By Shereen Siewert
The company overseeing operations at Wausau Center mall will pay $3.6 million to resolve allegations they arranged illegal payments to doctors in a kickback scheme at an Indiana hospital, settling a federal lawsuit.
According to the U.S. Department of Justice, Rialto Capital Management, the same Miami company that manages operations at Wausau Center, prompted the hospital to offer kickbacks and other benefits to physicians to induce referrals, advancing the company’s financial interest. Rialto Capital Management, directly and through affiliates, is a real estate investment and asset management company that invests and manages assets throughout the capital structure in real estate loans, properties and securities.
Mayor Rob Mielke, in an email to Wausau Pilot and Review, said city officials will “continue to feel that (Rialto) needs to be held accountable” until they ultimately sell the mall. The group acquired Wausau Center for $12.8 million in a July 2017 sheriff sale.
“As you may remember, last November I had sent them a very direct letter basically telling them that if they were not going to contribute in a positive way to the future of Wausau, then they need to sell the mall building to someone who will,” Mielke wrote. “While we have encouraged them on numerous occasions for different functions and options for the facility and have even hired consultants as to what can be done differently for the mall’s future (with Grant help from the state WEDC) they have continued to do nothing.”
The settlement, announced June 3 by DOJ officials, centers on alleged illegal payments at Kentuckiana Medical Center, a hospital Rialto acquired in 2013 through bankruptcy proceedings. Prosecutors say Rialto directed investors to provide personal loans to two referring doctors, then repeatedly held back from requiring repayment of those loans. The hospital’s failure to collect on those loans constituted a breach of federal law, prosecutors alleged.
Specifically, the complaint points to alleged violations of the Anti-Kickback Statute, which prohibits payments for referrals related to federal health care programs; the Stark Law, which restricts financial relationships between hospitals and referring physicians; and the False Claims Act, which prohibits claims to Medicare for items or services that are tainted by financial arrangements that violate the AKS or the Stark Law.
These rules were created to serve as tools for combating fraud, waste, and abuse in federally funded health care programs, according to U.S. Attorney for the Southern District of Indiana Josh Minkler.
The settlement resolves a lawsuit filed in federal court by Dr. Abdul Buridi under the whistleblower provisions of the False Claims Act, which permit private parties to bring lawsuits on behalf of the U.S. for false claims and to share in any recovery. Dr. Buridi will receive $612,000 from the settlement.
Mielke pointed out that the settlement and court filing does not directly impact Wausau Center, writing “these are two different properties and two different LLCs.” Rialto is the umbrella company to multiple limited liability companies, or LLCs, including the entity that represents Wausau Center’s ownership.
Rialto’s attorney is asking Wausau to allow the group to avoid using an outside accountant to calculate rent due the city under the terms of the ground lease for the mall. Instead, Rialto proposes using their own property manager to perform the calculations.
Federal documents describe Rialto as a dealer in massive pools of distressed loans, packaging them as marketable securities that has been the beneficiary of “billions in taxpayer dollars.” As reported by the Special Inspector General for the Troubled Asset Relief Program, Rialto was the sub-advisor to one of only eight fund managers granted the special privilege to receive matching investments from the federal government to finance massive acquisitions of legacy commercial mortgage backed securities.
The rates of return on these investments have been “exorbitant,” according to the complaint.
Neither Economic Development Director Chris Schock nor Economic Development Committee Chair Tom Neal responded to emails requesting comment for this story about Rialto’s conduct and the group’s ongoing relationship with the city.
Attempts to reach Rialto representatives were not successful.
The federal investigation was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Indiana, and the U.S. Department of Health and Human Services Office of Inspector General.