Opinion ID: 2967751
Heading Depth: 4
Heading Rank: 2

Heading: The Related Party Transactions

Text: As part of the scheme, the Boldens circumvented Medicaid’s regulations on related party transactions. In submitting Cost Reports to Medicaid, a nursing facility must disclose whether any of its costs resulted from transactions with related parties, i.e., individuals or businesses having immediate family relationships with the facility. N.C. Admin. Code tit. 10, r. 26H.0104. For related party transactions, Medicaid reimburses a nursing facility for only the related party’s actual costs for goods or services provided to the facility. In 1993, Mr. Bolden resigned from Emerald Health, due to disagreements with his father-in-law, and established a nursing supplies business called Carolina Supply Company (Carolina Supply). That same year Nelson Enterprises failed, and Ms. Bolden decided to extract extra monies from Medicaid by having Emerald Health purchase supplies from Carolina Supply at inflated prices. Due to Medic12 Ms. Bolden also misappropriated cash from Emerald Health with the assistance of Nelson, activity the Government characterized as a kickback operation. For example, in August of 1993, Nelson Enterprises submitted an invoice to Emerald Health in the sum of $2,332, purportedly for the purchase by Emerald Health of a copying machine. Although Emerald Health paid the invoice, it did not receive the copier. Instead, when Nelson Enterprises received payment from Emerald Health, Nelson gave $2,000 to Ms. Bolden and kept $332 for himself. Ms. Bolden listed this copier purchase as a direct cost on the 1993 Cost Report. UNITED STATES v. BOLDEN 11 aid’s limitations on related party transactions, she concealed Emerald Health’s purchases from Carolina Supply by having Nelson create a sham business to act as an intermediary between Carolina Supply and Emerald Health. Nelson then established a bank account for the sham business, which was called Industrial Consumer Products (Industrial). Carolina Supply would bill Industrial for various supplies it purportedly shipped to Emerald Health, and Industrial would in turn bill Emerald Health, at inflated prices, for those same supplies. Although the supplies were rarely delivered as ordered, Emerald Health would pay the Industrial bills, and Industrial would in turn pay the Carolina Supply bills. Nelson characterized his role in the Related Party Transactions as just selling paper. Emerald Health sometimes paid Industrial’s invoices even though no supplies were delivered to Emerald Health. In other instances, Nelson submitted Industrial invoices which Emerald Health did not pay, and for which no supplies were delivered (the Fictitious Invoices). The Fictitious Invoices were used solely to increase Emerald Health’s Medicaid reimbursements. When supplies were delivered, Emerald Health was usually charged 40% to 70% more than Carolina Supply’s actual costs. For example, in 1993, Carolina Supply purchased washcloths, bath towels, bibs, and fitted sheets at an approximate cost of $5,700. In September of 1993, Industrial charged Emerald Health approximately $15,500 for those items, which Emerald Health paid. Industrial, on November 19, 1993, issued a $13,000 check to Carolina Supply for those same items. Nelson thus profited by about $2,500, while Carolina Supply made more than $7,000. In carrying out the Related Party Transactions, Industrial submitted a total of eight invoices to Emerald Health.13 Two such invoices, total13 In March of 1994, Ms. Bolden had Nelson backdate three Industrial invoices to reflect non-existent sales transactions between Industrial and Emerald Health in August of 1993 (the Backdated Invoices). The Backdated Invoices were then included on the 1993 Cost Report, thereby increasing Emerald Health’s net receipts from Medicaid for that year. 12 UNITED STATES v. BOLDEN ling about $7,000, were never paid. Between September of 1993 and March of 1994, Emerald Health paid Industrial approximately $54,300 on the remaining six invoices, and Industrial made corresponding payments to Carolina Supply, the related party, of almost $47,000. The cost of the supplies actually delivered to Emerald Health was about $31,000. Ms. Bolden classified the eight invoices as direct costs on the 1993 and 1994 Cost Reports, failing to reveal that they were Related Party Transactions.