Complaint — United States ex rel. Ashwani Chawla v. Unified Care Services, LLC (No. 2:21-cv-05935, C.D. Cal.)

Summary

A False Claims Act qui tam complaint, filed under seal July 22, 2021 as Document 1 in United States ex rel. Ashwani Chawla v. Unified Care Services, LLC et al., Case No. CV21-5935-GW(RAOx), in the U.S. District Court for the Central District of California. Relator Ashwani Chawla, a California CPA and nursing home administrator, names Unified Care Services, LLC, its president Emmanuel David and affiliated skilled nursing facility operators in California and Arizona, stating the company is affiliated with roughly a dozen healthcare facilities. It alleges the defendants received PPP loans totaling $14,400,356 although, with their affiliates, they exceeded the 500-employee cap and had other sources of financial assistance. Its First through Fourth Causes of Action cite 31 U.S.C. § 3729(a)(1)(A), (B), (C) and (G); it seeks three times the government's damages plus civil penalties.

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“Complaint — United States ex rel. Ashwani Chawla v. Unified Care Services, LLC (No. 2:21-cv-05935, C.D. Cal.).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/complaint-no-2-21-cv-05935-dkt-1-c-d-cal-062246b097/, SHA-256 d9cd66d420e8aa840ac09f2f20dd4babfa9e2e19d8fff8ac08c536f3cef0f608.

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FEE PAID
I/S Case 2:21-cv-05935-GW-RAO Document 1 Filed 07/22/21
Page 1 of 22 Page ID #:1
FILED
CLERK, U.S. DISTRICT COURT

21
7/22/21
Days 1 JUSTIN T. BERGER (SBN 250346) cs
CENTRAL DISTRICT OF CALIFORNIA
BY: ___________________ DEPUTY

jberger@cpmlegal.com
2 KELSEY J. MOE (SBN 328815)
kmoe@cpmlegal.com
3 COTCHETT, PITRE & McCARTHY, LLP
San Francisco Airport Office Center
4 840 Malcolm Road
Burlingame, CA 94010
5 Telephone: (650) 697-6000
Facsimile: (650) 697-0577
6
Attorneys for Relator
7

8 UNITED STATES DISTRICT COURT

9 CENTRAL DISTRICT OF CALIFORNIA

10 [UNDER SEAL]., CASE NO. CV21-5935-GW(RAOx)
11 Plaintiffs, COMPLAINT FOR

12 v. 1. Submission of a False Claim
31 U.S.C. § 3729(a)(1)(A);
13 [UNDER SEAL],
2. Making False Statement in Support
14 Defendants. of a Claim
31 U.S.C. § 3729(a)(1)(B)
15
3. Conspiracy to Violate the False Claims
16 Act
31 U.S.C. § 3729(a)(1)(C)
17
4. Improper Retention of Money Owed to
18 the Government
31 U.S.C. § 3729(a)(1)(G)
19

20 DEMAND FOR JURY TRIAL

23 [FILED IN CAMERA AND UNDER SEAL
PURSUANT TO 31 U.S.C. § 3730(b)(2)]
24

28
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COMPLAINT
Case 2:21-cv-05935-GW-RAO Document 1 Filed 07/22/21 Page 2 of 22 Page ID #:2

1 JUSTIN T. BERGER (SBN 250346)
jberger@cpmlegal.com
2 KELSEY J. MOE (SBN 328815)
kmoe@cpmlegal.com
3 COTCHETT, PITRE & McCARTHY, LLP
San Francisco Airport Office Center
4 840 Malcolm Road
Burlingame, CA 94010
5 Telephone: (650) 697-6000
Facsimile: (650) 697-0577
6
Attorneys for Relator
7

8 UNITED STATES DISTRICT COURT

9 CENTRAL DISTRICT OF CALIFORNIA

10 UNTIED STATES OF AMERICA ex rel. CASE NO.
ASHWANI CHAWLA.,
11 COMPLAINT FOR
Plaintiffs,
12 5. Submission of a False Claim
v. 31 U.S.C. § 3729(a)(1)(A);
13
UNIFIED CARE SERVICES, LLC; 6. Making False Statement in Support
14 EMMANUEL DAVID; GERI-CARE INC. dba of a Claim
HARBOR CARE CENTER; GERI CARE V, 31 U.S.C. § 3729(a)(1)(B)
15 LLC dba WELLSPRINGS POST ACUTE
CENTER; PACIFIC PALMS HEALTHCARE, 7. Conspiracy to Violate the False Claims
16 LLC dba PACIFIC PALMS HEALTHCARE; Act
FOOTHILL CARE CENTER, INC dba APACHE 31 U.S.C. § 3729(a)(1)(C)
17 JUNCTION HEALTHCARE; MOUNT
MEGIDDO, LLC dba BANNING 8. Improper Retention of Money Owed to
18 HEALTHCARE; CANYON PROPERTIES III, the Government
LLC dba COUNTRY MANOR HEALTHCARE; 31 U.S.C. § 3729(a)(1)(G)
19 CLOVERLEAF ENTERPRISES, INC. dba
CHERRY VALLEY HEALTHCARE;
20 FOOTHILL CARE CENTER, LLC dba DEMAND FOR JURY TRIAL
GOLDEN STATE CARE CENTER; DAVID
21 KLEIS III, LLC dba MIRAVILLA CARE
CENTER, DAVID KLEIS II, LLC dba PALM
22 GROVE HEALTHCARE; MIRAMONTE
ENTERPRISES, LLC dba SAN JACINTO
23 HEALTHCARE; GERI CARE IV, LLC dba [FILED IN CAMERA AND UNDER SEAL
ANTELOPE VALLEY CARE CENTER; PURSUANT TO 31 U.S.C. § 3730(b)(2)]
24 WASHINGTON ENTERPRISES III, LLC dba
ST. ANDREWS HEALTHCARE; HACIENDA
25 CARE CENTER, INC. dba SIERRA VALLEY
REHABILITATION CENTER; HORIZON
26 WEST HEALTHCARE, INC. fka HERITAGE
CARE CENTEER, INC. dba HERITAGE
27 REHAB CENTER,

28 Defendants.
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COMPLAINT
Case 2:21-cv-05935-GW-RAO Document 1 Filed 07/22/21 Page 3 of 22 Page ID #:3

1 TABLE OF CONTENTS

2 Page No.
I. INTRODUCTION ...................................................................................................................... 1
3
II. JURISDICTION AND VENUE ................................................................................................. 1
4
III. PARTIES .................................................................................................................................... 2
5
IV. THE FALSE CLAIMS ACT ...................................................................................................... 4
6
V. THE CARES ACT AND PPP PROGRAM................................................................................ 5
7
VI. THE UNIFIED CARE SERVICES DEFENDANTS’ DID NOT QUALIFY FOR THE
8 LOANS ....................................................................................................................................... 9

9 A. ..............Unified Care Services and its Affiliates Far Exceed the 500-Employee Cap, and the
Revenue Benchmarks ................................................................................................................. 9
10
B.................. Unified Health Services and its Affiliates Submitted Fraudulent PPP Applications
11 .................................................................................................................................................. 12

12 C...... The Unified Health Services Chain Had Significant Sources of Financial Assistance, and
Otherwise Were Not in Need of PPP Loans ............................................................................. 14
13
VII. CAUSES OF ACTION ............................................................................................................. 16
14
FIRST CAUSE OF ACTION
15 Submission of a False Claim
31 U.S.C. § 3729(a)(1)(A) ........................................................................................................ 16
16
SECOND CAUSE OF ACTION
17 Making False Statement in Support of a Claim
31 U.S.C. § 3729(a)(1)(B) ........................................................................................................ 17
18
THIRD CAUSE OF ACTION
19 Conspiracy to Violate the False Claims Act
31 U.S.C. § 3729(a)(1)(C) ........................................................................................................ 18
20
FOURTH CAUSE OF ACTION
21 Improper Retention of Money Owed to the Government
31 U.S.C. § 3729(a)(1)(G) ........................................................................................................ 18
22
VIII. PRAYER FOR RELIEF ........................................................................................................... 19
23

28
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1 I. INTRODUCTION

2 1. The novel coronavirus has wrought devastation throughout our country. In response,

3 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in March

4 2020. The law was intended to provide emergency financial assistance to Americans suffering from

5 the economic impact of the virus.

6 2. One highly publicized portion of the aid was the Paycheck Protection Program

7 (“PPP”). Congress initially authorized $349 billion in forgivable loans to small business, and then in

8 April 2020 authorized more than $300 billion in additional funding for PPP.

9 3. Relator Ashwani Chawla brings this lawsuit under the False Claims Act to redress the

10 Unified Care Services Defendants’ improper receipt and retention of PPP loans, as well as to hold the

11 Unified Care Services Defendants liable for conspiring to obtain millions of dollars of taxpayer funds

12 to which they were not entitled. As a result of the defendants’ fraud conspiracy, they received PPP

13 loans totaling $14,400,356

14 4. Not a penny of these loans were necessary, and Defendants made false certifications

15 of need and eligibility under the PPP program and the CARES Act. These false statements were

16 material in getting the loan approved. These statements were objectively false and were knowingly

17 so. Only by making these false certifications and statements were the Defendants able to claim

18 eligibility for the loan program and, most tantalizing, for eventual forgiveness of the loans. In short,

19 the loans were not needed and Defendants were not eligible yet resulted in millions of taxpayer

20 dollars being directed to the Unified Care Services Defendants to earn interest and profit off the PPP

21 program, all with the opportunity to have the principal and interest of those loans forgiven.

22 II. JURISDICTION AND VENUE

23 5. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C.

24 § 1331, and 31 U.S.C. § 3732, the latter of which specifically confers jurisdiction on this Court for

25 actions brought pursuant to 31 U.S.C. §§ 3729 and 3730.

26 6. This Court has personal jurisdiction over Defendants pursuant to 31 U.S.C. § 3732(a)

27 because that section authorizes nationwide service of process and because Defendants have minimum

28
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COMPLAINT 1
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1 contacts with the United States. Moreover, Defendants can be found in and have transacted business

2 in the Central District of California.

3 7. Venue is proper in the Central District of California pursuant to 28 U.S.C. §§ 1391(b)

4 and 1395(a) and 31 U.S.C. § 3732(a) because Defendants can be found in and/or transact or have

5 transacted business in this district. At all times relevant to this Complaint, Defendants regularly

6 conducted, and continue to conduct, substantial business within this district and/or maintain

7 employees and offices in this district. The events that gave rise to this action occurred in this district.

8 III. PARTIES

9 8. Relator ASHWANI CHAWLA files this action on behalf of the United States pursuant

10 to the False Claims Act. Mr. Chawla is an original source of the information contained herein. Mr.

11 Chawla is a licensed California CPA as well as a licensed Nursing Home Administrator. He has

12 worked for several large healthcare and healthcare consulting firms, such as Kellogg and Andelson,

13 Zenith Health Care, and Windsor Healthcare. Mr. Chawla has extensive expertise in Medi-Cal cost

14 reports and worked as a government cost report auditor for two years. Throughout his career, cost

15 report preparation, consulting and compliance has been his area of expertise. At the time of filing

16 this lawsuit, the fact that the Unified Care Services Defendants were ineligible for receiving a PPP

17 loan was not publicly disclosed.

18 9. Defendant UNIFIED CARE SERVICES is a limited liability company that runs

19 healthcare services through various affiliates across California and Arizona. Its primary address is

20 2368 Torrance Blvd Suite 200, Torrance, CA 90501. Through common ownership and control,

21 Unified Care Services is affiliated with roughly a dozen healthcare facilities that provided long term

22 care and assisted living services to its clients.

23 10. Defendant Emanual David is President of Unified Care Service, LLC and is on the

24 governing board of each of the affiliated healthcare facilities listed below.

25 11. Defendant Geri Care IV, LLC, which does business as Antelope Valley Care Center,

26 is a Skilled Nursing Facility (“SNF”) located at 44567 N 15th St. West, Lancaster, CA 93534-2848.

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COMPLAINT 2
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1 12. Defendant Geri Care V, LLC, which does business as Wellsprings Post Acute Center,

2 formally known as Antelope Valley Healthcare, is a Skilled Nursing Facility (“SNF”) located at

3 44445 N 15th St. West, Lancaster, CA 93534-2801.

4 13. Defendant Mount Megiddo, LLC, which does business as Banning Healthcare is a

5 Skilled Nursing Facility (“SNF”) located at 3476 W Wilson St. Lancaster, CA 92220-3420.

6 14. Defendant Canyon Properties III, LLC, which does business as Country Manor

7 Healthcare is a Skilled Nursing Facility (“SNF”) located at 11723 Fenton Ave, Lake View Terrace,

8 CA 91342-6498.

9 15. Defendant Cloverleaf Enterprises, Inc., which does business as Cherry Valley

10 Healthcare is a Skilled Nursing Facility (“SNF”) located at 5800 W Wilson St, Banning, CA 92220-

11 0000.

12 16. Defendant Foothill Care Center, Inc., which does business as Golden State Care

13 Center is a Skilled Nursing Facility (“SNF”) located at 1758 North Big Dalton Ave, Baldwin park,

14 CA 91706-0000.

15 17. Defendant Geri-Care Inc., which does business as Harbor Care Center is a Skilled

16 Nursing Facility (“SNF”) located at 21521 South Vermont Ave, Torrance, CA 90502-1939.

17 18. Defendant Horizon West Healthcare, Inc., successor by merger to Heritage Care

18 Center, Inc., which does business as Heritage Rehab Center is a Skilled Nursing Facility (“SNF”)

19 located at 21414 S Vermont Ave, Torrance, CA 90502-0000.

20 19. Defendant David Kleis III, LLC, which does business as Miravilla Care Center is a

21 Skilled Nursing Facility (“SNF”) located at 9246 Avenida Miravilla, Cherry Valley, CA 92223-3835.

22 20. Defendant Pacific Palms Healthcare, LLC., which does business as Pacific Palms

23 Healthcare is a Skilled Nursing Facility (“SNF”) located at 1655 East 8th St, Beaumont, CA 92223-

24 2512.

25 21. Defendant David Kleis II, LLC, which does business as Palm Grove Healthcare is a

26 Skilled Nursing Facility (“SNF”) located at 1020 Termino Ave, Long Beach, CA 90804-4123.

28
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COMPLAINT 3
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1 22. Defendant Hacienda Care Center, Inc., which does business as Sierra Valley

2 Rehabilitation Center is a Skilled Nursing Facility (“SNF”) located at 301 W Putnam Av, Porterville,

3 CA 93257-3429.

4 23. Defendant Miramonte Enterprises, LLC, which does business as San Jacinto

5 Healthcare is a Skilled Nursing Facility (“SNF”) located at 275 N San Jacinto St, Hemet, CA 92543-

6 4453.

7 24. Defendant Washington Enterprises III, LLC which does business as St. Andrews

8 Healthcare is a Skilled Nursing Facility (“SNF”) located at 2300 W. Washington Blvd, Los Angeles,

9 CA 90018-1445.

10 25. Defendant Foothill Care Center, LLC., which does business as Apache Junction

11 Healthcare is a Skilled Nursing Facility (“SNF”) located at 2012 W Southern Ave, Apache Junction,

12 AZ 85120.

13 IV. THE FALSE CLAIMS ACT

14 26. The federal False Claims Act (the “FCA” or “Act”) was originally enacted during the

15 Civil War. Congress substantially amended the Act in 1986 – and, again, in 2009 and 2010 – to

16 enhance the ability of the United States Government to recover losses sustained as a result of fraud

17 against it. The Act was amended after Congress found that fraud in federal programs was pervasive

18 and that the Act, which Congress characterized as the primary tool for combating government fraud,

19 was in need of modernization. Congress intended that the amendments would create incentives for

20 individuals with knowledge of fraud against the Government to disclose the information without fear

21 of reprisals or Government inaction, and to encourage the private bar to commit legal resources to

22 prosecuting fraud on the Government’s behalf.

23 27. The FCA prohibits, inter alia: (a) knowingly presenting (or causing to be presented) to

24 the federal government a false or fraudulent claim for payment or approval; (b) knowingly making or

25 using, or causing to be made or used, a false or fraudulent record or statement material to a false or

26 fraudulent claim; (c) knowingly making, using, or causing to be made or used, a false record or

27 statement material to an obligation to pay or transmit money or property to the Government, or

28 knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or
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COMPLAINT 4
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1 transmit money or property to the Government; and (d) conspiring to violate any of these sections of

2 the FCA. 31 U.S.C. §§ 3729(a)(1)(A)-(C), and (G). Any person who violates the FCA is liable for a

3 civil penalty of thousands of dollars for each violation, plus three times the amount of the damages

4 sustained by the United States. 31 U.S.C. § 3729(a)(1).

5 28. The FCA allows any person having information about an FCA violation to bring an

6 action on behalf of the United States, and to share in any recovery. The FCA requires that the

7 Complaint be filed under seal for a minimum of 60 days (without service on the defendant during that

8 time) to allow the government time to conduct its own investigation and to determine whether to join

9 the suit.

10 V. THE CARES ACT AND PPP PROGRAM

11 29. The CARES Act was enacted in March 2020 to provide emergency financial

12 assistance to the millions of Americans suffering the economic effects caused by the COVID-19

13 pandemic. One piece of the CARES Act was the authorization of up to $349 billion in forgivable

14 loans to small businesses for job retention and certain other expenses, through the PPP. In April

15 2020, Congress authorized over $300 billion in additional PPP funding.

16 30. In order to obtain a PPP loan, a business had to qualify as a small business, and was

17 required submit a PPP loan application. The application is signed by an authorized representative of

18 the business. The application requires the business to acknowledge the program rules and make

19 affirmative certifications to be eligible to obtain the PPP loan and receive funds.

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COMPLAINT 5
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1 31. The certifications made by applying businesses in the application are below:

26 32. To be eligible to receive money from the program, the business must make a good

27 faith determination that “current economic uncertainty makes this loan necessary to support the

28 ongoing operations of the Applicant.” This means that entities are only eligible for PPP loans where
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COMPLAINT 6
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1 obtaining the money through the PPP program is a necessity. As more fully explained by the

2 Department of Treasury in its Frequently Asked Questions website related to the PPP program

3 (available at https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-

4 Asked-Questions.pdf, last accessed June 25, 2020):

19 Because this response was added on April 23, 2020, Treasury provided a safe harbor to businesses

20 who received but did not need a PPP loan to repay those loans with no consequence if they did so by

21 the deadline. However, entities that did not repay their loan, but instead sought forgiveness under the

22 PPP program, are not protected by the safe harbor.

23 33. Significantly, the applicant is also required to identify whether “the applicant or any

24 owner of the Applicant [is] an owner of any other business, or have common management with any

25 other business?” PPP borrower application Question 3. Any such business must be disclosed as part

26 of the application.

27 34. As explained in the FAQs, “[b]orrowers must apply the affiliation rules set forth in

28 SBA’s Interim Final Rule on Affiliation. A borrower must certify on the Borrower Application Form
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1 that the borrower is eligible to receive a PPP loan, and that certification means that the borrower is a

2 small business concern as defined in section 3 of the Small Business Act.” (available at

3 https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-

4 Questions.pdf, last accessed December 2, 2020).

5 35. Skilled Nursing Facilities use North American Industry Classification System

6 (“NAICS”) code 623110. According to the Small Business Administration, SNFs are deemed to be

7 small businesses if their total revenues, including affiliates, are $30,000,000.00 or less.

8 36. In addition the applicant must state, among other things, its: (a) average monthly

9 payroll expenses; and (b) number of employees. These figures are used to calculate the amount of

10 money the small business is eligible to receive under the PPP as well as to determine eligibility in the

11 program. In addition, businesses applying for a PPP loan must provide documentation showing their

12 payroll expenses.

13 37. A business’s PPP loan application is received and processed, in the first instance, by a

14 participating financial institution, then transmitted, for further review, to the Small Business

15 Administration (“SBA”) to assess the applicant’s eligibility. If a PPP loan application is approved,

16 the participating financial institution funds the PPP loan directly.

17 38. PPP loan proceeds must be used by the business on certain permissible expenses --

18 payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on

19 the PPP loan to be entirely forgiven if the business spends the loan proceeds on these expense items

20 within a designated period of time and uses a minimum percentage of those funds on payroll

21 expenses.

22 39. Borrowers may apply for and receive forgiveness of the principal and interest on their

23 loans if they use the funds for certain qualifying business expenses. In order for a loan to be

24 forgiven, subject to certain additional requirements, at least 60% of the proceeds of the loan must be

25 spent on payroll costs, while the remainder of the forgiven amount must be spent on business

26 mortgage interest payments, business rent or lease payments, or business utility payments.

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COMPLAINT 8
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1 40. In applying for forgiveness of a loan, borrowers again make certifications and

2 representations to the government that are material and binding. The certifications made in the

3 forgiveness application including the following:

14 VI. THE UNIFIED CARE SERVICES DEFENDANTS’ DID NOT QUALIFY FOR THE
15 LOANS
16 A. Unified Care Services and its Affiliates Far Exceed the 500-Employee Cap, and
17 the Revenue Benchmarks
18 41. Unified Care Services, located at 2368 Torrance Blvd, Torrance, CA 90501, was
19 formed in 1997. Though it only has three direct employees, Unified Care Services manages,
20 operates, and exerts complete control over roughly a dozen healthcare service providers throughout
21 California and Arizona, with hundreds of employees. The chain employs at total of 2,459 employees,
22 had a combined 2019 revenue of $168,730,930 far exceeding the legal maximum.
23 42. Emanual David, President of Unified Care Service, is on the governing board of each
24 of the affiliated healthcare facilities. Other members of the governing boards of each facility also
25 overlap, including J.L. Stuchardt, A.T. Quion, R.A. Ruiz, and E.T. Del Rosario.
26 43. The affiliated entities comprising the Unified Care Services chain are as follows:
27 44. Geri Care IV, LLC, which does business as Antelope Valley Care Center, is a Skilled
28 Nursing Facility (“SNF”) located at 44567 N 15th St. West, Lancaster, CA 93534-2848. As of
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1 December 31, 2019, it had 259 employees. It had revenues in 2019 of $18,414,66, and a Total Net

2 Worth of $1,880,351.

3 45. Geri Care V, LLC, which does business as Wellsprings Post Acute Center, formally

4 known as Antelope Valley Healthcare, is a Skilled Nursing Facility (“SNF”) located at 44445 N 15th

5 St. West, Lancaster, CA 93534-2801. As of December 31, 2019, it had 324 employees. It had

6 revenues in 2019 of $23,025,393, and a Total Net Worth of $2,040,667.

7 46. Mount Megiddo, LLC, which does business as Banning Healthcare is a Skilled

8 Nursing Facility (“SNF”) located at 3476 W Wilson St. Lancaster, CA 92220-3420. As of December

9 31, 2019, it had 87 employees. It had revenues in 2019 of $5,428,344, and a Total Net Worth of

10 negative $146,558.

11 47. Canyon Properties III, LLC, which does business as Country Manor Healthcare is a

12 Skilled Nursing Facility (“SNF”) located at 11723 Fenton Ave, Lake View Terrace, CA 91342-6498.

13 As of December 31, 2019, it had 130 employees. It had revenues in 2019 of $ 9,873,842, and a Total

14 Net Worth of $2,663,642.

15 48. Cloverleaf Enterprises, Inc., which does business as Cherry Valley Healthcare is a

16 Skilled Nursing Facility (“SNF”) located at 5800 W Wilson St, Banning, CA 92220-0000. As of

17 December 31, 2019, it had 174 employees. It had revenues in 2019 of $ 12,029,348, and a Total Net

18 Worth of $863,796.

19 49. Foothill Care Center, Inc., which does business as Golden State Care Center is a

20 Skilled Nursing Facility (“SNF”) located at 1758 North Big Dalton Ave, Baldwin park, CA 91706-

21 0000. As of December 31, 2019, it had 167 employees. It had revenues in 2019 of $9,005,163, and a

22 Total Net Worth of $891,587.

23 50. Geri-Care Inc., which does business as Harbor Care Center is a Skilled Nursing

24 Facility (“SNF”) located at 21521 South Vermont Ave, Torrance, CA 90502-1939. As of December

25 31, 2019, it had 148 employees. It had revenues in 2019 of $10,669,708, and a Total Net Worth of $

26 2,618,695.

27 51. Horizon West Healthcare, Inc., as successor by merger to Heritage Care Center,

28 Inc., which does business as Heritage Rehabilitation Center is a Skilled Nursing Facility (“SNF”)
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1 located at 21414 S Vermont Ave, Torrance, CA 90502-0000. As of December 31, 2019, it had 204

2 employees. It had revenues in 2019 of $ 17,094,107, and a Total Net Worth of $ 1,899,449.

3 52. David Kleiss III, LLC, which does business as Miravilla Care Center is a Skilled

4 Nursing Facility (“SNF”) located at 9246 Avenida Miravilla, Cherry Valley, CA 92223-3835. As of

5 December 31, 2019, it had 82 employees. It had revenues in 2019 of $ 4,804,365, and a Total Net

6 Worth of $620,462.

7 53. Pacific Palms Healthcare, LLC., which does business as Pacific Palms Healthcare is

8 a Skilled Nursing Facility (“SNF”) located at 1655 East 8th St, Beaumont, CA 92223-2512. As of

9 December 31, 2019, it had 169 employees. It had revenues in 2019 of $ 9,793,286, and a Total Net

10 Worth of $316,630.

11 54. David Kleis II, LLC, which does business as Palm Grove Healthcare is a Skilled

12 Nursing Facility (“SNF”) located at 1020 Termino Ave, Long Beach, CA 90804-4123. As of

13 December 31, 2019, it had 90 employees. It had revenues in 2019 of $5,998,839, and a Total Net

14 Worth of $992,867.

15 55. Hacienda Care Center, Inc., which does business as Sierra Valley Rehabilitation

16 Center is a Skilled Nursing Facility (“SNF”) located at 301 W Putnam Av, Porterville, CA 93257-

17 3429. As of December 31, 2019, it had 166 employees. It had revenues in 2019 of $ 11,833,366, and

18 a Total Net Worth of $ 2,108,069.

19 56. Miramonte Enterprises, LLC., which does business as San Jacinto Healthcare is a

20 Skilled Nursing Facility (“SNF”) located at 275 N San Jacinto St, Hemet, CA 92543-4453. As of

21 December 31, 2019, it had 139 employees. It had revenues in 2019 of $8,965,345, and a Total Net

22 Worth of $ 1,086,566.

23 57. Washington Enterprises III, LLC, which does business as St. Andrews Healthcare is

24 a Skilled Nursing Facility (“SNF”) located at 2300 W. Washington Blvd, Los Angeles, CA 90018-

25 1445. As of December 31, 2019, it had 93 employees. It had revenues in 2019 of $ 5,831,824, and a

26 Total Net Worth of $ 1,457,033.

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MCCARTHY, LLP
COMPLAINT 11
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1 58. Foothill Care Center, LLC., which does business as Apache Junction Healthcare is a

2 Skilled Nursing Facility (“SNF”) located at 2012 W Southern Ave, Apache Junction, AZ 85120. As

3 of December 31, 2019, it had 123 employees. It had revenues in 2019 of $13,454,213.

4 59. All of the above SNFs are 100% owned by the same entity, the “Charis Trust.” All of

5 the above SNFs have overlapping Governing Boards, and all are operated under the management

6 umbrella of Unified Care Services.

7 60. Accordingly, per the SBA guidelines, all of these entities are “affiliates,” and their

8 combined revenues ($166,221,809) and employee-counts (2,355) were the appropriate measure for

9 PPP qualification. Had they done so, however, they would not have qualified under any measure for

10 the PPP program. Knowing this, Defendants concealed their affiliated status, and applied for PPP

11 loans based solely on their own, individual employee counts and revenue figures.

12 B. Unified Health Services and its Affiliates Submitted Fraudulent PPP

13 Applications

14 61. On May 3, 2020, Antelope Valley Healthcare received $2,435,342.00 in PPP loans

15 through Wells Fargo. Due to the total affiliated revenues and employee-counts, Antelope Valley

16 Healthcare was not eligible for a PPP loan, and necessarily made several false certifications in order

17 to obtain this loan.

18 62. On July 27, 2020, Banning Healthcare received $693,634.00 in PPP loans through

19 Wells Fargo. Due to the total affiliated revenues and employee-counts, Banning Healthcare was not

20 eligible for a PPP loan, and necessarily made several false certifications in order to obtain this loan.

21 63. On March 25, 2021, Country Manor Healthcare received $1,108,720.00 in PPP loans

22 through Wells Fargo. Due to the total affiliated revenues and employee-counts, Country Manor

23 Healthcare was not eligible for a PPP loan, and necessarily made several false certifications in order

24 to obtain this loan.

25 64. On July 29, 2020, Cherry Valley Healthcare received $1,411,991.00 in PPP loans

26 through Wells Fargo. Due to the total affiliated revenues and employee-counts, Cherry Valley

27 Healthcare was not eligible for a PPP loan, and necessarily made several false certifications in order

28 to obtain this loan.
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COMPLAINT 12
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1 65. On July 27, 2020, Golden State Care Center received $ 1,097,172.00 in PPP loans

2 through Wells Fargo. Due to the total affiliated revenues and employee-counts, Golden Gate Care

3 Center was not eligible for a PPP loan, and necessarily made several false certifications in order to

4 obtain this loan.

5 66. On May 4, 2020, Harbor Care Center received $1,099,458.00 in PPP loans through

6 Wells Fargo. Due to the total affiliated revenues and employee-counts, Harbor Care Center was not

7 eligible for a PPP loan, and necessarily made several false certifications in order to obtain this loan.

8 67. On July 27, 2020, Miravilla Care Center received $656,477.00 in PPP loans through

9 Wells Fargo. Due to the total affiliated revenues and employee-counts, Miravilla Care Center was

10 not eligible for a PPP loan, and necessarily made several false certifications in order to obtain this

11 loan.

12 68. On May 1, 2020, Pacific Palms Healthcare received $1,076,659.00 in PPP loans

13 through Wells Fargo. On March 24 2021, Pacific Palms Healthcare received an additional

14 $1,141,177.00 in PPP loans through Wells Fargo. Due to the total affiliated revenues and employee-

15 counts, Pacific Palms Healthcare was not eligible for a PPP loan, and necessarily made several false

16 certifications in order to obtain this loan.

17 69. On April 21, 2020, Palm Grove Healthcare received $688,190.00 in PPP loans through

18 Wells Fargo. Due to the total affiliated revenues and employee-counts, Palm Grove Healthcare was

19 not eligible for a PPP loan, and necessarily made several false certifications in order to obtain this

20 loan.

21 70. On May 4, 2020, Apache Junction Healthcare received $1,172,418.00 in PPP loans

22 through Wells Fargo. Due to the total affiliated revenues and employee-counts, Apache Junction

23 Healthcare was not eligible for a PPP loan, and necessarily made several false certifications in order

24 to obtain this loan.

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COMPLAINT 13
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1 C. The Unified Health Services Chain Had Significant Sources of Financial

2 Assistance, and Otherwise Were Not in Need of PPP Loans

3 71. Defendants’ PPP Loan applications were also fraudulent because Defendants did not

4 need financial assistance. To the contrary, Defendants received an influx of revenues and other

5 financial assistance as a result of the COVID-19 pandemic.

6 72. Medicare patients in nursing homes have the highest reimbursement rates, between

7 $600 to $1,000 a day, several times higher than Medicaid (Medi-Cal) reimbursement of

8 approximately $200 a day. Nursing homes compete for Medicare patients which are main source of

9 profitability for this industry. Generally, nursing homes may only admit Medicare patients after a

10 hospital qualifying stay, meaning that they had been in a hospital for three (3) days prior. In response

11 to the COVID-19 pandemic, this three-day qualifying stay requirement was temporarily waived by

12 the Center for Medicare and Medicaid Services (“CMS”) resulting in a flood of new and profitable

13 high reimbursement patients entering skilled nursing facilities across the country.

14 73. With the increase in patients due to the CMS waiver of qualifying stays, nursing

15 homes throughout the country and California had to increase their staffing levels. In a time where

16 much of the nation was suffering, the nursing home business was growing and hiring more

17 employees.

18 74. Moreover, on March 28, 2020, CMS allowed for providers who bill under Medicare

19 parts A and B to request a three-month advance of their Medicare payments, leading to an influx of

20 cash in many health care facilities.

21 75. Furthermore, California temporarily increased reimbursement for Medi-Cal patients

22 by increasing the facility Medi-Cal rate by 10%. 70 to 80% of nursing home residents have Medi-

23 Cal. This resulted in additional significant profits to the bottom line, in some cases, millions of

24 dollars. Medi-Cal generally pays nursing homes within three weeks from billing, and most billing is

25 electronic. Accordingly, the increased cash flow to Defendants as a result of this temporary

26 reimbursement boost was virtually instantaneous.

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COMPLAINT 14
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1 76. Furthermore, on March 30, 2020, Governor Gavin Newsome announced the creation

2 of the California Health Care Worker Surge Initiative, in which California eased licensing and other

3 restrictions to increase the pool of potential health care workers given the vastly increased need.

4 77. Due to these circumstances, though claiming PPP loans were necessary to ensure that

5 they did not have to lay off workers, the Unified Care Service Defendants were never at risk of being

6 unable to pay their staff. Instead of potential payroll cuts, the healthcare providers listed were

7 increasing their staffing levels in conjunction with the increasing need of medical care providers due

8 to the COVID-19 pandemic.

9 78. Worse still, several of the Defendants received an influx of cash/windfall from other

10 federal agencies; making the PPP loans even less necessary.

11 79. For example, on May 8, 2020, Antelope Valley Healthcare received $907,985.00 in

12 the form of a loan from CMS. On October 27, 2020, they received $1,732,575.00 in the form of a

13 grant from the Department of Health and Human Services.

14 80. Antelope Valley Care Center received $1,242,985 in loans from the Department of

15 Health and Human Services through the CARES Act Provider Relief Fund.

16 81. Banning Healthcare received $434,632 in loans from the Department of Health and

17 Human Services through the CARES Act Provider Relief Fund.

18 82. Country Manor Healthcare received $740,973 in loans from the Department of Health

19 and Human Services through the CARES Act Provider Relief Fund.

20 83. Golden State Care Center received $179,866 in loans from the Department of Health

21 and Human Services through the CARES Act Provider Relief Fund.

22 84. Miravilla Care Center received $485,512 in loans from the Department of Health and

23 Human Services through the CARES Act Provider Relief Fund.

24 85. Palm Grove Healthcare received $386,837 in loans from the Department of Health and

25 Human Services through the CARES Act Provider Relief Fund.

26 86. Sierra Valley Rehabilitation Center received $978,636 in loans from the Department

27 of Health and Human Services through the CARES Act Provider Relief Fund.

28
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1 87. San Jacinto Healthcare received $659,094 in loans from the Department of Health and

2 Human Services through the CARES Act Provider Relief Fund.

3 88. Apache Junction Healthcare received $1,112,078 in loans from the Department of

4 Health and Human Services through the CARES Act Provider Relief Fund.

5 89. On May 8, 2020, Harbor Care Center received $849,425.00 in the form of a loan from

6 CMS. On May 13, 2020, they received another $250,000.00 from the Small Business Administration

7 in the form of a loan. On October 27, 2020, they received $611,984.00 from the Department of

8 Health and Human Services. Harbor Care Center, also, received $956,999 in loans from the

9 Department of Health and Human Services through the CARES Act Provider Relief Fund.

10 90. On October 27, 2020, Pacific Palms Healthcare received $752,683.00 in the form of a

11 grant from the department of Health and Human Services. Additionally, they received $896,297 in

12 loans from the Department of Health and Human Services through the CARES Act Provider Relief

13 Fund.

14 91. Potential borrowers that were in need of these precious funds lost out on the

15 opportunity to pay their workers and, in some cases, save their businesses from closing, because the

16 funds were instead directed to the Unified Care Services Defendants.

17 92. The Unified Care Services Defendants violated the False Claims Act by making false

18 claims for funds through PPP loans, making false statements in support those applications and claims,

19 retaining funds which they were required to return, using the proceeds of the loans for ineligible

20 expenses despite promises to the contrary, and conspiring to obtain the PPP loans.

21 VII. CAUSES OF ACTION

22 FIRST CAUSE OF ACTION

23 Submission of a False Claim

24 31 U.S.C. § 3729(a)(1)(A)

25 93. Relator realleges and incorporates by reference the allegations contained in all

26 paragraphs of the Complaint as if fully set forth herein.

27 94. This is a claim for treble damages and penalties under the False Claims Act, 31 U.S.C.

28 § 3729, et seq., as amended.
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MCCARTHY, LLP
COMPLAINT 16
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1 95. By virtue of the acts described above, Defendants knowingly presented or caused to be

2 presented, false or fraudulent claims to the United States Government for payment or approval.

3 96. The Government, unaware of the falsity funded PPP loans to be paid to the Unified

4 Care Services that would not have been funded or paid but for Defendants’ illegal conduct.

5 97. By reason of Defendants’ acts, the United States has been damaged, and continues to

6 be damaged, in a substantial amount to be determined at trial.

7 98. Additionally, the United States is entitled to the maximum penalty permitted for each

8 and every violation alleged herein.

9 99. Wherefore, Relator prays for relief as set forth below.

10 SECOND CAUSE OF ACTION

11 Making False Statement in Support of a Claim

12 31 U.S.C. § 3729(a)(1)(B)

13 100. Relator realleges and incorporates by reference the allegations contained in all

14 paragraphs of the Complaint as if fully set forth herein.

15 101. This is a claim for treble damages and penalties under the False Claims Act, 31 U.S.C.

16 § 3729, et seq., as amended.

17 102. By virtue of the acts described above, Defendants knowingly made or used, or caused

18 to be made or used, false or fraudulent records or statements material to false or fraudulent claims.

19 103. The Government, unaware of the falsity funded PPP loans to be paid to the Unified

20 Care Services that would not have been funded or paid but for Defendants’ illegal conduct.

21 104. By reason of Defendants’ acts, the United States has been damaged, and continues to

22 be damaged, in a substantial amount to be determined at trial.

23 105. Additionally, the United States is entitled to the maximum penalty permitted for each

24 and every violation alleged herein.

25 106. Wherefore, Relator prays for relief as set forth below.

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COMPLAINT 17
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1 THIRD CAUSE OF ACTION

2 Conspiracy to Violate the False Claims Act

3 31 U.S.C. § 3729(a)(1)(C)

4 107. Relator realleges and incorporates by reference the allegations contained in all

5 paragraphs of the Complaint as if fully set forth herein.

6 108. This is a claim for treble damages and penalties under the False Claims Act, 31 U.S.C.

7 § 3729, et seq., as amended.

8 109. By virtue of the acts described above, Defendants, their agents, employees and other

9 co-conspirators knowingly conspired to submit false claims to the United States, make or use false

10 records or statements material to false or fraudulent claims, and to conceal and fail to remit

11 overpayments from the United States.

12 110. The Government, unaware of the falsity funded PPP loans to be paid to the Unified

13 Care Services that would not have been funded or paid but for Defendants’ illegal conduct.

14 111. By reason of Defendants’ acts, the United States has been damaged, and continues to

15 be damaged, in a substantial amount to be determined at trial.

16 112. Additionally, the United States is entitled to the maximum penalty permitted for each

17 and every violation alleged herein.

18 113. Wherefore, Relator prays for relief as set forth below.

19 FOURTH CAUSE OF ACTION

20 Improper Retention of Money Owed to the Government

21 31 U.S.C. § 3729(a)(1)(G)

22 114. Relator realleges and incorporates by reference the allegations contained in all

23 paragraphs of the Complaint as if fully set forth herein.

24 115. This is a claim for treble damages and penalties under the False Claims Act, 31 U.S.C.

25 § 3729, et seq., as amended.

26 116. By virtue of the acts described above, Defendants knowingly concealed overpayments

27 from the United States Government and failed to remit such overpayments.

28
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COMPLAINT 18
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1 117. The Government, unaware of the falsity funded PPP loans to be paid to the Unified

2 Care Services that would not have been funded or paid but for Defendants’ illegal conduct.

3 118. By reason of Defendants’ acts, the United States has been damaged, and continues to

4 be damaged, in a substantial amount to be determined at trial.

5 119. Additionally, the United States is entitled to the maximum penalty permitted for each

6 and every violation alleged herein.

7 120. Wherefore, Relator prays for relief as set forth below.

8 VIII. PRAYER FOR RELIEF

9 WHEREFORE, Relator prays for judgment against the Defendants as follows:

10 1. That this Court enter judgment against Defendants in an amount equal to three times

11 the amount of damages the United States has sustained because of Defendants’ actions, plus the

12 maximum civil penalty for each violation of 31 U.S.C. § 3729;

13 2. That Relator be awarded the maximum amount allowed pursuant to § 3730(d) of the

14 False Claims Act;

15 3. That Relator be awarded all costs of this action, including attorneys’ fees and

16 expenses; and

17 4. That Relator recover such other relief as the Court deems just and proper.

18 IX. JURY DEMAND

19 Plaintiff demands a jury trial on all issues so triable

20
Dated: July 2, 2021 COTCHETT, PITRE & McCARTHY, LLP
21

22 By:
JUSTIN T. BERGER
23 .(/6(<-02(
24 Attorneys for Relator Ashwani Chawla
25

28
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COTCHETT, PITRE &
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COMPLAINT 19

File and source

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