Participants in Hospital Development Project Resolve Alleged Liability for Improperly Obtaining Government-Insured Loan
Pacific Medical Buildings LLC (PMB), PMB Lakeway LLC, RD Development Partners LLC, Lakeway Management LLC, J&L Rush Family Partnership LP, Jeff Rush, and Brad Daniel have agreed to pay the United States $1.1 million to resolve allegations that they violated the False Claims Act by improperly helping to obtain a loan insured by the Federal Housing Administration (FHA) and receiving impermissible distributions of project funds for the development of Lakeway Regional Medical Center in Lakeway, Texas, the Department of Justice today announced.
“Individuals and entities that benefit from FHA insurance must follow the requirements intended to safeguard this important program,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “We will continue to hold responsible those who knowingly violate these requirements and waste critical program funds.”
“This settlement reflects our commitment to safeguard the integrity of the FHA loan program,” stated U.S. Attorney John F. Bash, Western District of Texas.
The FHA, part of the U.S. Department of Housing and Urban Development (HUD), insures loans used to build hospitals in underserved areas. The settling parties, along with several other individuals and entities, were involved in efforts to develop a hospital using an FHA-insured loan. The settlement today resolves allegations that the settling parties participated in a scheme to improperly obtain the FHA-insured loan by delaying refunds to investors who had cancelled their investments to make it appear as if the project satisfied mortgage covenants regarding the cash on hand required to close the loan. The settlement also resolves allegations that the settling parties received impermissible distributions of project funds.
“It is deeply disconcerting when industry professionals, who have fiduciary responsibilities and are expected to act as honest brokers, exploit federal programs created to aid legitimate medical facilities,” said Robert Kwalwasser, Acting Assistant Inspector General for Investigation, HUD Office of Inspector General. “This settlement demonstrates our continuing resolve, and should serve as a warning, that we will pursue those engaged in behavior that undermines federal insurance programs.”
The settlement was the result of a joint investigation conducted by HUD, the HUD Office of Inspector General, the Civil Division, and the U.S. Attorney’s Office for the Western District of Texas. The claims asserted against the settling parties are allegations only, and there has been no determination of liability.