Letitia James sues Daryl Hagler for Nursing Home Fraud

New York Attorney General Letitia James is suing Brooklyn and Queens real estate investor Daryl Hagler for his alleged role in a nursing home fraud scheme that led to resident neglect, suffering and even death.

James alleges that Hagler and his business partner Kenneth Rozenberg, who co-owned Centers Health Care, converted more than $83 million in Medicaid and Medicare funds to enrich themselves. Meanwhile residents at their four nursing homes were forced to sit for hours in their own urine and feces, suffering from severe dehydration, malnutrition and increased risk of death.

The suit also alleges the owners of the nursing homes, which are located in Queens, The Bronx, White Plains and Buffalo, entered into deals that saddled the homes with debts where they were forced to pay inflated rents to companies owned by Hagler.

In one example, the Buffalo Center reported to the Department of Health that its facility would have an annual rent of $600,000 in 2015. But when the Buffalo Center closed on the purchase of its facility a few months later, Rozenberg signed a new lease with Hagler as the landlord obligating the facility to pay an annual rent of $2 million— 233 percent more than the rent reported to the Department of Health.

“Rozenberg and Hagler controlled the nursing homes using a partnership model that turned nursing homes into money-making machines,” the Attorney General’s office said in a release announcing the lawsuit on Wednesday.

Hagler could not be reached for comment.

A spokesperson for Centers Health Care denied the allegations “wholeheartedly“ and said it “attempted to resolve this matter out of court.”

“We will fight these spurious claims with the facts on our side. Beyond that, Centers Health Care will not comment on ongoing litigation,” Centers Health Care Jeffrey Jacomowitz told The Real Deal.

James is seeking to prohibit the nursing homes from admitting new residents until staffing increases to appropriate standards. She is also seeking to implement a financial and healthcare monitor and have the nursing homes repay wrongfully obtained government funds.

Hagler, who lives in Rockland County and is a board member of El Al Airlines, was emerging as an outerboro dealmaker.

Last year, he purchased a former Cigar Factory in Astoria for $26.4 million. That same year, he bought the Staybridge Suites hotel in Long Island City at 38-59 11th Street for $63 million.

He partnered with Brooklyn developer Isaac Hager on a few deals.

At one point, Hagler attempted to be a white knight for Hager’s Tillary Hotel in Downtown Brooklyn. Hagler sought to provide $96.8 million to fund Hager’s bankruptcy plan to keep the hotel. As proof of funds, Hagler showed the court he had a Charles Schwab account with $39.9 million and a Popular Bank account with $39.6 million. Hagler said he had an additional $60 million in other business entities he controlled. Hager eventually lost the hotel in a bankruptcy sale to Ohana Real Estate in late 2022.

More recently, Hagler and Hager bought a Crown Heights site for $43 million where Bruce Eichner’s Continuum Company sought to build a 1,500-unit residential development. Without rezoning, the developers can build a six-story, 293-unit building.

This is familiar waters for James, who has gone after a number of nursing home operators for fraud and resident neglect.

Notably, she filed a lawsuit against the operators of Cold Spring Hills, a 588-bed nursing home in Oyster Bay, Long island, which include Avi Philipson and his father Bent Philipson. An Avi Philipson-led group recently closed on an acquisition of 100 plus asset Brooklyn portfolio from All Year Holdings.