A lawsuit has been filed against the owners of two New Jersey-based nursing homes for reportedly participating in a multi-year scheme to misuse and conceal millions of dollars in Medicaid funds.

The NJ Office of the State Comptroller accused New York-based owners Daryl Hagler and Kenneth Rozenberg, as well as family members and associates, of self-dealing, manipulating financial and compliance reports and obscuring true ownership while also diverting Medicaid funds intended for resident care.

Hagler and Rozenberg, who own Deptford Center for Rehabilitation and Healthcare and Hammonton Center – the New Jersey nursing homes at the center of the lawsuit – also have ties to 46 nursing homes across four states, according to a report in NJ.com.

“The defendants engaged in violation of laws, rules and the Medicaid contract and manipulated financial and compliance reporting, to evade government oversight of their illegal conduct,” the comptroller said in its court filing. “Family members and other beneficial owners were deliberately embedded throughout this structure as owners, officers, and principals of related entities, allowing defendants to maintain effective control, while obscuring true ownership and accountability.”

The owners inflated rent payments to third-party property companies as they intentionally understaffed the facilities, according to the lawsuit, which resulted in serious care failures.

Investigators involved in a state Comptroller’s report from December have documented more than 3,400 emergency calls, ignored call bells, severe neglect, alleged sexual assaults, multiple tragic resident outcomes and unsafe discharges between 2019 and 2024.

Meanwhile, owners allegedly pocketed tens of millions in Medicaid funds.

The state Comptroller seeks to recover nearly $124 million, including restitution, disgorgement of overpayments, civil penalties and damages.

The lawsuit is indicative of a broader crackdown on nursing home oversight and Medicaid misuse with the state also terminating Medicaid funding for another troubled nursing home in the state, South Jersey Extended Care. The facility was under receivership. It was denied a proposed ownership change due to high fraud risk.