Nursing Home Executive Sentenced to 36 Months for $38 Million Employment Tax Fraud

Joseph Schwartz, ex-owner of Skyline Management, failed to remit withheld employee taxes and neglected required benefit plan reporting

NEWARK — Joseph Schwartz, 65, of Suffern, New York, was sentenced to 36 months in federal prison for his role in a $38 million employment tax fraud scheme involving nursing homes he operated across the country, U.S. Attorney Alina Habba announced.

Schwartz, the former owner and operator of Skyline Management Group LLC, headquartered in New Jersey, previously pleaded guilty before U.S. District Judge Susan D. Wigenton in Newark federal court to two counts: willful failure to pay over employment taxes and willful failure to file a required annual financial report for an employee benefit plan.

According to court documents and statements made in court, from October 2017 through May 2018, Schwartz withheld payroll taxes from employees at health care and rehabilitation facilities operated by Skyline in 11 states but failed to remit more than $38 million in those funds to the Internal Revenue Service (IRS), as required by law.

In addition to the tax fraud, Schwartz also failed to submit a mandatory Form 5500 to the U.S. Department of Labor, which details the financial condition of employer-sponsored retirement plans. Schwartz was the administrator of the Skyline 401(k) plan and was legally obligated to file the report for calendar year 2018.

Skyline, once a major operator in the long-term care industry, collapsed following mounting legal and financial troubles, including unpaid obligations to employees and state agencies.

The sentencing concludes a multi-agency investigation led by the IRS-Criminal Investigation Division, the Department of Labor’s Employee Benefits Security Administration, the FBI, and the Department of Health and Human Services, Office of Inspector General.

The prosecution was handled by Assistant U.S. Attorneys Daniel H. Rosenblum and Kendall R. Randolph of the U.S. Attorney’s Office in Newark and Trial Attorney Shawn Noud of the Justice Department’s Tax Division.