Former LifeCare CEO David Richards found not guilty of theft, records tampering

Former LifeCare executive David Richards was found not guilty of felony theft and records tampering Friday by Lorain County Common Pleas Judge James Miraldi. Miraldi, conducting a bench trial in which he was the final say on guilt or innocence, ruled immediately after he heard closing arguments Friday afternoon. He said the matter didn't belong in a criminal court. "I do not find the state has proved its case beyond a reasonable doubt on either of the charges, and I find the defendant not guilty on both counts," Miraldi said. Richards broke into tears and his supporters behind him in the gallery celebrated after Miraldi handed down the verdict. Miraldi praised the attorneys who argued the complicated case for 13 days over four months. The case took three years from arrest to verdict. Richards was a hardworking executive who certainly "wined-and-dined" potential customers and people he thought could help his company succeed, but that was all part of "making sure his employees were taking care of," Miraldi said. Citing the criticism that Richards paid for an Elyria Country Club membership he then billed to LifeCare, Miraldi said the country club is a place where a lot of business gets conducted. "It's a place where the CEO should be able to go without being questioned by the IT (information technology) guy," Miraldi said. That was a reference to LifeCare IT director and part-time police officer Richard Pozywak, who was among the first at LifeCare to raise a red flag about Richards' spending and bring the issue to the attention of authorities. The LifeCare board in 2021 included Richards, Pozywak and Kim Mason, who is now LifeCare's chief operating officer. It also had two open seats that were reserved for two members from outside LifeCare, seats that never were filled. But Mason and Pozywak didn't meet with Richards to discuss his spending first, "which is what a board does if you've got a real problem with your CEO," Miraldi said. Prosecution witnesses also had a problem describing an alleged "pattern" of improper spending by Richards, Miraldi said. One accusation that Miraldi said he found absurd was that Richards stole reels used to wind up and store Christmas lights that LifeCare used to decorate its ambulances at the holidays. The lights and reels were found in Richards' garage by Elyria police. "I mean, what kind of Mickey Mouse stuff is this?" Miraldi asked. Though he didn't have the burden to prove anything, defense attorney Brent English "proved (Richards) wasn't doing anything wrong and was running the company well," Miraldi ruled. Richards and LifeCare aren't done with each other in court: LifeCare Investments Inc. has sued Richards for damages in Common Pleas Court, and he has countersued them for wrongful termination and defamation of character, according to English and court records. Richards relieved Following the verdict, Richards thanked his wife and family for supporting him "through this three-year ordeal." "They've been absolutely my rock when it came to all the things I was dealing with relative to this," he said. Richards said the charges turned his life upside down, but he was able to lean on the people who loved, cared about and believed in him, he said. "It changed my whole outlook on really how wonderful they are, through this process," he said. English was "an absolute genius" when it came to putting together Richards' defense, he said, while Richards' current employer, Avita Health System, supported him and "looked beyond" the charges he was facing. "They believed in me and invested in me, and I've been able to turn my career around because of that," he said. Richards also said he still loves LifeCare and the employees there. "I loved them then, I love them still, they were very important to me when I was there, and I've never stopped thinking about their well-being and what we had tried to accomplish there," he said. "My heart goes out to them and I hope and wish them good luck." Background Following complaints by a LifeCare official, the Elyria Police Department investigated allegations that Richards had filed business expense reports for what were actually personal items, then improperly received reimbursement of nearly $27,000. That included $15,000 worth of mileage reimbursement he received, according to the Prosecutor's Office. Richards was originally hired by LifeCare in 2012. He rose to chief executive officer, chief financial officer and chief operating officer in 2019 when the company became an employee stock ownership plan, or ESOP, owned by its 175 employees. That was after years of the ambulance and medical transport company being owned by the De La Porte brothers, Herb and Pete, who were owed at least $6 million by LifeCare when Richards took over in July 2019. Richards testified he tried to get corporate credit, but the company's bank wouldn't offer enough to cover monthly expenses. So he backed LifeCare with own credit and got his credit card purchases reimbursed. Richards admitted to sloppy accounting practices and poor bookkeeping at times but denied any criminal conduct. Also, multiple people had access to the credit cards that Richards used for both business and personal expenses. He then sorted the two types of expenses into different categories when filing his monthy expense reports for LifeCare. A forensic accountant and Elyria police questioned at least 500 expenses for which Richards was reimbursed. Closings Part of Richards' defense was that his leadership helped save LifeCare from near bankruptcy during the COVID-19 pandemic. Otherwise, he was a "capable, rational, sensible individual" and business executive who took on a "big responsibility," English said in his closing argument. The criminal matter filed over the business expense reports "should have been a civil matter" between Richards and LifeCare, he said. "There is zero evidence of proof beyond a reasonable doubt" of a crime "and no evidence of tampering" with records, English said. Assistant Lorain County Prosecutor Mark Koza saw it differently. He questioned how Richards couldn't remember expense reports he filed in 2021 when he was questioned by Elyria police following his Dec. 9 arrest that year, but had exceptional recall of them at trial. "Fascinating how three-and-a-half years later he's able to check and rationalize" his spending, Koza said in his closing. "How can you have a better memory three-and-a-half years later than (Richards) did the month after" he made the purchases. The defense argued that LifeCare had no corporate policy on expense reports. If it didn't it was because Richards wanted it that way so he could do what he wanted, argued Koza, who prosecuted the case alongside Assistant Prosecutor Paul Griffin. Richards told Elyria police during his 2021 videotaped interrogation that he sometimes put former LifeCare owner Pete De La Porte's name on his meal expense report so it would go through faster. Richards "knew what he was getting away with because there was no one checking him," Koza argued. Contact Dave O'Brien at (440) 329-7129 or dobrien@chroniclet.com.