GE Credit Union approved $6.3M in PPP loans for nursing home company now accused of fraud

Owner accuses credit union of freezing PPP money
Kenwood Terrace Care Center.png
Posted at 5:00 AM, Jul 24, 2020

CINCINNATI — A Blue Ash nursing home company that is facing lawsuits from at least four different banks over losses related to an alleged fraud scheme received $10.3 million in Paycheck Protection Program loans and federal stimulus money from the CARES Act for COVID-19 relief. The payments arrived less than two months before the first suits were filed.

The flurry of lawsuits began on June 1, accusing Premier Health Care Management, its CEO Harold Sosna, and eight Ohio nursing homes, including seven in the Cincinnati area, of breach of contract and foreclosure in hopes of recouping tens of millions. Other related entities and stakeholders in the private family-owned company are also named as defendants.

General Electric Credit Union filed two of those lawsuits, seeking foreclosure related to a $16 million construction loan to build a new nursing home in the village formerly known as Amelia.

Two months before GE Credit Union filed those suits, it had approved 10 PPP loans through the U.S. Small Business Administration to help the Premier family of nursing home companies, which had promised to save 775 jobs.

"Premier had all its business accounts at GE Credit Union and went through them to get the PPP money," Sosna wrote in a statement to WCPO.

The Premier companies received $6.3 million in PPP loans on April 18, according to Sosna, who claims the credit union later froze millions of that money to offset its own financial losses and took it away from nursing home payroll.

"Through May 22, Premier properly used a total of $2.65 million to fund the various payrolls and another approximate $660,000 for rent and utility expenses. Every penny was properly accounted for," he wrote. “In late May General Electric Credit Union suddenly froze all the Premier accounts and grabbed the remaining $3 million in PPP money and the HHS (Health and Human Services) stimulus money and used it to offset Premier debt to GECU."

Michael Galasso, attorney for GE Credit Union, declined to comment: “I do not feel it is appropriate for my client to publicly address this matter at this time.”

PPP loans can be forgiven if companies show they spent at least 60% of loan proceeds on wages, commissions and other employee expenses within 24 weeks of receiving the loan.

Banks that approve PPP loans, like GE Credit Union, collect federal dollars as fees: 1% on loan amounts over $2 million, 3% on loans between $350,000 and $2 million, and 5% on loans below $350,000.

This graphic shows the PPP loans approved for the Premier family of companies.

Sosna accused General Electric Credit Union of freezing the PPP loan money, which caused paychecks to bounce, employees to quit and “patient care to be impacted.”

“This was clearly not the intended use of these funds when enacted by Congress,” Sosna wrote. “With all accounts frozen, Premier was unable to access any money, including the PPP money, in order to make payroll.”

Hamilton County Court of Common Pleas judges have appointed three separate receivers as custodians of the Premier nursing homes. Receivers are tasked with running daily operations and marketing the facilities for sale.

Sosna is also making serious accusations against one of those receivers: SAK Management Ohio, which Judge Jody Luebbers appointed on June 3 to manage six facilities where 375 residents live. The facilities are Beechwood Terrace, Kenwood Terrace Health Care Center, Ivy Woods Care Center, Madeira Health Care Center, Pleasant Ridge Care Center and Southbrook Health Care Center in Springfield.

When SAK took over the homes, Sosna said it refused to pay outstanding bills owed to vendors, so “facilities were left scrambling to feed their patients, scrounging for medical supplies, while working extremely short because staffing agencies were refusing to send help.”

Suzanne Koenig, president and founder of SAK, wrote in a statement to WCPO that, as court-appointed receiver, her firm is the only entity authorized to speak on behalf of Premier Health Care, noting that the organization severed ties with Sosna on June 2.

“SAK Management-Ohio categorically and emphatically denies allegations made by Mr. Harold Sosna,” Koenig wrote. “Residents … are well cared for by dedicated employees who have a long history with these residents. All post-receivership expenses are being paid timely.

“We have implemented a strong infection prevention and quality control program as we work to keep our residents and staff protected from COVID-19,” Koenig continued. “Facilities have all necessary personal protective equipment, food, medicine, and other supplies to provide for the day-to-day needs of all individuals in our care. Our vibrant homes are running well with operational improvements underway.”

The judge appointed SAK after an attorney for Huntington Bank, which is also suing the Premier companies, raised concerns that the nursing homes were in imminent danger of collapse because assets were frozen as part of the court battle.

But Sosna maintains that, seven weeks into its receivership, SAK is still having problems “performing basic tasks like paying bills.”

“Nursing facilities are required to maintain resident trust accounts for their patients so that they can access money for personal expenses not covered by Medicaid. Residents are not able to access those funds,” Sosna wrote. “Even seemingly simple tasks like replenishing petty cash and activity funds at the facilities has proven to be extraordinarily challenging for SAK.”

Because many key nursing home employees have quit, Sosna claims that “patient care has to be impacted. Management is stretched dangerously thin.”

At the heart of this court battle over nursing home assets is an alleged fraud scheme.

“This case is about a multi-million-dollar fraudulent scheme … which has defrauded S&T Bank out of nearly $60 million” through bogus checks and manipulating bank accounts, attorneys for the Pennsylvania-based community bank wrote in a lawsuit filed June 1.

Attorneys for Huntington, First Financial and S&T Bank, who have all filed lawsuits, either declined to comment or did not respond to requests for comment.

Two banks are also fighting over the remaining money from some nursing home accounts. S&T Bank added First Financial as a defendant to its lawsuit on June 8, accusing the bank of wrongfully retaining the “absconded funds,” and asking a judge for an injunction freezing the money.

"There is simply no grounds for S&T to push the remainder of its losses on to First Financial Bank,” wrote Susan Argo, an attorney for First Financial. “First Financial Bank, like S&T, has lost an extraordinary amount of money as a result of the Premier defendants’ check-kiting scheme.”

Check-kiting is the illegal act of writing a check without having funds in a bank account.

No criminal charges have been filed in this case.

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