FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Petitioner,
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`v.
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` ORAL ARGUMENT
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`REQUESTED
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`SUPREME COURT OF THE STATE OF NEW YORK
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`COUNTY OF NASSAU
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`-----------------------------------------------------------------------X
`PEOPLE OF THE STATE OF NEW YORK,
`by LETITIA JAMES, Attorney General
`of the State of New York,
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`
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`
`
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`COLD SPRING ACQUISITION, LLC D/B/A COLD
`SPRING HILLS CENTER FOR NURSING &
`REHABILITATION, COLD SPRING REALTY
`ACQUISITION, LLC, VENTURA SERVICES, LLC
`D/B/A PHILOSOPHY CARE CENTERS, GRAPH
`MGA, LLC, GRAPH MANAGEMENT, LLC,
`GRAPH INSURANCE COMPANY A RISK RETENTION
`GROUP, LLC, HIGHVIEW MANAGEMENT INC.,
`COMPREHENSIVE CARE SOLUTIONS, LLC,
`PHILIPSON FAMILY, LLC, LIFESTAR FAMILY
`HOLDINGS, LLC, ROSS CSH HOLDINGS, LLC,
`ROSEWELL ASSOCIATES, LLC,
`B&L CONSULTING, LLC, ZBL MANAGEMENT, LLC,
`BENT PHILIPSON, AVI PHILIPSON,
`ESTATE OF DEBORAH PHILIPSON, JOEL LEIFER,
`LEAH FRIEDMAN, ROCHEL DAVID,
`ESTHER FARKOVITS, BENJAMIN LANDA,
`DAVID ZAHLER, CHAYA ZAHLER, CHAIM ZAHLER,
`JACOB ZAHLER, CHESKEL BERKOWITZ, and
`JOEL ZUPNICK,
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`
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`
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`Respondents.
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`
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`-----------------------------------------------------------------------X
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`MEMORANDUM OF LAW IN SUPPORT OF PETTIONER ATTORNEY GENERAL’S
`PROPOSED ORDER TO SHOW CAUSE FOR CIVIL CONTEMPT PURSUANT TO
`JUDICIARY LAW § 753 AGAINST COLD SPRING HILLS, AVI PHILIPSON, AND
`JOEL LEIFER
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Table of Contents
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`I.
`PRELIMINARY STATEMENT………………………………………………………….1
`II. APPLICABLE LAW……………………………………………………………………...3
`III. ARGUMENT……………………………………………………………………………...4
`a. A Finding of Civil Contempt Is Appropriate And Necessary…………………………...4
`i. Cold Spring Hills Should Be Held in Contempt…………………………………...…4
`ii. Cold Spring Hills’ Managing Members, Avi Philipson and Joel Leifer, Should Be
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`Held in and Sanctioned For Contempt……………………………………………….5
`b. The Appropriate Sanction Is A Fine To Be Paid To The Fund by Avi Philipson and Joel
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`Leifer…………………………………………………………………………………...8
`c. Neither the Court’s Decision on the Petition Nor Cold Spring Hills’ Circumstances
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`Preclude an Order of Contempt…………………………………………………………9
`IV. CONCLUSION…………………………………………………………………………..12
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Table of Authorities
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`Page(s)
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`Cases
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`Bleakley v Schlesinger,
`294 NY 312 [1945] ....................................................................................................................6
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`El-Dehdan v El-Dehdan,
`114 AD3d 4, [2d Dept 2015] ...................................................................................................10
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`First National Bank of Glens Falls v Reoux
`
`9 AD2d 1005 (3d Dept 1959)]………………………………………………………….10
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`Green v Green,
`288 AD2d 436 [2d Dept 2001] ..................................................................................................3
`
`In re Andrew B.,
`128 AD3d 1513 [4th Dept 2015] ...............................................................................................4
`
`In re McCormack v Axelrod,
`59 NY2d 574, modified, 60 NY2d 652 [1983] ..........................................................................3
`
`In re Wimbledon Fin. Master Fund, Ltd. v Bergstein,
`173 AD3d 401 [1st Dept 2019] ..................................................................................................6
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`Jurney v MacCracken
`
`294 US 125 (1935)……………………………………………………………………...10
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`McCain v Dinkins,
`84 NY2d 216 [1994] ..............................................................................................................3, 8
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`People ex rel. Day v Bergen
`
`53 NY 404 (1873)……………………………………………………………………....10
`
`State of New York v Unique Ideas,
`44 NY2d 345 [1978] ..................................................................................................................8
`
`Tishman Constr. Corp. v United Hisp. Constr. Workers, Inc.,
`158 AD3d 436 [1st Dept 2018] ..................................................................................................6
`
`Town of Southampton v R.K.B. Realty, LLC,
`91 AD3d 628 [2d Dept 2012] ....................................................................................................8
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`ii
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Trustees for the Michigan Carpenters’ Council Pension Fund v Indy Lab Sys.,
`Ind. No. 4:04-CV-19, 2006 WL 1982607, [WD Mich July 12, 2006] ......................................6
`
`United States v Hochschild,
`977 F2d 208 [6th Cir 1992] .......................................................................................................6
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`Vacco v Consalvo,
`176 Misc. 2d 107 [NY Sup Ct, NY Cty 1998].........................................................................10
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`Wilson v United States
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`221 US 361, 376 [1911]…………………………………………………………………5,6
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`State Statutes
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`Executive Law
`§ 63(12) ............................................................................................................................2, 7, 11
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`Judiciary Law
`§ 753............................................................................................................................... 1-2, 5, 7
`§ 753[A][3] ................................................................................................................................3
`§ 773...........................................................................................................................................8
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`The New York State Attorney General (“Attorney General” or “Petitioner”) submits this
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`Memorandum of Law in support of its proposed order to show cause seeking to hold Respondent
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`Cold Spring Acquisition, LLC, d/b/a Cold Spring Hills Center for Nursing & Rehabilitation (“Cold
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`Spring Hills” or the “Nursing Home”), and its managing members, Respondent Avi Philipson and
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`Respondent Joel Leifer, in civil contempt pursuant to Judiciary Law § 753 for violating this Court’s
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`Decision and Order, dated October 20, 2023 (NYCSEF 731) (the “Order”). In support of the instant
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`application, Petitioner relies on the Affirmation of Special Assistant Attorney General Christina
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`Pinnola (“Pinnola Aff.”), the Affirmation of Senior Auditor-Investigator Patrick Beltrani
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`(“Beltrani Aff.”), both dated March 20, 2024, and all attached exhibits, as well as all documents
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`filed by Petitioner in support of its prior application for interim, provisional relief (NYSCEF 649-
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`670), which are hereby fully incorporated by reference herein.
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`PRELIMINARY STATEMENT
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`The conduct of Cold Spring Hills and its managing members, Avi Philipson and Joel
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`Leifer, is contemptuous and requires action to protect the vulnerable residents of Cold Spring Hills.
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`These residents are once again on the brink of facing the same risk of harm that they faced in the
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`summer of 2023 from Respondents’ refusal to pay the 1199SEIU National Benefits Fund (the
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`“Fund”) for health-related benefits for the union employees of Cold Spring Hills, i.e., those who
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`provide care to its residents.1
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`This Court recognized the importance of Cold Spring Hills ensuring these benefits are not
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`again placed in jeopardy when it issued the clear and straightforward Order requiring Cold Spring
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`Hills to timely make all necessary payments to the Fund. Both through the issuance of the Order,
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`1 The Fund comprises several different funds supporting various benefits for CSH union
`employees; as used here, Fund refers to the specific fund for healthcare and related benefits.
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`and again on the record at the hearing on the Petition in December 2023, the Court made clear that
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`it was imperative for Cold Spring Hills to make these payments.
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`Yet Cold Spring Hills—and its managing members—have wholly disregarded this Order
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`by making none of the required payments following the issuance of the Order—despite reassuring
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`the Court they would make all payments. As a result, the union employees of Cold Spring Hills
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`will again receive another notice of termination benefits this week, with the potential loss of these
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`crucial benefits shortly thereafter. Cold Spring Hills—and its managing members, Avi Philipson
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`and Joel Leifer—cannot justify their blatant violation of the Order, which has prejudiced
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`Petitioner.
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`Cold Spring Hills, Avi Philipson, and Joel Leifer thus should all be held in contempt
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`pursuant to Judiciary Law § 753, with the appropriate sanction being for Avi Philipson and Joel
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`Leifer to each pay a fine—and to pay such fine directly to the Fund. This will help ensure the
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`continuation of benefits for the union employees of Cold Spring Hills. Petitioner detailed in its
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`prior application for interim relief the deleterious effect that the termination of benefits would have
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`on the Nursing Home union employees and the concomitant negative consequences on resident
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`care. (See NYSCEF 670 at ¶¶ 17-24 [detailing impact on Cold Spring Hills’ employees and
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`operations].)
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`To be sure, such sanctions are necessary in light of the Court’s recently issued decision on
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`the Petition, dated March 15, 2024 (the “Decision”) (NYSCEF 802). This decision rightfully holds
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`Respondents Avi Philipson, Joel Leifer, and Cold Spring Hills liable for repeated illegality under
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`Executive Law § 63(12) for repeated violations of many state and federal regulations requiring
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`them to provide required care and sufficient staffing, which violations resulted in unacceptable
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`neglect of vulnerable people living at Cold Spring Hills. (Id. at 11-13). Respondents must be held
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`accountable for ignoring and violating the Order to prevent them from continuing to disregard it,
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`other court rulings, as well as applicable regulations—which this Court’s Decision recognized
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`these Respondents repeatedly violated from 2016 through 2022. The Fund will be issuing a notice
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`of termination this week, and benefits could terminate before any Court-approved Independent
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`Healthcare Monitor is installed and able to oversee operations of the Nursing Home. Independent
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`of any termination notice, the Court prudently issued the Order to ensure that Cold Spring Hills
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`met is legal obligations to pay for its unionized staff benefits, recognizing that the Nursing Home
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`needs staff to provide required care to its residents. Sanctions are necessary to hold Respondents
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`accountable for their violation of the law, and to ensure that these Respondents comply with the
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`Order and all Court orders and directions.
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`APPLICABLE LAW
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`“A court of record has power to punish, by fine and imprisonment, or either, a neglect or
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`violation of duty, or other misconduct, by which a right or remedy of a party to a civil action or
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`special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced, . . .
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`for any . . . disobedience to a lawful mandate of the court.” (Judiciary Law § 753[A][3].)
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`“To sustain a civil contempt, a lawful judicial order expressing an unequivocal mandate
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`must have been in effect and disobeyed.” (McCain v Dinkins, 84 NY2d 216, 226 [1994].) “[T]he
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`party to be held in contempt must have had knowledge of the order, although it is not necessary
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`that the order actually have been served upon the party.” (Id.) “In addition, prejudice to the rights
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`of a party to the litigation must be demonstrated.” (Id.) Contempt must be established to a
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`“reasonable certainty” (In re McCormack v Axelrod, 59 NY2d 574, 583, modified, 60 NY2d 652
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`[1983]), which the Second Department has interpreted to require clear and convincing evidence.
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`(E.g., Green v Green, 288 AD2d 436, 437 [2d Dept 2001].)
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`ARGUMENT
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`I.
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`A.
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`A Finding of Civil Contempt Is Appropriate And Necessary.
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`Cold Spring Hills Should Be Held in Contempt.
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`There can be no dispute that the Court issued a clear Order that Cold Spring Hills failed to
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`follow:
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`CSH must make all required payments in a timely manner to 1199SEIU National
`Benefits Funds to ensure that all employee benefits, including but not limited to,
`hospital, health, prescription drug, dental and disability benefits, remain available
`for CSH union employees . . . .
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`(NYSCEF 731 at 4.) The Order is unequivocal—Cold Spring Hills must meet its payment
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`obligations to the Fund. (Id. [“CSH will be required to make all necessary payments to the
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`1199SEIU National Benefits Funds for benefits of CSH’s unionized employees.”].) Moreover,
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`Cold Spring Hills unquestionably had knowledge of the Order—it was served on Cold Spring Hills
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`via NYSCEF and Cold Spring Hills’ counsel have acknowledged it in the December 2023 hearing
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`on the Petition. (Pinnola Aff., ¶¶ 21, 25.)
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`Yet since the Order was issued, and despite several months’ of payments being due, Cold
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`Spring Hills has made no such payments to the Fund, and thus is in direct violation of the Court’s
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`Order. (Pinnola Aff., ¶¶ 30, 34.) At no time has Cold Spring Hills informed the Court or Petitioner
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`that it was not going to abide by the Order, or that it would not make any past or future payments
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`to the Fund.2 (Id., ¶ 43.) Based on the most recent information available to Petitioner, Cold Spring
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`2 Cold Spring Hills’ lack of candor with the Court regarding compliance with the Order further
`militates against any defense, discussed infra, that may be asserted by Cold Spring Hills based on
`an inability to comply. (Cf. In re Andrew B., 128 AD3d 1513, 1515 [4th Dept 2015] [accepting
`defense based in part on fact that, “[n]otably, petitioner did not simply ignore the order when it
`became apparent that it was unable to comply with it. Instead, it filed a petition seeking to
`terminate” the court’s order].)
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Hills owes at least $2,653,338.13 to the Fund for obligations related to healthcare and related
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`benefits. (Id., ¶ 35.)
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`Finally, there can be no dispute that Cold Spring Hills’ violation of the Order has prejudiced
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`Petitioner’s rights. Both Petitioner, as Attorney General itself, and the State, whose interests
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`Petitioner also represents, have a compelling interest in protecting the public from repeated and
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`persistent illegality by ensuring that the Nursing Home complies with its legal duties, including
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`those in the Order and those requiring that it provide legally required care to its residents. Since
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`the Nursing Home can only provide resident care through staff, Petitioner has a compelling interest
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`in ensuring that the Nursing Home’s employees are not placed in an untenable situation of working
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`with no healthcare benefits—all while the Nursing Home continues to receive revenue from
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`Medicaid and Medicare to provide that care. Petitioner further has an interest in ensuring that
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`judicial orders issued to protect the public in proceedings commenced by the Attorney General are
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`complied with fully. (Pinnola Aff., ¶ 38.)
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`Petitioner has thus demonstrated that Cold Spring Hills violated the unequivocal Order,
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`that it knew of the Order, and that Petitioner’s rights were prejudiced as a result. Cold Spring Hills
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`should therefore be held in contempt pursuant to Judiciary Law § 753.
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`B.
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`Cold Spring Hills’ Managing Members, Avi Philipson and Joel Leifer, Should Be
`Held in and Sanctioned For Contempt.
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`Respondents Avi Philipson and Joel Leifer should also be held in and sanctioned for
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`contempt for the same reasons as apply to Cold Spring Hills. It is well-settled that where a judicial
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`order imposes an obligation on a corporate or similar entity, a principal of that entity, with
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`knowledge, can be held in contempt for the entity’s failure to comply the order. As the Supreme
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`Court of the United States explained in Wilson v United States:
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`A [judicial] command to the corporation is in effect a command to those who are
`officially responsible for the conduct of its affairs. If they, apprised of the writ
`directed to the corporation, prevent compliance or fail to take appropriate action
`within their power for the performance of the corporate duty, they, no less than the
`corporation itself, are guilty of disobedience, and may be punished for contempt.
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`(221 US 361, 376 [1911]; see also Bleakley v Schlesinger, 294 NY 312, 318 [1945] [affirming
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`finding of contempt against corporate principal where underlying order directed to corporation].)
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`As the Honorable Learned Hand stated in Alemite Mfg. Corp. v Staff: “[A] person who
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`knowingly assists a defendant in violating an injunction subjects himself to civil as well as criminal
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`proceedings for contempt. This is well settled law.” (42 F2d 832, 832 [2d Cir 1930] [Hand, J.].)
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`Thus, courts in New York and elsewhere routinely impose contempt on a principal of a company
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`where the principal was in a position to effect compliance with a court order directed to the
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`company but failed to do so. (E.g., Tishman Constr. Corp. v United Hisp. Constr. Workers, Inc.,
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`158 AD3d 436, 436-37 [1st Dept 2018] [affirming contempt sanction against president of union
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`of court order directed to union, despite being nonparty, because he was in position to ensure
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`compliance and had knowledge of it]; In re Wimbledon Fin. Master Fund, Ltd. v Bergstein, 173
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`AD3d 401, 401-02 [1st Dept 2019] [affirming contempt sanction against non-party member of law
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`firm who violated restraining order despite knowledge of it, and against law firm for same reasons];
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`Trustees for the Michigan Carpenters’ Council Pension Fund v Indy Lab Sys., Ind. No. 4:04-CV-
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`19, 2006 WL 1982607, at *2 [WD Mich July 12, 2006] [imposing contempt sanction against
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`principal for violation of order directed to company where she “was clearly the person responsible
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`for ensuring that the payments discussed above were timely made,” explaining, “[i]t is well settled
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`that a court’s contempt power extends to non-parties who have notice of the court’s order and the
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`responsibility to comply with it”]; see also United States v Hochschild, 977 F2d 208, 211 [6th Cir
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`1992] [collecting cases] [“This court has held that it is a basic equity principle that whenever an
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`injunction, whatever its nature may be, is directed to a corporation, it also runs against the
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`corporation’s officers, in their corporate capacities.”] [cleaned up].)
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`Avi Philipson and Joel Leifer, as managing members of Cold Spring Hills, are officially
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`responsible for the affairs of the company. (See NYSCEF 802 [Decision] at 14 [holding managing
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`members Avi Philipson and Joel Leifer liable under Executive Law §63(12) for violations of
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`regulations requiring operation with sufficient staffing and provision of required care of Nursing
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`Home residents]; see also NYSCEF 80 [Trans. of Exam. of A. Philipson, dated Nov. 5, 2020] at
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`60, [testifying that, as managing member, his “duties and responsibilities” are the “overall
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`operations of – of the facility”]; NYSCEF 588 [Answer of Avi Philipson] at ¶ 58 [admitting to
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`being 24% owner and has served as a managing member of Cold Spring Hills]; NYSCEF 615 [Aff.
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`of Joel Leifer] at ¶ 56 [admitting that even though he is not currently involved in Cold Spring Hills
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`operations, he was never “bought out” of his 25% managing member interest].)3
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`And, like Cold Spring Hills, Avi Philipson and Joel Leifer unquestionably had knowledge
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`of the Order: it was served on them via NYSCEF in this case.4
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`Thus, Avi Philipson and Joel Leifer should be held in and sanctioned for contempt pursuant
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`to Judiciary Law § 753 for their failure to ensure that Cold Spring Hills complied with the Order.
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`Holding these managing members in contempt would provide a deterrent to Respondents who
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`would otherwise violate this Court’s orders in the future without a second thought.
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`3 The Cold Spring Hills LLC operating agreement provides in relevant part: “the management and
`control of the business of [Cold Spring Hills] shall rest exclusively with the Managing Members,
`who all have the full, exclusive and absolute right, power and authority to manage and control each
`and every aspect of the business of [Cold Spring Hills].” (NYSCEF 565, § 5.1(a).) The agreement
`further provides: “All decisions by the Managing Members pursuant to this Agreement, shall be
`made upon the unanimous consent of the Managing Members.” (Id., § 5.1(b).)
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`4 Counsel for Avi Philipson also represents Cold Spring Hills.
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`II.
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`The Appropriate Sanction Is A Fine To Be Paid To The Fund by Avi Philipson and
`Joel Leifer.
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`A fine is the appropriate sanction for the contemptuous conduct of Avi Philipson and Joel
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`Leifer. Each should be fined for their repeated acts of contempt in disobeying the Court’s Order.
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`“Civil contempt fines must be ‘remedial in nature and effect’ and awards should be
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`formulated ‘not to punish an offender, but solely to compensate or indemnify private
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`complainants.’” (Town of Southampton v R.K.B. Realty, LLC, 91 AD3d 628, 30-31 [2d Dept 2012]
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`[quoting State of New York v Unique Ideas, 44 NY2d 345, 349 [1978]; see Judiciary Law § 773.).
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`“[W]here there is actual loss or injury the statute [Judiciary Law § 773] does not provide for a
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`general $250 fine, single or multiple. It calls instead for an assessment that will indemnify
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`aggrieved parties.” (Unique Ideas, 44 NY2d at 350.)
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`Consistent with these principles, the Court of Appeals made clear that the imposition of
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`civil contempt fines—which are in the discretion of the issuing court—should be broadly remedial
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`in nature. (McCain, 84 NY2d at 229.) In McCain, the Court of Appeals affirmed a contempt order
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`directing that the City of New York pay contempt fines directly to the beneficiaries of the
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`underlying order that the City violated—even though those beneficiaries were not parties to the
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`litigation. The McCain court held: “These fines against the City are as remedial as could be
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`developed within the discretionary, equitable powers of the courts under the unusual circumstances
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`of these matters.” (Id.)
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`Here, consistent with McCain and Unique Ideas, the Court should impose fines on Avi
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`Philipson and Joel Leifer, jointly and severally, of at least $2,653,338.13—i.e., the amount that
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`Cold Spring Hills owes to the Fund following the issuance of the Court’s Order, to be paid directly
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`to the Fund. The unusual circumstances of this case warrant such an order, as it is Avi Philipson’s
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`and Joel Leifer’s action (or lack thereof) that caused Cold Spring Hills to violate the Order.
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
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`Moreover, the Court should preclude Avi Philipson and Joel Leifer from paying the fine with
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`government healthcare reimbursement funds from the Medicaid Program.
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`III.
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`Neither the Court’s Decision on the Petition Nor Cold Spring Hills’ Circumstances
`Preclude an Order of Contempt.
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`The Court’s Decision on the Petition does not absolve Cold Spring Hills or its managing
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`members of their past contemptuous conduct, and is otherwise no impediment to the relief sought
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`in the instant application. First, the Decision does not rescind the Court’s prior Order requiring
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`Cold Spring Hills to make all timely payments to the Fund. Indeed, the Decision and the Order are
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`consistent and symbiotic—in both, the Court recognized the need to ensure that the Nursing Home
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`has appropriate staffing to provide the legally required care to residents. (NYSCEF 802 at 11-13.)
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`Nor does the Order provide that Respondents’ obligations to make timely payments to the Fund
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`terminate with the issuance of the Decision; even if it did, the instant application seeks to hold
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`Cold Spring Hills, Avi Philipson, and Joel Leifer in contempt for their past conduct—and these
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`Respondents should not be permitted to avoid their Court-ordered obligations where the problem
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`they created, which the Order sought to remedy, still exists, and will predictably continue to
`
`threaten resident care. Respondents’ compliance with the Order is necessary for the Nursing Home
`
`to provide care in compliance with applicable law, and to implement the Independent HealthCare
`
`Monitor’s recommendations to improve health care and staffing levels at the Nursing Home.
`
`Petitioner expects Cold Spring Hills to assert, as a defense to contempt, that it lacked the
`
`ability to comply with the Order. Any such defense should be rejected. Cold Spring Hills’
`
`managing members—Avi Philipson and Joel Leifer—can require the members of Cold Spring
`
`Hills to make capital contributions or otherwise fund the operations of Cold Spring Hills. (See
`
`NYSCEF 565 [Cold Spring Hills LLC Operating Agreement] § 3.1.) More practically, Cold Spring
`
`Hills’ bank records reveal that from October 2023 through January 2024, RAP 118, LLC
`
`
`
`9
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
`
`(“RAP”),5 owned by Respondent Avi Philipson, transferred a total of $2.5 million in cash to Cold
`
`Spring Hills—demonstrating that when Cold Spring Hills needs money, there is a means for it to
`
`acquire it. (Beltrani Aff., ¶¶ 2-5.)6 (See El-Dehdan v El-Dehdan, 114 AD3d 4, 18, [2d Dept 2015]
`
`[holding party could not rely on inability to pay defense to contempt where record establish had
`
`funds to make payment required by court order].)7
`
`Finally, any potential future change in ownership or operations of the Nursing Home is of
`
`no moment to the past contemptuous conduct of these Respondents. For example, Petitioner has
`
`learned that an individual named Mathew Varghese has been holding himself out as the incoming
`
`new owner and operator of the Nursing Home. Specifically, in late February and early March 2024,
`
`Petitioner learned that Cold Spring Hills and/or Mr. Varghese were representing to the Fund, and
`
`possibly others, that Mr. Varghese would be “taking over” operations of Cold Spring Hills in the
`
`near future. Petitioner also learned during this same time period that Mr. Varghese was attempting
`
`to negotiate a resolution of Cold Spring Hills’ arrears to the Fund—despite having no approved
`
`ownership interest in or operational control over Cold Spring Hills—but has not followed through
`
`with finalizing any such resolution. (Pinnola Aff., ¶ 40.)
`
`
`5 Notably, RAP’s Certificate of Formation indicates that it was formed on December 19, 2022,
`only three days after the filing of the Verified Petition in this Special Proceeding. (Beltrani Aff.,
`¶ 3.)
`
`6 In addition to these transfers between RAP and Cold Spring Hills, on December 20, 2023, Cold
`Spring Realty transferred $217,000 to Cold Spring Hills’ operating account. (Beltrani Aff., ¶ 6.)
`
`7 Moreover, any financial problems are of Respondents’ own making—i.e., they failed to operate
`the Nursing Home in compliance with the law—and thus not a viable defense to a finding of
`contempt. (Vacco v Consalvo, 176 Misc. 2d 107, 113 [NY Sup Ct, NY Cty 1998] [“a self-induced
`inability to comply is never a defense” to disobedience of a court order [citing Jurney v
`MacCracken, 294 US 125 (1935); People ex rel. Day v Bergen, 53 NY 404 (1873); First National
`Bank of Glens Falls v Reoux, 9 AD2d 1005 (3d Dept 1959)].)
`
`
`
`10
`
`14 of 17
`
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`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
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`INDEX NO. 617709/2022
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`RECEIVED NYSCEF: 03/20/2024
`
`Whether Mr. Varghese will be approved to be a new owner or operator of the Nursing
`
`Home is unclear.8 Mr. Varghese has many longstanding relationships with its existing Respondent
`
`owners and operators:
`
`• Mr. Varghese was employed by SentosaCare (“Sentosa”) the “consulting”
`company formerly owned and operated by Respondents Bent Philipson and
`Benjamin Landa. (NYSCEF 81 [Trans. of Exam. of Stella Vilardi] at 146);
`
`• As of February 2024, Mr. Varghese held an ownership interest in 14 nursing homes
`in states other than New York with at least one Respondent in this Special
`Proceeding—including Benjamin Landa, whom the Court has found to have
`engaged in fraudulent conduct in violation of Executive Law § 63(12)9 (Beltrani
`Aff., ¶ 7; Decision at 8-10);
`
`• Four of the nursing homes owned by Mr. Varghese in Florida have a principal
`address that corresponds to Blue Grass Health Partners D/B/A Valley Stream
`Operator I, LLC (“Valley Stream Operator”), which is incorporated in New York
`at the same address as Sentosa; (Beltrani Aff., ¶10.)
`
`• Valley Stream Operator has an ownership interest in 14 nursing homes in Kentucky,
`with Respondent Benjamin Landa having an ownership interest in 13 of these
`nursing homes and Respondents Bent Philipson and Philipson Family, LLC having
`an ownership interest in 12 of them; (Id.)
`
`• Mr. Varghese, or his corporate entities, received 4 checks from Bent Philipson
`totaling $131,970.00 between June 21, 2021 and October 8, 2021, bearing the
`memo “Florida Investment;” and (Beltrani Aff., ¶¶ 11-12.)
`
`• From December 10, 2020 through February 26, 2024, Mr. Varghese Received Over
`$691,000 from Respondents Philipson Family, LLC and ZBL Management, LLC.
`During this same time period, Mr. Varghese transferred over $916,000 to
`Respondent Benjamin Landa. (Beltrani Aff., ¶¶ 13-14.)
`
`
`8 Petitioner understands that neither Cold Spring Hills nor Mr. Varghese responded to DOH’s
`requests for additional information regarding a potential transfer of ownership of Cold Spring
`Hills. (Pinnola Aff., ¶ 43.)
`9 In addition, Mr. Varghese previously owned 11 nursing homes, also outside of New York, but
`between November 2023 and January 2024, he relinquished ownership of those facilities. Notably,
`Mr. Varghese owned 5 of those 11 nursing homes with Respondents Rochel David, Leah
`Friedman, Chaim Zahler, and Jacob Zahler. (Beltrani Aff., ¶ 9.)
`
`
`
`11
`
`15 of 17
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`

`

`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
`
`INDEX NO. 617709/2022
`
`RECEIVED NYSCEF: 03/20/2024
`
`But
`
`even
`
`if Mr.
`
`Varghese
`
`is approved
`
`to hold
`
`ownership
`
`in or operational
`
`control
`
`over
`
`the Nursing
`
`Home
`
`going
`
`forward,
`
`that
`
`does
`
`not
`
`absolve
`
`Cold
`
`Spring
`
`Hills
`
`or
`
`its managing
`
`members
`
`for
`
`their
`
`past
`
`contemptuous
`
`conduct.
`
`CONCLUSION
`
`Accordingly,
`
`for
`
`the reasons
`
`stated
`
`herein,
`
`the Attorney
`
`General
`
`respectfully
`
`asks
`
`the Court
`
`promptly
`
`to hold
`
`Respondents
`
`Cold
`
`Spring
`
`Hills,
`
`Avi
`
`Philipson,
`
`and
`
`Joel
`
`Leifer
`
`in civil
`
`contempt,
`
`and
`
`direct
`
`Avi
`
`Philipson
`
`and
`
`Joel
`
`Leifer
`
`each
`
`to pay
`
`a fine
`
`to the
`
`Fund
`
`in the
`
`amount
`
`of at
`
`least
`
`$2,653,338.13.
`
`Respectfully
`
`submitted,
`
`Letitia
`
`Attorney
`
`James
`General
`
`By:
`
`of
`
`the State
`
`of New York
`
`Pinnola
`Christina
`Assistant
`Special
`New York
`State
`Medicaid
`Fraud
`
`Attorney
`Attorney
`Control
`
`General
`General's
`Unit
`
`Office
`
`12
`
`16 of 17
`
`

`

`FILED: NASSAU COUNTY CLERK 03/20/2024 04:07 PM
`NYSCEF DOC. NO. 804
`
`INDEX NO. 617709/2022
`
`RECEIVED NYSCEF: 03/20/2024
`
`CERTIFICATION
`
`PURSUANT
`
`TO RULE
`
`202.8-b
`
`I, Christina
`
`Pinnola,
`
`an attorney
`
`duly
`
`admitted
`
`to practice
`
`law before
`
`the Courts
`
`of
`
`the
`
`State
`
`of New York,
`
`hereby
`
`certify
`
`that
`
`this Memorandum
`
`of Law complies
`
`with
`
`the word
`
`count
`
`limit
`
`set
`
`forth
`
`in
`
`Rule
`
`202.8-b
`
`as
`
`it
`
`contains
`
`3,851
`
`words,
`
`excluding
`
`the