United States District Court, S.D. Mississippi, Northern Division
UNITED STATES OF AMERICA ex rel. ACADEMY HEALTH CENTER, INC. f/k/a ADVENTIST HEALTH CENTER, INC. Plaintiff,
HYPERION FOUNDATION, INC., d/b/a OXFORD HEALTH & REHABILITATION CENTER; ALTACARE CORPORATION; HP/ANCILLARIES, INC.; LONG TERM CARE SERVICES, INC.; SENTRY HEALTHCARE ACQUIRORS, INC.; HP/MANAGEMENT GROUP, INC.; HARRY McD. CLARK; JULIE MITTLEIDER; DOUGLAS K. MITTLEIDER; and JOHN DOES 1-200, Defendants,
MEMORANDUM OPINION AND ORDER
CARLTON W. REEVES, District Judge.
Pending before the Court is a series of motions, including a Motion to Dismiss the United States' Complaint in Intervention, Docket No. 66; a Motion to Dismiss Academy's Second Amended Complaint for Lack of Subject Matter Jurisdiction and Failure to State A Claim, Docket No. 68; a Motion for Leave to Amend the Complaint, Docket No. 79; and a Motion to Strike the Affidavit of Melvin Eisele, Docket No. 84. After careful consideration of the briefs and the record, the Court is ready to rule. The Defendants' Motion to Dismiss the United States' Complaint in Intervention will be DENIED. The Motion to Dismiss Academy's Second Amended Complaint for Lack of Subject Matter Jurisdiction and Failure to State A Claim will be GRANTED IN PART and DENIED IN PART. The Motion for Leave to Amend the Complaint will be DENIED. The Motion to Strike the Affidavit of Melvin Eisele will be GRANTED.
I. PROCEDURAL HISTORY
This case arises out of a qui tam action brought by relator Academy Health Center, Inc., frequently known as Adventist Health Center, Inc. (hereinafter "AHC"), on behalf of the United States ("Relator"). AHC is a health care provider which, as part of its business, owns and leases skilled nursing facilities to other health care companies to manage them. On October 5, 2005, Hyperion Foundation, Inc. (hereinafter "Hyperion") entered into a lease agreement with AHC to manage the Oxford Health and Rehabilitation Center (hereinafter "Oxford" or "the Facility"), a skilled nursing facility in Lumberton, Mississippi. In turn, Hyperion entered into a management agreement with defendant AltaCare Corporation (hereinafter "Altacare") to manage the facility. As part of the terms, conditions and provisions of the lease agreement, Hyperion assumed the operations of Oxford and all of the rights and authority to operate Oxford and receive and accept payments, including those from Medicare and Medicaid, on behalf of the facility and its residents for services rendered to those residents.
The Relator AHC claims that this case began when Hyperion failed to pay the rent due to AHC, in violation of the lease agreement. AHC performed an initial investigation and determined that the Defendants could not or would not provide the requisite level of care for the residents. As a result, AHC took steps to terminate the lease and evict Hyperion as a tenant.
On July 15, 2008, AHC filed a Motion and/or Affidavit to Remove Tenant in the Justice Court of Lamar County, Mississippi, in an effort to evict Hyperion from the premises and terminate the relationship. The Motion sought to remove Hyperion as tenant by August 1, 2008, but Hyperion requested to continue the eviction hearing until August 6, 2008. On August 5, 2008, Hyperion filed a petition under Chapter 11 of the United States Bankruptcy Code before the U.S. Bankruptcy Court for the Southern District of Mississippi. As a result of the bankruptcy filing, the eviction proceeding could not go forward. See 11 U.S.C. § 362(a).
On September 30, 2009, Relator AHC filed its original Qui Tam Complaint and Other Relief in the bankruptcy proceeding, under seal, pursuant to Title 11, 28 U.S.C. §§ 157 and 1334(a)-(b). AHC provided a copy of the complaint and a confidential disclosure statement of all material evidence and information to the Attorney General of the United States and the U.S. Attorney for the Southern District of Mississippi, as required by the False Claims Act. See 31 U.S.C. § 3730(b)(2). On November 20, 2009, Relator AHC filed its First Amended Qui Tam Complaint and Other Relief, under seal, to allege new information and facts in support of its cause of action. The Relator duly provided the Complaint to the Government. On March 22, 2010, the bankruptcy court granted the United States Trustee's Motion to Dismiss Hyperion from bankruptcy due to Hyperion's failure to submit a disclosure report and its failure to file all monthly operating statements with the court and retained jurisdiction over the settlement agreement between Hyperion and AHC. On October 4, 2010, the bankruptcy court entered an agreed order transferring the qui tam proceeding originally brought in the bankruptcy action to this court. Docket No. 1
On December 3, 2012, after extensive investigation, the Government filed a Notice of Election to Intervene in Part and to Decline in Part in this action. The Government notified the Court of its decision to "intervene in that part of the action which alleges that defendants Hyperion, AltaCare, Long Term Care Services, Inc. ("LTCS") and Douglas K. Mittleider, made, caused to be made, and/or conspired to make false claims and false statements material to false claims to Medicare and Medicaid, for nursing home services at the Oxford Health & Rehabilitation Center facility in Lumberton, Mississippi." Notice of Election, Docket No. 32 at 2. The Government declined to intervene in the remainder of the Complaint.
AHC filed its Second Amended Complaint (hereinafter "Complaint") on February 11, 2011. Docket No. 7. The Complaint alleges that, from October 5, 2005 through at least May 1, 2012, Defendants made or caused to be made false or fraudulent claims and statements to the federal Medicare program and the federal-state Mississippi Medicaid program, for nursing home services purportedly provided to residents of Oxford which services were in fact non-existent, grossly deficient, materially substandard and/or worthless. Below is a summary of the allegations related to AHC's claims.
II. FACTUAL BACKGROUND
A. Relator's Complaint
1. Count I: Worthless Services and Resident Abuse
The Complaint alleges that "[t]he defendants exploited the residents of the Facility by receiving federal funds intended for care of the residents and willfully failing to utilize those funds toward resident care." It contends that the defendants have "abused the residents of the Facility by engaging in the willful or negligent infliction of physical pain, injury or mental anguish on the residents and/or the willful deprivation of services which are necessary to maintain the mental and physical health of the residents." SAC, ¶ 35. AHC alleges "financial abandonment, " in that the Defendants have diverted funds intended for resident care to entities controlled by Douglas Mittleider. That mismanagement includes rationing items and supplies needed for the basic care of the residents, including reusing towels, oxygen bottles, garbage and laundry bags, and medical tubing, increasing the risk of infection through repeated use. Hyperion has also had to hold paychecks to its employees because it did not have sufficient funds in its bank accounts to cover them; kept the Facility chronically short-staffed to lower costs; and closed part of the Facility, leaving the 120-bed facility with only 90 operational beds. Id.
AHC conducted an evaluation of the Facility in September 2008. The AHC evaluation found that Hyperion failed to provide a nursing home administrator or certified dietary manager for much of the period of evaluation; at least one laundry dryer was inoperative; several areas of the Facility had widespread mold and mildew; the bathroom tiles had a strong smell of urine, which indicated infrequent cleaning; old and mismatched furniture; and all of the showers had missing tiles, mold and mildew, and no privacy curtains or dividers. The Facility had received five Life Safety Code violations, while the average number of deficiencies for nursing homes in Mississippi at that time was 1.2, and the nation was 4.0. AHC indicates that these findings were reported to the Defendants. SAC, ¶ 36.
A state survey agency completed a survey and inspection of the Facility in February 2009, and found that the Facility was still not in substantial compliance with several conditions of participation. For example, during the February survey, "an astounding 20 out of 20 female residents surveyed" stated there were still no shower curtains or screens to provide privacy, and that "[t]he practice of the staff members was to bring in several females at a time to the shower area and undress and completely disrobe them in the shower areas in groups." The women surveyed stated that "they did not want to be nude in front of others and did not want to see others nude." SAC, ¶ 37.
A second AHC evaluation dated March 19, 2009, found that the Facility was still out of compliance with federal and state regulations. The Facility still had "inadequate equipment, old, worn and mismatched furniture, unsecured sprinkler heads, three of four shower areas were closed to residents, ' and the 200 wing [of the building] was still being used for scavenged parts and storage." The evaluation found that many of the toilets in the 200 wing of the building had no connection to the wall or broken handle, making it impossible to flush dirty toilets. There were also "widespread moisture and mold problems, roaches in the 200 Hall, and many of the 200 Hall rooms were missing mattresses and had broken air conditioning units." These findings were reported to the Defendants. SAC, ¶ 38.
A state survey dated November 24, 2009, found that the facility was still not in substantial compliance. The survey reported that a resident suffered a fall during a transfer from a wheelchair to his bed because a certified nurse assistant transferred the resident to the bed without aid, despite the fact that the resident's orders required that any transfer required a mechanical lift with two-person assistance. The resident suffered a sprained right ankle; he indicated that he had been moved on several occasions by only one staff member. The facility failed to thoroughly investigate and report the incident, failed to prepare comprehensive care plans, and failed to ensure the resident environment remained as free of accident hazards as possible. The report concluded that the Facility had not developed or implemented policies and procedures that prohibit mistreatment, neglect, and abuse of residents and misappropriation of resident property. SAC, ¶ 39.
A state survey dated March 25, 2010, indicated that the Defendants failed to maintain an effective pest control program so that the facility was free of pests and rodents. Their neglect of the Facility has "placed the residents at risk of physical and mental harm from snakes, rats, insects, and other vermin due to the lack of maintenance and housekeeping at the facility." SAC, ¶ 40. The survey reported the following incidents:
A snake entered the facility and was found in a bed-ridden resident's bed. The snake was discovered when a staff member investigated the resident's complaint of leg pain. When she pulled back the covers, a snake jumped out at her from the area of the resident's legs while the resident was still in the bed.
The resident's room where the snake was discovered showed evidence of a lack of maintenance, namely eroded wallboard in the bathroom with five areas noted with holes.
The facility's administrator recounted an incident in which surveyors saw a poisonous snake, a water moccasin, underneath bushes just outside the facility.
The administrator also told surveyors that facility staff members had previously discovered a snake in the sitting area in the front of the facility.
Another resident stated that she had spiders around her window until a hole was plugged and then had ants on the wall across from her bed. The resident stated that she just laid in the bed and watched them.
Other residents had sticky paper mouse traps in their rooms, and one resident stated she had recently noticed a mouse run under her bedside table. Another resident noted that staff members had caught two mice in her room. The floor was soiled and a gouged out area of the wall was visible under the heater.
The survey noted numerous holes and chipped or soiled tiles in several rooms in the facility.
A visitor to the facility told surveyors he had heard of snakes in the facility, that one snake was found in a resident's bed, and that he had killed a roach in the hallway and saw roaches often.
The Mississippi State Department of Health conducted a recertification survey at the
Facility on April 30, 2010. It found that the Facility was out of compliance with about twenty federal conditions of participation, including its status as at an "Immediate Jeopardy" level for "Administration" and "Accidents and Supervision." SAC, ¶ 41. Immediate Jeopardy is defined as "a situation in which the provider's noncompliance with one or more requirements of participation has caused, or is likely to cause, serious injury, harm, impairment, or death to a resident." 42 C.F.R. § 489.3. The survey findings include the following:
Hyperion failed to ensure that a resident received adequate supervision to prevent that resident from leaving the facility without staff knowledge. On March 30, 2010, a passerby informed staff that a resident was noted approximately 0.6 miles south of the facility on Highway 11.
The affected resident had known wandering behavior. This failure by Hyperion placed the resident at risk for serious injury, harm, impairment, and/or death and was deemed an Immediate Jeopardy level of noncompliance.
Hyperion also received a citation at an Immediate Jeopardy level for the facility's failure to be administered in a manner to attain or maintain the highest well-being of each resident as it relates to substandard quality of care and immediate jeopardy.
Hyperion failed to ensure sufficient staff was available on a 24-hour basis for six of fourteen days.
Hyperion failed to maintain an infection control program to provide a safe and sanitary environment, and 24 of 110 active employees had no documented evidence of having been tested for tuberculosis.
Hyperion failed to ensure that staff demonstrated competent skills and techniques in providing personal bathing care to a resident.
A staff member at the facility failed to change into a clean pair of gloves when cleaning a gastric tube site on a resident. That staff member also cleaned the site with water only rather than soap and water as was proper.
Hyperion failed to label medications according to physician dose instructions. Hyperion did not maintain accurate clinical records for nine of 24 records reviewed.
Hyperion did not ensure the physical environment of the kitchen was clean and sanitary for four office days of survey.
As a result of the April 2010 survey, the Centers for Medicare and Medicaid Services ("CMS") published notice of its intent to terminate the Facility's participation in Medicare and Medicaid programs. The Complaint alleges, however, that the Defendants were able to resolve the Immediate Jeopardy issue after two attempts. Shockingly enough, CMS decided not to terminate the Facility's participation.
A revisit by the state took place on May 17-18, 2010, to determine whether Oxford had removed the Immediate Jeopardy identified on April 30, 2010. The survey found continued noncompliance, but that the scope and severity level had been reduced. The survey found in part the following:
The Facility failed to ensure personal privacy by leaving a resident naked from the waist down and uncovered while the certified nurse assistant left to go to the bathroom to obtain soap. This occurred with two residents.
Eleven of twelve patients complained of not getting enough to eat. The Facility failed to provide prompt efforts to resolve the complaint. When asking for more food, residents reported that staff members told them, "That's all we have." Five of the twelve had lost weight over a three-month period although not determined to be significant amounts of loss. The Activity Director informed the agency that residents asked him/her for more food and he/she would buy them snacks with his/her own money.
The Facility failed to maintain a clean and homelike environment, in violation of federal housekeeping and maintenance requirements, see 42 C.F.R. § 483.15(h)(2), for two of five survey days. As found in the previous surveys, there were strong odors of urine, loose baseboards, loose air vents, and peeling paint.
The Facility failed to ensure that ten of 24 residents had care plans consistently developed and revised by the interdisciplinary team.
The services provided or arranged by the Facility did not meet professional standards of quality. For example, the Facility failed to ensure physician orders were implemented for one resident.
The Facility failed to ensure that sufficient staff was available on a twentyfour hour basis for six of the thirteen days of employee staffing reviewed.
The Facility failed to properly label medications according to physician's dosage instruction and medications were not administered as ordered. Drugs were not properly administered or stored as required by state and federal law.
The Facility failed to maintain an infection control program to provide a safe and sanitary environment. Staff failed to change gloves and failed to properly handle soiled linen.
The Facility failed to ensure the physical environment in the kitchen was kept clean and sanitary. Vents and ceiling tiles were stained and dirty.
The Relator alleges that evidence which surfaced in 2011 demonstrates a continued lack of care at the facility. They allege the following:
In January 2011, a patient was transferred to another local nursing facility; the new facility had to scrub the resident clean immediately upon admission because she had received very poor hygiene care at Oxford.
That same month, another resident was transferred because of bed sores and wounds that were left unhealed, which is the result of a lack of nutrition.
Local physicians have complained about the status of the Facility and have reported that they will not refer patients to it.
In January 2011, the security system was stripped from the facility wall (apparently repossessed), leaving a large unrepaired hole, and staff is required to stand guard at the doors to prevent elopements.
Staff failed to properly safeguard, account for, or dispose prescriptions drugs; Relator alleges and indicated that the facility administrator accessed narcotics and disposed out of them out of compliance with applicable regulations.
Residents of the Facility have filed suit against AHC as the Facility's owner for injuries involving inadequate staffing, substantial care following a fall, and failure to perform hygienic care, along with other claims.
In short, Relator alleges that this repeated failure to comply with Medicaid participation requirements indicates a pattern that Hyperion and/or the other Defendants have received funds to care for the residents, but operate Oxford at the bare minimum and do not provide it with the necessary requirements to operate in compliance with federal and state law. "Inadequate care, inadequate staffing, and inadequate supervision have resulted in pressure ulcers, poor hydration, poor nutrition, and falls, all of which indicate Defendants have provided worthless services (or worse, no services at all) to the residents of the Facility." SAC, ¶ 46. AHC indicates that it has received two "substantial offers" from Hyperion to purchase the Facility, which the Relator alleges indicates that Hyperion has sufficient funds or access to funds to operate the Facility in compliance, but has chosen not to do so. Id.
a) False Claims
Relator alleges that Hyperion and/or other Defendants have billed Medicare and Medicaid for worthless services, and have submitted false claims knowingly or with "deliberate indifference or reckless disregard for their truth or falsity." Id. According to the Relator, Hyperion holds the licensed authority to operate the Facility, but no one within Hyperion has any authority to make decisions on behalf of the entity. According to her testimony, Julie Mittleider was the wife of the Douglas Mittleider when she was appointed the original president, chief executive officer, chief financial officer, and chairman of the board of directors for Hyperion. Julie Mittleider, however, was never told of her appointment by her husband and never attended a board meeting. According to the Relator, she knew nothing of the operations of Hyperion from its inception in 2004 until July 24, 2008, when she allegedly resigned in favor of Defendant Harry M. Clark.
According to the testimony of defendant Harry M. Clark, he was asked by Mittleider to become the president of Hyperion on or about July 29, 2008. Clark did not know if he was appointed or had been elected. Clark testified that he had no knowledge of any aspect of the business of the Facility, even though he was the sole officer and director. The Relator, AHC, claims that it has not had dealings with any person other than Douglas Mittleider since the inception of the lease agreement, and that there is "no person with control or authority over the entity that holds the license to operate the facility." SAC, ¶ 57. Hyperion does not control the Facility and it cannot prevent the diversion of funds from Oxford to the Defendants. The Relator contends that Hyperion has abandoned the facility and failed to operate it in compliance with federal and state laws and regulations governing Medicaid and Medicare programs.
b) Nationwide Pattern of Conduct
The Relator contends that its allegations of inadequate staffing, failure to maintain facilities, neglect of residents and provision of substandard care at Oxford also hold true at other facilities controlled by Douglas Mittleider. The Relator has provided the following instances:
Massachusetts: Douglas Mittleider and several Mittleider entities which he controlled owned stakes in Governor Winthrop Nursing Home, a facility in Winthrop, Massachusetts. In that case, a judge appointed a receiver to oversee the facility due to the same issues. The court also prevented Douglas Mittleider and his entities from owning or operating a long-term care facility in Massachusetts for ten years.
Tennessee: Douglas Mittleider and AltaCare operated and managed Cambridge House in Bristol, Tennessee, where a resident died from complications from a broken leg she suffered when a hammock sling used by staff to lift her from a bed to a wheelchair snapped. Former Cambridge House employees stated administrators of the home, at the direction of Mittleider and AltaCare, had staff at the facility use slings and other equipment that were worn and in disrepair. The employees stated that new equipment was displayed for state surveyors while the worn equipment that was in daily use was hidden. After surveyors left, the newer items were put away until the next state surveyor visit.
Connecticut: The George and Sally Tandet Center has experienced financial problems and strikes due to the financial abandonment of that facility by AltaCare and Douglas Mittleider. Workers at the facility went on strike in 2010 to protest cuts in their health care insurance and bounced paychecks. In July 2009, every paycheck that it issued bounced, and afterward between two and twelve checks bounced every month.
The Relator alleges that the management of these facilities is part of a broader pattern; Douglas Mittleider and AltaCare "habitually funnel funds needed for the operation of facilities under their control and for the care of the residents of those facilities away from the facilities to entities under the control of Mittleider, neglecting the care of the residents and unjustly enriching Douglas Mittleider and/or the other defendants." SAC, ¶ 62. They allege that the Defendants have collected management fees from Oxford and "earn[ed] a profit while resident care suffers." SAC, ¶ 64.
2. Count II: Violation of Mississippi Vulnerable Persons Act
The Relator alleges that the Defendants violated the Mississippi Vulnerable Persons Act,
Miss. Code Ann. § 43-47-1, in that they "exploited the residents of the Facility by receiving federal funds intended for care of the residents and willfully failing to put those funds toward resident care." SAC, ¶ 68. According to the Relator, the "defendants have preyed upon the residents' status as beneficiaries of federal and state healthcare programs to profit from funds paid by those programs that were intended for care of the residents." SAC, ¶ 69. The Relator further alleges that the residents of Oxford fall within the definition of vulnerable adults under the Act because their "ability to perform the normal activities of daily living or to provide for their own care or protection from abuse, neglect, exploitation or improper sexual contact are impaired due to mental, emotional, physical or developmental disabilities or dysfunctions, or brain damage or the infirmities of aging." SAC, ¶ 67.
3. Count III: Overall Schemes to Defraud
The Relator has alleged a scheme by which the Defendants have defrauded health care programs, residents, landlords, vendors and creditors. According to the Relator, the Defendants fail to operate Oxford and other facilities in compliance with federal and state regulations in order to "systemically drain the funds from the facilities" and they have been "unjustly enriched by this conduct." SAC, ¶ 71.
A number of other entities and individuals assisted with the management of Oxford. These entities include HP/Ancillaries, Inc.; Long Term Care Services, Inc.; Sentry Healthcare Acquirors, Inc.; HP/Management Group Inc.; Harry McD. Clark; Julie Mittleider; and Douglas K. Mittleider. The Relator contends that Douglas Mittleider and all the other Defendants have siphoned money from Oxford through Hyperion to various entities owned and controlled by Mittleider. Hyperion submits claims for worthless services to Medicare and Medicaid and diverts funds paid by these programs to Mittleider companies as payment for alleged services provided by Oxford. Thus, Hyperion is a "sham corporation" and the alter ego of Douglas Mittleider, Julie Mittleider, and the other Defendants, which are mostly Mittleider-controlled companies. SAC, ¶ 73.
The Relator alleges that Douglas Mittleider serves as CEO, CFO, and/or Secretary of the other Mittleider companies. Douglas Mittleider, however, installed first his wife, Julie Mittleider, as a figurehead officer and director of Hyperion and later installed Harry Clark, an individual excluded from participation in federal healthcare programs, as the sole officer and director of Hyperion. Douglas Mittleider is also the CEO, CFO, and secretary of AltaCare. Corporation. AltaCare serves as manager/accountant of Hyperion and is a creditor of Hyperion. Under AltaCare's management, Hyperion was forced to file for Chapter 11 bankruptcy due to an inability to pay its debts, the largest of which was owed to the Relator for rent.
The Relator also contends that Julie Mittleider knowingly and willfully conspired with her husband Douglas Mittleider, Harry Clark, and the Mittleider companies to defraud the Medicare and Medicaid programs. Hyperion has allegedly made false claims and fraudulent disclosures to obtain payment from Medicare and Medicaid, which Hyperion has then illegally funneled at the direction of the Mittleiders to the Mittleider companies, including Sentry Healthcare, which is owned and operated by Julie Mittleider. In the same way, Harry M. Clark has also allegedly conspired with the Defendants to defraud Medicare and Medicaid programs.
During the bankruptcy proceeding, Hyperion, as managed by AltaCare, continued to pay out large sums of money to Douglas and Julie Mittleider's companies. Hyperion's Medicaid cost report for fiscal year 2008 also shows that Hyperion claimed costs of $358, 993 for AltaCare's management fees and accounting fees. Hyperion also claimed $1, 608.00 in costs to HP/Ancillaries, Inc., another of Douglas Mittleider's companies, on the 2008 Medicaid cost report. Hyperion made "cash transfers" to LTCS, which is owned and operated by Douglas Mittleider, totaling $672, 300 in three months - May, June, and July 2009 - alone. Sentry Healthcare Acquirors, Inc., which is owned and operated by Julie Mittleider, received $50, 000 in "cash transfers" from Hyperion in June 2009 alone. The Relator states that it is unclear what services either of these entities provided.
Relator AHC has also raised allegations related to the bankruptcy proceeding between itself and Hyperion. The bankruptcy court entered an order compelling settlement of the Relator's claims for past due rent. Hyperion was past due in an amount exceeding $500, 000. The settlement required Hyperion to pay $325, 000, a reduced sum, in one installment of $125, 000 and then in eighteen monthly installments of $6, 944.44. Hyperion was also to continue paying monthly lease fees of $36, 000 per the lease agreement. The monthly installments were to be paid by the fifth day of each month and no later than the fifteenth day of each month. The court order provided that, should Hyperion fail to timely pay the Court ordered settlement and lease payments by the fifteenth day, the Lease Agreement was to automatically terminate. The payments were to be transferred by wire into the Relator's account.
The payments were properly and timely paid from March until May of 2014. On May 14, 2010, a representative of Defendants improperly delivered two checks to Bass Memorial Academy ("Bass") for the payments due. According to the Relator, Bass is a nursing school affiliated with AHC, and it was not a party to the bankruptcy proceeding or settlement agreement. These checks were drawn on the account of Hyperion Foundation, Inc., DBA Oxford Health & Rehab CTR, Chap 11 Debtor in Possession Case 09-51228 ("Bankruptcy Account"). The Relator alleges that, although the bankruptcy action had been dismissed on March 22, 2010, Defendants continued to write checks on the Bankruptcy Account in an effort to misrepresent to payees that Hyperion was still protected by the bankruptcy laws and that the case was still open.
After the checks were deposited, they were returned for insufficient funds. The Relator then learned that, on May 18, 2010, the funds had been wire transferred into its account; the wire transfer was allegedly in the name of LTCS. In August 2010, Hyperion again hand delivered checks drawn on the Bankruptcy Account and stopped payment on the checks. Again, the funds were later wired into the AHC account from another account controlled by Douglas Mittleider. The October 2010 payments were also delivered by check, in violation of the settlement terms, and were returned for insufficient funds. Funds were again transferred by wire to AHC to cover the bad checks.
The Relator alleges that Hyperion and/or the Defendants hand delivered the checks knowing that there were insufficient funds in the Bankruptcy Account in an attempt to deceive AHC and the bankruptcy court that the payments had been timely made. The Relator also asserts that this conduct is further evidence of the Defendants' inability to manage and operate the facility and its propensity to defraud and deceive its creditors and the court. The commingling of funds from various accounts owned by Hyperion, LTCS, and others, is evidence that Douglas Mittleider controls all of the Defendant entities and funds from the operation of other facilities is being used to pay the debts of Hyperion.
Finally, although the total sum due to Relator was compromised by the order of the bankruptcy court, Hyperion claimed on its cost report that it paid the full amount of the lease payments due. The Relator contends that this claim is fraudulent and in violation of state and federal law.
4. Count V: Failure to Disclose Person With Ownership or Control Interest 
The Relator alleges that Hyperion has failed to disclose this required information about Harry Clark's control interest and his exclusion status to Medicaid and is in violation of the federal and state authorities which give Hyperion an "affirmative obligation" to disclose all persons who have an ownership, financial or control interest in it. The Relator contends that this information constitutes a false record or statement for the purpose of obtaining payment from a federal program.
5. Count VI: Failure to Make Required Disclosures on Medicaid Cost Report
According to the Relator, Hyperion failed to make the required disclosures in its cost reports as related to at least its officers and directors, as Hyperion did not disclose Mr. Clark as its sole officer and director on its 2008 cost report filed May 26, 2009. Hyperion also failed to disclose any individual as an officer or director on its 2009 cost report filed May 7, 2010. The Relator alleges that these omissions were attempts to conceal the actual ...