Official Site of The State of New Jersey

TRENTON—An investigation finds the owners of Hammonton Center for Rehabilitation and Healthcare and Deptford Center for Rehabilitation and Healthcare carried out an extensive years-long scheme to divert tens of millions of Medicaid funds to themselves while intentionally understaffing the facilities. The result, according to the report released today by the Office of the State Comptroller, was widespread neglect of the nursing homes’ residents and horrifying conditions that included the sexual assault of two residents, the death of another, and thousands of 911 calls.

According to the investigation by OSC’s Medicaid Fraud Division, Daryl Hagler, and his next-door neighbor and friend, Kenneth Rozenberg, hid their gross profiteering and self-dealing, using complex and improper real estate deals, excessive loans, inflated rents, and undisclosed fees paid to nine “related entities”—companies they or their relatives owned and controlled. Hagler owns the operations’ companies, while Rozenberg and Klein Family Enterprises (KFE) own the property companies.

From 2019 through mid-2024, the nursing homes received $134.8 million in Medicaid funds and Hagler and Rozenberg funneled $92 million of it to their related businesses. About $27.8 million of those funds went directly to Rozenberg and KFE’s bank accounts; they improperly used an additional $7.8 million of Medicaid funds to help fund their purchase of the nursing home businesses.

At the same time, both facilities were chronically understaffed, with many of the staff who worked there unlicensed and unqualified for the jobs they did. Deptford and Hammonton failed to meet minimum staffing requirements in all but two of the 146 days OSC reviewed. During OSC’s review period, the Centers for Medicare & Medicaid Services repeatedly designated both nursing homes as “special focus facilities”—a category reserved for the “worst of the worst” nursing homes.

A review of state and federal health reports shows a grim reality. Residents were left sitting in their own excrement or crying out in severe pain for hours without assistance. Two residents in Hammonton were sexually assaulted. A Deptford resident, who should have been on a pureed diet, was served solid food anyway and died of asphyxiation. Another Deptford resident, an amputee using a wheelchair, was discharged to a motel that immediately returned him because it couldn’t accommodate a wheelchair. The next day, Deptford discharged him again, depositing him in front of a social services office before it opened. Records show a total of more than 3,400 emergency calls placed to Hammonton and Deptford police about the nursing homes from 2019 to 2024. 

“Vulnerable people suffered unnecessarily because the owners decided to put the money in their pockets instead of paying for the staff to care for them,” Acting State Comptroller Kevin Walsh said.

OSC said that Hagler, Rozenberg, family members, KFE, and related entities owe the State of New Jersey $123.9 million plus penalties, with $87 million of it due to “pervasive and egregious violations” of staffing requirements.

OSC initiated the investigation in 2023 after the New York Office of the Attorney General filed a lawsuit alleging Hagler, Rozenberg, and their related entities defrauded the New York Medicaid program of about $83 million. OSC’s Medicaid Fraud Division subsequently notified Hagler, Rozenberg, and related entities that they would be suspended from New Jersey Medicaid, and the Department of Health put in place an independent receiver to oversee both facilities.

As part of this investigation, OSC examined thousands of documents, including financial and real estate records, and discovered that Hagler and Rozenberg filed state and federal cost reports disclosing that they had paid just $882,666 to their related parties when they had actually paid related entities $92 million.

To avoid the risk of self-dealing and fraud, state and federal laws require nursing homes to disclose transactions with vendors that are related and cap costs at actual cost or fair market value, whichever is lower. OSC found that most of the nine related entities that the nursing homes paid did not have contracts, invoices were missing, and those that were produced had red flags, raising questions about the legitimacy of the costs. Of the $92 million in related party costs, OSC determined that $27.8 million went into KFE and Rozenberg’s personal bank accounts, $7.8 million was for personal business loans the owners should have paid themselves, and $2.1 million lacked any documentation.

The real estate scams were a lucrative part of their scheme. In 2014, Hagler and Rozenberg purchased Hammonton, Deptford, and Mount Laurel Center for Rehabilitation and Healthcare by bundling the cost of the operations and properties into a single mortgage. While the purchase price for the properties was $20.6 million (and $48.2 million was for operations), they got a single mortgage for $58.2 million, took out a $10 million seller-financed promissory note, and then improperly passed on the costs to the nursing homes and Medicaid as “rent.”

On top of that, Hagler and Rozenberg entered into two unnecessary $15 million promissory notes on behalf of the nursing homes, with Rozenberg’s property companies charging each nursing home $451,000 a year in interest payments alone. They also refinanced the mortgage for Hammonton and Deptford and doubled the already inflated annual “rent” from $1.1 million each to $2.2 million a year for Hammonton and $2.3 million for Deptford. Overall, they charged a total of $31.4 million in additional rent from 2019 to 2024. OSC determined that $27.8 million of that $31.4 million was funneled as profits to KFE and Rozenberg.

The “excessive and unnecessary debt led to exorbitant and wasteful ‘rent’ payments paid primarily with Medicaid funds, diverting millions of dollars that could have been used to hire additional staff, pay existing staff higher wages, upgrade the facilities or offer additional therapies or activities to residents,” OSC’s report said.

OSC issued subpoenas for testimony to Hagler and Rozenberg, but they declined to be interviewed, citing their right against self-incrimination under the Fifth Amendment to the United States Constitution. OSC’s investigation is ongoing.

OSC has made six recommendations, including urging the Legislature to pass Senate Bill 1948, which would require nursing homes to submit audited financial statements for related entities. Noting that little has changed in the industry since OSC issued its December 2024 report showing rampant fraud, waste, and abuse at South Jersey Extended Care, Walsh said, “Once again, the facts are crying out for state government, including the Legislature, to treat the state of nursing homes in New Jersey as the urgent crisis it is.” 

Hagler and Rozenberg own or are involved with nursing homes in New Jersey, New York, Kansas, and Missouri. Their largest presence is in New York, where they are involved with at least 31 nursing homes.

Read the report.

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To report government fraud, waste, mismanagement, or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.