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A Tangled Web of Greed and Deceit Part 3

Published on November 30th, 2009

The March 2005 article in Counsel to Counsel discusses the complex but supposedly legal transaction involving Mariner and other entities including National Senior Care.  The article mentions the complexity of the billion dollar transaction.   After all, the deal took nearly seven
months to complete; involved roughly 80 attorneys from a half-dozen law firms; and hinged on the sale and lease-back of Mariner’s most valuable assets—its skilled nursing facilities.  Through its operating subsidiaries, Mariner owned, leased or managed nearly 260 skilled nursing facilities in more than 20 states and over a dozen long-term acute care hospitals in four states.

NSC (Harry Grunstein, Defendant Leonard’s brother from Israel) came calling in April 2004. NSC wanted to take the company private and made Mariner and its shareholders an offer that really was too good to refuse—$30 per share for a stock that was at that time trading in the low $20 range, plus the assumption of some $350 million in debt.  Specifically, the deal involved selling
170 of Mariner’s 260 skilled nursing facilities to a third party—SMV, a real estate investment company—to help NSC finance the merger. Under terms of the proposed agreement, SMV would lease the properties back to either Mariner (which by then would be an NSC subsidiary), or to another company, Sava SeniorCare. Further, after establishing a bridge loan to pay off Mariner’s shareholders, NSC would use the approximately $600 million realized by the sale of  the properties to finance the acquisition—including paying off both the bridge loan and Mariner’s
outstanding debt.

Executive compensation attorneys came in to review and restructure Mariner’s senior management agreements and benefit packages—including an employee retention plan
developed after NSC made it clear it wanted to keep the Mariner management  team in place.

Many readers may be wondering how this kickback scheme affects residents in a nursing home. Jim Edwards wrote on a blog recently that "The scariest wrinkle in the Omnicare kickback case is just how vulnerable old people in nursing homes are to schemes in which drug companies allegedly induce pharmacies to prescribe drugs they otherwise wouldn’t." Edwards cites one case where one patient cited by the government’s complaint received 67 — sixty-seven! – different drugs under Omnicare’s “care”. Those drugs included Cipro, Neurontin, Heparin, Pepcid, Oxycodone and Seroquel or their generics, according to the complaint.

Remember we as taxpayers pay for these medications and services to provide for the most vulnerable citizens in our country not to go into the pockets of corrupt and greedy corporate owners.

Joe Pioletti
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