UPDATE: Hospital CEO Caused Payment of $60,000 Bribe to Senator Keep Job

January 5, 2012

As readers of "BrokeAndBroker" know, I am an outspoken critic of corruption - which seems to have become a way of life for those in government.  Bribes and kickbacks have a corrosive effect that hinders honest government and prevents robust competition in the marketplace.

Far too often, taxpayers foot the bill for official corruption in the form of over-payment for shoddy services and substandard products.  Moreover, as word gets out that a bit of cash placed into an outstretched palm can grease the wheels to winning bids and contracts, the system of cronyism and misconduct becomes entrenched.  A darkened side-door becomes a well-lit superhighway.

Is this a problem solely limited to our federal government? Absolutely not!  Drill down - to the states, to the counties, to the cities, to the towns.  It's there too.

In recent years, I have made it a point to report about a particularly evil form of corruption: that involving the healthcare industry.  Few crimes that are more disgusting than those that inevitably drive up the cost of healthcare while frequently degrading the quality of the services provided.  The danger of healthcare industry fraud is that patients and their families ultimately foot the bill for all the illegal payments.  You're paying $30 for a lousy bandage in order to off-set the $50,000 bribe paid to some political hack -- or the hospital ratcheted up its charges because one of its employees overpaid for goods and/or services after getting a hefty kickback.

If you or a loved one has ever been a patient in a hospital, you are surely aware of the inflated prices charged by the institutions.  I'm sure that many of you have looked around and wondered why the facilities are so poorly maintained.  Read any number of recent criminal complaints involving the healthcare industry and you'll soon find your answers. Too many hospitals are run as petty fiefdoms where purchasing agents and providers seem to be setting up toll booths. You want the contract?  That's gonna cost you a kickback.  You want to head up the new surgical center? You're going to have to boost your Medicare reimbursement rates.

In a federal criminal Complaint filed on March 10, 2011, the following defendants were named:

  • Robert Aquino, 54, Glen Head, NY, the former Chief Executive Officer of Parkway Hospital in Queens, NY;
  • Carl Kruger, 62, Brooklyn, NY, former  New York State Senator;
  • Michael Turano, 50, Brooklyn, NY, a gynecologist;
  • Richard Lipsky,64,  New York, NY a lobbyist;
  • Solomon Kalish, 61, Rockville Centre, NY,  a healthcare consultant and the owner of Adex Mangement Inc.;   
  • David Rosen,54, Harrison, NY, former CEO of MediSys Health Network;
  • Aaron Malinsky, 63,   New York, NY, a real estate developer, and
  • William Boyland, Jr., 41, Brooklyn, NY, a  New York State Assemblyman.

And just exactly what were these defendants accused of doing?  Frankly, it's such a silly case, such an outrageous example of self-interest and public corruption, that you're really left shaking your head in disbelief that so many apparently intelligent and successful individuals would have engaged in this alleged crime.  On the other hand, given the banality of the fraud, it only underscores how commonplace such scams have become in the public sector.

Here's what this caper is about: Aquino, who was the  Chief Executive Officer of Parkway Hospital in Queens,  New York, learned that the State of  New York was slating his hospital for closure in 2008.  Apparently, Aquino wanted to keep his job - oh, and, sure, also keep the hospital open so that it could pay him.

What was Aquino's alleged solution to the thorny issue of his institution's closing?  According to prosecutors and plea agreements, Aquino caused Parkway Hospital to make $60,000 in payments to Adex. Okay, now it gets a bit fun.  Let's all trace the money.

Who just happened to have an interest in this Adex?  Why none other than  New York State Senator Kruger. My, how convenient!

Adex then paid half of that  $60,000 payment to Olympian Strategic Development Corp.

By Zeus!  Who do you think controlled Olympian?  Well, the feds alleged that this consulting company was controlled by Defendant Turano,  And, go figure, Turano just happened to be close - in tight - with Kruger.

On January 3, 2012, Aquino pled guilty in federal court in Unfortunately for Aquino (but fortunately for taxpayers), his guilty plea was heard by District Judge Jed S. Rakoff, whose recent rejection of the Securities and Exchange Commission's proposed settlement with READ.

On September 12, 2011, Rosen was convicted at a trial before Judge Rakoff  for his involvement in schemes to bribe Kruger, former  New York State Assemblyman Anthony Seminerio, and Boyland. Rosen is scheduled to be sentenced by Judge Rakoff on January 6, 2012.

On November 10, 2011, Boyland, 41, of Brooklyn,  New York, was acquitted by a jury. See this article.

On November 22, 2011, the Government entered into a deferred prosecution agreement with Malinsky,

On December 20, 2011:

  • Kruger, pled guilty to two counts of conspiracy to commit honest services fraud and two counts of conspiracy to commit bribery; and
  • Turano, pled guilty to one count of conspiracy to commit bribery.

Kruger and Turano are scheduled to be sentenced by Judge Rakoff on April 26, 2012.

Charges are still pending against Lipsky and Kalish, 61, who are presumed innocent unless and until proven guilty in a court of law.

Robert Aquino was all too willing to make sure a bribe was paid to preserve his job as CEO of a hospital. Like others in this case, he chose to fight his battle with money under the table rather than to play by the rules. And like others in this case, he now faces the prospect of jail. This Office remains committed to breaking the chains of corruption that weigh down  New York politics.

UPDATE

On January 4, 2012, Lipsky, pled guilty before Judge Rakoff in According to the Indictment, the Complaint, and and Lipsky's plea agreement, he is a professional lobbyist and has been the principal of Richard Lipsky Associates, Inc. since approximately 1981. Among his clients are unions and associations, food retail businesses, supermarkets, and beverage distributors.

In the Fall of 2007, Kruger asked Lipsky to retain Olympian Strategic Development Corp. (a consulting company controlled by Turano), Michael Turano, and his brother Turano, to work with him on a project in Brooklyn. Over the course of one year, Olympian and the Turanos did little in the way of documented work.

In 2008, Kruger referred a number of clients to Lipsky and asked that he pay Olympian Strategic Development Corp., Bassett Brokerage (another consulting company controlled by Turano), and/or Michael Turano a referral fee.from the referred business.  Lipsky agreed to the payments knowing that the quid pro quo would be that Kruger would take official action as a member of the New York State Senate. 

Between 2007 and 2011, Lipsky paid over $250,000 to Olympian Strategic Development Corp. and Bassett Brokerage, consulting companies controlled by Turano, with whom Kruger had a close relationship -- a relationship that is characterized as almost making the former state senator "effectively a member of Turano's family."  In exchange for the payments, Kruger undertook official action to benefit Lipsky and his lobbying clients.

Manhattan U.S. Attorney Preet Bharara stated:

As a lobbyist, Richard Lipsky was permitted to influence the legislative process on behalf of his clients with the power of his arguments, not the power of his checkbook. For too long and in too many ways, corruption has warped government in New York State and New York City. This Office will take every step necessary to root out that corruption and restore the public's faith in its government and its leaders.