Joseph Schwartz, pleads not guilty in tax case

Joseph Schwartz the former nursing home magnate charged last month in a multi-million dollar federal tax fraud scheme was arraigned in court in New Jersey on Monday, entering a not-guilty plea to charges that if. convicted could send him to prison for up to 10 years.

Appearing from his home in a video conference proceeding before U.S. District Court Judge Susan Wigenton in Newark, Schwartz said little as his lawyer, tax attorney Robert Fedor of Ohio, entered a plea on his behalf in a case alleging that he failed to withhold and pay employment taxes on behalf of thousands of employees, along with related charges.

Prosecutors in a 22-count indictment also alleged a widespread scheme of self-dealing which they charged had enriched Schwartz and helped finance an ill-fated expansion that allowed him to purchase dozens of nursing homes across the country.

Schwartz, 62, has been free since his indictment on a $2 million bond secured by his Suffern, N.Y., home, a five-bedroom four-bath gated house on more than an acre of property, records show.

The court has set to sign an order setting a schedule for the case, continuing the matter until May 6.

Schwartz headed Skyline Healthcare, a company he launched after acquiring his first nursing home in East Orange in 2005, court records show. The firm, which seemed to operate like some mom-and-pop business out of a small office above a Wood-Ridge pizzeria in Bergen County, once owned nearly 100 health care and rehabilitation facilities in Florida, Arkansas, North and South Dakota, Kansas, as well as New Jersey and elsewhere. But the empire ultimately collapsed amid financial insolvency, allegations of fraud, mismanagement, and neglect, according to lawsuits filed in multiple states.

Here in New Jersey, Skyline Healthcare operated three nursing homes: Hudson View Care & Rehab Center in North Bergen, Brookhaven Health Care Center in East Orange, and the Voorhees Care & Rehabilitation Center.

Schwartz had also sought to purchase the Andover Subacute and Rehabilitation Center in Sussex County, before the troubled facility came into the national spotlight over the discovery of 17 bodies, some being stored in a makeshift morgue, at the height of the COVID pandemic. The deal fell through as Skyline’s mounting financial problems came to light. It was later revealed that the new owners of the facility included his eldest son.

In depositions, Schwartz bragged about being “the largest nursing home chain operator in the country,” with a presence in 11 states. But court filings claimed Skyline Healthcare “had a habit of not paying bills to vendors, utilities, and landlords, or wages to its staff,” using a string of shell companies that existed in name only and served no practical purpose other than to attempt to avoid accountability and liability.

Schwartz was accused as well of diverting the cash generated by Skyline through inter-company transfers into closely held companies, those court filings alleged.

According to the federal indictment brought by the U.S. Attorney in New Jersey, Schwartz, who began his career as an insurance broker, sold that insurance business to another company in 2015 for approximately $22 million to finance the expansion of Skyline. He allegedly entered into an employment contract with the unidentified company as part of that transaction, receiving an annual salary of $300,000 and the right to collect commissions for selling insurance policies to Skyline-owned facilities and their employees. As Skyline acquired more health care and rehabilitation, prosecutors said, the other company sold more insurance policies, and Schwartz received larger commissions, the indictment noted.

Prosecutors said the $29.5 million tax scheme involved the alleged creation of several businesses to provide staffing and management services for approximately 15,000 employees of the Skyline-owned health care and rehabilitation facilities. Although owned by other individuals, those businesses were controlled by Schwartz, prosecutors claimed.

In addition, prosecutors said Schwartz allegedly did not file required reports with the Department of Labor relating to the financial condition, investments, and operation of the retirement plan.

The deliberate failure to collect and pay employment taxes, and tax evasion, is punishable by a maximum penalty of five years in prison and a maximum $10,000 fine, according to prosecutors. The two counts of evasion of unemployment taxes are punishable by a maximum of five years in prison and a maximum fine of $100,000. And each count of 401K benefit plan fraud is punishable by a maximum of 10 years in prison and a $100,000 fine.

In a separate civil lawsuit also being heard in federal district court in New Jersey, meanwhile, former employees allege that Skyline stole more than $2 million from their paychecks that was supposed to pay for their health insurance. Many said they were saddled with tens of thousands in unexpected medical debt.

Separately, the Nebraska Attorney General’s office last month accused Schwartz and his wife of orchestrating a $59.6 million Medicaid fraud that included the filing of fake cost reports which are required to be provided by long-term care facilities for payment by Nebraska Medicaid and the payment of vendors owned by Schwartz or his business associates at the expense of others.

And Schwartz has been charged criminally in Arkansas in connection with an alleged $3.6 million Medicaid fraud case. He is accused of illegally inflating rates at eight Arkansas nursing homes. He was also cited for allegedly failing to pay taxes that were withheld from employees’ paychecks, according to the state Attorney General’s office.