Jane MusgraveSon of longtime GOP powerhouse Elizabeth Fago pleads guilty in $11 million fraud.
Editor’s Note: President Donald Trump pardoned Paul Walczak on April 23, The New York Times reported here.
The oldest son of longtime Republican powerhouse Elizabeth Fago last week was sentenced to 18 months in prison after U.S. prosecutors said he bilked the federal government out of nearly $11 million in taxes.
Like his mother, who had her share of run-ins with the IRS, 55-year-old Paul Walczak ran a farflung nursing home empire.
But unlike his mother, who eventually paid her tax bills, federal prosecutors said Walczak reneged on a 2014 and then a 2016 agreement he made with the IRS to turn over the millions in taxes he withheld from his employees’ paychecks. Then, they said, he invented new ways to avoid paying.
“When the IRS (refused) to allow him to simply walk away with the millions of dollars he took from his employees … (Walczak) tried to hide his personal wealth by starting a new business under the name of his then 20-year-old daughter,” Assistant U.S. Attorney Brian Flanagan wrote in court papers.
Walczak’s motives were neither mysterious nor unique, he said.
“The defendant — like most tax cheats — was motivated by greed,” Flanagan wrote.
Walczak, who lives in a $5.6 million house along the Intracoastal Waterway at the east end of Hood Road, used the money to bankroll a lavish lifestyle, purchasing a $2 million yacht, chartering private jets and shopping at high-end retailers, he said.
His 74-year-old mother, a prominent Palm Beach County political fundraiser who supported President Donald Trump and counts former Florida Gov. Jeb Bush as a friend, disputed Flanagan’s characterization.
A mother’s plea
In a letter to U.S. District Judge Kenneth Marra, Fago asked — “mother to judge” — that the jurist put her son’s behavior into context.
“Paul’s actions, while wrong, were not motivated by personal greed, but by a misguided attempt to protect employees and to keep a business alive during extraordinary financial distress,” she wrote.
And, despite Flanagan’s harsh rhetoric, Marra gave Fago some solace.
Under federal sentencing guidelines, Walczak faced a sentence of at least three years in prison.
Instead, after a three-hour hearing on Friday that was packed with Walczak’s family and friends, Marra cut that possible sentence nearly in half. He allowed Walczak to remain free until July 10 when he must report to prison. He also ordered Walczak to repay the nearly $4.4 million he still owes the government.
Miami attorney Dennis Kainen, who was part of Walczak’s legal team, declined to comment specifically on the case.
“We appreciate the time the judge gave the parties so there could be a complete exchange of ideas and the court could evaluate Paul as a good individual who did something wrong,” Kainen said when reached after the hearing.
In court papers, Walczak’s lawyers described Walczak as a hard worker who learned the nursing home business while helping his mother build Healthcare Acquisition Inc. from four homes in Georgia into a national juggernaut with 150 facilities in 13 states.
Medicaid rules change
After Fago closed the company in 2007, Walczak opened his own nursing home business with a flagship location in Wellington.
He and Fago invested $18 million in NuVista, which became the parent company of dozens of related businesses, including Palm Health Partners, FW Healthcare Investors, and PHP Employment Services, court records show.
The venture was on its way to revolutionizing the nursing home industry, when the Centers for Medicare and Medicaid Services, beginning in 2015, began changing reimbursement rules, which threw the company into a tailspin, Walczak’s attorneys wrote.
Walczak lined up a real estate investment firm that agreed to pay $62 million for one of NuVista’s facilities. That would have allowed Walczak to pay his tax debts and revive the company’s sagging finances.
But, when the IRS issued a summons to the investment company, it backed out of the deal, the attorneys said.
Even though Walczak and Fago pumped another $8.5 million into NuVista, they couldn’t save it. It closed in 2019.
Walczak went to work as a consultant, but the COVID-19 pandemic crippled the nursing home industry and he was unable to find steady work, they wrote.
His 8,000-square foot home went into foreclosure — an action he halted with money he had earned as a consultant. He paid his daughters’ college tuition by selling his wife’s engagement and wedding rings, the attorneys wrote.
“This is not a case about tax fraud involving lying on tax forms or about tax evasion,” the attorneys wrote. “Mr. Walczak worked relentlessly for years trying to salvage his business.”
Further, they said, Walczak has paid the IRS most of the money he owed and in total, including all of his ventures, has paid $21 million in taxes to the government.
Flanagan was unimpressed. He claimed that Walczak only began making the delinquent payments after he was indicted in February 2023 on 12 charges of tax fraud.
“Following the indictment and staring down punishment, (Walczak) apparently found $8 million between the couch cushions and began to pay back to the IRS the trust fund taxes he stole,” Flanagan wrote in court papers.
Walczak in November pleaded guilty to two of the charges — willfully failing to pay employment taxes and willfully failing to file individual income tax returns. As part of the plea agreement, the other 10 charges were dismissed.
Fago, who once served on the board of the county’s Health Care District and a board formed to oversee the state’s $310 million contribution to The Scripps Research Institute in Jupiter, said she, her son and his family have suffered greatly.
“The consequences of his actions have already been devastating: the destruction of our family’s generational wealth, the collapse of the business we spent a lifetime building, and, most painfully, the emotional toll on his wife, children, and extended family,” she wrote.
“Please,” she asked Marra, “do not destroy what remains of this family.”
