A private family foundation has received more than $18 million in donations from seven nursing homes on Long Island and New York City since 2004, some of which the state said was public money intended for residents' care and should be returned.
The Klein Family Foundation, a nonprofit, is among those named in a lawsuit brought in February by Attorney General Eric T. Schneiderman against the owners of Medford Multicare Center for Living following the death of a patient on a ventilator.
The Medford nursing home -- where authorities alleged cost cutting led to patient abuse, neglect and death -- donated a total of $2 million in 2008 and 2009 to the Klein Family Foundation and other charitable foundations the nursing home owners control, according to the lawsuit.
The foundation has amassed more than $34.2 million since 2004 -- with $18.3 million of the contributions coming directly from for-profit nursing homes partly owned by Mordechai Klein of upstate Monsey and his parents, according to information reported to the Internal Revenue Service and a spokesman for the Medford nursing home.
Mordechai Klein, 62, owns half of the Medford nursing home and is a trustee of his family foundation. Norman Rausman, 50, also of Monsey, and members of his family own the remaining half. The other owners, according to the lawsuit, are Martin Rausman, 92, Michael Rausman, 58, and Henry Rausman, 63, all of Monsey, and Norman Rausman's brother-in-law, Mendel Aschkenazi, now deceased.
Medicaid fraud alleged
Schneiderman has accused Medford's owners of defrauding the Medicaid program by accepting public funds but failing to provide adequate care to the residents.
"Medford owners have instead dedicated themselves to lining their own pockets and improving their families' philanthropic reputation at home and abroad while turning a blind eye to the persistent neglect of its residents by senior management and staff," Schneiderman said in the lawsuit filed earlier this year.
The attorney general is seeking to recover Medicaid funds that he says should have gone to pay for residents' care at the 320-bed Medford facility. Instead, Schneiderman said the owners used some of the money to pay themselves "exorbitant" profits and salaries and donate to their private foundations.
Schneiderman did not say how much money he is looking to recoup from the owners, the Klein Family Foundation, the estates of Abraham Klein and Mendel Aschkenazi, Medford Multicare Management, Medford Multicare Center for Living, former nursing home administrator Steven Smyth and David Fielding, who ran the home until February when he was arrested on charges stemming from the death of a resident. In the lawsuit, however, prosecutors said that out of the $280 million the Medford nursing home received in Medicaid funds since it opened in 2003, $60 million wrongfully went to compensate the owners.
Mordechai Klein and the Rausmans declined to be interviewed for this article.
"The ownership prefers not to comment on an active investigation," spokesman Jason Newman said in an email.
The Medford home was cited by the state Department of Health in 2003 for unstable staffing, poor record keeping and inadequate patient nutrition, and again in 2009 for putting patients in immediate jeopardy, according to the lawsuit. The 2009 incident involved a patient disconnected from his ventilator for 22 minutes.
In subsequent years, Schneiderman's lawsuit alleges, the owners cut staff, food, medication and supplies, while they earned millions every year in salaries and profits. The owners' total earnings, according to the lawsuit, ranged from $3 million a year to as much as $13 million.
The nursing home came under scrutiny again in October 2012 when Aurelia Rios, 72, a patient in the ventilator unit, died after it was discovered the Central Islip woman wasn't attached to her breathing machine. The nursing home and some of its employees, including the administrator, are facing criminal charges, including neglect and abuse, falsifying business records and obstructing government administration, stemming from Rios' death. They have all pleaded not guilty.
In July, Schneiderman and the health department launched a separate investigation into the death of a 71-year-old patient on July 20 after her ventilator malfunctioned. Authorities did not name the woman, but an attorney for her family identified her as Sandra Cunha. No criminal or civil charges have been filed in Cunha's death.
The Klein Family Foundation was established in 2000, three years before Mordechai Klein's late father, Abraham Klein, opened the Medford facility.
From 2000 to 2003, Abraham Klein and a family trust gave a total of $8.4 million to the family-run foundation, according to public records.
Beginning in 2004, contributions began pouring in directly from the nursing homes owned by the Kleins, the records show.
A review of public records showed that Mordechai Klein's kin, including his parents, Abraham and Dinah Klein, own nine nursing homes: two in Suffolk, three in Nassau, three in Queens and one in New Rochelle. Two of the homes did not make direct donations to the family foundation, but the owners did.
Dead man listed as owner
Abraham Klein, who died in 2012, is still listed as part owner of Oceanside Care Center in Oceanside; Beach Terrace Care Center and Grandell Health Inc., both in Long Beach; Park Terrace Care Center in Rego Park; and Queens Nassau Nursing in Far Rockaway, according to the Centers for Medicare & Medicaid Services' website. Abraham and Dinah Klein are listed as owners of Fairview Nursing in Forest Hills.
Among the nursing homes owned by the Kleins, Fairview Nursing Center donated the most money to the family foundation -- a total of $10.3 million from 2004 to 2012, the most recent year available, records show.
The second-largest contribution came from Grandell Rehabilitation & Nursing Center in Long Beach, which gave a total of $3.9 million. The other nursing homes donated a combined $4.1 million.
The Klein Family Foundation also received contributions totaling $575,000 from Northern Manhattan Rehabilitation & Nursing Center, a home owned by Michael Rausman, also a part owner of the Medford nursing home.
A large chunk of the foundation money, $23.7 million, came from Abraham and Dinah Klein, their four relatives and a family trust, records show. All, except Mordechai Klein, listed the same Brooklyn address.
In 2012, the foundation reported $46.2 million in assets, according to public records. Since it was established, the foundation has given an average of about 5 percent of qualified assets annually, in small donations, to many Jewish organizations, mostly in Brooklyn and some in Israel.
Private foundations are required by the IRS to distribute 5 percent of their assets each year, said Ken Cerini, managing partner of Cerini and Associates, a Bohemia accounting firm that deals with nonprofits.
"The purpose of a family foundation is to provide a legacy," said Cerini, who has no business relationship with the Kleins. "The goal is to create an ongoing benefit, even after the contributor dies."
Schneiderman said in his lawsuit that the Medford nursing home owners "looted" $60 million of the $280 million in Medicaid funds, and "diverted" some of the money into the Klein Family Foundation and other foundations run by the Rausman family.
The Medford nursing home owners, according to Schneiderman, had plenty of money that should have gone to hire more additional staff so residents would have been adequately cared for and their safety would not have been jeopardized.
In 2011, the lawsuit alleged the owners' total compensation was $13.3 million, almost the same amount earned by more than 400 of their employees collectively.
In 2008 and 2009, the owners cut staffing costs on the Medford ventilator unit by 17 percent and 35 percent, respectively, while they paid themselves $8.5 million from the facility, according to the lawsuit. During those two years, the lawsuit says, the nursing home donated $2 million to the Klein and Rausman foundations.
In addition to asking state Supreme Court Justice Denise F. Molia to force the owners to repay the Medicaid money, Schneiderman is also asking the judge to do three things: appoint a receiver to monitor the Medford home's finances, appoint a consultant to monitor the quality of care, and bar the owners from operating any other health care facility New York.