Feds Ask To Make Life Care Chief Forrest Preston A Defendant In Major "False Claims" Lawsuit; Ask Claim Of "Unjust Enrichment"

  • Wednesday, August 12, 2015
Forrest Preston
Forrest Preston

The federal government is seeking to add Life Care Centers of America chairman Forrest L. Preston as a defendant in its major "false claims" action in Federal Court in Chattanooga.

The motion says, "Since the filing of its complaint, the United States has uncovered evidence that revealed the extent of Mr. Preston's involvement in the management of Life Care, the degree to which he was aware of complaints from his own employees regarding the conduct at issue in this litigation, and the degree to which he ignored corporate formalities and benefited unjustly from Life Care's unlawful conduct."

The motion also cites "the extent to which Medicare funds paid to Life Care as a result of its submission of false claims have been transferred, directly or indirectly, to Mr. Preston."

It says, "The United States seeks leave to allege a single claim against Preston individually for unjust enrichment."

The 82-year-old billionaire is the founder and sole stockholder of Life Care Centers, which is based in Cleveland, Tn.

The federal action, filed in 2012, asks millions of dollars in reimbursements, plus treble damages, against Life Care Centers as a result of two whistle blower lawsuits filed in federal court in Chattanooga in 2008.

The suit asked for the recovery of "millions of dollars that Life Care caused the Medicare and TRICARE programs to pay for services that were not covered by the skilled nursing facility benefit, that were not medically reasonable and necessary, and that were not skilled in nature."

The motion says Mr. Preston owns all the Life Care nursing homes either in whole or part and he was "the ultimate financial beneficiary of all revenues billed and collected, including Medicare and Medicaid funds, by Life Care Centers of America and its affiliated nursing homes" during the term covered by the lawsuit.

It says he "has operated Life Care and its related entities without regard for the separateness between himself and the corporate forms among the entities. As Preston himself explained in a deposition in another case, 'a benefit to me is the corporation. That's synonymous (it) really amounts to moving my own money from (my) own trousers from one pocket to another."

The motion says Life Care is organized as an S-Corporation and all of Life Care's income and losses "are reported on Preston's personal tax returns and are taxed to Preston (rather than at a corporate level)."

It says, "Preston's control over his unitary nursing home business also allowed him to secure significant loans on behalf of Life Care and his other businesses. For example, Life Care and dozens of other Preston-owned entities borrowed hundreds of millions of dollars from GE Capital in December 2010."

The motion says he has the sole authority to appoint and remove any member of Life Care's board of directors without cause and to amend the corporation bylaws at will.

It says he "has further controlled Life Care and its operations by filling open positions on the board with his personal friends and advisors, and at times, even his administrative staff. Preston restricted who could speak directly to the board and what information individuals were allowed to share with the board. Preston required materials to be filtered through him before being shared with the board, and executives were not allowed to speak at board meetings unless called on by Preston directly. Through his actions, Preston dominated Life Care and restricted the board's ability to adequately manage and oversee the company."

It was claimed that he was involved in numerous hiring and firing decisions, including dismissing two compliance officers.

The motion says Mr. Preston, who is now listed as one of the richest men in America,  has borrowed more than $50 million from Life Care. It says, "At times, these loans were not approved by the board and had no set repayment terms. Moreover, Life Care did not always secure collateral or other security from Preston."

It says, as a result of his actions, Life Care has become "severely under-capitalized."

The motion says under his control that Medicare has paid to Life Care "billions of dollars, a substantial portion of which were for medically unreasonable and unnecessary rehabilitation therapy services."

One complaint was brought by Glenda Martin, a registered nurse and a former staff development coordinator of Life Care Center of Morristown, Tn.

 Another was by Tammie Taylor, a former occupational therapist of Life Care Center at Inverrary, in Lauderhill, Fla.

Breaking News
New Hope Fire Department Disputes TWRA Report On Kayaker Rescues
  • 3/28/2024

New Hope Fire Department Corey Comstock disputed a report by the Tennessee Wildlife Resources Agency about the rescue of 33 kayakers from extremely high winds near Nickajack Cave on Monday. ... more

Woman Seriously Injured In House Fire Thursday Afternoon
Woman Seriously Injured In House Fire Thursday Afternoon
  • 3/28/2024

A woman sustained life-threatening injuries in a house fire on North Moore Road Thursday afternoon and was rescued by Chattanooga firefighters. Hamilton County 911 received a call at 12:18 ... more

Motorcyclist Hit Speeds Of 170 MPH; Posted Video Of Outrunning Police
Motorcyclist Hit Speeds Of 170 MPH; Posted Video Of Outrunning Police
  • 3/28/2024

A motorcyclist fled on Sunday, from a Hamilton County Sheriff’s Office deputy attempting to make a lawful stop on Highway 27. Since that time, the deputy has been working leads to identify the ... more