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Ex-Nursing Home Exec Convicted of $34 Million Tax Fraud

A federal jury in Texas has convicted a former nursing home executive for his role in an elaborate scheme to avoid paying $34 million in payroll taxes.

The jurors deliberated only one hour before finding Stephen Michael Ewing guilty on 27 criminal counts, Dallas U.S. Attorney Richard B. Roper said in a statement March 7.

The charges, filed in the U.S. District Court for the Northern District of Texas, involved an elaborate shell game hatched by Ewing, also known as Stephen Michaels, and two associates to conceal their roles as the operators of 70 nursing homes. The trio then withheld taxes from employees' paychecks and pocketed the money.

Ewing, 60, of Bedford, Texas, is the third person convicted over the scheme.

His co-conspirators, Gary R. Trebert and Larry Gordon May, each pleaded guilty to two of the 29 criminal charges filed against them in return for their cooperation in Ewing's prosecution.

Prosecutors charged the men with defrauding the federal government by obstructing the functions of the Internal Revenue Service and the Department of Health and Human Services.

According to an indictment filed a year ago, Trebert, May and Ewing lied to HHS and state health officials to obtain control of 70 licensed nursing homes in Texas, Kansas, Okalahoma, Iowa and Virginia.

The trio allegedly falsified documents including state license applications, Medicaid contracts and Medicare provider enrollment applications in an attempt to hide their identities as the true owners of the facilities and divert responsibility for the homes away from themselves so that the government could not link them to any fraud.

After acquiring the nursing homes, the men continued to hide their interests in the facilities, prosecutors said. From August 1999 though May 2004 they created more than 150 sham payroll and staffing companies, many with foreign business addresses, and falsely portrayed the fake companies to the IRS as employers of the nursing homes' more than 4,500 workers.

The defendants constantly shifted from one fake entity to another to elude the IRS, according to the indictment.

The men allegedly withheld more than $34 million in payroll taxes from employee paychecks and filed falsified documents through the fake companies to claim the withholdings. However, they never paid the money to the government, the indictment says.

The facilities generated more than $200 million in income, including reimbursements from Medicare and Medicaid, according to the charges.

Roper said in his statement that the three men diverted "significant sums of money" from the nursing homes for their own use.

He said prosecutors demonstrated at trial that Ewing alone spent more than $2.5 million derived from the homes, including more than $200,000 in expenditures at department stores and $250,000 on automobiles.

Roper also said May testified that he was making $10,000 to $25,000 a month for doing little more than signing documents and mailing them to the IRS from foreign countries.

The jury convicted Ewing on one conspiracy count, seven tax evasion counts, five mail-fraud counts, seven counts of submitting false statements to government agencies and seven counts of filing false statements regarding health care.

Each conspiracy, false statement and tax evasion count carries a maximum of five years in prison and a $250,000 fine. The maximum penalty for each mail-fraud count is 20 years in prison and a $250,000 fine.

Roper said Ewing could be forced to pay restitution. His sentencing is scheduled for July 21.

Trebert pleaded guilty Feb. 27, and prosecutors recommended an eight-year prison term, two years short of the maximum. He faces a fine of up to $500,000 and restitution to be determined by the court. His sentencing is scheduled for July 14.

May pleaded guilty in October. He faces a maximum of eight years in prison and will be sentenced April 28.

To comment, ask questions or contribute articles, contact West.Andrews.Editor@Thomson.com.

Ronald C. H. Eddins and Alan M. Buie of the U.S. attorney's office in Fort Worth, Texas, prosecuted the case.Robert N. Udashen and Kevin B. Ross of Sorrels, Udashen & Anton in Dallas represent Ewing.