Philip Esformes, a healthcare executive worth millions, has a “very large closet” in his two-story, Mediterranean-style home on North Bay Road near the exclusive La Gorce Country Club in Miami Beach.
And in that bedroom closet, prosecutors say, Esformes gave $5,000 to his right-hand man to be used to bribe a regulator to learn what the state knew about his vast network of skilled-nursing and assisted-living facilities.
Unbeknown to Esformes, the exchange of cash for inside information was videotaped by Esformes’ once-trusted friend, Gabriel Delgado.
He had agreed along with his brother, Guillermo, to help investigators target the executive in the summer of 2015 after the brothers got into serious trouble with the feds themselves.
Esformes, 48, the main defendant in a colossal $1 billion Medicare fraud case, has been held behind bars since July at the Miami Federal Detention Center as he awaits trial in federal court.
This month, Justice Department lawyers added an explosive new charge accusing Esformes of paying thousands of dollars to an employee with the state Agency for Health Care Administration to obtain patient complaints and inspection schedules on his facilities so he could fix the problems before regulators showed up at the door.
“At the center of this corruption is Mr. Esformes and his way and his ability to gain inspection reports from the Florida agency,” Justice Department lawyer Allan Medina said at Esformes’ detention hearing in August, months before the accusation would be added to a new federal grand jury indictment.
Esformes’ defense attorney downplayed the latest allegation, maintaining his client is innocent and that the Delgado brothers, who pleaded guilty, are the real criminals.
“The newest version of the indictment repeats most of what has already been alleged against Mr. Esformes and is based directly on claims made by admitted criminals who in return for lesser sentences have pointed fingers at Mr. Esformes,” said Miami lawyer Michael Pasano.
“The crimes, lies, obstructive behavior and pure greed of these men is astounding and will come out at the eventual trial [in September]. … The Delgado brothers apparently had people on the inside at AHCA. It is Philip Esformes’ position that those are crimes by the Delgados and not by him.”
Prosecutors said Esformes’ healthcare network as well as other co-conspirators such as the Delgado brothers billed $1 billion for fraudulent medical services between 2009 and last year.
In turn, the taxpayer-funded Medicare program paid out about $500 million — with Esformes’ network receiving about half that income.
Justice Department officials — along with South Florida’s U.S. attorney, the FBI and Health and Human Services agents described the Esformes prosecution as the nation’s biggest Medicare fraud case.
Since his arrest in July, Esformes and his team of lawyers have tried in vain to obtain bail for him, pledging $3 million from supporters, including a rabbi from the executive’s native city of Chicago, where he got started in the healthcare business with his father, Morris.
Almost all of the son’s assets — including 13 real estate properties in Miami Beach, Miami, Chicago and Los Angeles, as well as numerous bank accounts with $9 million, a Ferrari Aperta sports car and Grubel Forsey watch — have been temporarily frozen under a judge’s order.
In the criminal case, Magistrate Judge Edwin Torres concluded Esformes could flee the country. More significant, the judge found that Esformes runs the risk of obstructing justice because he had plotted in 2015 with the Delgado brothers to help one of them leave Miami for Israel to avoid trial.
The brothers, accused of sharing Medicare patients with him in a kickback scheme, recorded a two-hour conversation with Esformes.
It was carried out as part of the brothers’ cooperation deal with the feds to plead guilty.
After striking out with the magistrate, Esformes appealed to U.S. District Judge Joan Lenard, who took an even harsher view of him.
She not only denied his renewed bid for bond — which proposed confinement in his $4 million North Bay Road home and 24-hour monitoring by an off-duty police officer — but ordered him to return assets that he wrongfully transferred to his father in Chicago in violation of a court order.
“The government has presented strong evidence of the defendant’s intent to flee, his intent to obstruct justice and his lack of respect for the court’s authority and disregard for court orders,” Lenard found, adding that “no transfer should have taken place without permission of the court.”
Prosecutors said Esformes “amassed significant personal wealth” — reporting assets of $78 million, including two North Bay Road homes next door to each other — from his network of skilled-nursing and assisted-living facilities in South Florida. In 2012, Esformes reported making $10.4 million, according to court papers.
The prosecutors said Esformes continued to fleece the Medicare program even after he, his father and others settled a civil dispute a decade ago with the U.S. government for $15.4 million over allegations of paying kickbacks to physicians in exchange for patient referrals to Larkin Community Hospital.
In 2006, Esformes owned a chain of Miami-Dade assisted-living facilities and supplied patients to the South Miami hospital that were then returned to his facilities and recycled again, according to the settlement.
Now, Esformes is accused of exploiting his network of about 20 Miami-Dade skilled-nursing and assisted-living facilities to fleece the taxpayer-funded Medicare program in a similar scheme by filing false claims for services that were not necessary or in some instances not provided to about 14,000 patients.
Larkin Community Hospital, though not identified in the Esformes indictment, referred many of those Medicare patients to his network through kickback payments to physicians and other medical professionals, prosecutors say. Esformes, in turn, recycled the same patients back through the hospital after they stayed in his network, according to the indictment.
Esformes is charged with conspiring with Arnaldo Carmouze, 57, a Palmetto Bay physician’s assistant, and Odette Barcha, 50, a former director of outreach programs at Larkin, to move the patients in and out of the hospital through Esformes’ facilities to bilk Medicare.
Esformes is also accused of referring the patients in his network to other convicted healthcare fraud offenders, including the Delgado brothers.
According to their indictment, the brothers paid him kickbacks while swindling Medicare for mental health, prescription drug and home healthcare services.
As a result of their plea deals and help in the Esformes investigation, they received more lenient prison sentences.
Gabriel, 44, got 4 1/2 years and had to repay Medicare $9.1 million, while Guillermo, 47, was imprisoned for 9 years.
According to the Esformes indictment, some of the kickback payments were “disguised” to cover escort services for him as well as related travel and hotel expenses to the Ritz-Carlton Hotel in Orlando.
Esformes also used some of the Medicare income to pay for a wardrobe at Saks Fifth Avenue and a basketball coach for one of his three children, the indictment said.
Even before his arrest last summer, Esformes’ life was starting to unravel. In October 2015, Esformes’ wife, Sherri, filed for divorce. Court records reveal it has been a bitter dispute, though the wife’s attorneys described Esformes as a hard-working businessman and “great provider” before the breakup.
“The lifestyle of the parties and the family exceed that of the rich and famous,” her attorneys said in a filing last year.
“The numbers are staggering. The expenditures are unlimited and without any restrictions.”
Esformes not only owns a 7,100-square-foot home on a half-acre corner lot on North Bay Road near Biscayne Bay and the La Gorce Country Club, but a second 4,300-square-foot home next door that is basically styled as the “basketball house,” the filing said.
“It is essentially a multimillion-dollar house which has been converted into a basketball gym with additional facilities for workouts and fitness.”
If he is convicted at trial, Esformes could spend the rest of his life in prison.
If they prevail, Justice Department lawyers plan to seize Esformes’ main home, the basketball house next door, another 5,100-square-foot home on Miami Beach, and numerous other properties, claiming he purchased them all with ill-gotten Medicare money.
BY JAY WEAVER – Miamiherald.com