A new lawsuit filed by California Attorney General Rob Bonta alleges that a multilayered group of for-profit businesses, most based in Carlsbad, intentionally siphoned millions from 19 skilled nursing facilities scattered across the state, providing too little care for residents, a practice that subjected many seniors to bed sores, falls and unsanitary conditions.
The lawsuit targets one corporation and 24 associated limited liability corporations, which the litigation says ultimately benefit Aaron Chesley and James Gamett. Chesley is listed as co-founder of Sweetwater Care in Carlsbad, while Gamett is founder and managing partner of Sweetwater Private Equity in Encinitas, an organization that is not named in the attorney general’s legal complaint.
Related Articles
Rural schools feel the pinch from Trump administration’s cuts to mental health grants
Supreme Court preserves key part of Affordable Care Act’s free preventive health care coverage requirements
Child safety advocates and California’s cannabis industry battle over tax funds
Why Americans’ access to lifesaving vaccines is threatened by RFK Jr. overhaul
‘We are still here, yet invisible’: Study finds that US government has overestimated Native American life expectancy
Requests for comment made to Sweetwater Care and Sweetwater Private Equity were not returned.
The lawsuit was submitted Monday to San Diego Superior Court, but it was not officially part of the record until late Thursday. It states that a constellation of companies worked together to “extract” management and administrative fees from the skilled nursing facilities, billing Medi-Cal and Medicare while holding back on the staffing needed to provide enough care.
The companies, the lawsuit states, “were aware that failures to pay competitive wages, sufficient wages and/or wages that were commensurate with the local market would affect their ability to hire sufficient nursing staff and meet patient needs.
“Despite this knowledge, the Sweetwater defendants chose to offer salaries and wages in various Sweetwater facilities that were below market wages, thereby causing and contributing to the understaffing patterns which impacted patients of the Sweetwater facilities.”
The system of nested companies, some directly owning individual nursing facilities and others managing their operations, is familiar to Sam Brooks, an attorney and director of public policy for The National Consumer Voice for Quality Long-Term Care. The nonprofit advocates for the improvement of nursing home care nationwide.
“The whole point is that these layers and layers of ownership allow them to hide profits, allow them to hide from liability for their poor care, and then you have these just horrible outcomes that are listed in the complaint,” Brooks said. “Sadly, I’ve read about a lot of situations like this — it’s all too common.”
State law requires skilled nursing facilities to hire enough personnel to provide each of their patients at least 3.5 “direct care service hours” per day. The attorney general’s investigation used that standard to audit staffing levels at Sweetwater facilities from 2020 through 2024. On about 30 percent of the days facilities were operating, the 3.5-hour direct care standard was not met, according to results listed in the lawsuit.
“On 6,443 occasions — more than one out of every three days in a California Sweetwater facility — skilled nursing patients were exposed to staffing levels that were below, and in violation of, California’s overall 3.5 minimum staffing level,” the lawsuit states.
The filing indicates that patients were directly affected by the staffing, suffering injuries and indignities that could have and should have been prevented had enough qualified personnel been engaged.
“While defendants were understaffed in violation of California law, patients developed pressure ulcers so deep that a hip joint was visible, suffered unwitnessed falls with bone fractures, eloped from facilities unbeknownst to staff resulting in head trauma, developed medical emergencies unnoticed by staff, suffered bone fractures for days without appropriate assessment or care, and were left for extended periods of time soiled in urine and feces,” the lawsuit states.
None of the 19 California facilities listed in the lawsuit are in San Diego County. They are in smaller cities, such as Clearlake, Porterville, Visalia and Tulare.
The lawsuit estimates that the facilities collectively billed Medi-Cal and Medicare nearly $300 million for skilled nursing services during its period of examination, but a significant amount of that cash was not used for direct care.
“The investigation also revealed that Sweetwater extracted over $31 million as “profit” or “management fees” instead of using those dollars to provide the legally required staffing to meet minimum nursing staff levels,” the Attorney General’s office said in a statement.
The lawsuit asks for significant damages, $2,500 per defendant “for each violation” of state code.
Convoluted nursing home ownership is an issue that has been on the regulators’ radar for some time. A 2010 report from the U.S. Government Accountability Office found that nearly 1,900 skilled nursing facilities in the United States were purchased by private investors from 1998 through 2008. When these facilities changed hands, analysts found, they often ended up with multiple listed owners, making it arduous for residents and regulators to know exactly who is making the day-to-day decisions about critical matters, such as staffing.
And a 2018 report from the California State Auditor found that companies were “able to earn additional income when their nursing facilities obtained goods or services from other businesses that they or their family members owned or controlled.”
While these “related-party-transactions” are allowed by law, as long as they are accurately disclosed, Brooks, the consumer voice public policy director, said analysis of payment data shows that they often remove cash from the system that should be used to provide care.
“There was a paper last year that estimated 60% of profits are hidden in these related party transactions,” Brooks said. “The majority of that money is going toward paying ownership companies rent and management fees.”
Better regulation is necessary, he said, to more effectively police the billions of taxpayer dollars that are paid to nursing homes.
“Ultimately, there needs to be a limit on or a requirement that says, you know, something like 90 cents of every dollar goes toward direct resident care,” Brooks said.