PROVIDENCE — Nursing home operator Antonio L. Giordano will not succeed in his attempt to get $900,000 from the proposed sale of one of the nursing homes from which he illegally diverted money, federal prosecutors said last week.

The company that’s now trying to buy the Mount St. Francis Health Center, in Woonsocket, will have to pay $300,000 to Giordano’s lawyers, but the Internal Revenue Service will go after that $300,000 once the closing has taken place, according to federal court records.

Prosecutors say Mount St. Francis still owes $6.6 million in federal payroll taxes, but the IRS has agreed to discharge liens to allow the nursing home to be sold to American Senior Living Communities — or to another entity if a “higher and better offer” is received and approved by the court. At the same time, prosecutors are asking the court to determine that the federal government still has valid liens — which would allow it to pursue the money from sources, including Giordano, without holding up the sale.

Those are the latest developments surrounding Giordano, who was sentenced in September 2006 to 2½ years in federal prison for skimming equity from Mount St. Francis and two other nursing homes that were either in default of federally backed mortgages or operating in the red.

Authorities said Giordano diverted more than $780,000 in U.S. Housing and Urban Development money into an employee-relations firm, called My Place, headed by his daughters. One of the nursing homes, the now-closed Hillside Health Center in Providence, became notorious when The Journal reported on an 87-year-old patient who developed a life-threatening bedsore after being left for hours in her own feces.

Giordano, 64, of North Kingstown, has a projected release date of Dec. 22, and is now at a halfway house in Boston.

Earlier this year, lawyers representing Giordano went to state and federal court to pursue a $900,000 “administrative claim” from the proposed sale of Mount St. Francis.

Giordano’s lawyers said American Senior Living Communities had agreed to pay up to $2.2 million owed to the IRS as a condition of submitting an offer to buy the nursing home. But ASLC, which is now managing the nursing home, later told Giordano it was unable to make those payments. So Giordano and ASLC negotiated new terms under which ASLC would no longer be obligated to pay the IRS but would pay $900,000 into the receivership estate.

Giordano’s lawyers then made an “administrative claim” for the $900,000, saying that if it was approved, Giordano would release ASLC and the receiver from all liability for breaking the previous agreement. Giordano planned to use the money to pay his “secured creditors” — namely, “related entities” in which the owners or beneficiaries are his children, the lawyers said. Giordano’s children had provided him with money to pay court-ordered restitution, federal fines and debt owed to the Rhode Island Depositors Economic Protection Corporation. (Giordano also was a major delinquent borrower in the state’s banking crisis of the early 1990s.)

Federal prosecutors strongly objected to Giordano’s administrative claim, saying, “Approving payment to Giordano of $900,000 would, in essence, give he and his children back the money he stole from HUD.”

As Mount St. Francis’ general partner, Giordano has no claim in the receivership proceedings, prosecutors said. “Giordano’s asserted administrative claim comes across as an insider’s grab for the $900,000 closing payment, to the detriment of actual creditors of the estate, and in particular the United States,” prosecutors wrote.

On July 31, U.S. District Judge William E. Smith granted the receiver’s motion to sell Mount St. Francis free and clear of liens and other claims. In doing so, Smith ruled that a $900,000 closing payment “shall not be reduced by any administrative fees and expenses” or by “any other purported claims against the closing payment.”

Smith said American Senior Living Communities cannot buy the nursing home until it pays $300,000 to the Adler Pollock & Sheehan law firm for the attorneys’ fees that Giordano accumulated during the attempt to sell the nursing home to ASLC.

But, according to the court order, “the IRS intends to levy on [Adler Pollock & Sheehan] immediately after the disbursement of funds at closing, and subsequently as necessary, to collect the entire $300,000 payable to” the law firm.

Thomas M. Connell, spokesman for the U.S. Attorney’s Office, said, “The government’s concern was in preserving the right to pursue unpaid taxes and also preventing parties from unduly benefiting.” Regarding the $300,000 that would be paid to Adler Pollock & Sheehan, he said, “The government wants to keep all of its legitimate options open to make the taxpayers whole. The options include Giordano or other parties to which Giordano’s money may have gone, which is not to say what the ultimate outcome will be.”

Regarding Mount St. Francis, Connell said, “Certainly keeping it open and operating efficiently is a worthwhile objective for all parties.”

Lawyer Joseph P. Ferrucci, who has been appointed the receiver, said the court action is good news for the nursing home. “It means it saves a local senior care facility in Woonsocket, which is obviously a community that has experienced economic challenges,” he said. “It avoids closure of the facility and avoids disrupting 150 residents.”

American Senior Living Communities is offering about $12 million for the nursing home, and unless the court approves a better offer, the closing is to occur between Sept. 30 and Dec. 31, he said.

Ferrucci said Giordano agreed not to seek the $900,000 as part of a settlement of his potential breach-of-contract claim against American Senior Living Communities, and the settlement called for ASLC to pay $300,000 to Giordano’s lawyers at Adler Pollock & Sheehan. The $300,000 is to include $150,000 in cash and a $150,000 promissory note, he said.

“The importance of that is it’s not being paid from state proceeds,” Ferrucci said. “It’s being paid from one private party to the other’s counsel to extinguish a potential lawsuit. And it remains subject to any claims of the IRS.”

Robert I. Stolzman, one of the Adler Pollock & Sheehan lawyers representing Giordano in the Mount St. Francis matter, said Giordano never expected to get the $900,000. “The intent always was to try to settle Mr. Giordano’s alleged IRS obligation, not to take cash out of the project,” he said. “The intent was to persuade the IRS they’d be better off taking the $900,000 as an offer in compromise on his entire IRS obligation.”

But months passed without getting anyone in authority at the IRS to negotiate such an agreement, Stolzman said. So Giordano pursued the administrative claim for the $900,000 thinking that “if we got the money, at least that’s something to pay the IRS. If we didn’t get it, then that would provoke the IRS to pay attention,” Stolzman said.

While the administrative claim talked about channeling the $900,000 to Giordano’s children, Stolzman said the intent was always to give the money to the government.

As it turned out, “we got the IRS’s attention, but they didn’t compromise,” Stolzman said. “We would have hoped the IRS would have seen the benefit of getting a compromise amount up front because Mr. Giordano doesn’t have any money.”

efitzpat@projo.com