ASC's former CEO sentenced to 9.5 years in federal prison for role in $19.4 million fraud scheme
Former American Senior Communities CEO James Burkhart.
Former American Senior Communities CEO James Burkhart was sentenced Friday to 9 1/2 years in prison for his role in what U.S. Attorney Josh J. Minkler described as a “massive fraud, kickback and money-laundering conspiracy” through which the senior living and long-term care company leader and others funneled almost $19.4 million to themselves to fund luxury purchases.
Burkhart also was ordered to pay full restitution and serve three years of supervised release after his prison sentence is finished. Additionally, he will forfeit gold bars, gold coins and other seized assets.
“In spite of receiving a salary of over $1 million, Burkhart abused his official position of trust to steal taxpayer dollars intended to benefit this community's sick, elderly and mentally challenged,” Minkler said. “Because this thief was motivated by nothing other than corruption and greed, we sought a justifiably harsh sentence.”
Federal prosecutors had recommended that U.S. District Court Judge Tanya Walton Pratt impose a 12-year sentence, and Burkhart's attorneys had recommended a four-year sentence.
In a statement to McKnight's Senior Living, ASC said Pratt was “fair and honorable in her sentencing.”
“Mr. Burkhart's actions have not impacted the high standards of care to the residents who ASC has the privilege to serve,” the company's statement said. “We are pleased to move forward by continuing the tradition of quality care.”
Friday's hearing was the culmination of a three-year federal investigation and prosecution of Burkhart that began when a vendor who had been asked to be part of the scheme reported it to the FBI. The investigation, which also involved the Internal Revenue Service's Criminal Investigation Division and the Department of Health and Human Services' Office of Inspector General, included undercover informants, search warrants, an analysis of several shell companies and almost 100 bank accounts.
Also charged were ASC Chief Operating Officer Daniel Benson, Burkhart friend and associate Steven Ganote, and Burkhart's younger brother, Joshua.
In September 2015, federal agents raided Burkhart's home in Carmel, IN, and the ASC headquarters in Indianapolis, among other locations. Days later, ASC fired James Burkhart. Benson was fired, and ASC Chief Financial Officer Roger Werner resigned, in October 2015.
By October 2016, a federal grand jury had indicted the Burkharts, Benson and Ganote. And by January 2018, all of the defendants had pleaded guilty to federal felony charges. Benson is scheduled to be sentenced July 6; Ganote and Joshua Burkhart are scheduled to be sentenced July 9; and former landscape company founder David Mazanowski is scheduled to be sentenced July 10.
James Burkhart pleaded guilty to three federal felony offenses: conspiracy to commit fraud, conspiracy to violate the healthcare anti-kickback statute, and money laundering. He and his co-defendants funneled almost $19.4 million in fraud and kickbacks to themselves through several shell companies over approximately six years, according to the U.S. Attorney's Office.
ASC is Indiana's largest operator of senior housing and care facilities, with 94 locations offering independent living, assisted living, memory care, skilled nursing, rehabilitation, hospice care or home care throughout the state, according to its website. Burkhart used his position as CEO to cut secret side deals with more than a dozen of ASC's vendors, prosecutors said.
“In some cases, Burkhart had vendors inflate their bills to ASC, which Burkhart would pay with Health & Hospital's money, and the vendor would kick the overage back to Burkhart and his co-conspirators,” the Justice Department said. Health & Hospital Corp. of Marion County pays ASC to manage facilities it owns.
“In other cases, he formed shell companies that would inflate vendors' bills and submit them to ASC as if the shell companies were the real vendor,” the department said. “In still other cases, he caused vendors or shell companies to submit completely false bills for fictitious services that were never provided. And finally, in some cases, he simply demanded vendors to pay him kickbacks in exchange for him allowing them to service ASC's large number of facilities.”
Burkhart used the money to buy lakefront real estate, golf vacations, trips to Las Vegas, political contributions, diamond jewelry, gold coins and gold bars, according to prosecutors. He also spent more than $1.5 million on more than 150 flights on private jets, they said.
Prosecutors in the case, in addition to Minkler, included Assistant U.S. Attorneys Nicholas J. Linder and Cindy J. Cho. ASC said it was grateful to them and to the others “who uncovered his breathtaking web of frauds and brought him to justice.”