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New York Attorney General Letitia James with Cold Spring Hills (Getty, Senior Advice)

New York Attorney General Letitia James is suing a Long Island nursing home and its owners, including Brooklyn real estate investor Avi Philipson and his father, Bent Philipson, for allegedly diverting government funds, resulting in severe understaffing and neglect of residents.

The lawsuit comes as a group led by Avi Philipson is set to acquire All Year Holding’s North Brooklyn real estate portfolio for $43.5 million.

Philipson’s group also recently sought to buy All Year’s stake in the William Vale Hotel in Williamsburg, but the deal fell through.

Avi Philipson, through an attorney, declined to comment. Bent Philipson’s attorney did not return a request for comment. All Year declined to comment.

The attorney general alleges the operators of Cold Spring Hills, a 588-bed nursing home in Oyster Bay, used 13 companies to create the appearance they were paying for services for the nursing home, but were actually diverting Medicaid and Medicare funds to themselves.

According to the attorney general, an investigation found that Cold Spring Hills’ owners diverted over $22.6 million in Medicaid and Medicare funds from resident care through a fraudulent network of companies that were used to conceal profit taking.

“Cold Spring Hills’ owners put profits over patient care and left vulnerable New Yorkers to live in heartbreaking and inhumane conditions,” James said in a statement.

Her 186-page complaint also names nursing home operator Benjamin Landa as a defendant along with Benjamin Landa’s adult daughter.

“The harrowing breadth and depth of the findings of resident neglect, harm and suffering, and the persistent fraud and illegality in respondents’ operation of Cold Spring Hills is appalling and warrants due exposure and redress,” the complaint states.

The attorney general alleges the scheme involved a hidden illegal promissory note — with a 13 percent interest rate — that was used to acquire the nursing home facility. The note was used to funnel money to insiders instead for staffing or care, according to the complaint.

The investigation discovered that Avi Philipson was a willing straw owner of Cold Springs Hills and was inserted in the position by others, including his father, to conceal control of Cold Spring Hills and deceive the Department of Health, the suit claims. It also alleges Avi Philipson submitted false certifications to the agency.

According to James, the facility was “dangerously understaffed” before the pandemic and during the height of the pandemic. Family members of residents reported that the facility was unclean and that critical care equipment, such as wheelchairs, beds, shower chairs and air conditioners were broken.

Residents were routinely left sitting in soiled briefs and went unbathed for long periods.

The attorney general alleges Bent Philipson used Cold Spring Hills to provide extravagant salaries, bonuses and luxury cars for himself and others.

The attorney general is requesting a monitor be put in place at the nursing home and to prohibit it from admitting new residents until staffing reaches appropriate levels. She also seeks to ban Bent Philipson, Avi Philipson, Joel Leifer, Esther Farkovits, Rochel David, Leah Friedman and any of their related entities from any role at Cold Spring Hills.

In March, Avi Philipson’s Graph Group struck a deal to acquire All Year’s portfolio in March for $40 million in cash and $20 million in promissory notes. Rubin Schron’s Cammeby’s International Group, one of New York’s largest landlords, was a minority investor in the deal.

The buyers agreed to assume all of All Year’s unsecured claims as part of the deal. About a month ago, Avi Philipson’s group told All Year Holdings it wanted out. But the two sides have settled their differences and the sale is back on, but at a lower price.

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