DOJ Files Case Alleging that Nursing Home Owner Used Medical Directorship Payments as Guise for Kickbacks to Induce Referrals

On June 14, 2021, the Department of Justice filed a complaint in intervention against Paksn, Inc., a nursing home operator, Prema Thekkek, Paksn’s owner, and seven nursing home companies that Paksan operated and Thekkek owned. The complaint alleged that the defendants paid physicians ostensibly to serve as medical directors of the nursing homes, but in fact intended the payments to induce the physicians to refer patients to the nursing homes. See United States ex rel. Singh v. Paksn, Inc., et al., No. CV 15-09064 (C.D. Cal.) (complaint filed June 14, 2021).

Notably, the complaint repeatedly references Thekkek’s invocation of the Fifth Amendment in response to questions posed to her during testimony pursuant to a Civil Investigative Demand. When a party invokes the Fifth Amendment privilege against self-incrimination in a civil case, the court is permitted to instruct the jury that it may draw an adverse inference that the answer would have been against the party’s interest. See Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). In the past, however, the Department of Justice has been reluctant to cite in a complaint a defendant’s Fifth Amendment invocations during pre-litigation testimony. The Department now appears to have changed its practice.

Thekkek’s invocations of the Fifth Amendment were damning. The complaint includes these allegations:

  • “When Thekkek was asked whether the contracted medical directors at Gateway [a nursing home] ‘did little to no work in return for these stipends besides referring patients to Paksn,’ she invoked the Fifth Amendment.”
  • “When she was asked whether ‘Gateway didn’t need five contracted medical directors, but, rather, that is the number of doctors that Paksn thought necessary to pay in return for patient referrals,’ Thekkek invoked the Fifth Amendment.”
  • “When Thekkek was asked ‘did Paksn decide which physician to hire based on – to hire as medical directors based on which physicians it expected to refer patients to Paksn’s SNFs,’ she invoked the Fifth Amendment.”
  • “When Thekkek was asked whether ‘the amount that Paksn paid medical directors was directly tied, or at least it should have been, in your view, directly tied to the number of patients Paksn could expect to be referred from that doctor,’ she invoked the Fifth Amendment.”
  • “When Thekkek was asked ‘Why was Dr. Pareek making more as assistant medical director than Dr. Garcia’ and ‘Was it because Dr. Pareek was referring more patients to Paksn SNFs,’ she invoked the Fifth Amendment.”

The defendants’ internal e-mails further showed that a purpose of its medical directorship payments was to induce referrals. In one e-mail, an administrator at one of the defendant nursing homes wrote that: “I told [Dr. Verbinski] that if we don’t get patients we are not going to pay them . . . they are promising at least 10 patients for $2000 per month. I make it very clear to them that if we don’t see that number, we won’t pay them.” In another instance, two Paksn employees agreed to terminate a medical director because the physician had referred a patient to another facility.