Troutman Sanders lawyer named in federal complaint

By Péralte C. Paul

The Atlanta Journal-Constitution

A prominent attorney at Atlanta-based Troutman Sanders was named in a federal complaint charging he and several other parties, including two companies with Atlanta ties, were involved in a $50 million kickback scheme to steer nursing home patients to a Kentucky-based nursing home pharmaceutical firm.

Leonard Grunstein, a New York-based partner at Troutman Sanders and leader of the firm's real estate capitalization and investments practice groups, was named in the complaint filed March 4 under seal in the U.S. District Court's District of Massachusetts.

Also named in the now-unsealed complaint is Omnicare, a Covington, Ky.-based nursing home pharmacy; Grunstein's business associates Rubin Schron and Murray Forman, both of New York; Atlanta-based Mariner Health Care Inc. and SavaSeniorCare Administrative Services, which also is headquartered in Atlanta.

The complaint was unsealed following a $98 million settlement that Omnicare reached with the federal government following a whistleblower investigation that found the company was involved in four such kickback schemes.

In an e-mail statement, Troutman Sanders spokesman Mark D. Braykovich said Grunstein is taking a leave of absence until the matter is resolved. "The firm is confident there will be a successful resolution to the case and that Mr. Grunstein will return to work," Braykovich wrote.

Grunstein was an attorney for a now-defunct Texas-based firm, Jenkins & Gilchrist when some of the alleged wrongdoing occurred. Troutman Sanders subsequently took over some of Jenkins & Gilchrist's practice groups and hired 89 of its attorneys, including Grunstein in 2005.

According to the 32-page complaint, Omnicare paid Mariner and Sava $50 million in 2004 to get them to sign long-term pharmacy contracts and steer nursing home patients -- including those covered by Medicare and Medicaid -- back to it for pharmacy dispensing services.

Attorneys for Schron, Sava and the former Mariner Health Care did not return telephone calls seeking comment, Thursday.

Schron issued an e-mailed statement through his Hackensack, N.J., public relations firm via e-mail: "The civil claims relate to an arms-length transaction in 2004 that was, as the government's own pleadings show, thoroughly reviewed and approved  by various experienced lawyers and investment advisers.

"Mr. Rubin Schron believes he acted lawfully and in good faith under the direction of competent professionals in the bona fide sale of a business for fair value," the statement said.

Annaliese Impink, chief operations counsel for SavaSeniorCare, also issued an e-mail statement: "The allegations by the government concern a transaction that occurred before SavaSeniorCare commenced operations and well before the current management team was in place," the statement read.

The scheme allegedly worked this way, according the complaint:

Mariner, one of the nation's largest nursing home operators with more than 263 assisted living facilities,  announced in June 2004 it was selling itself to National Senior Care Inc. for $1 billion. National Senior Care, which is headed by Grunstein's brother, Harry, was created solely for that transaction. It is an affiliate of SavaSeniorCare.

Forman and Leonard Grunstein subsequently proposed Omnicare purchase a Mariner subsidiary, Mariner Medical Supply, for $50 million. If Omnicare didn't, it would lose the pharmacy services contract it had with Mariner after the sale to National Health Care.

Omnicare executives raised the concern about such a transaction being perceived as a kickback but agreed to the deal because it risked losing $155 million in revenue and $26 million in operating profit a year on the three years it had left in the contract with Mariner.