### People v Abraham Operations Assoc. LLC 2024 NY Slip Op 32976(U) August 23, 2024 Supreme Court, New York County Docket Number: Index No. 451549/2023 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local government sources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.NYSCEF DOC. NO. 886 INDEX NO. 451549/2023 RECEIVED NYSCEF: 08/23/2024

PRESENT: 

### SUPREME COURT OF THE STATE OF NEWYORK NEWYORK COUNTY HON. MELISSA A. CRANE PART Justice 60M

---------------------------------------------------------------------------------X INDEX NO. 451549/2023

PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, ATTORNEY GENERAL OF THE STATE OF NEW YORK, Plaintiff,

- V - ABRAHAM OPERATIONS ASSOCIATES LLC OBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING, DELAWARE OPERATIONS ASSOCIATES LLC OBA BUFFALO CENTER FOR REHABILITATION AND NURSING, HOLLIS OPERATING CO LLC OBA HOLLISWOOD CENTER FOR REHABILITATION AND HEALTHCARE, SCHNUR OPERATIONS ASSOCIATES LLC OBA MARTINE CENTER FOR REHABILITATION AND NURSING, LIGHT PROPERTY HOLDINGS ASSOCIATES LLC,DELAWARE REAL PROPERTY ASSOCIATES LLC,HOLLIS REAL ESTATE CO LLC,LIGHT OPERATIONAL HOLDINGS ASSOCIATES LLC,LIGHT PROPERTY HOLDINGS II ASSOCIATES LLC,CENTERS FOR CARE LLC OBA CENTERS HEALTH CARE, CFSC DOWNSTATE LLC,BIS FUNDING CAPITAL LLC,SKILLED STAFFING LLC,KENNETH ROZENBERG, DARYL HAGLER, BETH ROZENBERG, JEFFREY SICKLICK, LEO LERNER, REUVEN KAUFMAN, AMIR ABRAMCHIK, DAVID GREENBERG, ELLIOT KAHAN, SOL BLUMENFELD, ARON GITTLESON, AHARON LANTZITSKY, JONATHAN HAGLER, MORDECHAI MOTi HELLMAN, Defendant.

---------------------------------------------------------------------------------X 02/13/2024, MOTION DATE 02/13/2024 MOTION SEQ. NO. 002 003

DECISION 

### + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 002) 779, 780, 781, 782, 783,810,860 were read on this motion to/for DISMISS The following e-filed documents, listed by NYSCEF document number (Motion 003) 784, 785, 805, 806, 807,808,809,811,812,813 were read on this motion to/for DISMISS The Attorney General ofthe State ofNew York commenced this special proceeding, pursuant to NY Executive Law § 63 (12), by filing its verified petition on June 28, 2023

451549/2023 PEOPLE OF THE ST ATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 1 of 21 Page 1 of 21


### [* 1]NYSCEF DOC. NO. 886 INDEX NO. 451549/2023 RECEIVED NYSCEF: 08/23/2024
(NYSCEF DocumentNumber [Doc] 1 [verified petition]). In Motions 2 and 3, respondents
move to dismiss the petitionpursuant to CPLR 3211 (a) (1), (a) (7), and (a) (8). Background The facts are from the petitionunless noted otherwise. Petitioner asserts that the respondents engaged in persistent fraud and illegalityin their operation, ownership, and control offour nursing homes: Beth Abraham Center for Rehabilitation and Nursing in the Bronx ("Beth Abraham Center"); Buffalo Centerfor Rehabilitation and Nursing in Buffalo ("Buffalo Center"); Holliswood Center for Rehabilitation and Healthcare in Queens ("Holliswood Center"); and Martine Centerfor Rehabilitation and Nursing inWhite Plains ( "Martine Center") (collectively, the "NursingHomes"). According to the petition, all ofthe Nursing Homes are operatedby Centers for Care LLC ("Centers"). "Centers controls and manages theNursing Homes underthe guise of providing management consulting services" (Doc 1, 

### ,i 54). Petitioner asserts that respondents Kenneth Rozenberg ("Rozenberg") and Darryl Hagler ("Hagler") each hold a 50% ownership interest in Centers (id.). The individual respondents, including Rozenberg and Hagler, are coowners ofthe Nursing Homes, the LLCs that own the properties where the nursing homes are located, as well as the companies that operate, manage, or otherwise provide services to the nursing homes. The Other Corporate Respondents Abraham Operations Associates LLC ("Abraham Operations"), d/b/aBeth Abraham Center for Rehabilitation and Nursing, is a for-profit 448-bed nursing home. Light Operational Holdings Assocs. LLC ("Light Operational") is the 98% owner ofBeth Abraham Center, and Rozenberg owns 95% ofLight Operational. Rozenberg's daughter, Rivka Rozenberg, holds the

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remaining 5%. LightProperty Holdings Associates LLC ("LightProperty") owns the real property where Beth Abraham Centeris located and is BethAbraham's landlord. Hagler owns 99% ofLight Property. His son, Jonathan Hagler, owns the other 1%. Delaware Operations Associates LLC ("Delaware Operations"), d/b/a Buffalo Centerfor Rehabilitation andNursing, is a 200-bed for-profit nursing home located in Buffalo. Rozenberg is Buffalo Center's 90% owner and Jeffrey Sicklickis its 10% owner. DelawareReal Property Associates LLC ("Del. Real Property") owns the real property where Buffalo Centeris located. Hagler owns 99% ofDel Real Property andhis son owns the other 1%. Hollis Operating Co., LLC ("Hollis Operating Co.") d/b/a Holliswood Centerfor Rehabilitation and Healthcare is a 314-bed for-profit nursing home located at Hollis. It is owned by Rozenberg (95.5%), Sicklick (2.5%), and Leo Lerner (2%). Hollis Real Estate Co., LLC ("Hollis Real Estate") owns the real property where Hollis Centeris located. Hagler owns 90% ofHollis Real Estate and Mordechai "Moti" Hellman owns the remaining 10%. Schnur Operations Associates LLC ("SchnurAssociates"), d/b/a Martine Centerfor Rehabilitation andNursing, is a 200-bed for-profit nursing home in White Plains. Light Operational owns 65% ofMartine Center and the remaining interestis heldbyAmirAbramchik (10%), David Greenberg (10%), Elliot Kahan (10%), Rozenberg (4%), and Sol Blumenfeld (1%). As noted above, Rozenberg is the 95% owner ofLight Operational. LightProperty Holdings II Associates LLC ("LightProperty II") owns theWhite Plains real estate where Martine Centeris located. Hagler owns 99% ofLightProperty II and his son Jonathan owns the remaining 1%. TheNursing Homes paid funds to BIS Funding Capital LLC ("BIS"), ownedby Hagler (99%) and his son Jonathan (1%), "purportedly in exchange for software and major movable

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003
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equipment and other goods and services" (id. para 51). CFSC Downstate, LLC ("CFSC Downstate") is a New Yorklimited liability company. Skilled Staffing, LLC ("Skilled Staffing") is a staffing agency ownedby Shoshana Areman (majority) and Elisabeth Farkas (minority). Farkas is Rozenberg's daughter-in-law. Skilled Staffing received funds from the Nursing Homes for purportedmanagement and consulting services. 

### Respondents' Alleged Violations and Repeated and Persistent Fraud and Illegality As petitionernotes, New York lawimposes a "special obligation" on nursing home operators to provide nursing home residents with "necessary care and services," in accordance with each resident's care plan. New York and Federal lawrequire adequate staffing "to attain or maintain the highestpracticable physical, mental, and psychosocial well-being ofeach resident" 

### (see IO NYCRR §§ 415.1 (a); 415.3 (f); 415.12; 415.13; 42 CFR § 483.25; 

### seealso 42 § CFR 483.35; 483.10 (d) (2)). Petitioner asserts that respondents violated PublicHealth Law ("PHL") § 2803-d (7) by "repeatedly and persistently commit[ing] and tolerat[ing] numerous acts of neglect against residents oftheNursing Homes" (Doc 1 [Petition], ,i 3). The State asserts that respondents "fail[ed] to provide 'timely, consistent, safe, adequate and appropriate services, treatment and or care ... includingbutnotlimitedto: nutrition, medication, therapies, sanitary clothing and surroundings, and activities ofdaily living,' as defined by 10 NYCRR § 81.1(c)" (id.). Petitioner asserts that the respondents' engaged in "repeated and persistentfraud and illegality" from 2013 through the filing ofthe petition (id., 

### ,i 4). Thepurportedmisconduct includes respondents': "(l)repeated and persistentneglect and inhumane treatment ofresidents who suffered and died under their care, due to Respondents' repeated disregard for, and violation ofapplicable laws, including those obligating Respondents to providerequiredresident care and sufficient staffing to deliver it, and to limit 451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003
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admissions to residents for whomthe Nursing Homes were able to provide required care; and (2) a longhistory ofinsufficient staffing andresulting poor quality ofcare thatbegan well before the COVID-19 pandemic, in violation of numerous New York State and federal statutes and regulations, so that the Respondents, including the Nursing Homes' Owners, could covertly transfer millions ofdollars in "up-frontprofit" to themselves from theNursing Homes. The preventable harm and humiliation suffered by theNursing Homes' residents resulted from a complex web ofcorporate entities and fraudulent transactions implementedbyRespondents Rozenberg, Hagler, and Centers. This web intentionallyturned the Nursing Homes into money-making machines for those who controlled them. Indeed,
... Respondents covertly extracted exorbitant amounts ofmoney from the Nursing Homes through their collusive relationship, in which Rozenberg is the majority owner ofthe Nursing Homes, Hagleris the majority owner ofthe real estate upon which the Nursing Homes sit, and both individuals own Centers, which theyused to exercise control" (id.; see also id. at nl [" 'Up-front profit taking' refers to Respondents' practice ofmaking selfnegotiated and/or collusive payments from the Nursing Homes to themselves, companies they control, ortheirFavored Persons disguised as legitimate "expenses" and othertransfers offunds,
as a priority over, and withoutregard to, ensuring that the Nursing Homes have used the public funds theyreceived to meettheir duty to provide required care, with sufficient staffing to render such care to its residents."]). Supportedby sworn statements ofresidents, their family members, and Nursing Home staff, as well as analysis ofresidents' medical records and other evidence, petitioner asserts that respondents repeatedly and persistently neglected theirresidents and "illegally disregarded and violated state and federal laws so that they couldhide from regulators and the public how many millions ofdollars they were extracting from the Nursing Homes, while ignoring and violating the legal duties ofthe Nursing Homes and their owners to provide requiredresident care and sufficient staffing to deliver that care, and to limit admissions to residents to whom the Nursing Homes could provide required care" (id. ,i 5).

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### The State seeks declaratoryrelief, permanent injunctions, restitution, reimbursement ofexpenses, and statutory costs in connection with the following eleven
causes ofaction: (1) under§ 63 (12), against all respondents, for "Converting $83,810,544 in Government Healthcarereimbursement funds through deception, misrepresentation, and concealment"; (2) under§ 63 (12), againstRozenberg, Centers, the Nursing Homes' Operators, and the Nursing Homes' Owners, for falsely certifying compliance with Medicaid rules andregulations; (3) under§ 63 (12), against Rozenberg, Centers, the Nursing Homes' Operators, the Nursing Homes' Owners, the Landlords, Hagler, Jonathan Hagler, and Mordechai "Moti" Hellman, for collusive and/or self-dealing real estate transactions, leases, and loans; (4) under§ 63 (12), against Rozenberg, Centers, Nursing Home Operators, Nursing Home Owners, and Hagler, for failing to obtain DOH approval for withdrawals/transfers, and filing false costreports with DOH to conceal related party transactions; (5) under§ 63 (12), against Rozenberg, Centers, Nursing Home Operators, and Nursing Home Owners, for insufficient staffing, inadequate resident care, and other violations ofthe Public Health Law and otherNY and federal laws; (6) under§ 63 (12), against Rozenberg, Centers, Nursing Home Operators, Nursing Home Owners, and Hagler, for violating withdrawal and transfer disclosure requirements under Public Health Law§ 2808 (5) (c) and 10 NYCRR § 400.19; (7) under§ 63 (12), against Rozenberg, Centers, Nursing Home Operators, Nursing Home Owners, and Hagler, for filing false ormisleading costreports regarding relatedparty transactions in violation of 10 NYCRRpart 86-2; (8) under§ 63 (12), against all respondents, for filing false Medicaid claims in violation of 18 NYCRR § 515.2; (9) under§§ 63 (12) and 63-c, against all respondents, for overpayment ofpublic [Medicaid] funds; (10) under§§ 63 (12) and 63-c, against all respondents, for illegally obtaining and disposing ofMedicaid funds;

451549/2023 PEOPLE OF THE ST ATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003
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(11) against all respondents, for unjust enrichment thatresulted from diverted Medicaid funds. Respondents' Motions to Dismiss In Motion 3, Respondents Beth Abraham, Buffalo Center, Holliswood Center, Martine Center, Centers Health, Light Operational, Skilled Staffing, Kenneth Rozenberg; Beth Rozenberg; Jeffrey Sicklick; Leo Lerner; Reuven Kaufman; AmirAbramchik; David Greenberg; Elliot Kahan; Sol Blumenfeld; Aron Gittleson; Aharon Lantzitsky; and Mordechai "Moti" Hellman (collectively, the "Centers Respondents") move for partial dismissal pursuantto 

### CPLR 3211 (a) (1), (a) (7) & (a) (8). The Centers Respondents argue that the petition shouldbe dismissed as against certain individual respondents because the allegations are insufficient. They also assert that the court lacks personaljurisdiction over certain respondents, and the applicable statute oflimitations bars
some ofthe claims. In addition, the Centers Respondents argue that the Medicaid and Medicare conversion claims [Counts I, VIII, IX, and X] mustbe dismissed because the government didnot retain an interestin those funds once the funds covered services alreadyperformed. They argue that these conversion claims should also be dismissed because "the petition fails to trace the funds thatwere supposedly converted" (Doc 785 [reply mem, MS 03]). The Centers Respondents further urge the court to dismiss the State's claims involving false Medicaid certifications andinflatedrents for failure to state a cause ofaction. The Centers Respondents also assert that: Counts V and VIII mustbe dismissed because the AG did not account for the COVID crisis; the Tweed Law claims (Counts IX-X) mustbe dismissedbecause the TweedLaw does not create a new cause ofaction; and the unjust enrichment claim (CountXI) shouldbe dismissedbecause itis duplicative.

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003
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In Motion 2, Respondents Light Property, Del. Real Property, Hollis Real Estate, Light Property II, CFSC Downstate, BIS Funding, Hagler, and Jonathan Hagler (collectively, the "Real Estate Respondents" or "RERespondents") move to dismiss the petition in its entirety. The Real Estate Respondents urge the court to dismiss the petition against Jonathan Hagler. They also argue that the petition mustbe dismissedbecause it lacks specific allegations against each respondent. Further, the RE Respondents contend that the Medicaid fraud control unit ("MFCU") lacks authority to commence this special proceedingunder Section 63 (12). Similarly, they argue that federal law preempts § 63 (12) because Medicaid fraud requires scienterunder federal law. In addition, the RE Respondents assert that the summary nature of§ 63 (12) deprives them oftheir state and federal due process rights. The Centers Respondents and RE Respondents also adopt each other's arguments. The State opposes the motions to dismiss. Discussion In a special proceeding, a respondent "may raise an objection in point oflawby setting it forth in [the] answer orby a motion to dismiss the petition, made upon notice within the time allowed for answer" (CPLR404 [a]; 

### Cardinale vNew York City Dept. of Educ., 204 AD3d 994, 997 [2d Dept 2022], 

### appealdismissed, 39 NY3d 966 [2022]). "Ifthe motion is denied, the court may permitthe respondentto answer, upon such terms as may bejust" (CPLR404 [a]). "On a motion to dismiss pursuant to CPLR404 (a) and 3211 (a) (7), only the petition is considered, all ofits allegations are deemed true, and the petitioneris accorded the benefit of everypossible favorable inference" 

### (Cardinale, 204 AD3d at 997-998, citing 

### Connaughton v ChipotleMexican Grill, Inc., 29 NY3d 137, 142 [2017]). However, bare legal conclusions are not entitled to such deference.

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003
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1. PreliminaryMatters


### a. Standing The court rejects respondents' argumentthat petitioner lacks standing to maintain this special proceeding under§ 63 (12). Contrary to respondents' contention, the Attorney General is the petitioner, not the Medicaid Fraud Control Unit (MFCU). MFCUis a part ofthe Attorney General's Office 

### (e.g. Moe vKuriansky, 120 AD2d 594, 595 [2d Dept 1986 [the AG "ultimately control(s) (MFCU's) work"]). In any event, MFCUis authorizedunder state law (Exec. Order 4) and federal law (42 CPR § 

### 1007.1 

### etseq.) to investigate and prosecute, orrefer for prosecution, "violations ofall applicable State laws, including criminal statues, as well as civil false claims statutes or other civil authorities, pertaining to ... Fraud in the
...provision ofmedical assistance, orthe activities ofproviders" (42 CPR § 1007.11 

### [a]). 

### b. PersonalJurisdiction The courthasjurisdiction over the respondents. Contrary to respondents' contentions, jurisdiction over Hellman, Kaufman, Greenberg, Blumenfeld, and Jonathan Hagler is appropriate under CPLR 302 (a) (1). 

### The petition adequately establishes that these respondents transact business in New York. Long-armjurisdictionmaybe asserted over these respondents byvirtue oftheir membership interests in certain respondent entities. In addition, the courthasjurisdiction
over Hellman and Jonathan Haglerbecause they are members ofLLCs that own New York properties (CPLR 302 [a] [4]). Briefly, Hellman has transactedbusiness in the state. He is a member ofHollis Real Estate, that owns the Holliswood property, and received equity distributions from Holliswood's rents. Kaufman, Greenberg, and Blumenfeld own or owned parts ofthe operating respondents Holliswood Center and Martine Center, both located in New York, and they filed certifications

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and other documentation to the New York State Public Health and Health Planning Council (PHHPC) when these operator entities acquired theirnursing homes. Jonathan Hagleris a 1%
owner ofLightProperty, LightProperty II, Del. Real Property, and BIS Funding. He is also a 10% owner ofCFSC Downstate. Jonathan Hagler transactedbusiness, either directly orthrough
an agent, byvirtue ofhis membership interests in these New Yorkbusinesses. The claims against these respondents directly arise from their contacts with the state and the court's exercise of jurisdiction overthe out-of-staterespondents comports with due process.
c. 

### Statute of Limitations The statute oflimitations for petitioner's claims is 6 years 

### (see CPLR213 [9] [§ 63 (12) claims], CPLR213 [5] [§ 63-c claims], CPLR213 [1] [unjust enrichment claims]). Theparties agree that the limitations period was tolled for 228 days during the pandemic 

### (see Doc 811 [resp replymem] at 25). The petitioner argues thatthe "continuing wrong" doctrine extends the limitations period. Respondents argue that the petition does not allege continuing wrongs and that wrongful conduct that occurredbefore November 12, 2016 is time-barred. November 12, 2016 is 6 years and 228 days priorto the date that the AG filed the petition on June 28, 2023. The "continuingwrong" doctrine "isusually employed where there is a series of continuing wrongs and serves to toll the running ofa period oflimitations to the date ofthe commission ofthe lastwrongful act" 

### (Selkirk v State of New York, 249 AD2d 818, 819 [3d Dept 1998]). This doctrine "mayonlybe predicated on continuing unlawful acts andnot on the continuing effects ofearlierunlawful conduct" (id.). Respondents fail to establish that the continuing wrong doctrine is inapplicable. The petition asserts thatrespondents engagedin repeated andpersistent schemes involving fraud and illegality. For example, Rozenberg and Hagler allegedly colluded to force Holliswood to pay

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inflatedrental payments pursuantto an exorbitant lease. The lease was executed in 2013 butrent payments began in 2014 and continueduntil 2020. Contrary to respondents' contention, the harm did not occur in 2013 when the lease was entered, itbegan at the earliest in 2014 when Holliswood's minimum rent increased by 93% overthe rent rate that respondents submitted to DOH, and the harm continued throughout the lease term. The petitioner's claims are notbreach ofcontract claims where, for instance, the claim would accrue on the date ofthe breach, even if the harmresults later (see e.g. ClarkvMetropolitan Transp. Auth., 46 Misc 3d 344, 350 [Sup Ct, NY County 2013]). Here, instead, the AG alleges that the respondents orchestrated multiple ongoing illegal schemes to divert nursing home assets to themselves. As set forth in the petition (see e.g. Doc 1, 

### ,i 15), these alleged schemes include:
• Causing the Nursing Homes to enter into collusivereal estate arrangements that saddled the homes with excessive debts and forced them to pay falsely inflatedrents to real estate companies ownedbyHagler; • Extracting millions ofdollars from the Nursing Homes through collusive related party transactions, including the payment of"fees" to sham vendors owned in whole orpartbyRozenberg, Hagler, and/or their family members; • Causing the Nursing Homes to make interest-free loans to othernursing homes owned and operatedbyRozenberg for no discemablebusiness purpose, which deprived the Nursing Homes offunds to spend on staffing; these loans were rarelyrepaid in full, ifat all; and • Causing the Nursing Homes to pay purported "salaries" to their owners - salaries that were frequently unreported, inflated, and in some instances, indicative ofno showjobs, in that the purported "salaries" bore no relationship to any work supposedlyperformed. Thus, petitioner's allegations assert arepeated and persistent scheme to funnel up-front profits away from the nursing homes to the respondents in violation ofapplicable regulations (cf e.g. Selkirkv State, 249 AD2d 818, 819 [3d Dept 1998] [continuing wrong doctrine may apply where the harms constitute "continuing unlawful acts," as opposed to "continuing effects of earlierunlawful conduct"]; People v Trump, 62 Misc 3d500, 508 [Sup Ct 2018] [applying the

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continuing wrong doctrine where "respondents' alleged continuous and pervasive failure to operate andmanagethe" business "in accordance with
... statutory rules and fiduciary obligations" resulted "inthe misuse of [business] assets and self-dealing"]). Accordingly, at this pre-answer stage, and under the circumstances presentedin the petition, respondents have not sufficiently demonstrated, as a matter oflaw, that they are entitled to dismissal because the claims are time-barred. Even ifthe continuing wrong doctrine does not apply, the fraudulent concealment doctrine may toll the period. ExecutiveLaw§ 63 (12) "claims maybe tolled under the fraudulent concealment doctrine" 

### (New Yorkv Feldman, 2003-2 Trade Cases P 74102 [SDNY July 10, 2003]). The State alleges in the petition that Rozenberg and Hagler "caused the Nursing Homes to take (orbe obligatedto fund) Related-Party loans with exorbitantinterestrates to finance theirpurchases ofcertain Nursing Homes," and "causedthe realty companies to take commercial loans with principal amounts thatwere higher than necessary to acquire the Nursing Homes, leaving the Nursing Homes to repay that debt while" respondents collectedup-front profits (Doc 1, ,i 413). The State asserts that respondents deceived DOH and concealedtheirmisconductby "(i) taking out a series ofinflated mortgages and saddling the Nursing Homes with the responsibility to paythe debt, while pocketing excess proceeds; (ii) misleading DOH about the lease agreements and pocketing millions ofdollars in purportedrent; (iii) submitting false andmisleading annual CostReports; and (iv) withdrawing equity far in excess of3% without obtaining priorpermission from DOHthrough collusive transactions" (Doc 805 [petitioner's mem opp] at 47, citing petition [Doc 

### l], §§ VIII [A] [mortgages and leases], VIII [D] [3] [Cost Reports], VIII [E] [equitywithdrawals]). Petitioner asserts that the Nursing Home Operators andNursing Home Owners concealed this persistent fraud and illegalityby "flout[ing] DOH rules,
... failing to disclose related party

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### transactions on the Nursing Homes' cost reports[,]
... [and] ignoring[ing]
... the rules and regulations thatprohibit transfers offunds from nursing homes without DOH approval" (e.g. 

### Petition, ,i 

### 16). Thus, treating the allegations in the petition as true at this pre-answer stage, respondents do not establish as a matter oflaw that the fraudulent concealment doctrine fails to toll the limitations period. d. Respondents'dueprocess rights, generally 

### The RE Respondents assert that the summary nature ofan Executive Law§ 63 (12) special proceeding will deprive them oftheir due process rights. They argue that the court should convert this special proceeding to a plenary action. "The Supreme Court has stated that due process requires an opportunity to be heard 'at a meaningful time and in a meaningful manner'" (People vAppleHealth andSports Clubs, Ltd., Inc., 

### 80 NY2d 803, 806 [1992] [citations omitted]). "The opportunity mustbe appropriate to the nature ofthe case" (id., 

### citing Mullane v CentralHanover Trust Co., 

### 339 US 306, 313 [1950]). Respondents contend thatthe "sprawlingPetition is the result ofa 3-yearinvestigation, but the Real Estate Respondents have not been provided any meaningful opportunity to respond" (Doc 780 [RE Respondents' mem] at 20-21). They are incorrect. Here, as inAppleHealth I, 

### the Executive Law § 63 (12) procedures are constitutionally sufficient. Respondents were involved in the pre-litigation investigation and had opportunities to be heard before the state filed the petition (see People vAppleHealth andSports Clubs, Ltd., Inc., 

### 80 NY2d 803, 807 [1992] ["Thus, the litigation, once instituted, came as no surprise to the respondents. The prior negotiations with the Attorney-General and the petition clearly apprisedrespondents ofthe underlying facts alleged by the Attorney-General and afforded them ample opportunity to raise their opposing contentions on the merits ofthe petition."]). Since the AG filed the petition,

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respondents havebeen heard at oral argument on theirmotions for discovery and these motions to dismiss. They will also have the opportunity to beheard later in this case when they submit their answers, affidavits, and other evidence. They will also have the opportunity to appear for future oral arguments, hearings, and trials, as maybe necessary. Under the circumstances, this summaryproceeding does not deprive the respondents oftheirprocedural due process rights. 

### 2. Petitioner States Viable Executive Law § 63 (12) Claims
a. Petitioner's§ 63 (12) claims, generally ExecutiveLaw§ 63 (12) "defines the fraudulent conduct that it prohibits, authorizes the Attorney General to commence an action orproceeding to foreclose that conduct, and specifies the relief, including equitable relief, that the Attorney General may seek" (People v Trump EntrepreneurInitiative LLC, 137 AD3d409,417 [1st Dept 2016]). Executive Law § 62 (12) states: "Whenever any person shall engage in repeated fraudulent orillegal acts or otherwise demonstrate persistent fraud orillegality in the carrying on, conducting or transaction ofbusiness, the attorney general may apply, in the name ofthe people ofthe state ofNew York, to the supreme court ofthe state ofNew York, on notice offive days, for an order enjoining the continuance ofsuch business activity or ofany fraudulent orillegal acts, directing restitution and damages and, in an appropriate case, cancelling any certificate filed under and byvirtue ofthe provisions ofsection four hundred forty ofthe former penal law or section one hundred thirty ofthe general business law, and the courtmay award the relief applied for or so much thereofas it may deem proper." "A special proceeding, as authorizedbyExecutive Law § 63 (12), is intended as an expeditious means for the Attorney-General to prevent further injury and seek relieffor the victims ofbusiness fraud" (People vAppleHealth andSports Clubs, Ltd., Inc., 206 AD2d 266, 268 [1st Dept 1994]). In the context ofa§ 63 (12) proceeding, "[t]he word 'fraud' or 'fraudulent'
... shall include any device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise orunconscionable contractual provisions. The term 451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 14 of 21 Page 14of21


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### 'persistentfraud' or 'illegality'
... shall include continuance or carrying on of any fraudulent or illegal act or conduct. The term 'repeated' as used herein shall include repetition ofany separate and distinct fraudulent or illegal act, or conduct which affects more than one person" (Exec. Law § 63 [12]). Thus, fraud claims under§ 63 (12) are broader than common law fraud and can be established without proofofscienter orreliance (see People v Trump EntrepreneurInitiative LLC, 

### 137 AD3d 409,417 [1st Dept 2016]; People v Coventry FirstLLC, 

### 52 AD3d 345, 346 [1 st 

### Dept 2008]). "The test for fraud under Executive Law§ 63 (12) is whether the targeted act has the capacity or tendency to deceive or creates an atmosphere conducive to fraud" (People v Northern Leasing Sys., Inc., 

### 193 AD3d 67, 68 [1st Dept 2021]). Executive Law§ 63 (12) claims have been applied to a wide array ofrespondents, including persons with knowledge offraudulent schemes, individuals who perpetrated those schemes, and pass-through entities and knowing recipients offraudulently obtained proceeds (see People v LeasingExpenses Co. LLC, 

### 199 AD3d 521, 523 [1st Dept 2021]; see also e.g. People vNorthern LeasingSys., Inc., 

### 169 AD3d 527, 528 [1st Dept 2019]; People v One Source Networking, Inc., 

### 125 AD3d 1354, 1357 [4th Dept 2015] ["Because Executive Law§ 63 (12) allows the Attorney General to seek reliefagainst 'any person,' there is no impedimentto imposing personal liability against a corporate officer ifit is established that he [or she] personally participated in or had actual knowledge ofthe fraud or illegality."] [quotations omitted]; People vAppleHealth andSports Clubs, Ltd., Inc., 

### 80 NY2d 803, 808 [1992] [finding that "interlocking corporations" that "actedin concert" can be liable for fraudulent and illegal activities]; People v ColdSpringAcquisition, LLCD/B/A ColdSpringHills Center forNursing 

### &Rehabilitation, 

### Index No. 617709/2022 [Sup Ct, Nassau County 2022] [involving nursing homes, their operators, and owners, and related real estate entities]; People vFulton Commons

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 15 of 21 Page 15of21


### [* 15]NYSCEF DOC. NO. 886 INDEX NO. 451549/2023 RECEIVED NYSCEF: 08/23/2024



### Care Center, Inc., Index No. 617687/2022 [same]). That is, parties outside ofan organization who have knowledge ofthe organization's unlawful acts and have received the benefits ofthose unlawful acts can be held liable under§ 63 (12). Executive Law§ 63 (12) was "meantto protect not only the average consumer, but also the ignorant, the unthinking and the credulous" (State vNorthern LeasingSys. Inc., 193 AD3d at 75). Section 63 (12) actions have also been maintained on behalfofthe people ofNew York (e.g. People v SprintNextel Corp., 26 NY3d 98, 109 [2015]), and "to recover overpayments of reimbursements" paid by New York's Medicaid program (e.g. People v Pharmacia Corp., 39 AD3d 1117, 1118 [3d Dept 2007]). The petition sufficiently alleges that respondents repeatedly engaged in fraud and illegal behaviorby filing false and misleading Medicaid certifications, violating other Medicaid programregulations, paying fraudulent and collusive fees to relatedparty service providers, and orchestrating fraudulent real estate schemes based on fraudulent loans. The petition also alleges that respondents used these fraudulent and illegal activities to extractmillions ofdollars from the nursing homes that were then diverted to respondents in violation ofMedicaid, PHL, and DOH rules andregulations, including the Nursing Home's obligations to provide required care, maintain adequate staffing, and to limit admissions. In addition, petitioner sufficiently alleges a basis for the requested relief, including disgorgement and restitution ofimproperly diverted Nursing Home assets, shamrentpayments that violated the 3% rule, and misappropriated Medicaid and other government funds. b. Preemption Next, the court rejects respondents' contention that federal law preempts Executive Law § 63 (12). Section 63 (12) is not in conflictwith 42 CPR§ 1007.1. 42 CPR§ 1007.1 defines

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 16 of 21 Page 16of21


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### fraud as "any act that constitutes criminal or civil fraud under applicable State law. Such conduct may

### include deception, concealment ofmaterial fact, ormisrepresentation made intentionally, in deliberate ignorance of
... or in reckless disregard ofthe truth." This definition offraud in the CPRpermits

### but does notrequire 

### aminimum mens rea element.
c. ExecutiveLaw claims againstcertain individual respondents 

### The court also denies the motion to dismiss certain respondents from this special proceeding. Individual respondents Kenneth Rozenberg, Beth Rozenberg, Jeffrey Sicklick, Amir Abramchik, Elliot Kahan, David Greenberg, Sol Blumenfeld, Aron Gittleson, Aharon Lantzitsky, Reuven Kaufman and LeoLerner (collectively, the "Nursing Home Owners") may be held liable underthe Public Health Law ("PHL"). PHL 

### § 2808-a (2) defines "controlling person" as any person who "by reason ofa direct or indirect ownership interest ( whether ofrecord orbeneficial) has the ability, acting either alone or in concert with others with ownership interests, to direct or
cause the directions ofthe management or policies ofsaid facility." Any "controlling person" that is liable underthe PHL 

### "shall also be liable,jointly and severally, with and to the same extent as" the associated nursing home (PHL 

### §2808-1 [l]). As petitioner notes, "liability and responsibility follow the capability to make a profit" (Doc 805 [Petitioner's mem opp] at 17, quoting Ocean Side Inst. Indus. v UnitedPresby. Residence, 

### 254 AD2d 337, 338 [2d Dept 1998] [discussing legislative history]). The court denies the motion to dismiss petitioner's sixth cause ofaction, under § 63 (12), for the Nursing Home Owners' alleged PHL violations. Further, although some ofthe respondents may nothave had any responsibility to provide
care to nursing home residents, ormaynot have directly engaged in the alleged fraudulent activities, the petition states a§ 63 (12) claim against all respondents. Individuals maybe liable under§ 63 (12) ifthey participated in the fraudulent conduct or iftheyhad actual knowledge of

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 17 of 21 Page 17 of21


### [* 17]NYSCEF DOC. NO. 886 INDEX NO. 451549/2023 RECEIVED NYSCEF: 08/23/2024

the conduct (People vAppleHealth & Sports Clubs, Ltd., 80 NY2d 803, 807 [1992]), andparties who "turned a blind eye to evidence" offraudulent activities can also beheldliable (People v CollegeNetwork, Inc., 53 Misc 3d 1210(A) [Sup Ct, Albany County 2016]). Likewise, the court denies the motion to dismiss the claims against Hagler, individually. The petition is plainly sufficient as to Haglerbecause he is a 50% owner ofCenters, is Centers' CFO, and is the majority owner ofthe Landlord entities. In addition, the petition states claims against the minority owners ofthe Nursing Home Operators and the Landlords (the "Minority Owners"). Viewing the petition in the light most favorable to the State, the Minority Owners knew, or shouldhave known, about the fraudulent orillegal conduct and failed to prevent that conduct. The Minority Owners all benefited from the alleged fraudulent conduct and some purportedlyparticipated in the conduct signing Certificate ofNeed applications, holding positions at the nursing homes, or serving as consultants, andby accepting sham salaries (see e.g. Petition, 

### ,i,i 56-65, 235-236, 239, 249-269, 309, 605-609, 617-620, 628, 643-666; see also Petitioner's mem opp at 22-28). Finally, for the purposes ofthis pleading, the individual respondents maybe liable for the fraudulent orillegal acts that otherrespondents allegedly committed (e.g. People v GeneralElec. Co., 302 AD2d 314, 317 [1st Dept 2003] [finding third-party liabilityunder§ 63 [12] using agency theory]). In People vNorthern LeasingSys., Inc. (193 AD3d 67 [1st Dept 2021]), the First Departmentheldthat a respondent's failure to supervise adequately "created an enterprise conducive to fraud" that violated § 63 (12) (id. at 75). The respondents may also be liable under
an aiding and abetting theory (see People v CollegeNetwork, Inc., 53 Misc 3d 1210(A) [Sup Ct, Albany County 2016]). d. Other contentions

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 18 of 21 Page 18 of21


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Respondents have not established that dismissal ofresident care claims is warranted. They argue that the COVID pandemic excuses their failures to provide adequate care to the Nursing Home's residents. Atmost, these matters raise issues offact that cannotbe resolved on these motions. Similarly, the courtrejects respondents' contention thatthey are entitled to immunityunder the now-repealed Emergency Disaster Treatment Protection Act ("EDTPA"). Respondents have notmettheir burden ofestablishing that the claims in the petition fall within the scope ofthe EDTPA. The alleged violations beganbefore the pandemic and continued until the filing ofthe petition. Moreover, EDTPA immunity does not extend to gross negligence, reckless conduct, or intentional misconduct 

### (see PHL § 3082 [2]). Respondents have also failed to establish that DOHwaived the Nursing Homes' obligations to maintain adequate staffing levels at the facilities. 

### 3. Petitioner's Executive Law§ 63-c claims Executive Law § 63-c (the "TweedLaw") provides: "Where any money, funds, credits, or otherproperty, held or ownedbythe state, orheld or owned officially or otherwise for orin behalfofa governmental or otherpublic interest, by a domestic, municipal, or otherpublic corporation, orby a board, officer, custodian, agency, or agent ofthe state, or ofa city, county, town, village or other division, subdivision, department, orportion ofthe state, has heretofore been, oris hereafter, without right obtained, received, converted, or disposed of, an action to recover the same, or to recover damages or other compensation for so obtaining, receiving, paying, converting, or disposing ofthe same, orboth, maybe maintainedbythe state in any court ofthe state, ... although aright ofaction for the same cause exists bylaw in some otherpublic authority, and whether an action therefor in favor ofthe latter is oris notpending when the action in favor ofthe state is commenced. The attorney-general shall commence an action, suit or otherjudicial proceeding, as prescribedin this section, wheneverhe deems it for the interests ofthe state so to do; orwhenever he is so directed, in writing, bythe governor." Executive Law§ 63-c proceedings can beused to recovermisappropriated Medicaid funds 

### (e.g. Cuomo vFerran, 77 AD3d 698, 701 [2d Dept 2010] ["The TweedLaw vests the

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 19 of 21 Page 19 of21


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Attorney General with the discretionary authority to seekthe recovery ofmoney orproperty (otherthan real property) belonging to the State, orto recover damages or other compensation, or both, pursuant to any viable action orproceeding at law orin equity available to the State."]). Contrary to respondents' contentions, liability under§ 63-c does notrequire satisfying the elements ofcommon law conversion. Indeed, § 63-c "e "vests the Attorney General with the discretionary authority to seek the recovery ofmoney orproperty ...belonging to the State
... , orto recover damages or othercompensation for the same, orboth, pursuant to any viable action
orproceeding atlaw orin equity available to the State" 

### (State v Grecco, 21 AD3d 470, 477 [2d Dept 2005]). The petitioner need notprove that the respondents knew that the Medicaid funds
were obtained "withoutright" (ExecutiveLaw§ 63-c [1]). Here, the petition alleges that the respondents committed, orwere complicit in, the collection ofMedicaid funds "withoutright," for example, by filing false ormisleading Medicaid certifications, otherwise violated Medicaidprogramregulations, and paying fraudulent and collusive fees to related party service providers. These allegations are sufficient to survive this motion to dismiss the Tweed Law claims. 4. Petitioner's unjust enrichment claim Unjust enrichmentis an equitable quasi-contract claim that "depends uponbroad considerations ofequity andjustice" (

### Columbia Mem. Hosp. vHinds, 38 NY3d 253, 275 [2022]). "The essential inquiry in any action for unjust enrichment
... is whetherit is against equity and good conscience to permit the defendant to retain what is soughtto berecovered. A plaintiffmust show that (1) the otherpartywas enriched, (2) at thatparty's expense, and (3) that it is against equity and good conscience to permit [the otherparty] to retain what is sought tobe recovered"

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, AHORNEY GENERAL OF THE STATE OF NEW YORK vs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 20 of 21 Page 20 of21


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### (Mandarin TradingLtd. v Wildenstein, 16 NY3d 173, 182 [2011] [internal citations and quotationmarks omitted]). "Althoughprivityis notrequired for anunjust enrichment claim, a claimwill notbe supportedifthe connectionbetweenthe parties is too attenuated" (id. at 182). The claimantmust allege "arelationship betweenthe parties, or at least an awareness" ofthe otherparty (id.). 

### Respondents argue that this claim shouldbe dismissedbecause itis duplicative. First, the court finds thatthe unjust enrichment claim is pleaded sufficiently. Next, the court declines to dismiss this claim as duplicative atthis pre-response stage because Petitionermay assert it as an alternative basis for relief. 5. Conclusion The courthas considered the respondents' remaining contentions and finds them unavailing. Accordingly, itis ORDERED thatrespondents' motions to dismiss, MS 02 and 03, are denied; anditis further ORDERED thatthe respondents shall respondto the petition within 20 days from theefiled date ofthis decision and order.

8/23/2024

DATE MELISSAA. CRANE, J.S.C. CHECK ONE:
APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED 

# 0 DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

451549/2023 PEOPLE OF THE STATE OF NEW YORK, BY LETITIA JAMES, ATTORNEY GENERAL OF THE STATE OF NEW YORKvs. ABRAHAM OPERATIONS ASSOCIATES LLC DBA BETH ABRAHAM CENTER FOR REHABILITATION AND NURSING ET AL Motion No. 002 003 21 of 21

### □ OTHER**□** REFERENCE

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