Nursing Home Reform Group Criticized Over Referrals to Lawyers

Friday, June 18, 2004

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Nursing Home Reform Group Criticized Over Referrals to Lawyers

By DAVID KLINE

SACRAMENTO (CAPITOL)—Public Interest Watch, a national group that monitors non-profits, plans to continue to press a long-standing complaint against a nursing home reform group over its ties to trial lawyers, the organization’s leader said yesterday.

Lewis Fein, a non-practicing Los Angeles lawyer and PIW’s interim executive director, said the issue heated up this month as the state attorney general sent—and then retracted—a warning that the nursing home reform group might have violated the law.

San Francisco’s California Advocates for Nursing Home Reform has been accused by Public Interest Watch of abusing its non-profit tax status by operating a lucrative lawyer referral service.

“As a charitable organization, CANHR must by law be operated exclusively for public, charitable purposes,” PIW representative Michael Hardiman wrote in a Feb. 20, 2003, complaint to the IRS. “Instead, however, the organization appears to be run principally for the benefit of private attorneys.”

The complaint alleges that in 2000, lawyers “reaped over $2.5 million in legal fees from cases referred by the service.” CANHR’s revenue from referral fees is more than $400,000 a year, PIW claims.

The watchdog group, which also has filed a complaint with California’s state tax collector, distributed a press release June 7 touting what appeared to be the first sign that a government agency agrees with its assessment of CANHR.

The press release cited a June 1 letter to CANHR from Attorney General Bill Lockyer and Eileen Marxen of the state’s Registry of Charitable Trusts. Captioned “Warning of Impending Tax Assessment for Which You May Be Personally Liable,” the letter said CANHR failed to provide copies of Form 990, the tax return for non-profit organizations, for the past four years.

Nine days later, Lockyer and Marxen issued another letter, rescinding the warning and saying CANHR is “current in its reporting” of tax returns.

“I’ve never missed a filing,” Pat McGinnis, who founded CANHR in 1983 under the name Bay Area Advocates for Nursing Home Reform, said.

She said the warning appeared to be attributable to a filing error in the Registry of Charitable Trusts, and she accused Public Interest Watch of running a “smear campaign” in publicizing the issue.

Fein said that even if CANHR has filed all of its tax forms properly, the group still deserves criticism over “the very nature of how they behave.”

As a non-profit, Fein said, CANHR’s primary concern should be helping the public, not matching attorneys with clients.

CANHR’s Web site includes prominent mentions of its Lawyer Referral Service. In its IRS complaint, PIW said CANHR conducts attorney training seminars, publishes training materials and legal newsletters and acts as a plaintiff in cases litigated by the attorneys who use its referral service.

“Indicative of CANHR’s focus on serving the needs of attorneys rather than consumers is the fact that the organization every year hosts just one educational/training event for consumers and at least seven for attorneys and other professionals, such as financial planners,” the complaint said.

McGinnis said the service, approved by the State Bar of California, is legal and appropriate for her group since lawsuits can be an important tool in the fight against nursing home abuse.

“I’ve had a lawyer referral service since 1985,” McGinnis said. “It’s always been reported.”

CANHR has participated in a variety of suits against nursing home owners and state regulators over the quality of care in facilities. The group has assisted nursing home residents who were evicted without notice and others who were physically restrained in violation of state law, and also participated in a suit over violations of the Americans With Disabilities Act.

Nursing home residents do not pay for the assistance provided by CANHR.

Fein said he does not question the group’s purpose, but rather its designation as a non-profit, with the tax breaks that status carries.

“Even if they’re correct, and I’m not saying they are, there’s a difference between what’s legal and what’s right,” Fein said.

“Non-profits are abusing their tax status for ideological gain, and they do it on the left and the do it on the right,” Fein said. “They are cynically manipulating the system and in the long run they are going to hurt all non-profits by abusing the public trust.”

The lawyer referral service is a business enterprise that should be taxed accordingly, he said.

“They’re absolutely wrong,” McGinnis said. “Probably 95 percent of the lawyer referral services in this state are non-profit.”

While PIW has been battling with CANHR, it has had problems with its own non-profit status.

The District of Columbia had reported the group as being dissolved, but Fein said that was not the case. A notice on the PIW Web site said the government failed to record an annual report filed in 2003, but has done so now and has updated its records to show PIW as a non-profit in good standing.