|HUD No. 06-075
June 29, 2006
HUD SUSPENDS RHODE ISLAND NURSING HOME OPERATORS WHO HAVE AGREED TO PLEAD GUILTY TO EQUITY SKIMMING
WASHINGTON - Housing and Urban Development General Counsel Keith E. Gottfried today announced the immediate suspension of two Rhode Island nursing home operators from engaging in any further business transactions with HUD and the Executive Branch of the Federal Government. The suspensions of Antonio L. Giordano and John Montecalvo are based on the filing of criminal charges against them earlier this month by the U.S. Attorney for the District of Rhode Island.
In the criminal charge filed with the U.S. District Court for Rhode Island, the U.S. Attorney alleges that between January 1998 and May 2004, Giordano and Montecalvo engaged in equity skimming (in violation of 12 U.S.C. § 1715z-19) by using and authorizing more than $780,000 in rents, assets, proceeds and other funds derived from three Federal Housing Administration (FHA)-insured nursing homes they operated, to pay expenses that were not reasonable nor necessary for nursing home operations. The diversion of funds occurred during a period when the FHA-insured mortgages on Coventry Health Center, Mount St. Francis Health Center and Hillside Health Center, the three nursing homes operated by Giordano and Montecalvo, were in default and in a "non-surplus cash" position, in violation of HUD's Regulatory Agreement. An audit and investigation conducted by HUD's Office of Inspector General produced the information contained in the criminal charge.
Pursuant to a plea agreement entered into by Giordano and Montecalvo, on June 21, 2006, each of the defendants has pled guilty to one count of Equity Skimming, which upon conviction carries a maximum fine of $500,000 and five years imprisonment or both. In addition, the plea agreement spells out that the defendants are jointly and severally liable for restitution of the entire amount they skimmed, $780,539. In addition, the plea agreement permits HUD and other federal agencies to pursue administrative or civil actions against the defendants.
"The plea agreement is the result of a lot of tireless dedication, hard work and close coordination on behalf of HUD, the Department's Inspector General, the Office of the U.S. Attorney for the District of Rhode Island and our other colleagues at the U.S. Department of Justice," said Gottfried.
"This action demonstrates the steadfast and enduring commitment of HUD, the HUD OIG and our other federal partners to make sure HUD's programs are administered in accordance with the letter and intent of the law and are free from fraud, waste and abuse," said Kenneth M. Donohue, Sr., HUD's Inspector General.
In addition to the suspension of the two defendants, the Departmental Enforcement Center within the Office of General Counsel suspended 14 entities deemed to be affiliates of Giordano and Montecalvo.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development, and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov.