Miami healthcare exec Esformes sentenced to 20 years in biggest Medicare fraud case

Sep. 12--Philip Esformes, who once reigned over a healthcare kingdom that made him a super-rich man, was sentenced to 20 years in prison Thursday for paying bribes and receiving kickbacks in a massive $1 billion Medicare fraud case touted by federal prosecutors as the biggest in the nation.

U.S. District Judge Robert Scola said Esformes' scheme to generate thousands of Medicare patients for his chain of assisted-living and nursing-home facilities in Miami-Dade was "unmatched in our community, if not our country."

The judge said the taxpayer-funded Medicare program for the elderly and indigent was built on an honor system, and that "Mr. Esformes violated that trust in epic proportions."

Before Scola issued his punishment, the wealthy Miami Beach business executive sobbed as he apologized to the judge. "I lost everything I loved," Esformes, 50, said, admitting he was a "broken" man who was "disgusted" by his criminal activity. "I destroyed my marriage. I scarred my three children. There is no one to blame but myself. I accept responsibility for what I have done and regret it."

Convicted at trial in April of 20 healthcare-related bribery, kickback and money-laundering charges, Esformes gave an emotional 16-minute speech that generally acknowledged his criminal life but also aimed for mercy. He has been held in the Miami federal detention center since his arrest three years ago.

"Your honor, I don't want this [crime] to be the only legacy I leave behind," said Esformes, whose lawyers and supporters in the courtroom spoke of his personal and financial charity, especially in the Jewish, medical and academic communities.

Justice Department prosecutor Allan Medina said Esformes not only exploited patients to line his pockets at his chain of 16 assisted-living and skilled-nursing facilities, but "corrupted" the whole Medicare system in his zeal to fill patient beds without providing actual care.

"He corrupted the entire system -- the Medicare and Medicaid system," Medina said. "Philip Esformes had every opportunity. He had wealth, [making] $78 million in 2017. ... He has no excuse for what he did. He has no respect for the law. He has no remorse whatsoever.

"He was the boss," Medina said. "He bullied people to get what he wanted."

Justice Department prosecutors Medina, Elizabeth Young and James Hayes argued that Esformes had billed $1 billion to the federal health insurance program for questionable services that patients largely didn't need or even receive between 2006 and 2016. For his sentencing, they estimated the government's loss at more than $550 million and urged the judge to give Esformes 30 years in prison.

However, one of Esformes' defense attorneys, Howard Srebnick, argued that the government's estimated loss to Medicare was grossly inflated. He said the loss was as low as $690,000 and argued for a 10-year sentence.

Scola then cut Esformes a break, saying the loss was between $4.9 million and $8.3 million, which helped reduce the defendant's potential sentence significantly. Scola called his estimate "highly conservative."

At a critical juncture before he imposed Esformes' punishment, the judge seemed willing to lower his final sentence by four years if the defendant agreed to elaborate on his "acceptance of responsibility" in his original statement to Scola. The judge said he would only acknowledge Esformes' acceptance if he specifically admitted he paid bribes and committed other crimes. But, after Srebnick consulted with counsels Roy Black and Jackie Perczek, Esformes' legal team chose not to go that route because it would have precluded their appeal of his trial convictions.

"There's not much more Mr. Esformes will say today about his feelings and remorse," Srebnick told the judge, arguing he has suffered greatly in federal detention, endured unending shame, and is no longer the arrogant man he was before his arrest.

In April, a 12-person federal jury found Esformes guilty of most of the 26 charges brought against him in an indictment filed after his arrest in 2016. Jurors, however, did not reach a verdict on the main count -- that Esformes had conspired to defraud the taxpayer-funded Medicare program.

Esformes went to trial alone 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.

The deadlocked verdict on the main conspiracy count against Esformes was puzzling 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.

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 Esformes' son into the University of Pennsylvania. Esformes himself made $38 million from Medicare and Medicaid payments between 2010 and 2016.

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.

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 Esformes' corporate and personal assets frozen, his 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.

"This is not a mistake," Medina, the Justice Department prosecutor, said at Thursday's sentencing about Esformes' history of fleecing the Medicare system. "Day after day, this defendant chose to steal, this defendant chose to bribe. ... Mr. Esformes asked for a second chance of redemption. He had that chance" after the previous civil settlement with the government.

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 convicted of obstructing justice for plotting in 2015 with the Delgado brothers to help one of them leave Miami for Israel to avoid trial. Unbeknownst 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 convicted of paying bribes through Gabriel Delgado to a state healthcare administrator, Bertha Blanco, who also pleaded guilty, so that Esformes could receive inspection reports in advance for unannounced visits to his facilities in Miami-Dade.

A highlight at Esformes' trial was the testimony of 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.

Morris Esformes didn't make the team after entering the Ivy League school in the fall of 2015, but he graduated four years later. He sat by his father's side during Thursday's sentencing.

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 was given a probationary sentence and paid a $202,000 fine and a forfeiture judgment of $18,000.

On Thursday, Judge Scola said he decided to give Esformes 20 years in prison because his criminal activity covered almost every aspect of his life over a long period of time.

"I think Mr. Esformes is a complicated man. He's something of an enigma," Scola said. "He was obsessed with doing everything, but he was obsessed in a bad way."

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