Healthcare exec Philip Esformes pleads guilty to Medicare fraud, but spared prison time [Miami Herald]

A South Florida businessman pleaded guilty on Thursday to stealing millions of dollars from the taxpayer-funded Medicare program, capping a long-running healthcare fraud case marked by a commutation of his initial 20-year sentence by President Donald Trump in late 2020.

Philip Esformes, who formerly lived in Miami Beach while running a chain of skilled-nursing and assisted-living facilities, showed no emotion as a federal judge spared him from going back to prison but imposed tens of millions of dollars in financial penalties reflecting his ill-gotten gains.

Other than acknowledging his criminal activity as a healthcare operator who paid and received bribes in exchange for Medicare patients, Esformes said little during his change of plea hearing in Miami federal court and didn’t respond to a reporter’s question afterward.

The plea agreement was reached earlier this month between the Justice Department and Esformes in one of the nation’s biggest Medicare fraud cases. Despite Trump’s commutation of his initial prison term, Esformes faced a potential retrial on the main healthcare fraud conspiracy count and five related charges from his first trial in 2019 because a Miami federal jury deadlocked on those offenses while finding him guilty on 20 others.

The Justice Department vowed to retry Esformes as prosecutors negotiated a plea deal behind the scenes with his defense lawyers.

U.S. District Judge Robert Scola highlighted the “unusual” circumstances of Esformes’ healthcare fraud case, revealing for the first time what he thought about President Trump’s commutation of Esformes’ sentence after he had only served 4 1/2 years, including his time in detention after his arrest in July 2016.

“I can’t say that I was not disappointed when his sentence was commuted by the president,” Scola said, while pointing out that under the Constitution a president has the prerogative to grant clemency petitions.

Then, referring to a mob boss’ famous line in the Godfather II movie, the judge noted: “As Hyman Roth said, ‘This is the business we have chosen.’ ‘’

Before deciding to go along with the plea agreement reached by federal prosecutors and Esformes’ defense team, Scola asked a Justice Department lawyer why the agency was not recommending any more prison time for the defendant. On Thursday, Esformes, 55, pleaded guilty to a healthcare-fraud conspiracy charge involving bribery that carried up to 20 years in prison.

Prosecutor James Hayes acknowledged the unusual situation but pointed out that Esformes was pleading guilty to the “top count” in the indictment and paying nearly the entire restitution and financial judgments owed to the U.S. government. Hayes also noted the “finality” of the case, saying there would not be a costly second trial on the hung counts from the original trial.

One of Esformes’ lawyers, A. Scott Bolden, said his client has been a “model citizen” since he was released from prison more than three years ago.

“Mr. Esformes doesn’t have a whole lot more to give to the justice system,” Bolden told the judge as he supported his client’s plea deal.

Under the agreement, the other five hung charges from Esformes’ first trial alleging bribery payments, money laundering and obstruction of justice were dismissed by prosecutors with the Justice Department and U.S. Attorney’s Office in Miami. Esformes, who now lives in Palm Beach County, won’t have to serve additional prison time under the terms of the deal.

However, he’s required to pay $5.5 million in restitution to the federal Medicare program. He’s also required to pay at least $14 million from the sale of real estate and other business assets toward his outstanding forfeiture penalty of $38.7 million — the amount of money he received from Medicare through fraudulent billing at his Miami-Dade chain of assisted-living and skilled-nursing facilities between 2010 and 2016.

After the hearing, federal prosecutor Daren Grove said that Esformes has already paid the restitution amount and is expected to pay at least $30 million toward his forfeiture obligation.

READ MORE: Prosecutors will retry Miami healthcare mogul on hung charges from first fraud trial

How the plea agreement came to be

Word of a breakthrough in the difficult negotiations circulated earlier this month when Scola issued an order saying the parties “have reached a plea” agreement.

Over the past year, the court docket in Miami federal court showed the two sides repeatedly delayed a critical hearing with the judge to set a new trial date because of ongoing negotiations to resolve the criminal case.

Since his release from prison in late 2020, Esformes has kept a low profile. He failed to have his conviction and financial penalties overturned by a federal appeals court in Atlanta.

The U.S Supreme Court declined to hear Esformes’ appeal that the Justice Department’s plan to retry him on the remaining six hung counts amounted to “double jeopardy” and violated his constitutional rights in light of Trump’s commutation of his sentence. But Trump’s commutation was limited to his prison sentence, not his conviction and the deadlocked verdicts, Justice Department lawyers argued.

As federal prosecutors moved forward with retrying Esformes, they were also working behind the scenes to strike a possible plea deal and avoid another bruising trial.

More than seven years ago, top Justice Department prosecutors traveled to Miami for a news conference to unveil the $1 billion healthcare fraud case against Esformes, touting it as the biggest Medicare crime in history.

The first trial

When the former Miami Beach executive’s trial ended in 2019, Esformes was found guilty of 20 of 26 counts, including paying bribes, receiving kickbacks, committing money laundering and obstructing justice.

But the 12-person jury deadlocked on the main healthcare conspiracy charge. Although he dodged that main charge, Esformes was sentenced to 20 years in prison and ordered to pay $5.5 million to Medicare and an additional $38.7 million fine to the U.S. government.

But then, in a shocking blow to prosecutors, Trump commuted Esformes’ sentence in late 2020, allowing him to leave prison after serving 4 1/2 years behind bars, including his time in detention before trial. His conviction and fines remained intact.

Still, infuriated federal prosecutors vowed to retry Esformes on the six hung counts from his first trial.

Payments to get son into UPenn

Even by the standards of Miami’s rampant Medicare rackets, Esformes’ case stuck 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, along with other associates, billed $1 billion to Medicare and Medicaid over a decade.

Esformes, who went through a messy divorce, also acquired pricey real estate in Miami Beach and drove a Ferrari sports car. In addition, he used some of his ill-gotten Medicare proceeds to pay for prostitutes, five-star hotel stays and other personal expenses, according to court records.

Esformes, who had been detained without a bond after his arrest in July 2016, went to trial alone because two key conspirators — a physician’s assistant and a former Larkin Hospital administrator in South Miami who recycled Medicare patients for cash — had pleaded guilty and cooperated with prosecutors. Two other healthcare operators who steered Medicare patients to Esformes’ chain of skilled-nursing and assisted-living facilities had also pleaded guilty and testified against him.

In addition, an ex-Ivy League basketball coach testified that Esformes paid him hundreds of thousands of dollars to ensure a place for the healthcare mogul’s high school son on his basketball team. The former Penn coach, Jerome Allen, now an NBA assistant coach, testified that Esformes’ illicit payments enabled his son to be accepted to the University of Pennsylvania by reserving the spot for him on Allen’s basketball team. The son never played a game, though he ended up graduating from Penn.

In April 2019, the 12-person federal jury in Miami found Esformes guilty of most of the 26 charges, including a money-laundering count that expressly stated on the verdict form that the illegal proceeds came from healthcare fraud.

At his sentencing in September 2019, Judge Scola called Esformes’ scheme to generate thousands of Medicare patients for his chain of 16 assisted-living and nursing-home facilities in Miami-Dade “unmatched in our community, if not our country” and said he “violated [the system’s] trust in epic proportions.”

Trump’s commutation of Esformes’ sentence

Esformes was among 20 people — mostly political cronies of former President Trump implicated in scandals —whom Trump granted a full pardon or commutation of all or part of their sentences.

A statement issued by the White House noted that Esformes’ commutation was “supported” by former U.S. Attorney General Edwin Meese, who served under President Ronald Reagan, and Michael Mukasey, a former attorney general who served under President George W. Bush, as well as by former Deputy Attorney General Larry Thompson, who also served in the Bush administration.

The statement also highlighted that Esformes’ federal appeal of his 20-year sentence was backed by Meese, former Attorney General John Ashcroft and Attorney General Alberto Gonzales, who both served in the Bush administration. Kenneth Starr, the late GOP lawyer best known as an independent counsel who investigated President Bill Clinton, also backed the appeal.

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