What did Hudson County officials know and when did they know it?
These are the questions raised by last week’s surfacing of a 1995 report on Progressive Rehab.
Hudson County officials apparently knew of potential problems in 1995 when it privatized its two geriatric facilities, according to a representative of Liberty Mutual Insurance.
Progressive Rehab – a firm hired to run two county geriatric facilities that it eventually purchased — has become the focus of attention in Hudson County after a 1995 insurance investigation surfaced last week revealing serious possible problems with the way the county privatized geriatric services at Pollak and Meadowlands hospitals.
Progressive Rehab declared bankruptcy in July 2001, leaving a trail of debt, including to Hudson County, a situation the 1995 report seemed to warn against.
The 1995 report was issued by Szymoniak & Ridge, a legal firm representing Liberty Mutual Insurance Company in an investigation of Progressive’s application for Workman’s Compensation insurance. Liberty Mutual was to supply Progressive Rehab with the insurance.
According to this report that was submitted to New Jersey director of Insurance Fraud in August 1995, Progressive Rehab left a trail of debt and unanswered questions in facilities in New England prior to taking over operations in Hudson County.
The report singles out Michael Konig, one of the owners of Progressive Rehab and listed on the 1995 agreement with Hudson County as its president, and said serious questions were brought to the attention of then County Executive Robert Janiszewski. Janiszweski apparently ignored the information in a push to rid the county of the $35 million operational headache that both hospitals had become.
Progressive Rehab took over operations of two Hudson County facilities, Meadowview and Pollak Hospitals, in April 1995 from Hudson County, which had operated the facilities prior to that date.
Liberty Mutual began an investigation of Progressive’s application for Workman’s Compensation insurance on May 31, 1995.
“At that time, the county employees were fired by Hudson County and hired by Progressive Healthcare (also known as Progressive Rehab),” the Liberty Mutual report said.
According to county documents, in pursuing its plan to privatize the system, the county “lawfully terminated” the employees on April 14, 1995. The county agreement – signed by Konig and another Progressive owner, Amjed Chowdhry – expressed an intention to employ “some” of the employees provisionally to operate the facilities during the interim and possibly for an extended period, and requested the county turn over employee personnel files for the purpose of evaluating each employee who sought employment with Progressive. The employees at the time filed an appeal with the county to stop the takeover and eventually filed suit. The suit was later dismissed although a court of appeals ruled against Konig that same year on labor relations at a Vineland nursing home he operated.
Questions about Konig
Konig, a controversial nursing home owner, had a problematic history including the closing of nursing homes in Massachusetts, union disputes and allegations of neglect in various projects throughout the Northeast.
In New York City, Konig was called “the landlord from hell” by the New York Daily News for his running of a 59-building housing complex that accrued in excess of 10,000 building code violations.
“I have never been convicted of a crime,” Konig said during a telephone interview this week. “But I do admit that I’ve had problems at one home in Massachusetts”
Konig’s use of legal loopholes and the nearly perpetual lawsuits filed against him for alleged violations at nursing homes made him among the top targets for insurance investigators from Liberty Mutual, who merely refer to him by the address of his Teaneck offices.
“We have filing cabinets of information on him,” said said Liberty Mutual attorney Lynn Szymoniak during a telephone interview last week.
Konig, who just turned 50, has been in the nursing home business since 1974 when he took up operations of a home in West Orange. Over the last thirty years, he has operated facilities throughout four Northeast States, and though he currently is not the owner or manager of any nursing homes, he still has his license and maintains a consulting firm. He is listed in one business guide as an officer of about a dozen businesses, many of which are nursing homes throughout New Jersey. His wife has also been listed as owner of several nursing homes in New York and New Jersey.
Because Liberty Mutual had had previous dealings with Konig and other figures connected with Progressive Rehab, Liberty Mutual sent the application for Workman’s Compensation insurance to their special investigations unit (SIU), which tried to verify the accuracy of the information on the application.
The SIU concluded its investigation on Aug. 8, 1995, claiming that some of the information was false and that representatives of Progressive’s management company had allegedly underestimated payroll. The application claimed that Progressive had a payroll of slightly over $1 million when it actually had a payroll over $10 million.
“In other words, [Progressive] was paying 10 cents on the dollar in premiums,” said Szymoniak last week. “But Progressive reported the full amount to get Medicaid reimbursements. That’s how we found out. In New Jersey, those reports are easier to obtain than in other states.”
According to the 1995 report, the distortion of numbers was accomplished by creating an apparently shadow payroll management company for one of the hospitals. The application listed two management companies: Supreme Management Inc. and Supreme Management Inc. II when in reality only the first of these really existed.
Just who owned the management companies remains a mystery, since investigators got different answers from different people. Investigators spoke to Progressive’s auditor who claimed Michael Konig was the sole owner of Supreme Management.
Konig, when reached for comment, said he had no connection with the payroll management company except to hire the firm.
During a telephone interview last week, Szymoniak noted one important detail about coverage at both facilities: during the eight years of operations under Progressive, no Workmen’s’ Compensation claims were filed. This has prompted Hudson County Freeholder Bill O’Dea to question whether or not these complaints were filed through the county despite the fact that the workers at both facilities ceased being employed by the county after the takeover by Progressive.
Szymoniak, however, said that as early as 1995, Janiszewski was made aware of some of these questions and that her office had submitted to him this and other reports on the past and current practices of those operating as Progressive Rehab.
“We sent him copies of our reports,” she said. “We received notice that he had sent them on to Progressive. That didn’t seem to us to solve the problem.”
“I would like to know who got this information from Mr. Janiszewski,” said O’Dea at the Oct. 21 Freeholder caucus meeting.
Earlier problems with Konig
Konig also apparently obtained similar coverage for five nursing homes in Massachusetts in 1993-1994.
“Konig grossly underestimated the payroll for these homes at the time of the application,” the report said. “When Liberty Mutual discovered the actual payroll, Liberty Mutual filed a Report of Suspected Fraud with the Massachusetts Fraud Bureau.”
Konig called the underestimation of the payroll in Massachusetts “a mistake.”
“It was a ridiculous figure,” he recalled. “The payroll was listed at about $10,000 when it should have been in the millions. Of course, it was a mistake, and I said as much in court.”
At the same time Konig was making an agreement with Hudson County, officials from the state Department of Health in Massachusetts were shutting down nursing homes he operated there because of what they called substandard care and arranged to sell the facilities. At the time, Konig was banned from owning or operating any more nursing homes in that state for five years.
The Massachusetts attorney general and others claimed that Konig had pocketed more than $600,000 in Medicare payments and at one home owed more than $500,000 to supply vendors. He also had failed to pay more than $150,000 in federal fines. He had also allegedly abandoned one home, disavowing responsibility for its operation or closing.
A series of stories in the Boston Globe followed the tragic demise of Konig’s five nursing homes there, following a pattern that would be repeated in Hudson County in 2001.
According to state officials there, Konig walked away from the nursing homes, leaving them hopelessly in debt. “It was by mutual agreement that we left,” Konig said. “The state thought it would be a good idea for us to leave, so we did.”
In February, 2003, Konig agreed to pay $450,000 to resolve allegations of abuse and neglect of nursing home residents as well as financial abandonment of one facility. He was also banned from nursing home operations in Massachusetts for ten years.
“That matter is under appeal,” Konig said, although he admitted that there were problems. “What people aren’t saying is that we [his company] came in to rescue the operations from a previous firm that the state had taken the licenses away from.”
Did Hudson County blink first in regards to Progressive?
In the months before the eventual closing down of Progressive Rehab’s operations in 2001, Hudson County officials struggled for direction, fearing that Progressive would walk away from the massive debt they had incurred over eight years of operations.
County Executive Robert Janiszewski seemed to have abdicated responsibility for overseeing the agreement to the Freeholders. Unknown to anyone at the time, Janiszewski was under the direction of the U.S. Attorney in a corruption investigation.
At that time, Progressive was behind in payments to the county and had performed none of the upgrades agreed to in their 1995 contract. Hudson County feared to move to take the licenses to operate geriatric facilities at Pollak Hospital in Jersey City and Meadowview Hospital in Secaucus for fear of forcing taxpayers to shoulder the debt that Progressive had incurred.
Hudson County privatized the two facilities in 1995 because of increasing costs and uncertain Medicare reimbursements from the state. In 1993, Hudson County received $27 million from the federal government in reimbursements, but expended $35 million to operate the two-long term geriatric facilities. In 1995 Michael Konig – the operator of 20 other nursing homes throughout New Jersey – and Amjad Chowdhry, operating as Progressive Rehab, agreed to take over two facilities, renting the two hospitals until they could purchase the buildings outright. The first $4.5 million payment was slated for 1999 and the second $10 million payment for December 2003. After missing the first payment in 1999, Chowdhry – after apparently buying out Konig’s interest in Progressive – renegotiated the contract for a $13 million payment in 2003.
In late 2000 and early 2001, employees working at the two hospitals and vendors doing business at Pollak and Meadowview hospitals began to complain that they had not been paid, leaving freeholders to fear that Progressive would not be around long enough to make any payment at all.
County officials, in a move to collect something from Progressive in early 2001, reverted to the original agreement and demanded Progressive pay $4.5 million it owed from 1999. At the same time, county officials hurriedly sought to find another operator that might step in to handle day-to-day operations at the two hospitals.
An ensuing investigation in July 2001 led by Assemblywoman Joan Quigley and the Hudson County Freeholders uncovered the extent of Progressive’s problems. Not only were employee paychecks bonding, but payments to the Workman’s Compensation fund were not being made, nor were liability insurance payments. Progressive also owed millions to vendors for both hospitals, as well as a million-dollar sewerage bill to Jersey City.
When Freeholders went to investigate conditions at Pollak Hospital, Progressive staff threatened to call the police. Eventually, the Freeholders discovered serious health risks that would allow them to seize the operating licenses and still hold Progressive accountable for the debt. However, Progressive had already declared Chapter 11, and though the county eventually sold off the licenses to another operator later in the year, Progressive management essentially escaped their debt. This was despite the fact that a court in early 2003 ruled that Chowdhry could be held personally accountable for about $11 million.
Based on information supplied to him by the Hudson Reporter and Liberty Mutual Insurance, Freeholder Bill O’Dea asked the county’s legal department last week to follow up leads that might seek out additional finances.
“Last week, the newspaper reported that Chowdhry and Tarkus were breeding race horses,” O’Dea said. Surbhi Tarkus was a co-owner of Progressive Rehab with Chowdry at the time the company declared bankruptcy.
Added O’Dea, “I think it is important to pursue this if this is true. Also based on the report from Liberty Mutual, we might need to look and see if there are other deep pockets we might pursue like Michael Konig.”