PITTSBURGH — A federal judge sentenced the former owner of a Blue Ash nursing home company on Thursday to 42 months in prison for a $59 million fraud scheme that bilked two banks, Pennsylvania-based S&T Bank and Cincinnati-based First Financial Bank, in a check-kiting scheme.
U.S. District Court Judge Marilyn Horan in Pittsburgh allowed Harold Sosna to self-report to U.S. Marshals for prison at a later time. She also postponed her decision on how much restitution Sosna must pay, until she receives the full loss amount from several additional creditors.
Sosna, 68, founded Premier Health Care Management in 1998 and grew the family business until it owned nine post-acute and long-term care facilities, including seven in the Cincinnati area.
But the business began to falter in 2017, due to a series of regulatory and economic conditions, and by 2019 the financial situation was dire, according to a sentencing memorandum filed by Sosna’s attorney, Stephen Stallings.
Sosna took out numerous high-interest loans from pay-day lenders, also known as loan sharks, which made his financial situation worse, Stallings wrote.
“The onset of the global COVID-19 pandemic in 2020 was the last straw for the viability of Premier, and ultimately broke its financial back … Mr. Sosna made the tragic decision to use the ‘float’ at his business’ multiple banks. He chose to engage in the crime of check-kiting in an effort to extend the life of his doomed family business,” Stallings wrote.
Check-kiting means that Sosna manipulated his bank balances to take advantage of the float while writing more than 200 checks over three days in May 2020.
Sosna cooperated with federal authorities. He pleaded guilty to bank fraud last October.
“He gave lengthy and detailed interviews with the authorities and bank representatives so they could pursue legal action against the predatory lenders who exacerbated the loss. As a result, the victim bank now has a pending civil lawsuit against all of the predatory lenders and may well recover some or all of the outstanding losses through these actions. He also provided information to federal authorities about potential wrongdoing by others unconnected to his own crime,” Stallings wrote.
Sosna faces dozens of lawsuits, including some from local banks and creditors accusing him of breach of contract, unpaid rent and defaulting on loans.
Hamilton County Court of Common Pleas judges appointed three separate receivers as custodians of the Premier nursing homes. Receivers are tasked with running daily operations and marketing the facilities for sale.
Most of Sosna’s properties were recently sold. A judge approved the sale of 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 for $70.5 million to Buckeye Asset Acquisition LLC on July 1.
The websites for these facilities list them as part of CommuniCare Family of Companies, a family-owned company that is one of the nation’s largest providers of post-acute care, including skilled nursing.
Other facilities – Forest Hills Care Center in Columbus, Wexford Care Center in Deer Park, and Social Row Transitional Care near Dayton – were also recently sold.
But two of his properties are still awaiting sellers – a 7.5-acre undeveloped lot in Franklin County, and a partially constructed nursing home in Pierce Township near the village formerly known as Amelia.
General Electric Credit Union is suing Sosna and his related companies seeking foreclosure related to a $16 million construction loan to build that new nursing home in Pierce Township. Construction crews stopped work in June 2020, leaving what was to become a 113-bed facility frozen in mid-construction.
“The building is a problem for Pierce Township and the financial institutions that invested in the project. It is carrying a unique finance mechanism called a special improvement district that has generated roughly $2 million in debt. Because of this, buyers have been scarce,” said Pierce Township Trustee Allen Freeman.
A Hamilton County judge appointed a receiver to market both unsold properties, but activity has been limited.
“He has already suffered serious consequences from his offense, including the loss of the businesses he built over a lifetime, the ruination of his personal and business reputation and the destruction of his community’s faith in him,” Stallings wrote in his memo, which contained many letters from friends, family and former employees in support of Sosna.
Meanwhile, a lawyer for General Electric Credit Union wrote to Horan before Thursday’s sentencing in federal court that it had suffered $30 million in losses, offset by the $1 million it received from its insurance company.
First Financial Bank wrote to Horan that it suffered loan losses of $6.2 million and had paid another $514,000 in attorneys fees.
“The conduct, while very serious and criminal, was brief in duration and Mr. Sosna engaged in his criminal conduct in a (tragically wrong) effort to keep his business afloat, not for personal aggrandizement or profit. This by no means excuses or justifies his conduct, but it is important to understanding the nature and circumstances of his offense,” Stallings wrote in his sentencing memorandum.
But that's not how federal prosecutors saw it.
“The loss was foreseeable to Sosna, after all, the goal of his scheme was to trick S&T bank into extending him money that was not actually backed by deposits,” prosecutors wrote in a sentencing memorandum, asking for as much as six years in prison time for Sosna.
Horan scheduled a status conference in 30 days to decide on how much restitution Sosna must pay, given that so many lawsuits are still pending.
Recently, Milford-based Centerbank won a $1.2 million judgment in its lawsuit against Sosna and his former company, Kenwood Envision, which is one of the largest tenants in the mixed-use development Kenwood Collection for a defaulted loan.
Kenwood Collection also won a $3.7 million judgment against Kenwood Envision for unpaid rent in Hamilton County Court of Common Pleas.
In April, a federal judge in Oregon ordered Sosna to pay First Interstate Bank of Montana $1.8 million. Sosna was sued, along with Sosco Aviation and Premier Health Care, for defaulting on a $5 million loan to buy a 2009 Cessna 560XL and two P&W Canada PW545C engines. The lawsuit accuses Sosna of failing to make payments beginning on July 20, 2020.