HAMMONTON, NEW JERSEY — The New Jersey Office of the State Comptroller filed a civil lawsuit against the operators of two South Jersey nursing facilities and 31 additional defendants, alleging they misappropriated approximately $124 million in Medicaid funds while residents experienced sexual assault, wrongful death, and hazardous living conditions, according to court documents filed in January 2026.
The suit names Daryl Hagler and Kenneth Rozenberg as primary defendants, along with family members and business associates who allegedly participated in a scheme to divert taxpayer money from Hammonton Center for Rehabilitation and Healthcare and Deptford Center for Rehabilitation and Healthcare through a network of related companies. Both facilities operate 240 licensed beds and served predominantly Medicaid-funded residents during the period under investigation.
Alleged Financial Scheme
According to the Office of the State Comptroller, the defendants received $134.8 million in Medicaid reimbursements between 2019 and mid-2024, with approximately $92 million diverted through nine affiliated entities controlled by the operators and their relatives. The investigation found that funds were extracted through inflated rental payments, excessive loan arrangements, and undisclosed administrative fees, as reported by NJ 1015.
State Comptroller Kevin Walsh stated that the defendants "got rich off the backs of people who were unable to care for themselves," according to published reports. The suit alleges that $27.8 million flowed directly to bank accounts controlled by Rozenberg and Klein Family Enterprises, an entity connected to the ownership group.
The investigation revealed that the operators used complex real estate transactions to obscure the flow of funds, according to the New Jersey Monitor. Medicaid reimbursement rates are calculated based on allowable operating expenses, and regulators allege the inflated payments to related parties artificially increased costs while reducing resources available for resident care.
Resident Harm Allegations
The lawsuit details multiple instances of serious harm to residents at both facilities. At Hammonton Center, two residents were sexually assaulted during the period under review, according to the complaint. At Deptford Center, a resident died from asphyxiation after being served solid food despite a care plan requiring a pureed diet, as reported by Skilled Nursing News.
Additional allegations include a resident with an amputation who was discharged to a motel that lacked wheelchair accessibility, according to investigative reports. The suit claims residents were frequently left unattended for extended periods in soiled incontinence products and that staff ignored residents experiencing severe pain, as reported by ElderLawAnswers.
Chronic Understaffing
Emergency call records show that the two facilities placed more than 3,400 calls to emergency services between 2019 and 2024, reflecting what regulators describe as persistent understaffing, according to Skilled Nursing News. A review of 146 days of staffing records found that the facilities met minimum staffing requirements on only two days.
The investigation determined that both centers operated with an average of less than half the required nursing staff levels, according to an analysis published by the Center for Medicare Advocacy. Many employees working at the facilities lacked proper licenses or qualifications for the positions they held, regulators allege.
Federal regulations establish minimum staffing standards for nursing facilities participating in Medicaid and Medicare programs, with requirements varying based on resident acuity and facility size. Facilities must maintain sufficient staff to provide necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident.
Broader Investigation and Related Actions
The lawsuit emerged from a broader examination initiated by the Office of the State Comptroller in February 2022, which reviewed 15 of the lowest-rated nursing facilities in New Jersey. Those facilities received an average of $103 million in Medicaid funding, according to the Center for Medicare Advocacy.
The investigation led to the suspension of South Jersey Extended Care's Medicaid provider status, with Bridgeton Nursing Home scheduled to lose Medicaid eligibility on March 13, 2026, as reported by Skilled Nursing News. The defendants are also connected to 46 additional nursing facilities operating across four states.
A concurrent investigation by the New York Times examined related financial practices in the nursing home industry, according to published reports. Between 2021 and 2023, nursing home operators in New Jersey paid nearly $2 billion to private companies they controlled, according to research published by AARP and cited by ElderLawAnswers.
Financial Recovery Sought
The state is seeking $123.9 million in restitution and disgorgement of improperly diverted Medicaid funds, plus an additional $87 million in civil penalties for staffing violations and false claims, according to court filings. The lawsuit requests restitution for affected residents and families, recovery of Medicaid overpayments, and damages under the Medical Assistance and Health Services Act.
The case represents one of the largest Medicaid fraud actions filed against nursing facility operators in New Jersey history, according to analyses by elder law advocacy organizations. The Center for Medicare Advocacy cited the enforcement action as a model for state-level nursing home oversight nationwide.
Reform Proposals
The investigation has prompted renewed calls for legislative action to increase financial transparency requirements for nursing home operators in New Jersey. Proposed reforms include mandatory annual financial disclosures showing all payments to related entities and requiring audited financial statements for nursing home owners and affiliated companies, according to the New Jersey Monitor.
Current regulations require nursing facilities to maintain financial records and submit cost reports, but advocates argue that related-party transactions can obscure the true allocation of Medicaid funds. The proposed reforms would mandate detailed reporting of all business relationships between facility operators and companies receiving facility payments.
Resources for Families
Families with concerns about care quality or financial practices at nursing facilities can contact the National Long-Term Care Ombudsman Resource Center at 1-800-677-1116. The ombudsman program provides free, confidential assistance to residents and families addressing concerns about long-term care facilities.
Suspected Medicaid fraud can be reported to state authorities through official channels, and residents or families experiencing serious safety concerns should contact local law enforcement or Adult Protective Services. Medicare and Medicaid program complaints can be filed with state survey agencies responsible for facility inspections and regulatory enforcement.
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