The core financial allegation against Centers Health Care involves the systematic diversion of government funds intended for resident care into the personal accounts of its owners. In June 2023, New York Attorney General Letitia James filed a lawsuit accusing owners Kenneth Rozenberg and Daryl Hagler of misappropriating $83 million. The suit alleged that the operators utilized a network of shell companies and collusive real estate transactions to siphon Medicaid and Medicare reimbursements. These funds were legally designated for staffing and medical services at four specific facilities. The Attorney General’s Office asserted that the owners turned these nursing homes into "money-making machines" while residents suffered from severe neglect.

The lawsuit detailed specific methods used to extract capital from the nursing homes. The primary mechanism involved inflated rent payments paid to real estate companies also owned by Hagler and Rozenberg. By separating the operating companies from the property companies, the owners could charge their own facilities exorbitant rents.