Colonial Heights Rehabilitation and Nursing Center: A $20 Million Lawsuit Says Owners 'Siphoned' Money While a Resident Was Neglected. What Families Should Know

According to reporting by CBS 6 (WTVR) in Richmond, the family of Leroy Cole has filed a $20 million lawsuit over the care he received at Colonial Heights Rehabilitation and Nursing Center, a for-profit nursing home in Colonial Heights, Virginia. Cole was 67. He had suffered a stroke that limited his ability to speak and move, entered the facility in June 2023, and died in October 2023 after a hospitalization. His family, including son Diante Harper, daughter Tamisha Anderson, and sister Francine Cole, is represented by attorney Justin Sheldon of the firm Breit Biniazan.

The suit does not stop at the bedside. It names the companies and people the complaint says controlled the home: Colonial Heights Operator LLC, Virginia Care Holdco LLC, Innovative Healthcare Management LLC, the landlord company 831 East Ellerslie Avenue LLC, and three individuals the complaint identifies as the owners, Moshe Rajchenbach, Israel Birnbaum, and Hindy Spiegel. The complaint describes what it calls a corporate shell game that hid the real owners and moved profits to related companies, a structure it says was built to siphon money out of the facility. The claims are negligence, wrongful death, and violation of the Virginia Consumer Protection Act, the last of these alleging that the home misrepresented the quality and safety of its care.

Everything in this article about the lawsuit is an allegation. None of it has been proven in court, and the defendants deny it. We set out their response in full below. We write about the case because the financial record behind it has been examined by state auditors and independent analysts, and because the pattern it describes, money leaving a nursing home while care is cut, is the single most common engine of the neglect our firm sees.

The heart of the complaint is rent. The lawsuit alleges that the landlord company, 831 East Ellerslie Avenue LLC, charged the home grossly inflated rent from April 2023 through March 2024 totaling $7.7 million, which the complaint puts at 27 percent of the facility's revenue. An expert witness for the family, a former nursing home administrator, told CBS 6 he had never seen rent run above 10 percent in the cases he had reviewed. The complaint alleges that staffing fell well below industry standards over the same period.

The rent figure does not stand alone. In April 2025, CBS 6 reported its own review of the facility's financial records with two outside analysts, attorney and financial analyst Ernest Tosh and former nonprofit administrator Julian Rich. They found that the home's rent payments to a related company rose from about $2.6 million in 2022 to about $6.1 million in 2024, an increase of roughly 134 percent, and reached about 25 percent of total operating expenses by 2024. Tosh told the station the facility reported about $8 million in profit from 2020 through 2023 and then claimed an $89,000 loss in 2024, which he said can mask owner profit when earnings are shifted to a related entity. In his words, the home "was highly profitable, but they don't show the profits at the nursing home." Rich put it more plainly: "They're paying rent, basically, and it goes right into their pocket."

The same reporting tied the money to the staffing. CBS 6 reported that federal data showed a resident at the home received about 18 minutes of registered nurse time per day, against a Virginia average of about 39 minutes, and that a December 2024 state inspection cited inadequate staffing that was excessively low on weekends, along with failures in pressure injury care. These are competing characterizations of the same records, and the facility disputes them. What is not in dispute is that a large share of the home's revenue was leaving it for related companies while inspectors were citing it for understaffing.

The money questions are not only the family's. In May 2026, CBS 6 reported on a state audit of the facility's 2024 Medicaid cost report, carried out by contractors for the Virginia Department of Medical Assistance Services (DMAS), the state's Medicaid agency. Forensic accountant Valerie Gray, who reviewed the audit documents and is unaffiliated with either DMAS or the home, told the station that more than $4 million of the facility's roughly $24 million in operating costs were unsubstantiated or did not meet Medicaid reimbursement rules.

The audit adjustments were specific. CBS 6 reported that auditors removed more than $600,000 in related-party management fees, finding payments of more than $1 million against an allowable limit of about $439,000; roughly $117,000 in consulting fees for lack of third-party documentation; about $448,000 in related-party employee health insurance costs; and $544,000 in interest on owner loans, which auditors treated as an equity investment rather than a loan. The largest item was nearly $2 million in what auditors called excessive bulk purchases from a New York supplier, which they said appeared to have been made solely to inflate costs during a rebasing year, the year that sets Medicaid payment rates for the next three-year cycle. DMAS identified nine related entities it suspected had received fees the facility did not disclose. The home's appeal says the adjustments reduced its rates by $5.3 million.

The facility disputes the audit. Its legal counsel denied the related-party connections in its appeal, and DMAS said the home did not provide enough documentation to support that denial. A facility spokesperson, Mindie Barnett, said the home had invested significant resources in physical upgrades and staffing over the previous 18 months and criticized the station's reporting without identifying any specific error. A Republican state senator, Glen Sturtevant, told CBS 6 the state should audit all 36 of the other nursing homes in the same chain.

The lawsuit connects that financial picture to a specific decline. According to CBS 6, the complaint alleges that within 45 days of entering the home, Cole lost 7.5 percent of his body weight, suffered several falls, and developed pressure ulcers, one of which reached an unstageable level. He was hospitalized and died in October 2023.

Those injuries are the classic signature of understaffing, and they are not random. As we explain in our article on nursing home abuse and the understaffing problem, when a home does not put enough people on a shift to reposition residents, answer call bells, and help residents eat and drink, the predictable results are weight loss, falls, dehydration, and pressure ulcers. A resident recovering from a stroke, with limited ability to move or call for help, sits squarely in the group most exposed to every one of those harms.

An unstageable pressure ulcer is a serious wound. As our article on bedsores and pressure ulcers and nursing home neglect describes, the clinical standard calls for assessing each at-risk resident, repositioning on a schedule, using the right mattress, floating the heels, and managing nutrition and moisture, all of it documented. When those basics are skipped and a resident is hurt, the wound itself becomes a record of what went wrong. A lawsuit still has to prove that the facility's conduct caused the injury, and the defendants dispute that it did.

The Cole lawsuit is one of several legal matters tied to this home. In the spring of 2025, CBS 6 and sister station WWBT reported a separate wrongful death suit filed by the family of Geraldine Richardson, 78, who was admitted with dementia and difficulty walking and died in March 2023 from complications the family's attorney at the firm Cravens & Noll attributed to severe stage 4 pressure ulcers and a septic infection. That is a different family, a different lawyer, and a separate case, but the alleged pattern of wounds and decline is similar.

There is a criminal track as well, and it runs against individual employees rather than the facility. CBS 6, WRIC, and other outlets reported that in December 2024 prosecutors charged 18 nursing home employees in connection with elder abuse and neglect allegations. Most of those charges were later dropped by the Commonwealth's Attorney, which preserves the option to bring them back, as prosecutors said their investigation continued. Prosecutors have petitioned for a special grand jury to examine alleged conduct that includes abuse and neglect, falsifying documents, stealing medication, and potential money laundering and Medicaid and Medicare fraud. The facility itself has never been charged with a crime. In August 2025, a judge ruled that the facility lacked standing to challenge the police searches of its records because it was not a defendant.

We lay these out together for one reason. A single bad outcome can be an accident. A civil suit, a second civil suit, a state audit flagging millions in disallowed costs, and a criminal investigation of staff, all at one address, describe something that recurs. In litigation, that history becomes evidence, because it can show whether problems were known, repeated, and driven by choices about money and staffing rather than a single bad shift.

Colonial Heights Rehabilitation and Nursing Center is not an isolated facility. The Virginia Department of Health has listed its owner as Virginia Care Holdco LLC and its operator under the Medical Facilities of America banner. DMAS tracks the home as part of the Innovative Healthcare Management chain, a group of more than 30 Virginia nursing facilities; federal records list the same chain as Lifeworks Rehab. Innovative Healthcare Management, a New Jersey company, acquired the former Medical Facilities of America chain in 2021.

Readers of this site will recognize the chain. Our article on Henrico Health and Rehabilitation Center, a federally designated Special Focus Facility near Richmond, examined the same operator and the same mechanism: a home cited for abuse, neglect, and understaffing while a rising share of its revenue left through related-party rent. The Cole complaint alleges the pattern exists across the chain and names Westport and Henrico Health and Rehabilitation Center among the facilities, and CBS 6 reported similar lawsuits against those homes. For families, the useful point is that the problem described here is not one rogue building.

One recent development matters for current families. CBS 6 reported that in 2026 Colonial Heights and several related homes changed hands and that the Colonial Heights facility now operates under a new name, Magnolia Post Acute, with a new operator. The ownership details remain partly unclear in the public record, and the state has said the buyer was a different entity than the one first announced. The lawsuit, the audit, and the criminal investigation all concern the earlier ownership and operating period. A new name on the door does not erase the records from the years in question, and those records are what a family's claim would rest on.

The defendants reject the lawsuit. Through spokesperson Mindie Barnett, they told CBS 6 that the allegations are "based on fabrication, not facts" and that the suit "should be dismissed," and they said they will fight the claims in court. A defense attorney, John Owen, who represents the individuals and the related entities but not the facility, said the complaint mischaracterizes the corporate structure, and that owning separate legal entities is common and appropriate in this industry. On the rent specifically, a facility spokesperson has said the amount reflected fair market value.

Those responses are part of the record, and they are not throwaway lines. Whether a related-party rent is lawful or excessive, and whether a holding-company structure is ordinary business planning or a device to drain a facility, are exactly the questions a court decides after both sides put on evidence. None of the civil allegations have been proven, the facility is not a criminal defendant, and the dropped criminal charges against employees were not convictions. We report the allegations because they are specific and documented, not because they are established fact.

Regulatory findings, financial audits, and civil claims are different things, and it helps to keep them straight. An inspection deficiency is a government finding that the facility broke a care rule. A Medicaid audit adjustment is a finding that certain costs were not allowable. A lawsuit is a family's allegation that the facility's conduct caused a specific injury, and it has to be proven. But the three connect. The inspection record, the penalty history, and the staffing and financial data become evidence when a family pursues a claim, because together they can show whether the harm traces to known, repeated choices about money and staffing.

If your family member was a resident at Colonial Heights Rehabilitation and Nursing Center, under that name or as Magnolia Post Acute, and suffered a pressure ulcer, a serious fall, unexplained weight loss, an untreated infection, dehydration, or any form of abuse, the facility's documented history does not by itself prove your case. It does mean the questions are worth asking, and that the records exist to answer them. The same is true for families with a loved one at Westport, Henrico Health and Rehabilitation Center, or another home in the same chain.

Move quickly to preserve the paper and electronic trail. Federal law gives residents and their representatives the right to inspect and copy the medical record, so request the complete chart in writing: nursing notes, the care plan, the Minimum Data Set (MDS) assessments, medication administration records, wound care documentation, weight logs, and any incident, fall, or abuse reports. These are the documents that show whether a resident was turned, weighed, fed, and assessed as the standard of care requires.

Save your own materials too. Dated photographs of bruising, pressure ulcers, weight loss, or poor conditions are hard to dispute later. Write down the dates and times of your visits, what you saw, and the names of staff you spoke with. Keep texts and emails with the facility.

Pull the public record as well. The federal Care Compare system and independent databases such as ProPublica's Nursing Home Inspect publish inspection results, deficiencies, penalties, staffing data, and ownership for every Medicare or Medicaid certified nursing home. You can also file a complaint with Virginia's survey agency, the Office of Licensure and Certification within the Virginia Department of Health, which investigates complaints and can generate citations that become part of the facility's record.