paying bribes through Gabriel Delgado to a state healthcare administrator, Bertha Blanco, who also pleaded guilty, so that he could receive inspection reports in advance for unannounced visits to his facilities in Miami-Dade.
Perhaps the most riveting testimony at Esformes’ trial came from a former University of Pennsylvania head basketball coach, Jerome Allen, who got to know the businessman through a fellow coach who trained his son. He testified that Esformes paid him about $300,000 in cash bribes and wire transfers to place his son, Morris, on a priority list as a “recruited basketball player” so he could be accepted to Penn and its exclusive Wharton School of Business.
Allen, now an assistant basketball coach with the Boston Celtics, said Morris Esformes was not cut out for Division I basketball. But in exchange for bribes, the coach testified that he still put him on a short list of five recruits to get him into the Ivy League school. Morris Esformes didn’t make the team after entering in the fall of 2015, though he is expected to graduate this spring.
Allen, who was fired in March 2015 after a string of losing seasons before Esformes’ son started at Penn, pleaded guilty to a bribery-related money-laundering charge. He will be sentenced in mid-April.