A Rockland nursing home business that has been defending itself for two years in a fraud lawsuit brought by the state attorney general has filed for bankruptcy protection.
Cold Spring Acquisition, of Spring Valley, declared between $1 million and $10 million in assets and at least $50 million in liabilities, in a Chapter 11 petition filed on Jan. 2 in U.S. Bankruptcy Court, White Plains.
Five days later, state Attorney General Letitia James filed an adversary proceeding to move the pending fraud case to bankruptcy court.
Cold Spring Acquisition operates the Cold Spring Hills Center for Nursing & Rehabilitation in Oyster Bay, Nassau County. It is controlled by Bent Philipson — the operator of numerous nursing homes in New York and New Jersey — and family members.
Cold Spring Acquisition’s principal place of business is a house in Spring Valley that Philipson has used as a mailing address.
In 2022, the attorney general accused the Philipson family and several of their businesses of diverting $22.6 million in Medicaid and Medicare funds to themselves, while allegedly cutting staffing and creating conditions that endangered the residents.
Now she seeks to move the case from Nassau Supreme Court to White Plains bankruptcy court.
Martin A. Cauz, a restructuring officer hired by Cold Spring Acquisition, blames the nursing home’s financial problems on the attorney general.
He described the fraud case as a “crusade against for-profit nursing homes” that was “accompanied by a smear campaign of press releases, announcements and ‘leaks’ to the press.”
A judge found that the attorney general was unable to prove fraud or financial impropriety, Cauz said, and dismissed much of the case last March. The attorney general has appealed the decision.
As a result of the fraud case, Cauz said, the population of the 588-bed facility dropped to 423 residents by last April, “making it impossible to operate without large losses.” Now there are about 300 residents.
He said the owners have been trying to sell the nursing home but the state Department of Health has not approved a potential buyer.
On Dec. 16, the nursing home notified the health department that it was contemplating an emergency evacuation of the facility, “to avoid having [a] resident census in excess of [Cold Spring’s] ability to provide care.”
The Nassau judge issued a temporary restraining order prohibiting the transfer of patients.
That was the “breaking point,” Cauz stated.
Cold Spring Acquisition owes $21.8 million to its landlord, a company controlled by Bent Philipson and his son Avi, thus qualifying as insiders. It owes another $31 million to unsecured creditors who are not company insiders, including $15.6 million to union benefits and pension funds, $14 million in trade debt and $1.4 million in legal fees.
Cauz said the company’s strategy is to use bankruptcy protection to obtain breathing space, unlock cash flow, and “evaluate its path moving forward.”
