Interesting! Illinois won’t step in on civil suit alleging kickbacks were paid to nursing home operators - chicagotribune.com

State authorities decline to move forward on civil allegations by whistle-blowers that one of the nation's largest pharmacy companies allegedly paid a multimillion-dollar kickback to Chicago nursing home operators. According to a civil lawsuit by two health care industry insiders, pharmaceutical supply firm Omnicare Inc. allegedly inflated the purchase price it paid for a pharmacy company purportedly controlled by Chicago nursing home operators Philip Esformes and his father, Morris Esformes.

State authorities are declining to move forward with civil allegations that one of the nation's largest pharmacy companies allegedly paid multimillion-dollar kickbacks to a family of prominent Chicago nursing home operators, court records and interviews show.

According to a civil lawsuit by two health care industry insiders, pharmaceutical supply firm Omnicare Inc. allegedly inflated the purchase price it paid for a pharmacy company purportedly controlled by Chicago nursing home operators Philip Esformes and his father, Morris Esformes.

The $32 million that Omnicare paid for Total Pharmacy in 2004 included millions of dollars that were in fact a kickback to secure long-term pharmacy contracts with nursing homes the Esformes family controlled or influenced, the lawsuit alleges.

But after a three-year investigation involving federal agents and Illinois Attorney General Lisa Madigan's office, Madigan followed the U.S. Justice Department's lead and declined to intervene in the case.

"We looked at every possible angle of this case and unfortunately were left in a position where it is impossible to meet our burden" of proof, Madigan's deputy chief of staff, Cara Smith, said Friday. But, Smith added, "We don't regret a day we spent on this case."

The case will now move forward as a civil lawsuit, said attorney Timothy McCormack, who represents the whistle-blowers.

Philip and Morris Esformes, who are listed as part-owners of 28 nursing homes in Illinois and Florida, declined to comment but denied wrongdoing through their attorneys. They have not yet been served with court papers or responded to the lawsuit, records show. And they have not been charged with any crime in the sale of Total Pharmacy.

"I cannot emphasize strongly enough that Philip Esformes vehemently denies any wrongdoing," said his attorney Michael Pasano.

"Morris Esformes emphatically denies wrongdoing," said his attorney Harvey Tettlebaum.

Omnicare spokesman Andy Brimmer said "the company believes the allegations are without merit and intends to vigorously defend itself."

"Total Pharmacy is a legitimate up and running company that sold for a fair price," said company attorney Daniel Purdom. Purdom also denied that Morris Esformes had any ownership or control of the firm and said he was not involved in the sale to Omnicare.

In a written statement, McCormack, the whistle-blowers' attorney, said: "The decision by the state of Illinois … doesn't mean the allegations in the complaint are any less valid or less serious."

The Justice Department in January declined to intervene in a federal lawsuit containing similar allegations. Both the state and federal lawsuits were filed under the federal False Claims Act, which allows citizens to bring fraud actions on behalf of the government and recover funds on the government's behalf.

The case was brought by pharmacy executive Maureen Nehls, who served as vice president of pharmacy operations for Total Pharmacy, according to the suit. Joining her in the lawsuit is former health care dealmaker Adam Resnick, a self-described addicted gambler who recently served a 25-month federal prison sentence for his role in a $10 million check-kiting scheme that led to the collapse of Universal Federal Savings Bank in Chicago's Pilsen community.

Government authorities have recently won settlements in federal court in Boston totaling about $33.9 million based on Resnick's information about deals involving Omnicare and other nursing home chains, McCormack said. Those cases were among a cluster of whistle-blower lawsuits Omnicare recently settled by paying $98 million.