As Penna. targets nursing homes, law firm could benefit

Last year, the Pennsylvania Attorney General's Office dropped subpoenas on dozens of nursing homes statewide, demanding facts about their staffing - an opening salvo in a probe that could force the homes to pay big fines.

The office says the process will improve conditions and pay off for the state's elderly.

Someone else could benefit, too - the Cohen, Milstein, Sellers & Toll law firm. The Washington firm stands to pocket up to $21 million of the first $100 million of any fines extracted by state prosecutors.

In fact, it was Cohen Milstein that dreamed up the initiative and sold it to the Attorney General's Office to obtain a no-bid contract.

With authority from the state's top law enforcement agency, the firm is pressing the nursing homes for information, to determine whether they are defrauding patients by understaffing their government-financed institutions.

If so, the attorney general can sue the homes and collect fines - with Cohen Milstein getting a share.

Amid growing controversy, the firm and others like it have been shopping similar cases to attorneys general nationwide.

In Pennsylvania, Cohen Milstein struck its contract with former Attorney General Linda Kelly in 2012. Her successor, Kathleen Kane, has since reaffirmed the deal - and approved four others like it.

To supporters, these partnerships make sense. Without having to spend taxpayer money, allies say, state prosecutors are able to deploy private lawyers with the expertise to take on big corporations for the public good.

But opponents say contracts like the one signed with Cohen Milstein establish troubling ethical incentives at best and, at worst, glaring examples of pay-to-play: Political donors rewarded with exclusive, lucrative government pacts.

Critics say that rather than have disinterested regulators - state employees whose pay increases not one cent if they issue a fine or not - the deals unleash dollar-driven hired guns armed with subpoena power and the prestige of government.

The Pennsylvania nursing homes are fighting back. In a lawsuit filed in Commonwealth Court against Kane and Cohen Milstein, they are asking a judge to throw out the firm's contract and rip up the subpoenas.

"This Cohen Milstein-driven investigation is an effort to create a 'problem' where none exists in a search for profits for itself," the suit contends.

Kane, the first Democrat elected Pennsylvania's top prosecutor, has embraced outside firms to augment her staff of 180 prosecutors, many of whom pursue civil matters.

In all, her office has no-bid contingency-payment contracts with about 10 firms to pursue a range of cases, from overcharges by drug companies to alleged payday-loan fraud.

The firms have embraced her, too. According to public records, the firms have given Kane more than $350,000 in campaign donations - nearly 10 percent of the total she got from donors other than her husband.

For its part, Cohen Milstein gave $10,000 to her campaign and helped bankroll an organization for Democratic attorneys general that helped Kane, too.

Kane's office has shrouded much of the private firms' work in secrecy. Until the nursing homes filed suit, it refused to say what Cohen Milstein had been hired to do.

Kane has also been mum about the work of three other law firms she hired since her 2012 election: the Philadelphia firm of Golomb & Honik is pursuing one secret initiative; two firms, Grant & Eisenhofer, of Wilmington, and Baron & Budd, of Dallas, are working on another undisclosed matter.

Lawyers from each donated to Kane's campaign, paced by $85,000 from Stuart Grant and Jay Eisenhofer, founders of the Delaware firm.

In articles last year that won a Pulitzer Prize, the New York Times detailed how corporations have increasingly built ties to Republican attorneys general, while the plaintiffs' bar has done the same with their Democratic counterparts.

In an interview last week with The Inquirer, Scott Harshbarger, a former Democratic attorney general of Massachusetts, said he worried that the public would see cases motivated by the questions: "Who contributed to me?" or "Is this a money maker?"

Harshbarger said public trust would be greatly undermined "once people believe that the attorney general is making decisions more on private interests than in the public interest."

Founded in 1986, Cohen Milstein bills itself as one of the country's premier firms for class actions, with more than 80 lawyers in six cities.

This past winter, one of its lawyers, Linda Singer, was working the room at the Democratic Attorneys General Association in Las Vegas.

Moving from table to table, Singer stopped at one point to huddle with Kane, familiar enough to ask the attorney general about her pending divorce, according to Walter Cohen, a former deputy Pennsylvania attorney general who was at the table - and who represents the nursing homes in the fight against Singer's firm.

Singer declined to comment for this article. With a personal touch, abundant energy, and well-placed campaign money, Singer, who like Kane is 48, is a leader in a burgeoning field she helped create. Her law firm calls it a "public client" practice.

Singer was briefly an attorney general herself - in Washington, D.C., in 2007. As a Cohen Milstein partner, she has landed state prosecutors as clients from Mississippi to New Mexico.

She struck her deal in Pennsylvania in late 2012 with Kelly, an appointee and Republican completing the term of Tom Corbett after he became governor. Reached Friday, Kelly said she could not recall details of the contract.

After backing Kane's opponent in the 2012 attorney general primary, Cohen Milstein switched allegiances when Kane won the nomination. Later that year, it gave her campaign $10,000.

Records show Singer signed the Pennsylvania deal on Oct. 9, 2012.

Eight days later, the firm donated $10,000 to the Democratic Attorneys General Association. The same day, the association gave Kane's campaign $100,000.

In early 2014, Kane's office signed an amendment with Singer to boost the firm's payment to $21 million from the first $100 million collected from the nursing homes - an increase of $4 million over the previous compensation rate.

Chuck Ardo, Kane's spokesman, said the pay was increased to compensate the firm for cuts to its contract in other ways. He declined to elaborate.

Over the next six months, the firm served the subpoenas on homes run by five for-profit chains, whose properties stretch from Scranton and Philadelphia to Pottsville and Carlisle. The chains are Golden Living, Grane HealthCare, Guardian Elder Care, Reliant Senior Care, and Genesis.

The subpoenas were issued by a deputy state attorney general - and a Cohen Milstein paralegal acting as a "representative of the attorney general authorized to serve a subpoena."

While sweeping, the firm's effort was far from comprehensive. The contract with Kane's office excluded all nonprofit facilities and about half of for-profit homes.

Cohen, the lawyer for the nursing homes, said the firm was choosing targets based on their apparent wealth. Like bank robber Willie Sutton, he said, Cohen Milstein was going "where the money is."

Ardo said his office and Cohen Milstein had reasons for selecting specific chains, but said he could not detail them.

"The vast majority of Pennsylvania's nursing homes provide the services expected of them," he said. "Occasionally, further scrutiny is required. The choice of those that need further scrutiny is neither arbitrary nor unfair."

In its original contract, the Attorney General's Office agreed to something novel - it said it would always seek money from nursing homes to resolve a case, rather than merely demand improvements in conditions.

On April 23, three weeks after the nursing homes filed suit, the office amended the contract to drop that provision.

In their suit, the nursing homes fault Cohen Milstein's tactics, saying the firm is relying on an "unapproved, unsanctioned and unadopted" model - developed by a personal-injury law firm in Texas - to measure their staffing levels.

More broadly, the homes say that the entire Cohen Milstein campaign unnecessarily duplicates oversight of the Pennsylvania Department of Health - and is a poor substitute for state regulations typically developed in an open process after months of public debate.

Under those rules, nursing homes are given surprise inspections yearly and must meet state-mandated staffing levels and submit to investigation when complaints are filed.

In an argument filed last month, Kane's staff and Cohen Milstein lawyers said the attorney general had long had legal authority to hire outside firms for help. In short, they said, the nursing homes' legal challenge was "nothing more than an effort by petitioners to avoid an investigation."

No fines have yet been imposed or collected, and it's unclear when or how the court might rule.

David Wilkins, a professor at Harvard University Law School who has studied the issue of public/private legal partnerships, noted that whistle-blowers routinely collect money for tipping off prosecutors to corruption.

"There's lot of cases where we give private parties incentive to discover public wrongdoing," Wilkins said Friday. "The real key is whether the attorney general is exercising proper supervisory control over the private actor."

215-854-4821 @CraigRMcCoy