Tuesday, December 11, 2007

billing fraud at the Columbia/HCA Corporation, a hospital chain that Mr. Rainwater helped found.

A Price Too High?; Deal to Save Charter Behavioral May Have Harmed It
By BARRY MEIER
Published: February 16, 2000
NYTimes

The nation's largest chain of psychiatric hospitals lies in tatters. More than half of the roughly 90 hospitals and treatment centers operated by Charter Behavioral Health Systems will soon be closed and the company is expected to announce as early as today that it is seeking bankruptcy protection.
Three years ago, officials of a real estate investment trust headed by Richard E. Rainwater, the financier based in Fort Worth, announced a $400 million investment that they said would breathe new life into Charter. But rather than revitalizing the chain, the deal contributed to its collapse, according to many former Charter officials, undermining patient care in the process.
The company says that Charter's woes were caused by insurance cutbacks, not by the 1997 plan, and that patient care was not affected. The 1997 plan, though, saddled Charter Behavioral, a unit of Magellan Health Services Inc., with some $125 million in franchise fees and rapidly escalating rents. The chain's former chief executive said he warned that the costs would cause financial chaos. Those pressures, coupled with industrywide insurance cutbacks, were soon felt in psychiatric wards, former company officials said.
Hospital directors and workers, overworked and faced with repeated salary freezes, quit. Wards had too few employees, federal and state reports show. Training programs were eliminated, former company officials said. Broken chairs and walls were not repaired. ''It felt like they were strip-mining this place,'' said Dr. Hashim Hafez, the medical director at a Charter unit in Nashua, N.H., until he quit last year.
Charter Behavioral, which once had units in 27 states caring for more than 8,000 patients, many of them children, had long had a troubled past. But after 1997, patient care failed even at well-run hospitals, according to regulators and former company executives.
''Charter was never a great company,'' said Cindy Musikantow, who once ran a treatment center for adolescents that the company managed in Naperville, Ill. ''But it disintegrated to the degree that decisions were being made without regard for patients.''
The deal was a complex one that was intended to benefit both Mr. Rainwater's real estate trust, the Crescent Real Estate Equities Company, and Magellan Health. Under the plan, the trust received income from lease payments and Magellan received franchise fees.
In addition, Mr. Rainwater, as the largest shareholder in Magellan Health at the time, stood to profit because the sale of the ailing chain raised Magellan's stock price.
Magellan Health's top executive also got a large bonus, according to filings with the Securities and Exchange Commission. Additionally, the plan enabled Magellan, the nation's largest behavioral health company, to leave the hospital business for managed health care, a more lucrative field.
The deal split ownership of Charter Behavioral between Magellan Health and an affiliate of Crescent Real Estate. The psychiatric chain's buildings were sold to Crescent Real Estate, which leased them back at a healthy profit.
Both Mr. Rainwater -- a former business associate of Gov. George W. Bush Jr. of Texas -- and Mac Crawford, the chief executive of Magellan Health at the time of the deal, declined to be interviewed. In written responses, their spokesmen said that Charter Behavioral's financial woes were caused by insurance cutbacks, not by the 1997 plan. They said patient care was not affected.
''Sure, we had falling resources,'' said Dr. Gary M. Henschen, the chief medical officer of Charter Behavioral, which is based in Alpharetta, Ga. ''But we have done the best we can.''
In late 1995, Mr. Rainwater and his wife, Darla Moore, paid $69.7 million for a 12.3 percent stake in Magellan Health. The following year, he approached Mr. Crawford about a deal for Magellan to sell Charter Behavioral's buildings to Crescent. Companies that operate nursing homes had engaged in similar ''sale lease-backs'' to raise cash.
In the 1997 deal, Crescent Real Estate paid $400 million to acquire a half-stake in Charter Behavioral and buy its buildings. Because federal tax laws bar real estate investment trusts, or REIT's, from operating companies, Mr. Rainwater and his associates formed a publicly traded company, Crescent Operating Inc., to hold the half-stake.
Under the deal, Charter Behavioral was required to pay Crescent Real Estate $41.5 million in rent, a return of about 11 percent. Gerald Haddock, a Crescent executive, described the lease returns as ''exceptional.'' The rent, which took precedence over franchise fees to Magellan Health, escalated 5 percent annually.
Magellan Health, which is based in Columbia, Md., retained a 50 percent stake in Charter Behavioral, which was to pay it $78 million annually in franchise fees. Magellan, which used cash from the sale to finance managed care acquisitions, said that those payments could decline if industrywide insurance cuts continued.
At the time, most analysts applauded the plan. But John Lutzius, an analyst with Green Street Advisors in Newport Beach, Calif., said shortly after that the new payments left Charter Behavioral with little cash to weather any problems.
''Between the franchise fees and the rent, Magellan and Crescent were effectively sweeping all the cash flow from Charter,'' Mr. Lutzius said recently.
Mr. Rainwater's bet on the psychiatric industry proved to be wrong. In 1997, some within Charter Behavioral had sounded warnings about the deal's consequences for the company.
In separate interviews, two former top Charter officials said John M. DeStefanis, Charter's top executive, told Mr. Crawford of Magellan Health that the franchise fee and rent payments would financially devastate the psychiatric hospitals. Not long after the deal closed, Mr. DeStefanis resigned, those former officials said.
''John went nose to nose with them and that's why he was forced out of the company,'' said one former executive who spoke on the condition of anonymity.
Asked about that account, Mr. DeStefanis confirmed it but declined further comment, citing a confidentiality agreement. In his statement, Mr. Crawford disputed this version of events, saying that Mr. DeStefanis supported the deal. Mr. DeStefanis's departure was unrelated to the deal, he said.
Magellan officials declined to comment on discussions with Mr. DeStefanis. ''In the course of negotiating any transaction, differing viewpoints are always expressed, and, in a good organization, are even encouraged,'' the company said in a statement.
Magellan Health executives said the deal would benefit Charter Behavioral; Magellan's top official also profited. Mr. Crawford, whose salary in fiscal 1996 was $712,500, received a $2.48 million bonus for closing the deal, according to Magellan Health's 1997 proxy statement.
In his statement, Mr. Crawford described his cash payment as a ''retention bonus.'' One company director, A. D. Frazier Jr., said that he supported the payment to Mr. Crawford because the 1997 deal moved Magellan toward managed care and away from hospitals.
A month after the deal closed in June 1997, the federal government further cut hospital reimbursements. That December, Magellan told shareholders in its annual report the move would cut the $78 million due in franchise fees from Charter Behavioral in fiscal 1998 by a range of $10 million to $15 million.
Mr. DeStefanis's projections, however, proved far more accurate. Charter Behavioral managed to pay only $32 million in fees that fiscal year. In January 1998, seven months after the deal and 45 days after Magellan issued its annual report, the chain made its last franchise payment.
Charter Behavioral had had a troubled record of patient care, including settlements of government charges involving fraudulent billing. Regulators said, however, that some units provided good care.
In early 1997, for example, Dr. Ronald Davidson, a hospital consultant for the State of Illinois, declared he would not hesitate to use a company center in Brown Deer, Wis., for his own child.
But by early 1998, conditions there and at other well-run units worsened as the weakening chain imposed repeated salary freezes, staff cutbacks and other cost-cutting measures, said former executives, including Ms. Musikantow, the former head of the Chicago-area unit.
At Charter's flagship hospital in Nashua, N.H., resources shrank and staff levels fell, said Dr. Philip Santora, a former associate medical director at the unit. When experienced nurses and therapists quit, they were replaced by fresh graduates, he said.
In 1998 and 1999 reports, federal and New Hampshire regulators found unsupervised children engaging in sex or hurting themselves at the Nashua unit. Wards persistently had too few employees. Suicide attempts were not recorded, and children were improperly restrained.
Dr. Santora, who quit in August, said that while insurance cutbacks played a role, the 1997 deal resulted in a pattern of neglect.
''You can chip away and chip away and sooner or later you reach a critical mass and a point of no return,'' he said.
As its hospitals veered out of control, Charter Behavioral's governing board -- which was comprised of two executives from Magellan Health and two associates of Mr. Rainwater -- had little response.
Dr. Clarissa Marques, Magellan Health's chief clinical officer, joined the board in August 1998 and found it had never received or asked for patient care reports. She said that in 1998 it did not meet until late October.
John C. Goff, one of Mr. Rainwater's closest associates, who headed the board then, declined to comment.
In mid-1998, Mr. Crawford left Magellan Health to become chief executive of Caremark Rx of Birmingham, Ala. About that time, in an S.E.C. filing, Crescent Operating -- which along with Magellan had lent some money to Charter -- acknowledged that Charter's operating losses were growing because of insurance cutbacks and the rents and fees the 1997 deal required.
In November 1998, Mr. Goff resigned from Charter Behavioral's board. A month later, the chain's accountants questioned its ability to continue, according to an S.E.C. filing.
Last April, the television news magazine ''60 Minutes II'' broadcast the results of an undercover investigation at several Charter Behavioral units. Secretly recorded footage showed ill-trained employees crudely restraining teenagers and filling in medical records for patients who apparently had not been examined.
Several company hospitals were already under government scrutiny. After the broadcast, federal officials announced a broad investigation of Charter Behavioral for Medicaid fraud and patient abuse. Magellan Health is also part of the inquiry.
That investigation involves activities both before and after the 1997 deal and is not focused on its financial aspects. (There is also a Federal investigation into billing fraud at the Columbia/HCA Corporation, a hospital chain that Mr. Rainwater helped found. Mr. Rainwater has not been accused of any wrongdoing.)
Vowing to improve patient care, Charter Behavioral hired outside consultants. Regulators shut some units and the company closed others.
By last August, Charter Behavioral could no longer make lease payments. The next month, Magellan Health transferred most of its remaining stake in Charter to Crescent Operating. Magellan and Charter agreed to indemnify each other in the face of the investigations. In December, Charter said it would reorganize and sell some 50 units.
Magellan Health officials said yesterday that the troubled chain could announce a bankruptcy filing as early as today. Michael French, Charter Behavioral's chief executive, and associates of Mr. Rainwater said they believed that following a reorganization, Charter Behavioral would be stronger.
On a recent day at the New Hampshire facility, a sign on the door instructed employees to turn in their keys during exit interviews. The keys would not work anyway. The locks had been changed. The last patient had been transferred.
''It all fell apart so fast,'' said Dr. Hafez, the former medical director. ''It was like the Kremlin. Everyone knew it was falling apart. But when it fell apart, it fell apart so quickly because there was no foundation.''

1 comment:

Jay Draiman said...

Energy Billing Fraud Charges vs Multiut owned by Nachshon Draiman!
Multiut Admitted to holding money belonging to customers.
Chicago Metro Area Consumers are taken for a ride by Multiut – Nachshon Draiman – Energy Billing fraud.

In a Class Action proceeding initiated in November 2001 - The case after numerous delays by Multiut, is now proceeding.
Gore vs Multiut - IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS Case No. 01 CH 19688
Posted on September 21st, 2007:
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT - CHANCERY DIVISION
FILED
JACK GORE on behalf of himself and all ) NOV 28, 2002
other persons or entitles similarly situated, |

vs. No. 01 CH 19688
DOROTHY 8ROWN CLERK OF CIRCUIT COURT
MULTIUT CORP, an Illinois corporation, } Judge Stephen A, Schiller
Defendant ) Courtroom 2402
RESPONSE TO §2-619.1 MOTION TO DISMISS J/
Plaintiff JACK GORE (“Gore”). by his attorneys LARRY D DRURY LTD., hereby responds to the Motion to Dismiss 2nd Amended Complaint, pursuant to 735 ILCS 5/2-615 and 619, brought as a combined 2-619.1 motion by defendant MULTIUT CORP. (“Multiut”).
Introduction
Multiut is trying to time-bar this case by transforming express a written agency-service contract drafted by Multiut into a contract for sale of goods, and by disputing Gore's allegations as to concealment and discovery of the wrong – but without submitting any Rule 191 affidavit or documentation. This is a class action arising out
of a written contract drafted by Multiut, attached here and to the 2nd Amended Complaint as Exhibit A and B collectively referred to herein as the "contract" or "agreement “ unless otherwise indicated by context): (1)
(A) A service contract to act as Gore's "purchasing representatives" in obtaining natural gas from “off system" suppliers. This contract, entered into on or about December 1990, was titled “Agreement," Exh. A 1, 3-6, 10. And,
{B} A series of supplemental agency contracts to act as Gore’s agent, in so doing with respect to various Properties. These were entered into contemporaneously with the service contract and thereafter, and titled "Natural Gas Purchasing and Agency Agreement.” Exh.-B. (2)
(1) Similarly Multiut refers to them collectively as “the agreement” in its brief (Mem. p. 2, fn. 1). Although the documents are on separately filed pages, they are mutually inclusive and one could not be entered into without the other; e.g. the service contract refers to and incorporates the agency contracts, wherein Multiut refers to itself as Gore's 'exclusive natural gas purchasing agent'. See Exh. A, third introductory paragraph and 16-17; Exh. B 1,
(2) Exh. 8 one of the series, is dated 1998, Exh. C is Gore’s §2-806 affidavit as to the others. Gore has stated he does not have a copy of each, they are inaccessible to him i.e. no longer in his possession, whether missplaced or otherwise, and cannot be located or returned. 2nd Amd.. Compl. {4; Exh, C, in the 1st Amd. Complaint, Count 4 for breach of oral contract was voluntarily dismissed without prejudice after Gore's deposition of May 8,- 2002, when the service contract and the 1998 agency contract were produced by Multiut and adequately established, Exhs, A-B are the same Exhs. 1-2 attached to the Gore transcript, excerpts of which are attached herein as Exh. D, Similarly the missing agency agreements are likely in Multiut’s possession and will be produced in discovery.
The contract was drafted by Multiut, it unequivocally defines Multiut's role in the transactions, and shows that this case is not governed by the UCC. What is at issue here is not the "good" that Multiut obtained for Gore, but the service Multiut provided as his purchasing agent. Gore is suing upon the service and agency contract – not the natural gas - and has alleged that Multiut breached its duties in two respects;
{1} By falsely and intentionally charging and retaining for its own use funds that were to be applied to a City of Chicago 8% gross receipts tax (“Tax”), which it had promised would be placed in escrow and forwarded to the City. Between December 1990 and January 1995 (after the City of Chicago changed the Tax), Multiut collected approximately $14,000 from Gore and at least $1 million to $1.5 million from the Class, for this Tax that was not actually imposed upon Multiut. 2nd Amd. Compl. 7-9, '3! Multiut not only failed to inform Plaintiff and
the Class that the money collected was not so applied or escrowed, but also failed to escrow, account for, and refund the funds with interest.
(2) By overcharging for the service of providing natural gas. Multiut was to charge for natural gas actually supplied to Gore and the Class on a set per therm cost basis, plus an amount equal to 1/2 of their respective per therm cost savings per month, instead, Multiut overcharged and billed Gore at least $100.000 and the class millions of dollars and refuses to provide an accounting and refund with interest. Id. 10-11.
Gore has further alleged that Multiut prevented him from discovering the wrongs by intentionally concealing them until at least December 2000, when he discovered the truth and could not reasonably have done so earlier. (Gore testified at his deposition on May 8, 2002 that he first discovered the discrepancies in his bills, the overcharges, the taxes, and failure to escrow the taxes, in December 2000. See Exh, D, pp. 25-28,) Thereafter he was unable to obtain any refund and based thereon, terminated Multiut’s services on or about June 2001, However, the wrongful acts are continuing to date, in that Multiut continues to 'refuse to provide an accounting and refund with interest to Gore and the Class, all to their detriment and damage. They seek imposition of constructive trust (id. 22), an accounting and damages in not less than the foregoing amounts plus interest (id, 9-13, 23).
Gore filed the original Class Action Complaint on Nov. 20, 2001, and in lieu of responding to a motion to dismiss, filed the 1st Amended Class Action Complaint Feb. 14, 2002, setting forth 4 counts for (1) breach of
3-: The City did not and will not collect the 8% Tax, presumably because of U.S. constitutional restrictions as to the interstate commerce clause and exceptions for interstate pipelines and out-of-state suppliers. As a result in 1994 the City changed the tax from an 8% gross receipts tax to a flat rate tax of 1.4 to 1.5 cents per therm. 2nd Amd. Comp. P 8. in Multiut’s response to First Request to Admit {attached hereto as Exh. F), it has admitted the following statements about this Tax; (8) that Multiut collected approximately $14,000 in Tax from Gore between 1991-1994; and (9) that Multiut spent its customers Tax payments on business expenses.. Yehuda Draiman testified to the same effect in his deposition 1-10-02 See transcript excerpts attached hereto as Exh. E, at pp, 36-37,40, 68, and Exh, 6 thereto.
Activity Date: 8/15/2007 Participant: GORE JACK
CASE SET ON STATUS CALL
Court Date: 8/29/2007
Court Time: 0930
Court Room: 2402
Judge: BRONSTEIN, PHILIP L.


August 30th, 2007 at 2:25 pm
RE: MULTIUT CORP. FORMER CUSTOMERS!
Multiut owner is Nachshon Draiman of Cook County, Illinois
PLEASE BE ADVISED THAT YOU ARE PROBABLY DUE A REFUND PLUS INTEREST FOR SALES TAX ON NATURAL GAS WHICH WAS COLLECTED FROM YOU AND WITHHELD BY MULTIUT CORP. TEL # 847-982-0030 at 7514 N. Skokie Bl. Skokie, Illinois.
MULTIUT IS HOLDING APPROXIMATELY OVER ONE MILLION DOLLARS THAT MAY BELONG TO CUSTOMERS.
MULTIUT HAS OVERBILLED CUSTOMERS ON SHARED SAVINGS FOR THE PAST 14 YEARS.
THERE IS CURRENTLY A CLASS ACTION SUIT AGAINST MULTIUT.
I STRONGLY SUGGEST THAT YOU HAVE ALL YOUR BILLS THAT WERE ISSUED BY MULTIUT CORP. AUDITED THOROUGHLY THERE MAY BE STORAGE CREDITS DUE YOU AND ERRORS IN BILLING WHICH CREDITS MAY BE DUE YOU.
Multiut has admitted in Court that they are holding the money.
Gore vs Multiut 01 CH 19688 Circuit Court of Cook County, Illinois
A concerned citizen
For honesty in billing

Fraud, Insolvency and numerous contempt of court orders
Dynegy Mkg & Trade v. Multiut Corp, Nachshon Draiman et al
On August 16th, 2007: Numerous Federal contempt of court orders against Nachshon Draiman and Multiut
Dynegy Mkg & Trade v. Multiut Corp, Nachshon Draiman et al 1:02-cv-07446.
Multiut Corp and Nachshon Draiman dba Future Associate of Skokie, IL. are withholding evidence of fraudulent activities in the Energy industry and inflated Medicaid billing to the government for Nursing Home patients. Also Bank fraud against their bank by presenting fraudulent and inflated receivable reports in order to get and keep a credit line, Nachshon Draiman was a large stock holder of the bank. Draiman Nachshon • SC 13G • Success Bancshares Inc • On 2/17/98
Filed On 2/17/98 • SEC File 5-53545 • Accession Number 950137-98-586
Court: United States District Court Northern District of Illinois -
Case Title: Dynegy Mkg & Trade v. Multiut Corp, Nachshon Draiman Future Associates et al
Case Number: 1:02-cv-07446
Judge: Hon. John A. Nordberg
Filed On: 10/16/2002
SUMMARY
Case Number: 1:02-cv-07446
Referred To: Honorable Michael T. Mason
Jury Demand: Defendant
Demand: $9999000
Nature of Suit: Contract: Other (190)
Jurisdiction: Diversity
Cause: 28:1332 Diversity-Breach of Contract
Case Updated: 01/20/2005
NAMES
Party Name: Multiut Corporation an Illinois Corporation,
Party Type: Defendant
Attorney(s): Paul Thaddeus Fox
(312) 456-8400
Firm Name: Greenberg Traurig, LLP.
Firm Address: 77 West Wacker Drive
Suite 2500
Chicago, IL 60601
Alan Jay Mandel
847-329-8450
Firm Name: Alan J Mandel Ltd
Firm Address: 7520 North Skokie Blvd
Skokie, IL 60077
03/30/2007 225
NOTICE of Motion by Ira P. Gould for presentment of motion to withdraw as attorney224 before Honorable John A. Nordberg on 4/19/2007 at 02:30 PM. (Gould, Ira) (Entered: 03/30/2007)
04/18/2007 226
MINUTE entry before Judge John A. Nordberg: Motion of Ira Gould to withdraw his appearance on behalf of Multiut Corporation 224 is granted. The motion will not be heard on 4/19/07 as noticed. Mailed (vmj, ) (Entered: 04/19/2007).
For More Information See: www.antidefamationusa.com or www.antidefamation.us