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Technically, it is not legal for your director to require you to work at his nursing home that has no affiliation agreement with the base hospital for your residency program. This is a CPME requirement. Without this affiliation agreement, the medical malpractice insurance that you get from the hospital for residency training technically will not cover you at the nursing home.
I am sure that there are illegal things that take place at various residency training programs and residents often do it to make their attending, hospital, or residency director happy. Most of these are not reported because the resident might be afraid that an open investigation by CPME might cause the program to close or face some sort of penalty / possible termination from the program by the hospital or residency director.
If you wish to report this, CPME is probably the best place to do it, as suggested by jonwill. You might also consider reporting it to the Director of Graduate Medical Education at your hospital or one of the administrators at the hospital.