Why Has Failed Nursing Home Mogul Joseph Schwartz Not Been Charged with a Crime for Stealing Millions from His Employees?

Who Are the Real Criminals In the United States?

U.S. prisons are filled with people who shouldn’t be there. Their crimes are relatively minor.  However, the really big criminals who steal millions aren’t locked up.  They are the “white collar criminals.”  Let’s take Joseph Schwartz as an example of a white-collar criminal par excellence. Schwartz is well known in the nursing home system.  He was able to obtain licenses for over 100 skilled nursing facilities in 11 states.  He failed to pay vendors and employees as he pocketed Medicare and Medicaid funds and eventually drove his company – Skyline Healthcare – into insolvency.  In the process of creating a failed company with borrowed money, he stole millions from his nursing home employees. This theft happened several years ago and has been widely reported in the media[i] and yet no arrest has been made and no charges have been filed.

As the New York Times pointed out in an editorial a couple of days ago,

 “In New York, as in many other states, stealing more than $1000 is a felony. A person who grabs a new iPhone, can end up in prison, at public expense, for four years.

    In New Jersey, which has the most stringent standard in the United States, a person can be convicted of a felony for stealing more than $200 – a number that hasn’t changed since 1978.”

Serious Crime Doesn’t Seem to Matter if the Criminal is a Nursing Home Operator and Employees & Patients are the Victims

Schwartz deducted money from employee paychecks for health insurance.  Instead of buying the insurance, he pocketed the money.  As many as 1000 employees were victims of this criminal behavior in several states.  Kansas was one of those states.  I called the Kansas Attorney General’s office to find out if any investigation was underway.  On the second call, I was lucky enough to connect with someone who was kind enough to direct me to an investigator who said he was indeed conducting an investigation, but couldn’t tell me anything about it. 

It is hard for me to understand why an investigation into a crime that occurred years ago is still pending without an indictment or charges dismissed.  Either Schwartz took the money illegally or he didn’t.  It should not be hard to determine that.  Employees allowed him to deduct the money with the understanding he would buy health insurance.  He didn’t. 

If nursing home employees are caught stealing from an owner, I doubt if it would take years to charge them with a crime.  My guess is that they would be handcuffed and walked out of the building to jail.  According to media accounts the only justice available to employee victims of Schwartz is a lawsuit they, themselves, filed.

The Long-term Care System is Beset with White Collar Criminals Who Act with Impunity Because there are No Consequences

I know of no attorney general in any of the states in which Schwartz operated who has filed criminal charges against him. Given the seriousness of the crime and the amount involved, AGs in states like Kansas, Arkansas, Pennsylvania, and Massachusetts are dilatory in carrying out their responsibilities.

Furthermore, I’m appalled at the lack of advocates’ interest in redress for victimized employees of the notorious Skyline venture and its sleazy, criminal owner.  It seems to me that the AARP (not much of an advocacy organization) and other organizations such as Kansas Advocates for Better Care and individuals holding themselves out as advocates for patients and employees would be demanding answers from state AGs regarding the lack of action in holding Schwartz accountable. 

My suspicion is that every state which granted Skyline a license screwed up.  Had they done their due diligence, they would have found a trail of evidence screaming “don’t turn nursing homes over to this shady character.”  My research also suggests that he moved in on Golden Living nursing homes looted by a private equity firm and, like a vulture, treated them as his carrion – to be scavenged and left to rot. States were anxious to unload a bunch of facilities in receivership (left in the wake of private equity looting) and a predator was allowed to move in and create a tragedy on top of a tragedy.

What Does the Schwartz/Skyline Scandal Tell Us About How We View Patients & Employees of Nursing Homes?

During my career in industrial relations, I worked for corporations that considered employee pay sacrosanct.  To us, pay was near and dear – no one fooled with it.  Our hourly employees were valuable stakeholders in the enterprise. They came to work every day in good faith and deserved to be paid for what they did.  Without them, we could not grow the company and earn a reasonable return for shareholders.  We also had respect for the quality of our products and services. We did not cheat our customers.  Indeed, no self-respecting corporation did that. We were driven by a philosophy known as “managerial capitalism.”

The attitude of corporate management began to change in the 1980s.  A ridiculous and theoretically unsound management theory was foisted on the public by conservative economists.  As opposed to managerial capitalism, celebrity economist Milton Friedman and his cohorts convinced the business world and politicians that capitalism works best when corporate management (and government for that matter) attends to one objective:  protecting and enhancing shareholder value.  Friedman was even given a platform on PBS during the 1980s to sell his idea to the public – and they bought it.

This “agency theory” of management has been destructive for both U.S. capitalism and our culture and society.  It has elevated wealth and predatory behavior to an acceptable business strategy.  White collar criminals are only charged with a crime when they victimize other well-heeled white-collar individuals.

The main problem with the overriding value of money and shareholders is that other human beings are devalued.  The least powerful and poorest human beings are devalued the most.  They become prey for institutional needs.  They fill prisons and inhumane nursing homes either because they are seen as of no value or because they can add value to revenue producing real estate.

The goal of a Friedman capitalistic system is to suppress wages and exploit workers.  If they get cheated despite providing sincere hard work, too bad, it’s conducive to shareholder value and OK. One of the many problems with this situation is that the proponents of this form of hyper-capitalism also set about to destroy employee bargaining rights and have made great progress in that endeavor.

Patients and employees in nursing homes depend on government agencies and advocacy organizations for protection. If state AGs won’t hold predators accountable and advocates won’t demand that they do that, institutionalized elders and disabled individuals are defenseless. Furthermore, if operators have no moral hazard they will continue to abuse and exploit both workers and patients.

[i] See, e.g., David Porter, Associated Press  (February 5, 2020), “Failed nursing homes’ operators stole from employees,”; Star-Ledger (Newark, NJ) (February 7, 2020), “Nursing home operators stole $2M from employees’ paychecks, lawsuit claims”); U.S. Fed News (June 27, 2019), “Skyline Healthcare owner, 5 Massachusetts Nursing homes cited for wage theft”; Ann Neuman, The Guardian (July 30, 2020) “Seniors and staff caught in the middle of nursing homes’ quest for profit; The cycle of buying and selling care homes has led to shortcuts, closures, even fraud – and imperiled vulnerable residents’ health”; The Leavenworth Times (February 6, 2020), “Suit: Failed nursing homes’ operators stole from employees.”