United States v. Giordano

• Decision Date: 04 October 2012
• Docket Number: No. CA 09–432 ML.,CA 09–432 ML.
• Citation: 898 F.Supp.2d 440
• Parties: UNITED STATES of America, Plaintiff, v. Antonio L. GIORDANO, John Montecalvo, Pasquale Confreda, and Coventry Health Center Associates, Defendants.
• Court: U.S. District Court — District of Rhode Island

898 F.Supp.2d 440

UNITED STATES of America, Plaintiff,

v.Antonio L. GIORDANO, John Montecalvo, Pasquale Confreda,¹ and Coventry Health Center Associates, Defendants.

No. CA 09–432 ML.

United States District Court,

D. Rhode Island.

Oct. 4, 2012.

John T. McConkie, U.S. Dept. of Justice, Washington, DC, for Plaintiff.

Vincent A. Indeglia, Indeglia & Associates, Warwick, RI, for Defendants.

MEMORANDUM AND ORDER

MARY M. LISI, Chief Judge.

The United States of America (“Government”), on behalf of the United States Department of Housing and Urban Development (“HUD”), has filed a six-count complaint against Defendants alleging equity skimming in violation of 12 U.S.C. § 1715z–4a. The matter is now before the Court on the Government's motion for summary judgment against Defendants Antonio L. Giordano (“Giordano”), John Montecalvo (“Montecalvo”), and Coventry Health Center Associates (“CHCA”), on counts 1 through 4 of the complaint.² The Government alleges that Defendants implemented a scheme wherein they diverted millions of dollars away from two HUD-insured Rhode Island nursing homes in order to enrich Defendants and certain members of Giordano's family. Giordano denies the allegations.

I. Standard of Review

Summary judgment is appropriate only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). An issue is “genuine” if the pertinent evidence is such that a rational factfinder could resolve the issue in favor of either party, and a fact is “material” if it “has the capacity to sway the outcome of the litigation under the applicable law.” National Amusements, Inc. v. Town of Dedham, 43 F.3d 731, 735 (1st Cir.1995).

The moving party bears the initial burden of showing the Court that no genuine issue of material fact exists. Id. Once the moving party makes this showing, the nonmoving party must point to specific facts demonstrating a trialworthy issue. Id. The Court views all facts and draws all reasonable inferences in the light most favorable to the nonmoving party. Continental Casualty Co. v. Canadian Universal Insurance Co., 924 F.2d 370 (1st Cir.1991).

To aid the Court in identifying genuine issues of material fact, this District has adopted Local Rule Cv 56. “Valid local rules are an important vehicle by which courts operate. Such rules carry the force of law, and they are binding upon the litigants and upon the court itself[.]” Air Line Pilots Association v. Precision Valley Aviation, Inc., 26 F.3d 220, 224 (1st Cir.1994) (citations and footnote omitted). Local Rule Cv 56 provides that in addition to a memorandum of law, the moving party in a motion for summary judgment “shall” also file a separate statement of undisputed facts. D.R.I. LR Cv 56(a)(1). An “objecting party that is contesting the movant's Statement of Undisputed Facts shall file a Statement of Disputed Facts, which shall be numbered correspondingly to the Statement of Undisputed Facts, and which shall identify the evidence establishing the dispute....” Id. at (a)(3). “[A]ny fact alleged in the movant's Statement of Undisputed Facts shall be deemed admitted unless expressly denied or otherwise controverted by a party objecting to the motion.” Id. Parties who ignore Local Rule Cv 56 do so at their own peril. Gosselin v. Webb, 242 F.3d 412, 415 n. 2 (1st Cir.2001); see also Pope v. Potter, No. 03–544, 2005 WL 3178179 (D.R.I. November 28, 2005) (attempt to dispute facts by merely incorporating them into a memorandum opposing a motion for summary judgment does not meet the requirements of the local rule; a separate statement must be filed).

The Government filed a 38–page statement of undisputed facts, supported by 44 exhibits, which contained 181 fact statements. Giordano filed a one and a half page “statement of disputed facts” containing 7 “disputed facts.” For the most part, Giordano's statement contains immaterial and conclusory statements. As a result, the facts as delineated in the Government's statement of undisputed facts are deemed by this Court to be admitted by Giordano. See D.R.I. LR Cv 56; Indian Harbor Ins. Co. v. Assurance Co. of America, No. CA 08–146 ML, 2010 WL 2365571 (D.R.I. May 21, 2010), report and recommendation adopted,No. CA 08–146 ML, 2010 WL 2346654 (D.R.I. June 9, 2010).³

II. Facts

A. Mt. St. Francis Health Center–General Overview

On or about September 27, 1983, Mt. Saint Francis Associates, (“MSFA”), was formed in order to acquire and operate Mt. St. Francis Health Center (“Mt. St. Francis” or “project”), a nursing home in Woonsocket, Rhode Island. Giordano was a general partner in MSFA. On or about November 9, 1983, MSFA purchased Mt. St. Francis and executed a mortgage deed and note in the amount of $6,129,900. On or about July 13, 1995, MSFA refinanced the mortgage through Suburban Mortgage Associates, Inc. (“Suburban Mortgage”), in the amount of $8,622,900. MSFA subsequently borrowed an additional amount from Suburban Mortgage resulting in a mortgage debt of approximately $9,700,000. The Mt. St. Francis' mortgages were insured by HUD under title II of the National Housing Act. See generally12 U.S.C. § 1701 et seq. As a general partner in MSFA, Giordano was one of the owners of Mt. St. Francis. At his deposition, Giordano testified that he had extensive experience with HUD insured properties and he described himself as the regional “leader in the industry” among those working with HUD properties. Government Exhibit 1, Tab (e) at 135.

On or about July 14, 1995, as a condition of HUD's mortgage insurance, MSFA entered into a regulatory agreement with HUD. Giordano signed the regulatory agreement as a general partner of MSFA. The regulatory agreement states that “[o]wners shall not[,] without the prior written approval of [HUD] ... assign, transfer, dispose of, or encumber any personal property of the project, including rents, or pay out any funds except from surplus cash, except for reasonable operating expenses and necessary repairs.” Government Statement of Undisputed Facts (“SUF”) at ¶ 15; Government Exhibit 8 at ¶ 6(b) (emphasis added). The agreement defines the term “owners” as “ [MSFA] and any of its partners, together with their respective successors[,] executors, administrators, heirs and assigns.” Id. at ¶ 14; Government Exhibit 8 at ¶ 17 (emphasis added). Generally, the agreement defines the term “surplus cash” as the cash remaining after the payment of

[1] [a]ll sums due or currently required to be paid under the terms of any mortgage or note insured or held by the Secretary; [2] [a]ll amounts required to be deposited in the reserve fund for replacements; [and 3] [a]ll obligations of the project other than the insured mortgage unless funds for payment are set aside or deferment of payment has been approved by the Secretary....

Id. at ¶ 17; Government Exhibit 8 at ¶ 13(f).

On or about April 20, 1993, MSFA and Giordano submitted to HUD a Project Owner's & Management Agent's Certification of Multifamily Housing Projects for Identity–of–Interest or Independent Management Agents. The certification was signed by Giordano. In the certification, MSFA disclosed that it would pay Giordano, as managing general partner, a “special fee” equal to 3 percent of net patient revenue. In exchange for the fee, Giordano agreed to perform various services that were “peculiar to the project's status as a special-purpose and regulated facility[.]” SUF at ¶ 21. A substantial portion of those services, however, were subcontracted to Consultants, Inc., an entity controlled by Giordano. The certification also stated that MSFA and Giordano would comply with the regulatory agreement and HUD handbooks.

On or about January 1, 1995, MSFA entered into a management agreement with Sterling Health Care Management Company, LLC (“Sterling”), and agreed to pay Sterling a management fee equal to 3 percent of net patient revenue. The management agreement provided that Sterling had “complete authority to manage and control all health care and financial aspects of the operation of” Mt. St. Francis. Government Exhibit 12 at ¶ 2. 1. The agreement also provided that it was to be performed in conformity with Department of Human Services guidelines and the regulatory agreement. Montecalvo was the general manager of Sterling.⁴

From 1999–2004 Peter Fournier (“Fournier”) was the administrator of Mt. St. Francis. Mt. St. Francis hired Montecalvo as the assistant administrator and Giordano set his compensation at $42.70 per hour. In his deposition, however, Fournier testified that Mt. St. Francis did not have an assistant administrator's position and that Montecalvo acted as the administrator only when Fournier was on vacation, which was between two to three weeks per year. Fournier testified that Mt. St. Francis regularly had difficulty meeting its payroll obligations. Giordano testified that he constantly made loans to Mt. St. Francis. Ultimately, Fournier left the employ of Mt. St. Francis because he believed Mt. St. Francis' finances required more attention than they were receiving.

Mt. St. Francis defaulted on its mortgage loans in 2008. The mortgages were assigned to HUD which subsequently sold them for a loss of $7,842,300.

B. Coventry Health Center–General Overview

Beginning in 1987, Coventry Health Continuum, Inc., (“Coventry Continuum”), leased and operated Coventry Health Center, (“Coventry Health Center” or “project”), a nursing home in Coventry, Rhode Island. Coventry Health Center Associates, (“CHCA”), was created to own and develop Coventry Health Center. Giordano, Pasquale Confreda (“Confreda”), and John Assalone (“Assalone”) were general partners in CHCA. On or about May 24, 1994, CHCA refinanced its mortgage on Coventry Health Center through Suburban Mortgage in the amount of $15,308,700.

The Coventry Health Center mortgage was also insured by HUD under title II of the National Housing Act. On or about May 24, 1994, CHCA entered...