Owner of shuttered Skyline nursing home chain admits $38M tax fraud

Matthew Fazelpoor//January 19, 2024//

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The former owner of the now defunct Skyline Health Care nursing home chain admitted his role this week in a $38 million employment tax fraud scheme.

From October 2017 through May 2018, Joseph Schwartz, 64, of Suffern, N.Y., owned Wood-Ridge-headquartered Skyline Management Group LLC and its related entities, which included more than 90 nursing homes across 11 states before its collapse, including three here in New Jersey.

In Newark federal court Jan. 17, Schwartz pleaded guilty before U.S. District Judge Susan Wigenton to a two-count indictment charging him with: willfully failing to pay employment taxes withheld from employees; and willfully failing to file an annual financial report with the Department of Labor for the 401(k) benefits plan he sponsored.

“Schwartz admitted that he was required to collect, truthfully account for and pay over to the IRS on behalf of employees of Skyline Management Group the trust fund taxes imposed on their employees by the IRS but failed to do so,” according to court documents released by prosecutors from the U.S. Attorney for the District of New Jersey’s Office. “The total amount of taxes was $38.9 million. Schwartz admitted he was also an administrator of the Skyline 401K plan and had an obligation to file an annual Form 5500 financial report with the Secretary of Labor for calendar year 2018, but knowingly and willfully failed to file the report.”

The employment tax fraud count carries a maximum penalty of five years in prison and $250,000 fine (or twice the gross gain or loss from the offense, whichever is greatest). The failure to file a Form 5500 count carries a maximum potential penalty of 10 years in prison and a $250,000 fine (or twice the gross gain or loss from the offense, whichever is greatest).

Schwartz’s sentencing is scheduled for May 22, 2024.

U.S. Attorney for New Jersey Philip Sellinger — Sellinger

“Joseph Schwartz admitted to defrauding the United States by failing to pay over to the IRS more than $38 million in payroll taxes. As an employer, Schwartz was required to withhold trust fund taxes from his employees’ paychecks and then dutifully report and turn those monies over to the IRS,” said U.S. Attorney for New Jersey Philip Sellinger. “Schwartz broke the law when he willfully withheld trust fund taxes from his employees but pocketed the money he had withheld rather than turning it over to the government; he will now be held accountable for his criminal tax violations.”

“Today’s plea is just one more example of our commitment to investigate and prosecute those who fail to comply with their federal tax obligations,” said Tammy Tomlins, IRS-criminal investigation special agent in charge of the Newark Field Office.

James Dennehy, FBI-Newark special agent in charge, described the scheme as Schwartz “basically stealing money from his employees and the IRS.”

“These taxes are an incredibly important facet of how our government functions, making up a significant portion of revenues brought in by the Treasury Department,” said Dennehy. “Other fraudsters currently committing the same fraud should pay attention to the lesson Schwartz learned the hard way – don’t cheat the taxman.”

An attorney for Schwartz did not respond to a request for comment by publication of this story.