Could face $500,000 fine, up to 5 years in prison
Antonio L. Giordano and John Montecalvo pleaded guilty Wednesday to equity skimming in violation of federal housing law governing three nursing homes that they controlled.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
Giordano and Montecalvo admitted that they caused about $780,000 in “unreasonable and unnecessary” payments on behalf of the nursing homes when the homes were either in default of federally backed mortgages or were operating in a “non-surplus cash” position.
The Office of the U.S. Attorney announced the guilty pleas, which the defendants entered before Judge Mary M. Lisi in U.S. District Court in Providence.
At the plea hearing, Assistant U.S. Attorney Andrew J. Reich said that the government could prove that Giordano, who owned the three nursing homes through partnerships, and Montecalvo, who maintained financial control over the homes for Giordano, caused payments totaling $780,539 to be made to My Place Inc., which a member of Giordano’s family owned.
My Place provided a limited number of services to the homes’ employees that were deemed not to be reasonable or necessary, such as holding holiday parties for staff and families, conducting raffles, and providing arts and crafts and sometimes small gifts to employees.
Administrators and others sometimes complained to Montecalvo and Giordano about the uselessness of payments to My Place, but the defendants insisted that the payments be made.
During that time, the nursing homes, Mount Saint Francis Health Center, Coventry Health Continuum, and Hillside Health Center, were either in default of mortgages insured by the U.S. Department of Housing and Urban Development, or were operating without enough cash to satisfy their financial obligations. It is illegal to make unnecessary or unreasonable payments when in default of HUD-backed mortgages or when operating in a “non-surplus cash” position.
“Diverting funds in this manner seriously undermines HUD’s efforts to provide adequate nursing home facilities to those who are seriously in need,” said HUD Inspector General Kenneth M. Donohue.
In their plea agreements, Giordano and Montecalvo acknowledged that they could still be subject to administrative actions by HUD.
The maximum penalty for equity skimming is five years imprisonment and a $500,000 fine. The defendants are free on unsecured bond pending sentencing, which is scheduled for Sept. 15.
