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Convicted ex-ASC chief Burkhart loses bid to stay civil lawsuit

February 5, 2019

The former CEO of a nursing home company now serving prison time for his major role in a corporate fraud scheme has lost his bid to stay additional civil proceedings against him while he fights to have his convictions tossed on the basis of an alleged “profound conflict of interest” on the part of Indianapolis law firm Barnes & Thornburg.

James Burkhart, the disgraced CEO of nursing home giant American Senior Communities, had petitioned the Indiana Southern District Court to stay the proceedings in American Senior Communities, LLC v. James Burkhart, et al., 1:17-cv-03273, while he seeks to vacate or set aside the nearly 10-year sentence in his criminal case, United States of America v. James Burkhart, 1:16-cr-00212. Burkhart pleaded guilty in the criminal case to various fraud counts relating to his leadership of a $19 million overbilling and kickback scheme involving ASC vendors. He is now serving time in Montgomery, Alabama.

Barnes represented Burkhart in the criminal proceedings, but in a December filing the former CEO alleges the law firm’s representation of him was tainted by its affiliation with an alleged victim of the ASC fraud, Health & Hospital Corporation of Marion County. Health & Hospital Corp. owns more than 70 ASC nursing homes, but more relevant to Burkhart’s motion, the company has strong ties to Barnes.

Specifically, Burkhart alleges he learned after sentencing — and later confirmed through online searches — that Barnes lobbied for HHC and represented the company against allegations of Medicare and Medicaid fraud. That relationship was never made known to Burkhart, he says, but he alleges the relationship is the reason Barnes encouraged him to plead guilty and take a friendly approach to HHC.

In a statement last month to the Indianapolis Business Journal, former Barnes partner Donald Lundberg — who has also served as the leader of the Indiana Supreme Court Disciplinary Commission and now serves as Barnes’ outside counsel — said the firm “at all times act(ed) exclusively in Mr. Burkhart’s interest.”

“Convicted criminals often attack their lawyers after facing the reality of their punishment,” Lundberg told IBJ. “Barnes & Thornburg is required to respect Mr. Burkhart’s confidentiality rights even in the face of his unwarranted attack.”

According to Burkhart’s sworn declaration submitted as part of his motion to vacate sentence, Lundberg was among the Barnes attorneys who billed time for his criminal case.

While the challenge to Barnes’ representation is pending, Burkhart moved to stay civil proceedings brought by ASC. The civil case had previously been stayed while the criminal case progressed, and Burkhart argued the civil proceedings should again be put on hold until 30 days after entry of judgment on his motion to vacate.

“He argued that the parallel proceedings of this civil case and his (28 United States Code section 2255) ‘criminal action’ would have implications if he were to prevail and be granted a new trial,” Southern District Judge Tanya Walton Pratt wrote in an order denying the motion to stay. “For example, he contends that the potential exists for exploitation of civil discovery to develop an unfair advantage in the 2255 proceedings and his right against self-incrimination would be challenged.”

Pratt, however, agreed with ASC that staying the civil proceedings would not be in the interests of justice.

“The issues in the two proceedings are not the same,” the judge wrote. “Burkhart’s section 2255 petition alleges ineffective assistance of trial counsel and the issue in the civil case is whether Burkhart defrauded ASC. The Government is not a party to this action, therefore Burkhart’s concern that the Government will try to take advantage of the broader rules of civil discovery to obtain information for the section 2255 petition is not implicated.”

Pratt likewise rejected Burkhart’s argument that not staying the proceedings could negatively impact his Fifth Amendment right against self-incrimination.

“Regarding his Fifth Amendment concerns, ASC has pointed out that a Stipulated Protective Order is in place which prevents the parties from disclosing certain information produced in this litigation to parties outside of the litigation,” she wrote. “They explain that because the Government is not a party to this case, such an order can be used to shield Burkhart from any perceived Fifth Amendment concerns.”

In addition to the criminal proceedings, the filing of the motion to vacate sentence led to the opening of a new civil case involving the ASC fraud, Burkhart v. United States of America, 1:18-cv-4013.

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