National Century bribery case
Ex-president, friend indicted
Wednesday, October 24, 2007 3:42 AM
By Jodi Andes
THE COLUMBUS DISPATCH
Recordings from wiretaps are being used as the basis for the latest charge against the former president of the now-defunct National Century Financial Enterprises.
Lance K. Poulsen and his friend, Karl A. Demmler, were indicted yesterday on charges of conspiracy to obstruct justice, accused of trying to bribe a witness in the criminal case surrounding the company's collapse.
Poulsen and Demmler were recorded secretly on court-ordered wiretaps, and the witness they are accused of trying to bribe also wore a wire arranged by FBI agents, the indictment states.
The recordings show the pair wanted the witness to develop a "mental lapse" concerning National Century's dealings. Some of the conversations were recorded as recently as two weeks ago, court records show.
National Century provided financing to health-care companies by collecting money owed to them for a fee. FBI and IRS agents say company executives cooked the books using fraudulent schemes for years.
When the company collapsed in 2002, investors lost $1.9 billion, making it the largest fraud by a private company in U.S. history, federal prosecutors say.
Its collapse created a domino effect that brought down 275 health-care companies. Poulsen was arrested in Tampa, Fla., last week. U.S. marshals are expected to bring him to Columbus sometime this week, said Fred Alverson, spokesman for the U.S. attorney's office.
Demmler was in custody here.
The indictment says that the witness is a woman who previously pleaded guilty to fabricating data in the company's 1995 investment report, but does not name her.
Through Demmler, Poulsen offered to pay the witness what she had forfeited to the federal government, plus three years in lost wages, the indictment says. Demmler added that his take would be 10 percent of what Poulsen was offering her, the indictment says.
Poulsen and other executives are scheduled for trial Feb. 5 before federal Judge Algenon Marbley on the initial charges of securities fraud, money laundering and wire fraud.
Tuesday, October 30, 2007
Thursday, October 25, 2007
Lottery.....Richard Rainwater
HISTORICALLY an underground operation run by mobsters and known as “the numbers,” the informal street game has been transformed into a lucrative, state-sponsored corporate enterprise — largely through the efforts of Gtech and Scientific Games, analysts say.
Scientific Games was founded in 1973, and Gtech opened its doors eight years later, at a time when state lotteries were still in their infancy. Only 13 states had lotteries, which were generally operated as small back-office operations and run by political appointees who usually had experience in law enforcement.
Gtech was guided by one of the company’s three co-founders, Guy Snowden, a blustery former I.B.M. engineer, who had talked the Bass brothers of Texas and the investor Richard Rainwater into bankrolling a business devoted to winning state lottery contracts and operating them for a hefty commission. Mr. Snowden’s pitch to state lotteries was simple: Gtech could start up lotteries faster and operate them more efficiently and with a higher level of security than state agencies could. Within a decade, Gtech had won nearly half of the nation’s online lottery contracts.
......................Published: Sunday, October 21, 2007
Divide and Conquer: Meet the Lottery Titans
RON STODGHILL and RON NIXON
Scientific Games was founded in 1973, and Gtech opened its doors eight years later, at a time when state lotteries were still in their infancy. Only 13 states had lotteries, which were generally operated as small back-office operations and run by political appointees who usually had experience in law enforcement.
Gtech was guided by one of the company’s three co-founders, Guy Snowden, a blustery former I.B.M. engineer, who had talked the Bass brothers of Texas and the investor Richard Rainwater into bankrolling a business devoted to winning state lottery contracts and operating them for a hefty commission. Mr. Snowden’s pitch to state lotteries was simple: Gtech could start up lotteries faster and operate them more efficiently and with a higher level of security than state agencies could. Within a decade, Gtech had won nearly half of the nation’s online lottery contracts.
......................Published: Sunday, October 21, 2007
Divide and Conquer: Meet the Lottery Titans
RON STODGHILL and RON NIXON
American Bankruptcy Institute,,,,,Gerard J. Leimkuhler
Sustaining Members
Contributions of $2,000-$4,999
Gerard J. Leimkuhler
Wescott Strategic Management LLC
Contributions of $2,000-$4,999
Gerard J. Leimkuhler
Wescott Strategic Management LLC
Additction to Oil ...more dots for Rainwater & Bush
Open letter to Texas newspapers about peak oil: 'Why aren’t you listening?'
by Jeffrey J. Brown
April 2, 2006
Mr. Wesley R. Turner, President & Publisher
Fort Worth Star Telegram
Mr. James H. Moroney , III, Publisher & CEO
The Dallas Morning News
Subject: What Are Two Texas Billionaires,
Richard Rainwater & T. Boone Pickens,
Saying About Peak Oil & Why Aren’t You Listening?
Gentlemen:
I realize that I don’t have to introduce Richard Rainwater and Boone Pickens to you two gentlemen, but for the benefit of those who may not be familiar with Messrs. Rainwater and Pickens, following are brief introductions.
Richard Rainwater is the Texas based businessman who was chiefly responsible for turning the Bass Family’s inheritance of $50 into a $5 billion dollar fortune. Mr. Rainwater was therefore indirectly responsible for the remarkable urban renaissance of downtown Fort Worth, as a result of the Bass family’s massive investments. Mr. Rainwater also had a material role in George W. Bush’s selection as Managing Partner of the Texas Rangers Baseball Team, which launched Mr. Bush on his way to the Governor’s Mansion and then to the White House.
Mr. Pickens, now based in Dallas, has had a long and storied career in the oil and gas industry. Like most Texas oilmen, Mr. Pickens has had his ups and downs. Most recently he has been on an up cycle, via his investment firm, BP Capital.
These two gentlemen share an uncanny and proven ability to accurately predict future trends. The only real mistake that I am aware of is Mr. Pickens’ timing regarding natural gas prices some years ago. He was right about the price move, but he was just a little early.
Mr. Rainwater was profiled in the 12/14/05 issue of Fortune Magazine, “The Rainwater Prophecy.” Mr. Rainwater is deeply concerned about Peak Oil. In the article, Mr. Rainwater said, “This is the first scenario I’ve seen where I question the survivability of mankind.” Mr. Rainwater first became concerned about Peak Oil after reading “The Long Emergency” by James Howard Kunstler.
According to Bill McKenzie, with the Dallas Morning News, the primary reason that President Bush used the “Addicted to OIl” phrase in his state of the Union Speech was the Fortune article about Richard Rainwater, and again Mr. Rainwater became concerned about Peak Oil after reading Mr. Kunstler’s book.
...............
by Jeffrey J. Brown
April 2, 2006
Mr. Wesley R. Turner, President & Publisher
Fort Worth Star Telegram
Mr. James H. Moroney , III, Publisher & CEO
The Dallas Morning News
Subject: What Are Two Texas Billionaires,
Richard Rainwater & T. Boone Pickens,
Saying About Peak Oil & Why Aren’t You Listening?
Gentlemen:
I realize that I don’t have to introduce Richard Rainwater and Boone Pickens to you two gentlemen, but for the benefit of those who may not be familiar with Messrs. Rainwater and Pickens, following are brief introductions.
Richard Rainwater is the Texas based businessman who was chiefly responsible for turning the Bass Family’s inheritance of $50 into a $5 billion dollar fortune. Mr. Rainwater was therefore indirectly responsible for the remarkable urban renaissance of downtown Fort Worth, as a result of the Bass family’s massive investments. Mr. Rainwater also had a material role in George W. Bush’s selection as Managing Partner of the Texas Rangers Baseball Team, which launched Mr. Bush on his way to the Governor’s Mansion and then to the White House.
Mr. Pickens, now based in Dallas, has had a long and storied career in the oil and gas industry. Like most Texas oilmen, Mr. Pickens has had his ups and downs. Most recently he has been on an up cycle, via his investment firm, BP Capital.
These two gentlemen share an uncanny and proven ability to accurately predict future trends. The only real mistake that I am aware of is Mr. Pickens’ timing regarding natural gas prices some years ago. He was right about the price move, but he was just a little early.
Mr. Rainwater was profiled in the 12/14/05 issue of Fortune Magazine, “The Rainwater Prophecy.” Mr. Rainwater is deeply concerned about Peak Oil. In the article, Mr. Rainwater said, “This is the first scenario I’ve seen where I question the survivability of mankind.” Mr. Rainwater first became concerned about Peak Oil after reading “The Long Emergency” by James Howard Kunstler.
According to Bill McKenzie, with the Dallas Morning News, the primary reason that President Bush used the “Addicted to OIl” phrase in his state of the Union Speech was the Fortune article about Richard Rainwater, and again Mr. Rainwater became concerned about Peak Oil after reading Mr. Kunstler’s book.
...............
Wednesday, October 24, 2007
2.3-million members are nearly equally divided between Medicare and Medicaid
An FBI agent arrived about 9:25 a.m. and told employees they could leave for the day. [Chris Zuppa | Times]
TAMPA -- Federal law enforcement agents executed a search warrant this morning at the offices of WellCare Health Plans Inc. on Henderson Road, and people were seen removing materials from the building of the managed care company.
Acting U.S. Attorney James Klindt said FBI agents and law enforcement agents from the U.S. Department of Health and Human Services as well as the Florida Attorney General's Medicaid Fraud Control Unit were participating in the execution of the warrant at 8735 Henderson Road in Tampa. The ongoing investigation "does not directly concern, nor should it have any impact upon, the delivery of any health care service to any person," the U.S. Attorney's Office said in a statement.
The office gave no further details on the investigation. The FBI did not immediately return calls for comment.
Many employees were standing outside the offices this morning, talking on cell phones or heading to their cars to leave.
Steven Meitzen, 51, arrived at WellCare about 9:40 a.m. for a job interview. A sheriff's deputy stopped him when he exited a parking garage elevator and director him to stand with a crowd of about 20 employees waiting outside, he said.
"I was told by a member of the human resources that they thought it was a bomb scare, but they were locked down and not allowed to leave the building," Meitzen said. "Later on, I talked to someone who said (the FBI) had a subpoena and were looking for records."
Meitzen stood by for nearly half an hour, watching "a lot" of unmarked vehicles with flashing ligths surround the property.
"They had a lot of the entrances covered," Metizen said.
WellCare's Web site describes it as a leading provider of managed care services dedicated to government-sponsored health care programs focusing on Medicaid and Medicare plans, including health plans for families, children, the blind and disabled, and prescription drug plans.
Its 2.3-million members are nearly equally divided between Medicare and Medicaid programs, and it posted $3.8-billion in revenue last year, the vast majority of that from state and federal government reimbursements. Profits were $139.2-million, nearly three times its net income after going public in 2004.
In June, Medicare's parent agency announced that seven of the industry's biggest players have agreed to suspend marketing until protective measures take effect to guard against rogue agents enrolling customers in fee-for-service plans they didn't want or need. Among the seven: Tampa's fastest-growing publicly traded company, WellCare Health Plans Inc.
--Bill Coats, Times staff writer
-- Trading was halted in WellCare stock at 10:59 a.m. after it had fallen $5.47 a share to $115.50.
TAMPA -- Federal law enforcement agents executed a search warrant this morning at the offices of WellCare Health Plans Inc. on Henderson Road, and people were seen removing materials from the building of the managed care company.
Acting U.S. Attorney James Klindt said FBI agents and law enforcement agents from the U.S. Department of Health and Human Services as well as the Florida Attorney General's Medicaid Fraud Control Unit were participating in the execution of the warrant at 8735 Henderson Road in Tampa. The ongoing investigation "does not directly concern, nor should it have any impact upon, the delivery of any health care service to any person," the U.S. Attorney's Office said in a statement.
The office gave no further details on the investigation. The FBI did not immediately return calls for comment.
Many employees were standing outside the offices this morning, talking on cell phones or heading to their cars to leave.
Steven Meitzen, 51, arrived at WellCare about 9:40 a.m. for a job interview. A sheriff's deputy stopped him when he exited a parking garage elevator and director him to stand with a crowd of about 20 employees waiting outside, he said.
"I was told by a member of the human resources that they thought it was a bomb scare, but they were locked down and not allowed to leave the building," Meitzen said. "Later on, I talked to someone who said (the FBI) had a subpoena and were looking for records."
Meitzen stood by for nearly half an hour, watching "a lot" of unmarked vehicles with flashing ligths surround the property.
"They had a lot of the entrances covered," Metizen said.
WellCare's Web site describes it as a leading provider of managed care services dedicated to government-sponsored health care programs focusing on Medicaid and Medicare plans, including health plans for families, children, the blind and disabled, and prescription drug plans.
Its 2.3-million members are nearly equally divided between Medicare and Medicaid programs, and it posted $3.8-billion in revenue last year, the vast majority of that from state and federal government reimbursements. Profits were $139.2-million, nearly three times its net income after going public in 2004.
In June, Medicare's parent agency announced that seven of the industry's biggest players have agreed to suspend marketing until protective measures take effect to guard against rogue agents enrolling customers in fee-for-service plans they didn't want or need. Among the seven: Tampa's fastest-growing publicly traded company, WellCare Health Plans Inc.
--Bill Coats, Times staff writer
-- Trading was halted in WellCare stock at 10:59 a.m. after it had fallen $5.47 a share to $115.50.
"Nov. 12, 1998 – Doctors Community Healthcare Corporation (DCHC) and National Century Financial Enterprises, Inc. (NCFE) today announced the completio
THE CASE AGAINST CONTRACTING WITH DOCTORS COMMUNITY HEALTHCARE CORPORATION (DCHC)
By Councilmember David Catania (At-Large)
The following items are a collection of published accounts regarding Doctors Community Healthcare Corporation (DCHC). At present, the Control Board is in the process of negotiating an agreement with DCHC to take over operations of the PBC, including DC General Hospital. Given DCHC's record, I believe that it would be unwise to entrust one of our most important institutions to this company.
Among the most serious allegations and concerns include:
1. DCHC, a for-profit company, is deeply in debt and unprofitable;
2. DCHC has a reputation for its inability to complete deals and for 11th hour demands in negotiations.
Consider the following published accounts:
I. DCHC'S FINANCIALHISTORY IS EXTREMELY WEAK. MOREOVER, THERE IS NO EVIDENCE THAT DCHC'S FINANCIAL SITUATION HAS IMPROVED.
Doctors CommunityHealthcare Corp. (DCHC) is strapped for cash, is carrying a huge debt and has posted steep annual losses for the last three years. . . .. In this year’s first half, the company reported a $2.6 million loss before taxes on revenues of $60.5 million. In 1997, it posted a $17 million loss before taxes onrevenues of $109.3 million. The company did not provide after-tax figures for last year. The $17 million loss includes a $5.5 million loss attributed to changes in Medicare and Medicaid reimbursements and unpaid property taxes in prior years at the company’s hospital in Washington, D.C. In 1996 and 1995, DCHC reported loses of $3.6 million and $3.3 million, respectively. Restated 1995 financial results – following an audit by Ernst &Young LLP – show that DCHC had overstated revenues by $2.3 million. The company currently has long-term debt of $123 million – which excludes debt from the Reese/Grant transaction. DCHC’s total shareholder equity is a negative $22.2 million, pushing its debt-to-capitalization ratio to a whopping 122% -- a sign of an overleveraged company with minimal financial flexibility.”Crain’s Chicago Business, October 12, 1998, Pg. 1 (emphasis added). As a privately-held corporation, DCHC does not file standard corporate reports with the Securities and Exchange Commission -- such as 10-Ks. As such, it is nearly impossible to perform due-diligence into their finances.
II. DCHC & GREATER SOUTHEAST COMMUNITYHOSPITAL: 11TH HOUR NEGOTIATING PRACTICES (1999).
A. DCHC backed out of the original deal only an hour before its announcement. “Washington,D.C. based Greater Southeast Community Hospital officials were ‘shocked’ yesterday when Arizona-based Doctors Community Healthcare Corp. withdrew its $39 million offer to buy the hospital and its affiliates only an hour before the deal was to be announced in bankruptcy court the Washington Post reports. Doctors Community officials said that they were ‘blindsided’ by last-minute financial disclosures filed by the near-bankrupt Washington, D.C. hospital, which included reports that state and federal officials are trying to recover $4.6 million in overpayments. Doctors Community officials also complained about ‘major discrepancies’ in the hospital’s inventory of shared and leased medical equipment, but made clear that they hope to negotiate a new deal with the hospital today. Greater Southeast, currently facing a $70 million debt, has until tomorrow to secure a partner or will face a court-ordered liquidation of all of its assets.” AmericanHealth Line, November 4, 1999 (emphasis added).
B. With Greater Southeast Community Hospital's back against the wall, DCHC purchased the hospital for much less than originally agreed upon. "National Century Financial Enterprises, Dublin, Ohio, provided $30 million in financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital". Modern Healthcare, February 28, 2000, Pg. 52.
C. DCHC continues to seek financial advantages from the District. "Paul Tuft, the CEO of Doctors Community Healthcare, proposed a 20 year property tax exemption at the beginning of 2000, soon after Doctors Community purchased Greater Southeast at a bankruptcy sale. The tax exemption could be worth nearly $1 million a year." Washington Post, January 23, 2001, Pg. B5 (emphasis added).
D. After the purchaseof Greater Southeast, DCHC downsized Hadley. "The company that owns the two District hospitals east of the Anacostia River said yesterday that it will consolidate emergency and general medical services at the larger one and convert the other into a nursing home and long-term acute care facility. Hadley Memorial Hospital will close its emergency room Feb. 1 and send such cases to Greater Southeast Community Hospital, which is expanding to accommodate the change." Washington Post, January 9, 2001, Pg.B3.
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THE CASE AGAINST CONTRACTING WITH DOCTORS COMMUNITY HEALTHCARE CORPORATION ("DCHC")
By Councilmember David Catania (At-Large)
The following items are a collection of published accounts regarding Doctors Community Healthcare Corporation ("DCHC"). At present, the Control Board is in the process of negotiating an agreement with DCHC to take over operations of the PBC, including DC General Hospital. Given DCHC's record, I believe that it would be unwise to entrust one of our most important institutions to this company.
Among the most serious allegations and concerns include:
DCHC, a for-profit company, is deeply in debt and unprofitable;
DCHC has a reputation for its inability to complete deals and for 11th hour demands in negotiations.
Consider the following published accounts:
I. DCHC'S FINANCIAL HISTORY IS EXTREMELY WEAK. MOREOVER, THERE IS NO EVIDENCE THAT DCHC'S FINANCIAL SITUATION HAS IMPROVED.
"Doctors Community Healthcare Corp. (DCHC) is strapped for cash, is carrying a huge debt and has posted steep annual losses for the last three years. . . . . In this year’s first half, the company reported a $2.6 million loss before taxes on revenues of $60.5 million. In 1997, it posted a $17 million loss before taxes on revenues of $109.3 million. The company did not provide after-tax figures for last year. The $17 million loss includes a $5.5 million loss attributed to changes in Medicare and Medicaid reimbursements and unpaid property taxes in prior years at the company’s hospital in Washington, D.C. In 1996 and 1995, DCHC reported loses of $3.6 million and $3.3 million, respectively. Restated 1995 financial results – following an audit by Ernst & Young LLP – show that DCHC had overstated revenues by $2.3 million. The company currently has long-term debt of $123 million – which excludes debt from the Reese/Grant transaction. DCHC’s total shareholder equity is a negative $22.2 million, pushing its debt-to-capitalization ratio to a whopping 122% -- a sign of an overleveraged company with minimal financial flexibility." Crain’s Chicago Business, October 12, 1998, Pg. 1 (emphasis added).
As a privately-held corporation, DCHC does not file standard corporate reports with the Securities and Exchange Commission -- such as 10-Ks. As such, it is nearly impossible to perform due-diligence into their finances.
II. DCHC & GREATER SOUTHEAST COMMUNITY HOSPITAL: 11th HOUR NEGOTIATING PRACTICES (1999).
A. DCHC backed out of the original deal only an hour before its announcement.
"Washington, D.C. based Greater Southeast Community Hospital officials were ‘shocked’ yesterday when Arizona-based Doctors Community Healthcare Corp. withdrew its $39 million offer to buy the hospital and its affiliates only an hour before the deal was to be announced in bankruptcy court the Washington Post reports. Doctors Community officials said that they were ‘blindsided’ by last-minute financial disclosures filed by the near-bankrupt Washington, D.C. hospital, which included reports that state and federal officials are trying to recover $4.6 million in overpayments. Doctors Community officials also complained about ‘major discrepancies’ in the hospital’s inventory of shared and leased medical equipment, but made clear that they hope to negotiate a new deal with the hospital today. Greater Southeast, currently facing a $70 million debt, has until tomorrow to secure a partner or will face a court-ordered liquidation of all of its assets." American Health Line, November 4, 1999 (emphasis added).
B. With Greater Southeast Community Hospital's back against the wall, DCHC purchased the hospital for much less than originally agreed upon.
"National Century Financial Enterprises, Dublin, Ohio, provided $30 million in financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital." Modern Healthcare, February 28, 2000, Pg. 52.
C. DCHC continues to seek financial advantages from the District.
Paul Tuft, the CEO of Doctors Community Healthcare, proposed a 20 year property tax exemption at the beginning of 2000, "soon after Doctors Community purchased Greater Southeast at a bankruptcy sale." The tax exemption could be worth nearly $1 million a year. Washington Post, January 23, 2001, Pg. B5 (emphasis added).
D. After the purchase of Greater Southeast, DCHC downsized Hadley.
"The company that owns the two District hospitals east of the Anacostia River said yesterday that it will consolidate emergency and general medical services at the larger one and convert the other into a nursing home and long-term acute care facility. Hadley Memorial Hospital will close its emergency room Feb. 1 and send such cases to Greater Southeast Community Hospital, which is expanding to accommodate the change." Washington Post, January 9, 2001, Pg. B3.
III. DCHC & BOSTON REGIONAL MEDICAL CENTER: BANKRUPTCY, CLOSURE, AND LAWSUITS (1997-1999).
A. Boston Regional Medical Center is suing DCHC for backing out of their deal.
"A bankrupt and shuttered Massachusetts hospital late last week filed suit against a financing company that was supposed to keep it out of trouble and a for-profit hospital chain that backed out of a deal to buy the facility. Boston Regional Medical Center, Stoneham, Mass., which closed and filed for bankruptcy last February, blamed the financing company, Dublin, Ohio-based National Century Financial Enterprises and its chief executive officer, Lance Poulson, for its demise. The hospital also blamed Paul Tuft, chairman and CEO of Doctors Community Healthcare Corp., for its trouble. The lawsuit, filed in U.S. Bankruptcy Court in Boston, seeks unspecified damages for 16 counts including alleged fraud, misrepresentation, breach of fiduciary duty and civil conspiracy." . . . "National Century had agreed to back a deal by Scottsdale, Ariz.-based Doctors Community to buy ailing not-for-profit Boston Regional for $52 million (July 19, 1999, p.30). National Century also owns a minority stake in Doctors Community. As the hospital's losses mounted, the deal went sour, and Doctors Community backed out after 18 months of negotiations. The lawsuit claims that National Century promised to lend $16 million in working capital to the hospital, provide a line of credit of up to $4 million and provide long-term financing of about $36 million for the deal. The suit says the company knew at the time it made these pledges that it did not have the ability or willingness to follow through." Modern Healthcare, January 24, 2000, Pg. 4 (emphasis added).
According to a complaint filed in U.S. Bankruptcy Court in Boston filed October 31, 2000: "Doctor Community Healthcare eventually did take over [Boston Regional Medical Center], in 1997, but financial conditions continued to get worse. The new DCHC, the lawsuit says, mismanaged money, did not pay taxes or insurance premiums, and drove the hospital into bankruptcy. It also failed to buy the hospital, as promised, and did not provide the attorney general with requested information, the lawsuit states." Worcester Telegram & Gazette, January 16, 2001, Pg. B1 (emphasis added).
B. Despite letter of intent, DCHC never finalized offer to purchase Boston Regional.
"Doctors Community Healthcare Corp., which had signed a letter of intent to purchase the facility [Boston Regional] a year ago, was still attempting to negotiate a lower purchase price as recently as last week, according to one official close to the bankruptcy proceedings. He said Doctors Community initially offered $50 million but backed out and substituted an offer of $25 million that the hospital rejected." Boston Globe, February 21, 1999, Pg.1.
C. Relying on DCHC's more generous initial offer, Boston Regional rejected other offers to its detriment.
Doctors Community had offered to buy Boston Regional Medical Center, which sits on a "45-acre parcel overlooking Spot Pond, for $52 million. . . . Doctors Community, a privately held for-profit health management firm based in Arizona, had ostensibly outbid Winchester Hospital, which had offered $37 million, and for-profit Tenet Healthcare Corp. of California, which had bid $39 million. Both wanted to buy the hospital outright." Boston Globe, October 25, 1999, Pg. A1.
D. Despite the fact that the purchase never occurred, DCHC managed Boston Regional to DCHC's advantage.
"But between the time Doctors Community and Boston regional signed an interim agreement in October 1997 and the day the deal fell apart in February (1999) . . . the hospital’s financial condition had worsened. Adding to its woes was a stipulation in the papers it signed with Doctors Community in which the hospital agreed to borrow heavily from a Doctors Community-affiliated financing company in order to stay afloat until the deal closed. The loans of up to $16 million were to be repaid at the closing or assumed by the newly formed hospital partnership. Doctors Community itself was borrowing up to $37.5 million from that same financing company, National Century Financial Enterprises, to pay for its investment in Boston regional. When this financial house of cards fell in February, Boston Regional found itself without a financial partner but on the hook for millions borrowed from Doctors Community. Too late to revive the previous offers, the 195-bed hospital fell into bankruptcy court. . . . Doctors Community arranged a last-resort mechanism of selling Boston Regional’s accounts receivables at a discount, so that the hospital could get cash in exchange for turning over its right to insurance reimbursements, and it promised to keep Ricks on as hospital president. Even before the agreement was finalized, the hospital began paying $50,000 a month in management fees to Doctors Community last year." Boston Globe, October 25, 1999, Pg. A1 (emphasis added).
E. DCHC's final offer equaled the assessed value of the valuable land on which Boston Regional was located.
"The 40-acre parcel [on which Boston Region sits] is appraised by the town of Stoneham at $25.7 million, according to Stoneham’s director of assessing, Elaine Moore." Boston Globe, March 14, 1999, Pg. 1.
"Doctors Community Healthcare Corp., which had signed a letter of intent to purchase the facility [Boston Regional] a year ago, was still attempting to negotiate a lower purchase price as recently as last week, according to one official close to the bankruptcy proceedings. He said Doctors Community initially offered $50 million but backed out and substituted an offer of $25 million that the hospital rejected." Boston Globe, February 21, 1999, Pg.1.
IV. DCHC & MICHAEL REESE AND GRANT HOSPITAL: SHAKY FINANCING AND LACK OF COMMITMENT (1998).
A. DCHC had a difficulty financing the purchase of the two hospitals.
Doctors had difficulty completing the financing for the transaction with Columbia/HCA for the acquisition of Michael Reese and Grant Hospitals. Chicago Tribune, November 5, 1998, p. 3N.
"The Arizona-based hospital management company that plans to acquire ailing Columbia Michael Reese Hospital and Medical Center and Grant Hospital is itself in need of financial resuscitation, according to company documents provided to Illinois regulators. Crain’s Chicago Business, October 12, 1998, Pg. 1.
B. DCHC had to pay a penalty for failing to complete the financing on time.
"Doctors Community Healthcare Corp. of Scottsdale, Ariz., Thursday obtained a firm commitment from a New York investment bank [Credit Suisse First Boston Corp] to underwrite its acquisition of Michael Reese Hospital and Medical Center and Grant Hospital from Columbia/HCA Healthcare Corp. However, it remained unclear whether Nashville-based Columbia would allow Doctors Community to miss yet another deadline for closing the transaction. Earlier this month, Doctors Community had to write Columbia a $2.5 million check to extend the close to Friday’s deadline because its financial commitments weren’t firm." Chicago Tribune, October 30, 1998, Pg. 3N (emphasis added).
C. Soon after assuming control of Michael Reese Hospital, DCHC ended the hospital's relationship with Humana to save money.
"Michael Reese Hospital and Medical Center won’t renew its longtime contract with Humana Inc., saying the health maintenance organization is costing the South Side hospital too much money. . . . . Humana’s customer base is responsible for 30 percent of the hospital’s admissions at a time when the facility’s new owners are attempting a financial turnaround. But Reese executives said the HMO, which pays the hospital a fixed rate for medical care services, was paying Reese about half of what the hospital’s expenses were." Chicago Tribune, March 31, 1999, Pg. 1N (emphasis added).
D. DCHC's Actions at Micheal Reese Hospital negatively impacted neighboring hospital.
"Mercy was unprepared to take on several thousand patients insured by Humana, Inc. when nearby Michael Reese Hospital and Medical Center decided last March to drastically curb its relationship with the managed-care plan after a dispute over rates." Chicago Tribune, April 27, 2000, Pg. 1N.
E. DCHC sought unsuccessfully to merge Michael Reese Hospital with nearby hospital.
"Michael Reese Hospital and Medical Center has suggested a possible merger with its closest neighbor and fierce rival on the city's South Side, Mercy Hospital and Medical Center, sources say. Dennis Patterson, interim president and CEO of Mercy, confirms that Dr. Enrique Beckmann, Reese's chairman and CEO, approached him last month to express interest in the two institutions 'working together' on a possible 'relationship'." . . . "Though rebuffed for now, the overture signals Reese's desire for a merger partner or other merger to help it withstand the financial pressures it is facing. Both Reese and Mercy are suffering from excess hospital capacity and falling federal reimbursements." . . . "'There's a population to be served (on the South Side), but neither has done real well with it in an economically feasible way.', says Don Hamilton, a partner and health care consultant in Ernst & Young LLP's Chicago office. 'Putting weakness with weakness isn't a way to make strength, but maybe they don't have alternatives. Maybe they don't need to have two of everything.'" Crain's Chicago Business, April 10, 2000, Pg. 3.
F. Michael Reese Hospital is located on very valuable land.
"Adding to the drama: Reese’s Near South Side real estate is highly coveted – meaning the hospital could be worth more dead than alive. And its physicians, who were expected to take a big ownership stake in the hospital , have yet to put in a dime." Crain’s Chicago Business, February 8, 1999, Pg. 1 (emphasis added).
"Michael Reese Hospital and Medical Center is putting together a real estate team to evaluate options for its sprawling, and potentially lucrative, South Side lakefront property." Crain's Chicago Business, March 20, 2000, Pg. 3 (emphasis added).
G. Shortly after DCHC bought Micheal Reese Hospital and Grant Hospital, DCHC quickly resold Grant Hospital, which was loosing more money under its management.
"The questions of commitment were triggered by how quickly Doctors Community Healthcare Corp. auctioned off the hospital (Grant). The company bought Grant from Columbia/HCA Healthcare Corp. just last fall and promised to operate Grant as a health-care facility. . . . The sale will allow Doctors to focus solely on Michael Reese, which lost more than $50 million last year. With Grant’s losses, Doctors may have had a hard time turning both facilities around. Grant’s losses went from between $200,000 and $400,000 a month under Columbia ownership to $600,000 a month once Doctors Community bought Grant in November." Chicago Tribune, May 21, 1999, Pg. 3N (emphasis added).
"Chicago-based Grant Hospital is on the selling block once again, a ‘scant three months’ after Scottsdale, AZ-based Doctors Community Healthcare Corp, bought it." American Health Line, February 25, 1999.
H. DCHC had difficulty meeting the obligations surrounding the sale of Grant Hospital.
"But for the struggling Michael Reese Hospital and Medical Center on Chicago’s South Side, a competing hospital holds its fate. Edgewater Medical Center, a not-for-profit hospital on Chicago’s North Side, holds a trump card that could doom for-profit Michael Reese. Edgewater’s ace-in-the-hole is a first mortgage note secured by prime waterfront real estate- the property atop which 225-bed Micheal Reese sits. That land is potentially worth triple the value of the paper backing it. If Michael Reese’s for-profit parent, Scottsdale, Ariz.-based Doctors Community Healthcare Corp., defaulted on the mortgage, 215-bed Edgewater could force the hospital into foreclosure. . . . Edgeater’s potential foreclosure power over Michael Reese stems from a little-noticed detail in the not-for-profit’s agreement to buy Grant Hospital, another Chicago hospital, from Doctors Community this summer. Doctors Community originally purchased Grant and Michael Reese from Columbia/HCA Healthcare Corp. in November 1998. As part of the deal, Columbia continued the mortgage on those properties. But when Doctors Community later decided to sell Grant to Edgewater, it encountered a snag. . . . To close the Grant deal, Doctors Community persuaded Edgewater to assume a first mortgage interest on Michael Reese. Edgewater paid $10.9 million to take out the mortgage. ‘We were told by Doctors Community at the 11th hour that that’s something they would need to get the deal done.’ Said Edgewater’s Zeisel. Modern Healthcare, September 20, 1999, Pg. 2.
IV. DCHC & NATIONAL CENTURY FINANCIAL ENTERPRISES ("NCFC"): AN UNDENIABLE PARTNERSHIP
A. NCFC is a health care financing company.
"The company [National Century Financial Enterprises], based in Dublin, Ohio, has made a name for itself in a controversial form of health care financing that struggling hospitals have increasingly turned to. Under this strategy, hospitals sell or pledge their expected insurance reimbursements, or accounts receivables, to companies like National Century, in exchange for cash." The Boston Globe, January 21, 2000, Pg. B4.
"Headquartered in Dublin, OH, National Century Financial Enterprises, Inc. estimated revenues of approximately $200 million for 1999 and is the country's largest provider of healthcare accounts receivable financing via its securitized portfolios. In addition to its Dublin headquarters, NCFE has offices in Scottsdale AZ." Business Wire, January 24, 2000.
B. NCFC owns over 11% of DCHC.
"Doctors Community was founded in 1991 by Paul Tuft, . . . The company pursued struggling hospitals, often by forming ownership partnerships with physicians. . . . National Century Financial Enterprises, a Dublin, Ohio-based financing company that funds many of Doctors Community's deals, is financing Doctors' purchase of the hospital [Greater Southeast] as well as providing an upfront loan to Greater Southeast to tide it over until the purchase is completed. The company, which provides high-interest loans and lines of credit to struggling healthcare providers that may be shunned by traditional lenders, has an 11.5% stake in Doctors Community." Modern Healthcare, November 22, 1999, Pg. 8.
C. DCHC uses NCFC to finance DCHC's efforts.
Greater Southeast Community Hospital
"National Century Financial Enterprises, Dublin, Ohio, provided $30 million on financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital." Modern Healthcare, February 28, 2000, Pg. 52.
Boston Regional Medical Center
"Adding to its [Boston Regional] woes was a stipulation in the papers it signed with Doctors Community in which the hospital agreed to borrow heavily from a Doctors Community-affiliated financing company in order to stay afloat until the deal closed. The loans of up to $16 million were to be repaid at the closing or assumed by the newly formed hospital partnership. Doctors Community itself was borrowing up to $37.5 million from that same financing company, National Century Financial Enterprises, to pay for its investment in Boston Regional. When this financial house of cards fell in February, Boston Regional found itself without a financial partner but on the hook for millions borrowed from Doctors Community." Boston Globe, October 25, 1999, Pg. A1.
Michael Reese Hospital and Grant Hospital
"Nov. 12, 1998 – Doctors Community Healthcare Corporation (DCHC) and National Century Financial Enterprises, Inc. (NCFE) today announced the completion of the acquisition of Michael Reese and Grant Hospitals from Columbia/HCA. The NCFE agreements provide for accounts receivable and equipment financing commitments totaling $80 million for the purchase of the hospital’s healthcare receivables from third party payers and equipment financing. The purchase price for both hospitals is $62.5 million plus working capital." Business Wire, November 12, 1998.
D. NCFC has been investigated for fraudulent activity.
"A major credit-rating service has launched an investigation into the operations of Dublin-based National Century Financial Enterprises after receiving three anonymous letters alleging fraudulent activity at the company." The Columbia Dispatch, May 26, 2000, Pg. 1C.
"Duff & Phelps Credit Rating Co. (DCR) and Fitch IBCA recently have launched an investigation into the financial records and activities of healthcare receivables company National Century Financial Enterprises (NCFE) in response to a series of anonymous letters received separately by both DCR and Asset Sales Report. . . . The first two letters, addressed to Jeff Orr and dated April 26, 1999, and July 16, 1999, state that NCFE "operates outside the scope of its indentures and normal business practices." Further, the writer of the letters alleges that ‘it is estimated that approximately 50% or more of the $2 billion portfolio is either worthless or non-existent." Asset Sales Report, May 22, 2000.
V. MORE INFORMATION ON DCHC
DCHC operates the following health care institutions:
Michael Reese Hospital and Medical Center in Chicago 482-bed;
Pacifica Hospital of the Valley in Sun Valley, Calif. 242-bed;
Hadley Memorial Hospital in Washington, D.C. 148-bed;
Greater Southeast Community Hospital in Washington, D.C. 450-bed;
Brea Community Hospital (Calif.) 162-bed;
Pine Grove Hospital, a psychiatric facility in Canoga Park, Calif. 80-bed
Paul R. Tuft, Chairman of the Board and Chief Executive Officer. Mr. Tuft's was formerly a partner in a law firm in Omaha, Nebraska specializing in healthcare finance.
Mel Redman, President and Chief Operating Officer. Mr. Redman spent 25 years at Wal-Mart Stores, Incorporated, where he served as Senior Vice President of Operations.
Visit their website at www.doctorscommunity.com.
By Councilmember David Catania (At-Large)
The following items are a collection of published accounts regarding Doctors Community Healthcare Corporation (DCHC). At present, the Control Board is in the process of negotiating an agreement with DCHC to take over operations of the PBC, including DC General Hospital. Given DCHC's record, I believe that it would be unwise to entrust one of our most important institutions to this company.
Among the most serious allegations and concerns include:
1. DCHC, a for-profit company, is deeply in debt and unprofitable;
2. DCHC has a reputation for its inability to complete deals and for 11th hour demands in negotiations.
Consider the following published accounts:
I. DCHC'S FINANCIALHISTORY IS EXTREMELY WEAK. MOREOVER, THERE IS NO EVIDENCE THAT DCHC'S FINANCIAL SITUATION HAS IMPROVED.
Doctors CommunityHealthcare Corp. (DCHC) is strapped for cash, is carrying a huge debt and has posted steep annual losses for the last three years. . . .. In this year’s first half, the company reported a $2.6 million loss before taxes on revenues of $60.5 million. In 1997, it posted a $17 million loss before taxes onrevenues of $109.3 million. The company did not provide after-tax figures for last year. The $17 million loss includes a $5.5 million loss attributed to changes in Medicare and Medicaid reimbursements and unpaid property taxes in prior years at the company’s hospital in Washington, D.C. In 1996 and 1995, DCHC reported loses of $3.6 million and $3.3 million, respectively. Restated 1995 financial results – following an audit by Ernst &Young LLP – show that DCHC had overstated revenues by $2.3 million. The company currently has long-term debt of $123 million – which excludes debt from the Reese/Grant transaction. DCHC’s total shareholder equity is a negative $22.2 million, pushing its debt-to-capitalization ratio to a whopping 122% -- a sign of an overleveraged company with minimal financial flexibility.”Crain’s Chicago Business, October 12, 1998, Pg. 1 (emphasis added). As a privately-held corporation, DCHC does not file standard corporate reports with the Securities and Exchange Commission -- such as 10-Ks. As such, it is nearly impossible to perform due-diligence into their finances.
II. DCHC & GREATER SOUTHEAST COMMUNITYHOSPITAL: 11TH HOUR NEGOTIATING PRACTICES (1999).
A. DCHC backed out of the original deal only an hour before its announcement. “Washington,D.C. based Greater Southeast Community Hospital officials were ‘shocked’ yesterday when Arizona-based Doctors Community Healthcare Corp. withdrew its $39 million offer to buy the hospital and its affiliates only an hour before the deal was to be announced in bankruptcy court the Washington Post reports. Doctors Community officials said that they were ‘blindsided’ by last-minute financial disclosures filed by the near-bankrupt Washington, D.C. hospital, which included reports that state and federal officials are trying to recover $4.6 million in overpayments. Doctors Community officials also complained about ‘major discrepancies’ in the hospital’s inventory of shared and leased medical equipment, but made clear that they hope to negotiate a new deal with the hospital today. Greater Southeast, currently facing a $70 million debt, has until tomorrow to secure a partner or will face a court-ordered liquidation of all of its assets.” AmericanHealth Line, November 4, 1999 (emphasis added).
B. With Greater Southeast Community Hospital's back against the wall, DCHC purchased the hospital for much less than originally agreed upon. "National Century Financial Enterprises, Dublin, Ohio, provided $30 million in financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital". Modern Healthcare, February 28, 2000, Pg. 52.
C. DCHC continues to seek financial advantages from the District. "Paul Tuft, the CEO of Doctors Community Healthcare, proposed a 20 year property tax exemption at the beginning of 2000, soon after Doctors Community purchased Greater Southeast at a bankruptcy sale. The tax exemption could be worth nearly $1 million a year." Washington Post, January 23, 2001, Pg. B5 (emphasis added).
D. After the purchaseof Greater Southeast, DCHC downsized Hadley. "The company that owns the two District hospitals east of the Anacostia River said yesterday that it will consolidate emergency and general medical services at the larger one and convert the other into a nursing home and long-term acute care facility. Hadley Memorial Hospital will close its emergency room Feb. 1 and send such cases to Greater Southeast Community Hospital, which is expanding to accommodate the change." Washington Post, January 9, 2001, Pg.B3.
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THE CASE AGAINST CONTRACTING WITH DOCTORS COMMUNITY HEALTHCARE CORPORATION ("DCHC")
By Councilmember David Catania (At-Large)
The following items are a collection of published accounts regarding Doctors Community Healthcare Corporation ("DCHC"). At present, the Control Board is in the process of negotiating an agreement with DCHC to take over operations of the PBC, including DC General Hospital. Given DCHC's record, I believe that it would be unwise to entrust one of our most important institutions to this company.
Among the most serious allegations and concerns include:
DCHC, a for-profit company, is deeply in debt and unprofitable;
DCHC has a reputation for its inability to complete deals and for 11th hour demands in negotiations.
Consider the following published accounts:
I. DCHC'S FINANCIAL HISTORY IS EXTREMELY WEAK. MOREOVER, THERE IS NO EVIDENCE THAT DCHC'S FINANCIAL SITUATION HAS IMPROVED.
"Doctors Community Healthcare Corp. (DCHC) is strapped for cash, is carrying a huge debt and has posted steep annual losses for the last three years. . . . . In this year’s first half, the company reported a $2.6 million loss before taxes on revenues of $60.5 million. In 1997, it posted a $17 million loss before taxes on revenues of $109.3 million. The company did not provide after-tax figures for last year. The $17 million loss includes a $5.5 million loss attributed to changes in Medicare and Medicaid reimbursements and unpaid property taxes in prior years at the company’s hospital in Washington, D.C. In 1996 and 1995, DCHC reported loses of $3.6 million and $3.3 million, respectively. Restated 1995 financial results – following an audit by Ernst & Young LLP – show that DCHC had overstated revenues by $2.3 million. The company currently has long-term debt of $123 million – which excludes debt from the Reese/Grant transaction. DCHC’s total shareholder equity is a negative $22.2 million, pushing its debt-to-capitalization ratio to a whopping 122% -- a sign of an overleveraged company with minimal financial flexibility." Crain’s Chicago Business, October 12, 1998, Pg. 1 (emphasis added).
As a privately-held corporation, DCHC does not file standard corporate reports with the Securities and Exchange Commission -- such as 10-Ks. As such, it is nearly impossible to perform due-diligence into their finances.
II. DCHC & GREATER SOUTHEAST COMMUNITY HOSPITAL: 11th HOUR NEGOTIATING PRACTICES (1999).
A. DCHC backed out of the original deal only an hour before its announcement.
"Washington, D.C. based Greater Southeast Community Hospital officials were ‘shocked’ yesterday when Arizona-based Doctors Community Healthcare Corp. withdrew its $39 million offer to buy the hospital and its affiliates only an hour before the deal was to be announced in bankruptcy court the Washington Post reports. Doctors Community officials said that they were ‘blindsided’ by last-minute financial disclosures filed by the near-bankrupt Washington, D.C. hospital, which included reports that state and federal officials are trying to recover $4.6 million in overpayments. Doctors Community officials also complained about ‘major discrepancies’ in the hospital’s inventory of shared and leased medical equipment, but made clear that they hope to negotiate a new deal with the hospital today. Greater Southeast, currently facing a $70 million debt, has until tomorrow to secure a partner or will face a court-ordered liquidation of all of its assets." American Health Line, November 4, 1999 (emphasis added).
B. With Greater Southeast Community Hospital's back against the wall, DCHC purchased the hospital for much less than originally agreed upon.
"National Century Financial Enterprises, Dublin, Ohio, provided $30 million in financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital." Modern Healthcare, February 28, 2000, Pg. 52.
C. DCHC continues to seek financial advantages from the District.
Paul Tuft, the CEO of Doctors Community Healthcare, proposed a 20 year property tax exemption at the beginning of 2000, "soon after Doctors Community purchased Greater Southeast at a bankruptcy sale." The tax exemption could be worth nearly $1 million a year. Washington Post, January 23, 2001, Pg. B5 (emphasis added).
D. After the purchase of Greater Southeast, DCHC downsized Hadley.
"The company that owns the two District hospitals east of the Anacostia River said yesterday that it will consolidate emergency and general medical services at the larger one and convert the other into a nursing home and long-term acute care facility. Hadley Memorial Hospital will close its emergency room Feb. 1 and send such cases to Greater Southeast Community Hospital, which is expanding to accommodate the change." Washington Post, January 9, 2001, Pg. B3.
III. DCHC & BOSTON REGIONAL MEDICAL CENTER: BANKRUPTCY, CLOSURE, AND LAWSUITS (1997-1999).
A. Boston Regional Medical Center is suing DCHC for backing out of their deal.
"A bankrupt and shuttered Massachusetts hospital late last week filed suit against a financing company that was supposed to keep it out of trouble and a for-profit hospital chain that backed out of a deal to buy the facility. Boston Regional Medical Center, Stoneham, Mass., which closed and filed for bankruptcy last February, blamed the financing company, Dublin, Ohio-based National Century Financial Enterprises and its chief executive officer, Lance Poulson, for its demise. The hospital also blamed Paul Tuft, chairman and CEO of Doctors Community Healthcare Corp., for its trouble. The lawsuit, filed in U.S. Bankruptcy Court in Boston, seeks unspecified damages for 16 counts including alleged fraud, misrepresentation, breach of fiduciary duty and civil conspiracy." . . . "National Century had agreed to back a deal by Scottsdale, Ariz.-based Doctors Community to buy ailing not-for-profit Boston Regional for $52 million (July 19, 1999, p.30). National Century also owns a minority stake in Doctors Community. As the hospital's losses mounted, the deal went sour, and Doctors Community backed out after 18 months of negotiations. The lawsuit claims that National Century promised to lend $16 million in working capital to the hospital, provide a line of credit of up to $4 million and provide long-term financing of about $36 million for the deal. The suit says the company knew at the time it made these pledges that it did not have the ability or willingness to follow through." Modern Healthcare, January 24, 2000, Pg. 4 (emphasis added).
According to a complaint filed in U.S. Bankruptcy Court in Boston filed October 31, 2000: "Doctor Community Healthcare eventually did take over [Boston Regional Medical Center], in 1997, but financial conditions continued to get worse. The new DCHC, the lawsuit says, mismanaged money, did not pay taxes or insurance premiums, and drove the hospital into bankruptcy. It also failed to buy the hospital, as promised, and did not provide the attorney general with requested information, the lawsuit states." Worcester Telegram & Gazette, January 16, 2001, Pg. B1 (emphasis added).
B. Despite letter of intent, DCHC never finalized offer to purchase Boston Regional.
"Doctors Community Healthcare Corp., which had signed a letter of intent to purchase the facility [Boston Regional] a year ago, was still attempting to negotiate a lower purchase price as recently as last week, according to one official close to the bankruptcy proceedings. He said Doctors Community initially offered $50 million but backed out and substituted an offer of $25 million that the hospital rejected." Boston Globe, February 21, 1999, Pg.1.
C. Relying on DCHC's more generous initial offer, Boston Regional rejected other offers to its detriment.
Doctors Community had offered to buy Boston Regional Medical Center, which sits on a "45-acre parcel overlooking Spot Pond, for $52 million. . . . Doctors Community, a privately held for-profit health management firm based in Arizona, had ostensibly outbid Winchester Hospital, which had offered $37 million, and for-profit Tenet Healthcare Corp. of California, which had bid $39 million. Both wanted to buy the hospital outright." Boston Globe, October 25, 1999, Pg. A1.
D. Despite the fact that the purchase never occurred, DCHC managed Boston Regional to DCHC's advantage.
"But between the time Doctors Community and Boston regional signed an interim agreement in October 1997 and the day the deal fell apart in February (1999) . . . the hospital’s financial condition had worsened. Adding to its woes was a stipulation in the papers it signed with Doctors Community in which the hospital agreed to borrow heavily from a Doctors Community-affiliated financing company in order to stay afloat until the deal closed. The loans of up to $16 million were to be repaid at the closing or assumed by the newly formed hospital partnership. Doctors Community itself was borrowing up to $37.5 million from that same financing company, National Century Financial Enterprises, to pay for its investment in Boston regional. When this financial house of cards fell in February, Boston Regional found itself without a financial partner but on the hook for millions borrowed from Doctors Community. Too late to revive the previous offers, the 195-bed hospital fell into bankruptcy court. . . . Doctors Community arranged a last-resort mechanism of selling Boston Regional’s accounts receivables at a discount, so that the hospital could get cash in exchange for turning over its right to insurance reimbursements, and it promised to keep Ricks on as hospital president. Even before the agreement was finalized, the hospital began paying $50,000 a month in management fees to Doctors Community last year." Boston Globe, October 25, 1999, Pg. A1 (emphasis added).
E. DCHC's final offer equaled the assessed value of the valuable land on which Boston Regional was located.
"The 40-acre parcel [on which Boston Region sits] is appraised by the town of Stoneham at $25.7 million, according to Stoneham’s director of assessing, Elaine Moore." Boston Globe, March 14, 1999, Pg. 1.
"Doctors Community Healthcare Corp., which had signed a letter of intent to purchase the facility [Boston Regional] a year ago, was still attempting to negotiate a lower purchase price as recently as last week, according to one official close to the bankruptcy proceedings. He said Doctors Community initially offered $50 million but backed out and substituted an offer of $25 million that the hospital rejected." Boston Globe, February 21, 1999, Pg.1.
IV. DCHC & MICHAEL REESE AND GRANT HOSPITAL: SHAKY FINANCING AND LACK OF COMMITMENT (1998).
A. DCHC had a difficulty financing the purchase of the two hospitals.
Doctors had difficulty completing the financing for the transaction with Columbia/HCA for the acquisition of Michael Reese and Grant Hospitals. Chicago Tribune, November 5, 1998, p. 3N.
"The Arizona-based hospital management company that plans to acquire ailing Columbia Michael Reese Hospital and Medical Center and Grant Hospital is itself in need of financial resuscitation, according to company documents provided to Illinois regulators. Crain’s Chicago Business, October 12, 1998, Pg. 1.
B. DCHC had to pay a penalty for failing to complete the financing on time.
"Doctors Community Healthcare Corp. of Scottsdale, Ariz., Thursday obtained a firm commitment from a New York investment bank [Credit Suisse First Boston Corp] to underwrite its acquisition of Michael Reese Hospital and Medical Center and Grant Hospital from Columbia/HCA Healthcare Corp. However, it remained unclear whether Nashville-based Columbia would allow Doctors Community to miss yet another deadline for closing the transaction. Earlier this month, Doctors Community had to write Columbia a $2.5 million check to extend the close to Friday’s deadline because its financial commitments weren’t firm." Chicago Tribune, October 30, 1998, Pg. 3N (emphasis added).
C. Soon after assuming control of Michael Reese Hospital, DCHC ended the hospital's relationship with Humana to save money.
"Michael Reese Hospital and Medical Center won’t renew its longtime contract with Humana Inc., saying the health maintenance organization is costing the South Side hospital too much money. . . . . Humana’s customer base is responsible for 30 percent of the hospital’s admissions at a time when the facility’s new owners are attempting a financial turnaround. But Reese executives said the HMO, which pays the hospital a fixed rate for medical care services, was paying Reese about half of what the hospital’s expenses were." Chicago Tribune, March 31, 1999, Pg. 1N (emphasis added).
D. DCHC's Actions at Micheal Reese Hospital negatively impacted neighboring hospital.
"Mercy was unprepared to take on several thousand patients insured by Humana, Inc. when nearby Michael Reese Hospital and Medical Center decided last March to drastically curb its relationship with the managed-care plan after a dispute over rates." Chicago Tribune, April 27, 2000, Pg. 1N.
E. DCHC sought unsuccessfully to merge Michael Reese Hospital with nearby hospital.
"Michael Reese Hospital and Medical Center has suggested a possible merger with its closest neighbor and fierce rival on the city's South Side, Mercy Hospital and Medical Center, sources say. Dennis Patterson, interim president and CEO of Mercy, confirms that Dr. Enrique Beckmann, Reese's chairman and CEO, approached him last month to express interest in the two institutions 'working together' on a possible 'relationship'." . . . "Though rebuffed for now, the overture signals Reese's desire for a merger partner or other merger to help it withstand the financial pressures it is facing. Both Reese and Mercy are suffering from excess hospital capacity and falling federal reimbursements." . . . "'There's a population to be served (on the South Side), but neither has done real well with it in an economically feasible way.', says Don Hamilton, a partner and health care consultant in Ernst & Young LLP's Chicago office. 'Putting weakness with weakness isn't a way to make strength, but maybe they don't have alternatives. Maybe they don't need to have two of everything.'" Crain's Chicago Business, April 10, 2000, Pg. 3.
F. Michael Reese Hospital is located on very valuable land.
"Adding to the drama: Reese’s Near South Side real estate is highly coveted – meaning the hospital could be worth more dead than alive. And its physicians, who were expected to take a big ownership stake in the hospital , have yet to put in a dime." Crain’s Chicago Business, February 8, 1999, Pg. 1 (emphasis added).
"Michael Reese Hospital and Medical Center is putting together a real estate team to evaluate options for its sprawling, and potentially lucrative, South Side lakefront property." Crain's Chicago Business, March 20, 2000, Pg. 3 (emphasis added).
G. Shortly after DCHC bought Micheal Reese Hospital and Grant Hospital, DCHC quickly resold Grant Hospital, which was loosing more money under its management.
"The questions of commitment were triggered by how quickly Doctors Community Healthcare Corp. auctioned off the hospital (Grant). The company bought Grant from Columbia/HCA Healthcare Corp. just last fall and promised to operate Grant as a health-care facility. . . . The sale will allow Doctors to focus solely on Michael Reese, which lost more than $50 million last year. With Grant’s losses, Doctors may have had a hard time turning both facilities around. Grant’s losses went from between $200,000 and $400,000 a month under Columbia ownership to $600,000 a month once Doctors Community bought Grant in November." Chicago Tribune, May 21, 1999, Pg. 3N (emphasis added).
"Chicago-based Grant Hospital is on the selling block once again, a ‘scant three months’ after Scottsdale, AZ-based Doctors Community Healthcare Corp, bought it." American Health Line, February 25, 1999.
H. DCHC had difficulty meeting the obligations surrounding the sale of Grant Hospital.
"But for the struggling Michael Reese Hospital and Medical Center on Chicago’s South Side, a competing hospital holds its fate. Edgewater Medical Center, a not-for-profit hospital on Chicago’s North Side, holds a trump card that could doom for-profit Michael Reese. Edgewater’s ace-in-the-hole is a first mortgage note secured by prime waterfront real estate- the property atop which 225-bed Micheal Reese sits. That land is potentially worth triple the value of the paper backing it. If Michael Reese’s for-profit parent, Scottsdale, Ariz.-based Doctors Community Healthcare Corp., defaulted on the mortgage, 215-bed Edgewater could force the hospital into foreclosure. . . . Edgeater’s potential foreclosure power over Michael Reese stems from a little-noticed detail in the not-for-profit’s agreement to buy Grant Hospital, another Chicago hospital, from Doctors Community this summer. Doctors Community originally purchased Grant and Michael Reese from Columbia/HCA Healthcare Corp. in November 1998. As part of the deal, Columbia continued the mortgage on those properties. But when Doctors Community later decided to sell Grant to Edgewater, it encountered a snag. . . . To close the Grant deal, Doctors Community persuaded Edgewater to assume a first mortgage interest on Michael Reese. Edgewater paid $10.9 million to take out the mortgage. ‘We were told by Doctors Community at the 11th hour that that’s something they would need to get the deal done.’ Said Edgewater’s Zeisel. Modern Healthcare, September 20, 1999, Pg. 2.
IV. DCHC & NATIONAL CENTURY FINANCIAL ENTERPRISES ("NCFC"): AN UNDENIABLE PARTNERSHIP
A. NCFC is a health care financing company.
"The company [National Century Financial Enterprises], based in Dublin, Ohio, has made a name for itself in a controversial form of health care financing that struggling hospitals have increasingly turned to. Under this strategy, hospitals sell or pledge their expected insurance reimbursements, or accounts receivables, to companies like National Century, in exchange for cash." The Boston Globe, January 21, 2000, Pg. B4.
"Headquartered in Dublin, OH, National Century Financial Enterprises, Inc. estimated revenues of approximately $200 million for 1999 and is the country's largest provider of healthcare accounts receivable financing via its securitized portfolios. In addition to its Dublin headquarters, NCFE has offices in Scottsdale AZ." Business Wire, January 24, 2000.
B. NCFC owns over 11% of DCHC.
"Doctors Community was founded in 1991 by Paul Tuft, . . . The company pursued struggling hospitals, often by forming ownership partnerships with physicians. . . . National Century Financial Enterprises, a Dublin, Ohio-based financing company that funds many of Doctors Community's deals, is financing Doctors' purchase of the hospital [Greater Southeast] as well as providing an upfront loan to Greater Southeast to tide it over until the purchase is completed. The company, which provides high-interest loans and lines of credit to struggling healthcare providers that may be shunned by traditional lenders, has an 11.5% stake in Doctors Community." Modern Healthcare, November 22, 1999, Pg. 8.
C. DCHC uses NCFC to finance DCHC's efforts.
Greater Southeast Community Hospital
"National Century Financial Enterprises, Dublin, Ohio, provided $30 million on financing to Doctors Community Healthcare Corp., Scottsdale, Ariz., for its acquisition of Greater Southeast Community Hospital in Washington. The deal was completed Dec. 31. The agreement provided for accounts receivable, equipment financing and real estate bridge commitments for the $22.3 million purchase with more funding available for closing costs and working capital." Modern Healthcare, February 28, 2000, Pg. 52.
Boston Regional Medical Center
"Adding to its [Boston Regional] woes was a stipulation in the papers it signed with Doctors Community in which the hospital agreed to borrow heavily from a Doctors Community-affiliated financing company in order to stay afloat until the deal closed. The loans of up to $16 million were to be repaid at the closing or assumed by the newly formed hospital partnership. Doctors Community itself was borrowing up to $37.5 million from that same financing company, National Century Financial Enterprises, to pay for its investment in Boston Regional. When this financial house of cards fell in February, Boston Regional found itself without a financial partner but on the hook for millions borrowed from Doctors Community." Boston Globe, October 25, 1999, Pg. A1.
Michael Reese Hospital and Grant Hospital
"Nov. 12, 1998 – Doctors Community Healthcare Corporation (DCHC) and National Century Financial Enterprises, Inc. (NCFE) today announced the completion of the acquisition of Michael Reese and Grant Hospitals from Columbia/HCA. The NCFE agreements provide for accounts receivable and equipment financing commitments totaling $80 million for the purchase of the hospital’s healthcare receivables from third party payers and equipment financing. The purchase price for both hospitals is $62.5 million plus working capital." Business Wire, November 12, 1998.
D. NCFC has been investigated for fraudulent activity.
"A major credit-rating service has launched an investigation into the operations of Dublin-based National Century Financial Enterprises after receiving three anonymous letters alleging fraudulent activity at the company." The Columbia Dispatch, May 26, 2000, Pg. 1C.
"Duff & Phelps Credit Rating Co. (DCR) and Fitch IBCA recently have launched an investigation into the financial records and activities of healthcare receivables company National Century Financial Enterprises (NCFE) in response to a series of anonymous letters received separately by both DCR and Asset Sales Report. . . . The first two letters, addressed to Jeff Orr and dated April 26, 1999, and July 16, 1999, state that NCFE "operates outside the scope of its indentures and normal business practices." Further, the writer of the letters alleges that ‘it is estimated that approximately 50% or more of the $2 billion portfolio is either worthless or non-existent." Asset Sales Report, May 22, 2000.
V. MORE INFORMATION ON DCHC
DCHC operates the following health care institutions:
Michael Reese Hospital and Medical Center in Chicago 482-bed;
Pacifica Hospital of the Valley in Sun Valley, Calif. 242-bed;
Hadley Memorial Hospital in Washington, D.C. 148-bed;
Greater Southeast Community Hospital in Washington, D.C. 450-bed;
Brea Community Hospital (Calif.) 162-bed;
Pine Grove Hospital, a psychiatric facility in Canoga Park, Calif. 80-bed
Paul R. Tuft, Chairman of the Board and Chief Executive Officer. Mr. Tuft's was formerly a partner in a law firm in Omaha, Nebraska specializing in healthcare finance.
Mel Redman, President and Chief Operating Officer. Mr. Redman spent 25 years at Wal-Mart Stores, Incorporated, where he served as Senior Vice President of Operations.
Visit their website at www.doctorscommunity.com.
Doctors Community Healthcare Corp...just who is the OWNER ?
Last Southeast Washington Hospital May Close; LaRouche Warned of Privatization Swindle
Oct. 21, 2007 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).
Greater Southeast Hospital in Washington, D.C., which was supposed to replace the shut-down D.C. General, is in danger of losing its accreditation again, because of an "immediate threat to life," according to the Joint Commission on Accreditation. According to the Washington Post, the latest problems concern the hospital's fire alarm and fire-suppression systems, and emergency power supply.
The LaRouche movement warned in 2001, before D.C. General was closed under a privatization scheme, that the group in control of Greater Southeast were crooks and racketeers. Since that time, the group's financial partner went bankrupt in a multi-billion dollar fraud involving asset-backed securities, and the firm's executives have been indicted for securities fraud and money laundering. On Oct. 18, the former chief executive of National Century Financial Enterprises was arrested on additional charges of witness tampering and obstruction of justice. National Century was the financial partner of Doctors Community Healthcare Corp., the owners of Greater Southeast, and National Century was buying up Greater Southeast's financial receivables and bundling them into securities, while skimming off the proceeds and not paying the hospitals bills.
In the latest effort to bail out the failing hospital, the D.C. government has agreed to pay $79 million to allow yet another buyer to take it over; one source tells LPAC that the buyer plans to turn it into into a nursing home, eliminating the last remaining hospital in poverty-stricken southeast Washington.
Oct. 21, 2007 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).
Greater Southeast Hospital in Washington, D.C., which was supposed to replace the shut-down D.C. General, is in danger of losing its accreditation again, because of an "immediate threat to life," according to the Joint Commission on Accreditation. According to the Washington Post, the latest problems concern the hospital's fire alarm and fire-suppression systems, and emergency power supply.
The LaRouche movement warned in 2001, before D.C. General was closed under a privatization scheme, that the group in control of Greater Southeast were crooks and racketeers. Since that time, the group's financial partner went bankrupt in a multi-billion dollar fraud involving asset-backed securities, and the firm's executives have been indicted for securities fraud and money laundering. On Oct. 18, the former chief executive of National Century Financial Enterprises was arrested on additional charges of witness tampering and obstruction of justice. National Century was the financial partner of Doctors Community Healthcare Corp., the owners of Greater Southeast, and National Century was buying up Greater Southeast's financial receivables and bundling them into securities, while skimming off the proceeds and not paying the hospitals bills.
In the latest effort to bail out the failing hospital, the D.C. government has agreed to pay $79 million to allow yet another buyer to take it over; one source tells LPAC that the buyer plans to turn it into into a nursing home, eliminating the last remaining hospital in poverty-stricken southeast Washington.
80,000 false claims totaling more than $2.5 million.
Detroit Doctor, Biller Sentenced in Health Care Fraud Scheme
YouNewsTV™Story Created: Oct 23, 2007 at 9:26 AM EDT
Story Updated: Oct 23, 2007 at 9:26 AM EDT
By Beth Boehne
DETROIT (AP) — A Detroit federal judge has sentenced a doctor to 16 years in prison and his biller to three years for their role in a scheme to bilk Blue Cross Blue Shield of Michigan of $775,000.
Sixty-one-year-old Dr. Zack Brown and 68-year-old Davell Culberson were convicted in May of conspiracy on accusations of submitting 19,000 phony insurance claims. The court said the men submitted more than 80,000 false claims totaling more than $2.5 million.
U.S. District Judge Marianne Battani on Monday ordered Brown and Culberson to pay $1.13 million in restitution to the insurer and Medicare.
The judge said Brown recruited 140 phony patients, including 12 who also were convicted of felonies and 30 who entered into pretrial agreements.
YouNewsTV™Story Created: Oct 23, 2007 at 9:26 AM EDT
Story Updated: Oct 23, 2007 at 9:26 AM EDT
By Beth Boehne
DETROIT (AP) — A Detroit federal judge has sentenced a doctor to 16 years in prison and his biller to three years for their role in a scheme to bilk Blue Cross Blue Shield of Michigan of $775,000.
Sixty-one-year-old Dr. Zack Brown and 68-year-old Davell Culberson were convicted in May of conspiracy on accusations of submitting 19,000 phony insurance claims. The court said the men submitted more than 80,000 false claims totaling more than $2.5 million.
U.S. District Judge Marianne Battani on Monday ordered Brown and Culberson to pay $1.13 million in restitution to the insurer and Medicare.
The judge said Brown recruited 140 phony patients, including 12 who also were convicted of felonies and 30 who entered into pretrial agreements.
$1.5 million “fake healthcare clinic”
October 19, 2007 -- LOS ANGELES – California Attorney General Edmund G. Brown Jr. today announced the arrest of four suspects involved in a $1.5 million “fake healthcare clinic” scam. The suspects created a health clinic and recruited people to undergo unnecessary medical tests, with the sole purpose of filing false claims with Medi-Cal and Medicare.
Commenting on the arrests, Attorney General Brown said, “The suspects create a fake healthcare clinic to line their own pockets rather than help the sick and elderly. These arrests send a strong message that this kind of rip-off will not be tolerated.”
The 4 defendants, arrested yesterday morning at various locations in Los Angeles County, are: Richard Melkonyan, Akop Melkonian, Lilit Baghdasaryan, and Dr. Rito Castanon-Hill. Dr. Neil Hollander has agreed to surrender next week. David James Garrison remains at large.
The suspects operated Scott Medical Center in Burbank and hired two physicians, Dr. Hollander and Dr. Castanon-Hill, to create a front for a physician assistant who falsified records and billed for procedures not actually performed. The suspects recruited patients to undergo unnecessary exams and then the clinic operators and medical supply company billed Medi-Cal and Medicare.
Baghdasaryan supplied false information to the Franchise Tax Board to conceal stolen funds in 2003 and 2004. Garrison under-reported and failed to report to the Franchise Tax Board monies he was paid by Dr. Hollander, Dr. Rito Castanon-Hill, United Management Group, Inc., and S.M.C. Group, Inc., violations of Revenue and Taxation code Section 19706, Tax Evasion.
All of the defendants are charged with Penal Code Section 550, Submission of False Insurance claims; Penal Code Section 487, Grand Theft; Welfare & Institutions Code Section 14107, submission of False Medi-Cal Claims: and Penal Code Section 186.10 (a) (1), Money Laundering.
Agencies involved in the investigation include the California Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse, Los Angeles Health Authority Law Enforcement Task Force, United States Office of Inspector General Health and Human Services, the Department of Health Services and Glendale Police Department. During the investigation, agents executed search warrants in Tujunga, Chatsworth, Glendale and the LAX area, seized 4 guns, and approximately $150,000 in cash.
Medi-Cal is a state managed program that pays for essential medical services, medical equipment, and medication for qualifying disabled, indigent and elderly California residents. It is funded by the state and federal governments and administered by the California Department of Health Services.
The Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes those who file fraudulent claims for medical services, medical equipment and drugs.
During the 2005/2006 Fiscal Year, the Bureau of Medi-Cal Fraud and Elder Abuse recovered $267,854,037 in Medi-Cal fraud and $6,525,097 in criminal prosecutions.
Suspects charged include:
• Richard Melkonyan (DOB 12/11/1970) was arrested at his home in Glendale, California.
• Akop Melkonian (DOB 10/28/1972) was arrested at his home in Chatsworth, California.
• Lilit Baghdasaryan (DOB 06/12/1980) was arrested at her home in Tujunga, California.
• David James Garrison (DOB 06/16/1961) resides in Los Angeles, California, is currently at large.
• Neil Hollander, M.D. (DOB 07/28/1940) resides in Huntington Beach, California, has agreed to surrender to authorities next week.
• Rito Castanon-Hill, M.D. (DOB 08/19/1971) arrested at his home in Los Angeles, California.
Source: California Attorney General
Commenting on the arrests, Attorney General Brown said, “The suspects create a fake healthcare clinic to line their own pockets rather than help the sick and elderly. These arrests send a strong message that this kind of rip-off will not be tolerated.”
The 4 defendants, arrested yesterday morning at various locations in Los Angeles County, are: Richard Melkonyan, Akop Melkonian, Lilit Baghdasaryan, and Dr. Rito Castanon-Hill. Dr. Neil Hollander has agreed to surrender next week. David James Garrison remains at large.
The suspects operated Scott Medical Center in Burbank and hired two physicians, Dr. Hollander and Dr. Castanon-Hill, to create a front for a physician assistant who falsified records and billed for procedures not actually performed. The suspects recruited patients to undergo unnecessary exams and then the clinic operators and medical supply company billed Medi-Cal and Medicare.
Baghdasaryan supplied false information to the Franchise Tax Board to conceal stolen funds in 2003 and 2004. Garrison under-reported and failed to report to the Franchise Tax Board monies he was paid by Dr. Hollander, Dr. Rito Castanon-Hill, United Management Group, Inc., and S.M.C. Group, Inc., violations of Revenue and Taxation code Section 19706, Tax Evasion.
All of the defendants are charged with Penal Code Section 550, Submission of False Insurance claims; Penal Code Section 487, Grand Theft; Welfare & Institutions Code Section 14107, submission of False Medi-Cal Claims: and Penal Code Section 186.10 (a) (1), Money Laundering.
Agencies involved in the investigation include the California Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse, Los Angeles Health Authority Law Enforcement Task Force, United States Office of Inspector General Health and Human Services, the Department of Health Services and Glendale Police Department. During the investigation, agents executed search warrants in Tujunga, Chatsworth, Glendale and the LAX area, seized 4 guns, and approximately $150,000 in cash.
Medi-Cal is a state managed program that pays for essential medical services, medical equipment, and medication for qualifying disabled, indigent and elderly California residents. It is funded by the state and federal governments and administered by the California Department of Health Services.
The Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes those who file fraudulent claims for medical services, medical equipment and drugs.
During the 2005/2006 Fiscal Year, the Bureau of Medi-Cal Fraud and Elder Abuse recovered $267,854,037 in Medi-Cal fraud and $6,525,097 in criminal prosecutions.
Suspects charged include:
• Richard Melkonyan (DOB 12/11/1970) was arrested at his home in Glendale, California.
• Akop Melkonian (DOB 10/28/1972) was arrested at his home in Chatsworth, California.
• Lilit Baghdasaryan (DOB 06/12/1980) was arrested at her home in Tujunga, California.
• David James Garrison (DOB 06/16/1961) resides in Los Angeles, California, is currently at large.
• Neil Hollander, M.D. (DOB 07/28/1940) resides in Huntington Beach, California, has agreed to surrender to authorities next week.
• Rito Castanon-Hill, M.D. (DOB 08/19/1971) arrested at his home in Los Angeles, California.
Source: California Attorney General
Tuesday, October 23, 2007
Obstruction Charged in Fraud Trial
Obstruction Charged in Fraud Trial
Former CEO of Health-Financing Firm Accused of Offering to Pay Witness
By Carrie Johnson
Washington Post Staff Writer
Friday, October 19, 2007; Page D03
The indicted former chief executive of a health-care financing company whose downfall helped push dozens of hospitals into bankruptcy was arrested yesterday on charges of offering to pay a witness to change her testimony at his coming criminal trial.
Lance K. Poulsen, who founded National Century Financial Enterprises, is awaiting a trial in February on conspiracy and securities fraud charges in connection with more than $3 billion in questionable debt his company issued before it folded five years ago.
Lance K. Poulsen, former chief executive of National Century Financial Enterprises, faces new charges that he tried to pay a witness to change her testimony. (By Susan Biddle -- The Washington Post)
Lawyers for Poulsen, who was taken into custody in Tampa and detained at prosecutors' request, did not return calls. Justice Department officials filed a new criminal complaint against Poulsen yesterday charging him with obstruction of justice based on evidence they obtained through phone recordings and court-approved wiretaps.
In its heyday, National Century infused billions of dollars into struggling hospitals in exchange for insurance payments that the facilities expected to receive. National Century sold bonds to generate the cash it offered to hospitals and then paid the bondholders, which included major employee retirement funds, with the insurance proceeds. The company's 2002 collapse days after FBI agents raided its Dublin, Ohio, headquarters left more than two dozen hospitals in precarious financial shape.
One of these was Greater Southeast Community Hospital in Southeast Washington. Its operator cited the troubles at National Century when it later filed for bankruptcy.
The case, which authorities likened to a massive Ponzi scheme, amounted to one of the largest investigations of a private company, securities regulators said at the time.
Poulsen, who has denied the charges, reappeared on the government's radar screen in March, when, according to court filings, he enlisted a middleman to approach a witness in his coming trial on charges that could send him to prison for 30 years. Poulsen and the middleman, Karl A. Demmler, tried to persuade the unnamed witness to change her story in exchange for thousands of dollars in cash, according to the filings. A court-appointed lawyer for Demmler did not return calls yesterday.
Over several months, federal agents surreptitiously recorded conversations between Demmler and the witness, a former National Century employee whom the men called "Mary." At a July 13 meeting, for instance, Demmler told the witness that she should "prevaricate" and have a "mental lapse," FBI Special Agent Jeffrey Williams wrote.
Poulsen and Demmler arranged for the money to flow from a company that Demmler controlled into the witness's bank account, the criminal complaint said. Poulsen wanted "Mary" to get a new lawyer whose fees he would pay using a legal insurance policy that Poulsen had obtained, according to comments he made in a Sept. 5 call recorded by the FBI.
"I don't have a problem getting the money part of that, uh, handled," Poulsen told Demmler in a Sept. 26 call, court filings said.
Poulsen apparently acted in response to the five-year statute of limitations on his first round of criminal charges, which is scheduled to expire next month, reasoning that if a critical witness against him changed her story by the deadline, he would "definitely win the white-collar case," according to his comments in an Oct. 11 call that the government recorded.
Terry Sherman, a lawyer for Sherry L. Gibson, a former National Century vice president who pleaded guilty to a conspiracy charge that she helped hide $400 million in company shortfalls, declined to comment yesterday on whether she is the witness Poulsen attempted to influence.
Former CEO of Health-Financing Firm Accused of Offering to Pay Witness
By Carrie Johnson
Washington Post Staff Writer
Friday, October 19, 2007; Page D03
The indicted former chief executive of a health-care financing company whose downfall helped push dozens of hospitals into bankruptcy was arrested yesterday on charges of offering to pay a witness to change her testimony at his coming criminal trial.
Lance K. Poulsen, who founded National Century Financial Enterprises, is awaiting a trial in February on conspiracy and securities fraud charges in connection with more than $3 billion in questionable debt his company issued before it folded five years ago.
Lance K. Poulsen, former chief executive of National Century Financial Enterprises, faces new charges that he tried to pay a witness to change her testimony. (By Susan Biddle -- The Washington Post)
Lawyers for Poulsen, who was taken into custody in Tampa and detained at prosecutors' request, did not return calls. Justice Department officials filed a new criminal complaint against Poulsen yesterday charging him with obstruction of justice based on evidence they obtained through phone recordings and court-approved wiretaps.
In its heyday, National Century infused billions of dollars into struggling hospitals in exchange for insurance payments that the facilities expected to receive. National Century sold bonds to generate the cash it offered to hospitals and then paid the bondholders, which included major employee retirement funds, with the insurance proceeds. The company's 2002 collapse days after FBI agents raided its Dublin, Ohio, headquarters left more than two dozen hospitals in precarious financial shape.
One of these was Greater Southeast Community Hospital in Southeast Washington. Its operator cited the troubles at National Century when it later filed for bankruptcy.
The case, which authorities likened to a massive Ponzi scheme, amounted to one of the largest investigations of a private company, securities regulators said at the time.
Poulsen, who has denied the charges, reappeared on the government's radar screen in March, when, according to court filings, he enlisted a middleman to approach a witness in his coming trial on charges that could send him to prison for 30 years. Poulsen and the middleman, Karl A. Demmler, tried to persuade the unnamed witness to change her story in exchange for thousands of dollars in cash, according to the filings. A court-appointed lawyer for Demmler did not return calls yesterday.
Over several months, federal agents surreptitiously recorded conversations between Demmler and the witness, a former National Century employee whom the men called "Mary." At a July 13 meeting, for instance, Demmler told the witness that she should "prevaricate" and have a "mental lapse," FBI Special Agent Jeffrey Williams wrote.
Poulsen and Demmler arranged for the money to flow from a company that Demmler controlled into the witness's bank account, the criminal complaint said. Poulsen wanted "Mary" to get a new lawyer whose fees he would pay using a legal insurance policy that Poulsen had obtained, according to comments he made in a Sept. 5 call recorded by the FBI.
"I don't have a problem getting the money part of that, uh, handled," Poulsen told Demmler in a Sept. 26 call, court filings said.
Poulsen apparently acted in response to the five-year statute of limitations on his first round of criminal charges, which is scheduled to expire next month, reasoning that if a critical witness against him changed her story by the deadline, he would "definitely win the white-collar case," according to his comments in an Oct. 11 call that the government recorded.
Terry Sherman, a lawyer for Sherry L. Gibson, a former National Century vice president who pleaded guilty to a conspiracy charge that she helped hide $400 million in company shortfalls, declined to comment yesterday on whether she is the witness Poulsen attempted to influence.
Former CEO accused of trying to bribe witness
Former CEO accused of trying to bribe witness
Friday, October 19, 2007 3:40 AM
By Tracy Turner
THE COLUMBUS DISPATCH
Lance K. Poulsen
Lance K. Poulsen spent last night in jail as charges against the former leader of the defunct National Century Financial Enterprises continued to mount.
Poulsen was arrested in Tampa, Fla., and charged with witness tampering, federal conspiracy and obstruction of justice, said
J. Mark Batts, acting special agent in charge of the FBI's Cincinnati division.
Karl A. Demmler was arrested on the same charges in Columbus, the FBI said.
Demmler, the former owner of the Bogey Inn in Dublin, was used by Poulsen to "frequently contact a witness for the government … to offer her cash in exchange for her not giving damaging testimony against Poulsen in his federal fraud trial," the FBI said.
Poulsen was president and chief executive of National Century, a former Dublin health-care financing company that is accused of engineering the biggest case of fraud by a private company in U.S. history, costing investors $1.9 billion.
After National Century went bankrupt in 2002, about 275 health-care companies also failed because of financing problems related to the collapse.
Poulsen is among seven National Century executives indicted earlier and accused of conspiring to defraud investors by diverting funds, falsifying data in investors' reports and moving money around to conceal shortfalls. Poulsen is to stand trial in February.
In the new indictments, Poulsen and Demmler are accused of offering $500,000 to a female witness in Poulsen's trial. The witness was to be given $5,000 to start, with monthly payments thereafter, the indictments said.
Demmler is described in court documents as "a longtime acquaintance" of Poulsen's and the previous owner of a bar frequented by National Century executives.
Demmler arranged for the witness to give him 10 percent of the money that Poulsen was to pay her for her testimony, the criminal complaint said.
The witness is described as a former National Century executive who pleaded guilty to participating in the conspiracy and was ordered to pay restitution for her part in the fall of the company.
For the money, Poulsen and Demmler expected the witness to "say she does not recall" when questioned and "when shown a document with handwriting on it, she should say it does not look like her handwriting or it looks forged," the indictments said.
Demmler is scheduled to appear at a detention hearing today in Columbus, while Poulsen, who lives in Port Charlotte, Fla., will have one in Tampa, where he is being held, said Doug Squires, assistant district attorney with U.S. District Court in Columbus.
Squires said the government will ask that Poulsen be sent to Columbus to face charges and remain in custody. Squires called him a flight risk and a danger to the community.
If convicted of the new charges, Poulsen could get up to 10 years in prison and a $250,000 fine. If he is convicted of the previous charges, he could get life in prison, the FBI said.
Earlier indictments said company executives received about $29.6 million in bonuses and wages between 1996 and 2002, while providing investors with a "false and misleading picture" that National Century was a "healthy, growing company."
At least four former National Century officials have pleaded guilty:
• Jon A. Beacham, director of securitization, to conspiracy and security fraud.
• Sherry Gibson, executive vice president for compliance, to conspiracy to commit securities fraud.
• John Allen Snoble, chief financial officer, vice president and controller, to conspiracy to launder money.
• Brian J. Stucke, director of compliance, to conspiracy to commit securities fraud.
tturner@dispatch.com
Friday, October 19, 2007 3:40 AM
By Tracy Turner
THE COLUMBUS DISPATCH
Lance K. Poulsen
Lance K. Poulsen spent last night in jail as charges against the former leader of the defunct National Century Financial Enterprises continued to mount.
Poulsen was arrested in Tampa, Fla., and charged with witness tampering, federal conspiracy and obstruction of justice, said
J. Mark Batts, acting special agent in charge of the FBI's Cincinnati division.
Karl A. Demmler was arrested on the same charges in Columbus, the FBI said.
Demmler, the former owner of the Bogey Inn in Dublin, was used by Poulsen to "frequently contact a witness for the government … to offer her cash in exchange for her not giving damaging testimony against Poulsen in his federal fraud trial," the FBI said.
Poulsen was president and chief executive of National Century, a former Dublin health-care financing company that is accused of engineering the biggest case of fraud by a private company in U.S. history, costing investors $1.9 billion.
After National Century went bankrupt in 2002, about 275 health-care companies also failed because of financing problems related to the collapse.
Poulsen is among seven National Century executives indicted earlier and accused of conspiring to defraud investors by diverting funds, falsifying data in investors' reports and moving money around to conceal shortfalls. Poulsen is to stand trial in February.
In the new indictments, Poulsen and Demmler are accused of offering $500,000 to a female witness in Poulsen's trial. The witness was to be given $5,000 to start, with monthly payments thereafter, the indictments said.
Demmler is described in court documents as "a longtime acquaintance" of Poulsen's and the previous owner of a bar frequented by National Century executives.
Demmler arranged for the witness to give him 10 percent of the money that Poulsen was to pay her for her testimony, the criminal complaint said.
The witness is described as a former National Century executive who pleaded guilty to participating in the conspiracy and was ordered to pay restitution for her part in the fall of the company.
For the money, Poulsen and Demmler expected the witness to "say she does not recall" when questioned and "when shown a document with handwriting on it, she should say it does not look like her handwriting or it looks forged," the indictments said.
Demmler is scheduled to appear at a detention hearing today in Columbus, while Poulsen, who lives in Port Charlotte, Fla., will have one in Tampa, where he is being held, said Doug Squires, assistant district attorney with U.S. District Court in Columbus.
Squires said the government will ask that Poulsen be sent to Columbus to face charges and remain in custody. Squires called him a flight risk and a danger to the community.
If convicted of the new charges, Poulsen could get up to 10 years in prison and a $250,000 fine. If he is convicted of the previous charges, he could get life in prison, the FBI said.
Earlier indictments said company executives received about $29.6 million in bonuses and wages between 1996 and 2002, while providing investors with a "false and misleading picture" that National Century was a "healthy, growing company."
At least four former National Century officials have pleaded guilty:
• Jon A. Beacham, director of securitization, to conspiracy and security fraud.
• Sherry Gibson, executive vice president for compliance, to conspiracy to commit securities fraud.
• John Allen Snoble, chief financial officer, vice president and controller, to conspiracy to launder money.
• Brian J. Stucke, director of compliance, to conspiracy to commit securities fraud.
tturner@dispatch.com
Monday, October 22, 2007
Stephen H. Winters,DHHS Appeals Board
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF
SUBJECT: Stephen H. Winters,
Petitioner,
DATE: July 14, 2005
- v -
Inspector General
Appellate Docket No. A-05-25
Civil Remedies No. CR1246
Decision No. 1986
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF
SUBJECT: Stephen H. Winters,
Petitioner,
DATE: July 14, 2005
- v -
Inspector General
Appellate Docket No. A-05-25
Civil Remedies No. CR1246
Decision No. 1986
Halliburton, Hunt Oil, and Rainwater
You know, George W Bush's Partner with Texas Rangers
Talking Deals;
Group May Gain Control of Penrod
By THOMAS C. HAYES
Published: March 29, 1990
LEAD: WITH the Hunt brothers of Texas removed from any role in the Penrod Drilling Corporation, a syndicate of 10 banks and an investor group headed by Richard E. Rainwater are expected to decide soon who will control the world's largest offshore oil and gas driller. If events work out, the group led by the Fort
WITH the Hunt brothers of Texas removed from any role in the Penrod Drilling Corporation, a syndicate of 10 banks and an investor group headed by Richard E. Rainwater are expected to decide soon who will control the world's largest offshore oil and gas driller. If events work out, the group led by the Fort Worth investor may end up controlling the company for far less than rival bidders have offered to buy it outright.
Several bidders for Penrod have emerged: The Tisch family has offered $450 million; the Rowan Companies, a Houston-based driller, offered $325 million; a Norwegian group has made a bid, and others higher than $500 million have been reported. But the Rainwater group may find that after negotiating with Penrod's creditors, its $95 million investment for a 27 percent stake in the company is enough to give it operating control.
The Rainwater-controlled Energy Service Company, a drilling company that is part of the Penrod investment group, is pushing for a recapitalization of Penrod that might include a public sale of common shares. Other drillers, including Odeco and the Western Company of North America, have been successful in selling stock in the last year, and a Penrod offering could draw a large crowd.
Penrod's lenders, headed by Manufacturers Hanover and First Chicago, could thus avoid new write-offs, recoup some past losses and have a role in whatever recovery unfolds in the coming years in the drilling industry.
Values for used drilling rigs are up more than 50 percent in the last year, to $16 million for models operating in 250 feet of water. Penrod has 39 offshore rigs, and 45 more rigs used for drilling on land. With oil prices firming, drilling budgets rising at big oil companies and prospects for further increases in the rigs' value, many Penrod lenders are unwilling to sell their notes at a discount, people close to the situation said.
Founded more than 60 years ago by H.L. Hunt, who was considered the world's richest man when he died in 1974, debt-laden Penrod has been starved for cash since oil prices plunged four years ago and leading oil companies pulled the plug on their drilling budgets.
At first, three of Mr. Hunt's sons who controlled Penrod, William Herbert, Nelson Bunker and Lamar Hunt, filed costly lawsuits to stall the banks' attempt to seize rigs to cover more than $750 million in unpaid loans. In a partial truce two years ago, the banks wrote off $250 million of the loans in exchange for 50 percent of Penrod's stock.
Last week, with a March 31 deadline looming for the first of 32 consecutive quarterly principal payments on $525 million in remaining principal and accrued interest, and Penrod's cash flow still depressed, the Hunts handed over the rest of their holdings.
The note holders, including the Rainwater group, agreed to drop a potential claim on up to $300 million in future profits from the Placid Oil Company, which the brothers still control.
The lenders' improving prospects at Penrod made their claim on Placid profits less important than removing the Hunts from the bargaining table at Penrod, said Russell E. Miller, an analyst at Alex. Brown & Sons Inc. in Baltimore.
The Rainwater group, a partnership consisting of Energy Service; Goldman, Sachs; Mr. Rainwater, and others, had paid $95 million to acquire $135 million of the Penrod bank debt, or 27 percent of the total, before the Hunts' departure last week. The Rainwater group's stock holding in Penrod has now doubled, to 27 percent.
Mr. Rainwater, once the principal deal maker for the Bass family, also of Fort Worth, entered the industry three years ago when he acquired a large stake in Blocker Energy. Blocker's debt-laden balance sheet was later restructured and the company's name was changed to Energy Service, or Ensco. Mr. Rainwater owns 21 percent.
Ensco operates in the Middle East, South America, Canada and the United States and has five offshore rigs and 24 land rigs. The company, which is listed on the American Stock Exchange, earned $2.6 million on $158.5 million in sales last year. It is also a supplier in the growing market of horizontal drilling equipment.
Does Mr. Rainwater intend to use the 27 percent stake in Penrod to squeeze more money from other Penrod bidders eventually? Or is he trying to become a catalyst for a reshaping of the world's offshore oil industry?
Mr. Miller of Alex. Brown said the Rainwater group was bargaining with each bank, searching for agreements either to acquire the debt or for the banks to ease the 1988 repayment terms and allow Ensco to take command of Penrod operations.
Others in the industry are not so sure. Two years ago, a Rainwater group delayed for several months the takeover by Halliburton Inc. of Gearheart Industries, a cash-short maker of gauges and other equipment used in testing well sites. Halliburton eventually paid $67 million for Gearhart debt that the Rainwater group had acquired for $33 million.
Still, control of Penrod could prove far more lucrative. Unlike most sectors of the oil industry, offshore drilling did not contract through bankruptcies, mergers and takeovers after prices collapsed in 1986, said James L. Carroll, an analyst at Paine Webber Inc., in New York. Many companies still have more debt than future revenues are likely to cover, he added.
''Whatever happens to the Penrod assets is very important to the whole offshore industry,'' Mr. Carroll said. ''If it ends up in the hands of other operators, you could see the beginnings of a major consolidation. This means whoever gets Penrod is going to be in an instant leadership position.''
Talking Deals;
Group May Gain Control of Penrod
By THOMAS C. HAYES
Published: March 29, 1990
LEAD: WITH the Hunt brothers of Texas removed from any role in the Penrod Drilling Corporation, a syndicate of 10 banks and an investor group headed by Richard E. Rainwater are expected to decide soon who will control the world's largest offshore oil and gas driller. If events work out, the group led by the Fort
WITH the Hunt brothers of Texas removed from any role in the Penrod Drilling Corporation, a syndicate of 10 banks and an investor group headed by Richard E. Rainwater are expected to decide soon who will control the world's largest offshore oil and gas driller. If events work out, the group led by the Fort Worth investor may end up controlling the company for far less than rival bidders have offered to buy it outright.
Several bidders for Penrod have emerged: The Tisch family has offered $450 million; the Rowan Companies, a Houston-based driller, offered $325 million; a Norwegian group has made a bid, and others higher than $500 million have been reported. But the Rainwater group may find that after negotiating with Penrod's creditors, its $95 million investment for a 27 percent stake in the company is enough to give it operating control.
The Rainwater-controlled Energy Service Company, a drilling company that is part of the Penrod investment group, is pushing for a recapitalization of Penrod that might include a public sale of common shares. Other drillers, including Odeco and the Western Company of North America, have been successful in selling stock in the last year, and a Penrod offering could draw a large crowd.
Penrod's lenders, headed by Manufacturers Hanover and First Chicago, could thus avoid new write-offs, recoup some past losses and have a role in whatever recovery unfolds in the coming years in the drilling industry.
Values for used drilling rigs are up more than 50 percent in the last year, to $16 million for models operating in 250 feet of water. Penrod has 39 offshore rigs, and 45 more rigs used for drilling on land. With oil prices firming, drilling budgets rising at big oil companies and prospects for further increases in the rigs' value, many Penrod lenders are unwilling to sell their notes at a discount, people close to the situation said.
Founded more than 60 years ago by H.L. Hunt, who was considered the world's richest man when he died in 1974, debt-laden Penrod has been starved for cash since oil prices plunged four years ago and leading oil companies pulled the plug on their drilling budgets.
At first, three of Mr. Hunt's sons who controlled Penrod, William Herbert, Nelson Bunker and Lamar Hunt, filed costly lawsuits to stall the banks' attempt to seize rigs to cover more than $750 million in unpaid loans. In a partial truce two years ago, the banks wrote off $250 million of the loans in exchange for 50 percent of Penrod's stock.
Last week, with a March 31 deadline looming for the first of 32 consecutive quarterly principal payments on $525 million in remaining principal and accrued interest, and Penrod's cash flow still depressed, the Hunts handed over the rest of their holdings.
The note holders, including the Rainwater group, agreed to drop a potential claim on up to $300 million in future profits from the Placid Oil Company, which the brothers still control.
The lenders' improving prospects at Penrod made their claim on Placid profits less important than removing the Hunts from the bargaining table at Penrod, said Russell E. Miller, an analyst at Alex. Brown & Sons Inc. in Baltimore.
The Rainwater group, a partnership consisting of Energy Service; Goldman, Sachs; Mr. Rainwater, and others, had paid $95 million to acquire $135 million of the Penrod bank debt, or 27 percent of the total, before the Hunts' departure last week. The Rainwater group's stock holding in Penrod has now doubled, to 27 percent.
Mr. Rainwater, once the principal deal maker for the Bass family, also of Fort Worth, entered the industry three years ago when he acquired a large stake in Blocker Energy. Blocker's debt-laden balance sheet was later restructured and the company's name was changed to Energy Service, or Ensco. Mr. Rainwater owns 21 percent.
Ensco operates in the Middle East, South America, Canada and the United States and has five offshore rigs and 24 land rigs. The company, which is listed on the American Stock Exchange, earned $2.6 million on $158.5 million in sales last year. It is also a supplier in the growing market of horizontal drilling equipment.
Does Mr. Rainwater intend to use the 27 percent stake in Penrod to squeeze more money from other Penrod bidders eventually? Or is he trying to become a catalyst for a reshaping of the world's offshore oil industry?
Mr. Miller of Alex. Brown said the Rainwater group was bargaining with each bank, searching for agreements either to acquire the debt or for the banks to ease the 1988 repayment terms and allow Ensco to take command of Penrod operations.
Others in the industry are not so sure. Two years ago, a Rainwater group delayed for several months the takeover by Halliburton Inc. of Gearheart Industries, a cash-short maker of gauges and other equipment used in testing well sites. Halliburton eventually paid $67 million for Gearhart debt that the Rainwater group had acquired for $33 million.
Still, control of Penrod could prove far more lucrative. Unlike most sectors of the oil industry, offshore drilling did not contract through bankruptcies, mergers and takeovers after prices collapsed in 1986, said James L. Carroll, an analyst at Paine Webber Inc., in New York. Many companies still have more debt than future revenues are likely to cover, he added.
''Whatever happens to the Penrod assets is very important to the whole offshore industry,'' Mr. Carroll said. ''If it ends up in the hands of other operators, you could see the beginnings of a major consolidation. This means whoever gets Penrod is going to be in an instant leadership position.''
Friday, October 19, 2007
fraudulently overbilled Medicare for equipment receiving nearly $1 million in Medicare funds.
Medical equipment supplier indicted for Medicare fraud
10/18/2007 1:48 PM
U.S. Attorney John L. Ratcliffe announced that a federal grand jury has returned an indictment charging a medical equipment supplier with federal violations in the Eastern District of Texas. The indictment was returned Oct. 17.
Florence Ubak-Offiong, 38, of Sugar Land, was indicted on five counts of health care fraud and two counts of violating the anti-kickback statute.
If convicted, she could receive a maximum of 10 years in federal prison and a fine of up to $250,000.00 for each of the health care fraud charges and up to five years for each of the anti-kickback charges.
The indictment alleges that Ubak-Offiong owned and operated a medical supply company in Sugar Land with customers throughout the state, including the Eastern District of Texas. It is alleged that Ubak-Offiong fraudulently overbilled Medicare for equipment receiving nearly $1 million in Medicare funds.
This case is being investigated by the Texas Attorney General's Office, Medicare Fraud Control Unit; HHSC-OIG and is being prosecuted by Special Assistant U.S. Attorney Christopher T. Tortorice.
It is important to note that an indictment should not be considered as evidence of guilt and that all persons charged with a crime are presumed innocent until proven guilty beyond a reasonable doubt.
10/18/2007 1:48 PM
U.S. Attorney John L. Ratcliffe announced that a federal grand jury has returned an indictment charging a medical equipment supplier with federal violations in the Eastern District of Texas. The indictment was returned Oct. 17.
Florence Ubak-Offiong, 38, of Sugar Land, was indicted on five counts of health care fraud and two counts of violating the anti-kickback statute.
If convicted, she could receive a maximum of 10 years in federal prison and a fine of up to $250,000.00 for each of the health care fraud charges and up to five years for each of the anti-kickback charges.
The indictment alleges that Ubak-Offiong owned and operated a medical supply company in Sugar Land with customers throughout the state, including the Eastern District of Texas. It is alleged that Ubak-Offiong fraudulently overbilled Medicare for equipment receiving nearly $1 million in Medicare funds.
This case is being investigated by the Texas Attorney General's Office, Medicare Fraud Control Unit; HHSC-OIG and is being prosecuted by Special Assistant U.S. Attorney Christopher T. Tortorice.
It is important to note that an indictment should not be considered as evidence of guilt and that all persons charged with a crime are presumed innocent until proven guilty beyond a reasonable doubt.
Witness tampering......
Former National Century chief arrested on witness-tampering charges
Thursday, October 18, 2007 12:15 PM
By Tracy Turner
THE COLUMBUS DISPATCH
The former president and chief executive of National Century Financial Enterprises was arrested today in Tampa, Fla., on charges of witness tampering.
Lance K. Poulsen, now of Port Charlotte, Fla., also was charged with federal conspiracy and obstruction of justice, said J. Mark Batts, acting special agent in charge of the FBI’s Cincinnati division.
Karl A. Demmler, of Columbus, was also arrested on the same charges, the FBI said.
Poulsen is accused of using Demmler to “frequently contact a witness for the government … to offer her cash in exchange for her not giving damaging testimony against Poulsen in his federal fraud trial.” That trial is scheduled to begin in February.
Poulsen, along with seven other National Century executives, was indicted this summer on charges of conspiring to defraud investors by diverting more than $2 billion in investors’ funds, falsifying data in investor’s reports and diverting funds to conceal investors’ shortfalls.
National Century, a health-care financing company, was based in Dublin. It filed for bankruptcy in November 2002.
If convicted of the charges, Poulsen could face life in prison, the FBI said.
Thursday, October 18, 2007 12:15 PM
By Tracy Turner
THE COLUMBUS DISPATCH
The former president and chief executive of National Century Financial Enterprises was arrested today in Tampa, Fla., on charges of witness tampering.
Lance K. Poulsen, now of Port Charlotte, Fla., also was charged with federal conspiracy and obstruction of justice, said J. Mark Batts, acting special agent in charge of the FBI’s Cincinnati division.
Karl A. Demmler, of Columbus, was also arrested on the same charges, the FBI said.
Poulsen is accused of using Demmler to “frequently contact a witness for the government … to offer her cash in exchange for her not giving damaging testimony against Poulsen in his federal fraud trial.” That trial is scheduled to begin in February.
Poulsen, along with seven other National Century executives, was indicted this summer on charges of conspiring to defraud investors by diverting more than $2 billion in investors’ funds, falsifying data in investor’s reports and diverting funds to conceal investors’ shortfalls.
National Century, a health-care financing company, was based in Dublin. It filed for bankruptcy in November 2002.
If convicted of the charges, Poulsen could face life in prison, the FBI said.
Tuesday, October 16, 2007
SCHIP.....All we have to do is collect a fraction of the STOLEN MONIES
If we only collected some of the money that has been stolen for so many years by fradulent means, we probably could have health insurance for all!
Republicans are confident that they'll have enough votes this week to support the President's veto of the SCHIP program, and Democrats are on the verge of conceding defeat on this bill. But you've got a chance to show that the conventional wisdom is wrong, because some GOP members are feeling the heat. There are only about 20 more votes, overwhelmingly Republican, needed to override. (At the end of this column, you'll see the names of the congressmen whom you can call toll-free at 1-800-828-0498 through Families USA if you live in their district and can make your concerns known. If you don't live in their districts, forward this link to those who do live in those states. You can also use the organization's email contact form on its Take Action page and learn basic talking points to make your case.)
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Print
Comment
The SCHIP legislation extends much-needed coverage for an extra $35 billion to aid 10 million lower-income kids who don't qualify for Medicaid. But the president is pushing the veto in order to serve the the GOP's free-market ideology with an assortment of bogus claims, even as the Bush administration avoids cracking down on billions in corporate health care fraud. But as the Bazelon Center for Mental Health Law points out the bill offers important new benefits too: " The legislation would for the first time establish parity for mental health benefits in SCHIP plans by prohibiting discriminatory financial requirements or treatment limitations."
Here are the main talking points to provide your member of Congress, and a link to a range of editorial opinions, mostly supporting the veto override:
This bill represents a historic, bipartisan compromise to reach out to the growing number of low-income, uninsured children in this country and ensure that they get access to the healthy start they deserve.
Don't know what to say? Here are some Talking Points:
I strongly urge you to vote to override President Bush's veto of health care for 10 million American kids.
Every child in America needs and deserves health care.
As a voter, I believe that America's children should the top priority of my elected leaders.
Please vote to override the President's veto of SCHIP! (pronounced S-CHIP).
If your Congressman is on the list, then it's time to give him or her a call to let your legislator know what you think. As the Bazelon Center's alert proclaims:
Please Act Now!
If your Representative is on the following list, call today and urge him or her to vote YES for health insurance for children in low-income working families. And if you know people in those states, forward this email and ask your friends and colleagues who are constituents to make the call.
Use the toll-free number 1 800-828-0498 set up by Families USA to access the Capitol switchboard, which will connected you to your Representative's office.
Target List of Representatives
AL Robert Aderholt
AR John Boozman
CA Brian Bilbray
CA John Doolittle
CO Marilyn Musgrave
FL Gus Bilirakis
FL Ginny Brown-Waite
FL Tom Feeney
FL Rick Keller
IL Judy Biggert
IL Tim Johnson
IL Peter Roskam
IL Jerry Weller
LA Rodney Alexander
MI Joseph Knollenberg
MI Thaddeus McCotter
MI Tim Walberg
MN Michelle Bachman
MO Sam Graves
NJ Rodney Frelinghuysen
NJ Scott Garrett
NJ Jim Saxton
NY Randy Kuhl
OH Steve Chabot
OR Greg Walden
PA John Peterson
TX Kay Granger
VA Thelma Drake
VA Randy Forbes
Republicans Who Didn't Vote
CA Wally Herger
WY Barbara Cubin
Republicans are confident that they'll have enough votes this week to support the President's veto of the SCHIP program, and Democrats are on the verge of conceding defeat on this bill. But you've got a chance to show that the conventional wisdom is wrong, because some GOP members are feeling the heat. There are only about 20 more votes, overwhelmingly Republican, needed to override. (At the end of this column, you'll see the names of the congressmen whom you can call toll-free at 1-800-828-0498 through Families USA if you live in their district and can make your concerns known. If you don't live in their districts, forward this link to those who do live in those states. You can also use the organization's email contact form on its Take Action page and learn basic talking points to make your case.)
Comment
The SCHIP legislation extends much-needed coverage for an extra $35 billion to aid 10 million lower-income kids who don't qualify for Medicaid. But the president is pushing the veto in order to serve the the GOP's free-market ideology with an assortment of bogus claims, even as the Bush administration avoids cracking down on billions in corporate health care fraud. But as the Bazelon Center for Mental Health Law points out the bill offers important new benefits too: " The legislation would for the first time establish parity for mental health benefits in SCHIP plans by prohibiting discriminatory financial requirements or treatment limitations."
Here are the main talking points to provide your member of Congress, and a link to a range of editorial opinions, mostly supporting the veto override:
This bill represents a historic, bipartisan compromise to reach out to the growing number of low-income, uninsured children in this country and ensure that they get access to the healthy start they deserve.
Don't know what to say? Here are some Talking Points:
I strongly urge you to vote to override President Bush's veto of health care for 10 million American kids.
Every child in America needs and deserves health care.
As a voter, I believe that America's children should the top priority of my elected leaders.
Please vote to override the President's veto of SCHIP! (pronounced S-CHIP).
If your Congressman is on the list, then it's time to give him or her a call to let your legislator know what you think. As the Bazelon Center's alert proclaims:
Please Act Now!
If your Representative is on the following list, call today and urge him or her to vote YES for health insurance for children in low-income working families. And if you know people in those states, forward this email and ask your friends and colleagues who are constituents to make the call.
Use the toll-free number 1 800-828-0498 set up by Families USA to access the Capitol switchboard, which will connected you to your Representative's office.
Target List of Representatives
AL Robert Aderholt
AR John Boozman
CA Brian Bilbray
CA John Doolittle
CO Marilyn Musgrave
FL Gus Bilirakis
FL Ginny Brown-Waite
FL Tom Feeney
FL Rick Keller
IL Judy Biggert
IL Tim Johnson
IL Peter Roskam
IL Jerry Weller
LA Rodney Alexander
MI Joseph Knollenberg
MI Thaddeus McCotter
MI Tim Walberg
MN Michelle Bachman
MO Sam Graves
NJ Rodney Frelinghuysen
NJ Scott Garrett
NJ Jim Saxton
NY Randy Kuhl
OH Steve Chabot
OR Greg Walden
PA John Peterson
TX Kay Granger
VA Thelma Drake
VA Randy Forbes
Republicans Who Didn't Vote
CA Wally Herger
WY Barbara Cubin
Saturday, October 13, 2007
MORE DIRT ON HCA and FRIENDS
Tennessee Company Faces False Claims Act Lawsuit
This coming from The City Paper, a former Tennessee executive for Iasis Healthcare, one of Tennessee’s largest health care companies, has blown the whistle in a False Claims lawsuit.
Jerre Frazier worked for Iasis in Franklin, Tennessee for four years, becoming vice president for ethics and compliance and as its chief compliance officer. During this time, Frazier discovered that many of the top Iasis executives had previously worked for Nashville-headquartered HCA, a for-profit hospital chain which itself was guilty of defrauding the government through Medicare fraud totaling $1.7 billion (yes, a b as in bullion and in boy that’s a lot of money).
The allegations in the present False Claims lawsuit against Iasis Healthcare is that these executives from HCA brought their dirty business with them. Specifically, the False Claims charges are that Iasis compensated doctors for their referrals and for performing unnecessary medical services that were charged to Medicare. In return, doctors received discounted rent for office and lab space from Iasis.
Iasis owns 15 hospitals, none located in Tennessee, along with other medical facilities. If the court sides in his favor, Frazier will be awarded 15-30% of the government’s total recoveries (remember that b-illion number above) for blowing the whistle on Iasis and helping the federal government reclaim its stolen Medicare funds. The percentage depends on if the Department of Justice will pursue this matter or turn it over to private qui tam attorneys.
This coming from The City Paper, a former Tennessee executive for Iasis Healthcare, one of Tennessee’s largest health care companies, has blown the whistle in a False Claims lawsuit.
Jerre Frazier worked for Iasis in Franklin, Tennessee for four years, becoming vice president for ethics and compliance and as its chief compliance officer. During this time, Frazier discovered that many of the top Iasis executives had previously worked for Nashville-headquartered HCA, a for-profit hospital chain which itself was guilty of defrauding the government through Medicare fraud totaling $1.7 billion (yes, a b as in bullion and in boy that’s a lot of money).
The allegations in the present False Claims lawsuit against Iasis Healthcare is that these executives from HCA brought their dirty business with them. Specifically, the False Claims charges are that Iasis compensated doctors for their referrals and for performing unnecessary medical services that were charged to Medicare. In return, doctors received discounted rent for office and lab space from Iasis.
Iasis owns 15 hospitals, none located in Tennessee, along with other medical facilities. If the court sides in his favor, Frazier will be awarded 15-30% of the government’s total recoveries (remember that b-illion number above) for blowing the whistle on Iasis and helping the federal government reclaim its stolen Medicare funds. The percentage depends on if the Department of Justice will pursue this matter or turn it over to private qui tam attorneys.
Friday, October 12, 2007
THE BUSH CONNECTION.....Money money money
7. *Kenneth & Linda Lay (Houston): $122,500
Lay’s Enron gas hired two GHWB cabinet members as they left office (see James Baker, No. 56, and Robert Mosbacher, No. 30). After GHWB’s ’93 Gulf War victory tour of Kuwait, several members of his entourage, including Baker, stayed on to hustle Enron contracts. The Clinton administration also threatened to cut Mozambique’s aid in ’95 if it did not give Enron a contract. Former Enron president Richard Kinder also gave GWB $119,409.
8. Ray L. Hunt (Dallas): $105,000
Oil heir Hunt and Dallas’ city manager secretly planned the $210 million Reunion development for a year before briefing the city council. Hunt was the sole bidder for this private-public deal that appeared to be written by Hunt’s lawyers. Hunt hired John Scovell ($1,000 to GWB) to head his development company. Scovell’s father sat on Dallas committees that selected Reunion as the site of a new sports arena.
10. Richard E. Rainwater (Ft. Worth): $100,000
Rainwater was a key investor in the Texas Rangers and Columbia/HCA Healthcare, which the government is investigating on Medicare fraud charges (see Richard Scott, No. 65). GWB received $37,500 from executives of Rainwater’s Crescent Real Estate (see Gerald Haddock, No. 33), which bought two buildings from the state in ’96 at bargain-basement prices. GWB’s personal blind trust invested in Crescent during his first term.
Lay’s Enron gas hired two GHWB cabinet members as they left office (see James Baker, No. 56, and Robert Mosbacher, No. 30). After GHWB’s ’93 Gulf War victory tour of Kuwait, several members of his entourage, including Baker, stayed on to hustle Enron contracts. The Clinton administration also threatened to cut Mozambique’s aid in ’95 if it did not give Enron a contract. Former Enron president Richard Kinder also gave GWB $119,409.
8. Ray L. Hunt (Dallas): $105,000
Oil heir Hunt and Dallas’ city manager secretly planned the $210 million Reunion development for a year before briefing the city council. Hunt was the sole bidder for this private-public deal that appeared to be written by Hunt’s lawyers. Hunt hired John Scovell ($1,000 to GWB) to head his development company. Scovell’s father sat on Dallas committees that selected Reunion as the site of a new sports arena.
10. Richard E. Rainwater (Ft. Worth): $100,000
Rainwater was a key investor in the Texas Rangers and Columbia/HCA Healthcare, which the government is investigating on Medicare fraud charges (see Richard Scott, No. 65). GWB received $37,500 from executives of Rainwater’s Crescent Real Estate (see Gerald Haddock, No. 33), which bought two buildings from the state in ’96 at bargain-basement prices. GWB’s personal blind trust invested in Crescent during his first term.
"The biggest case you've never heard of."
National Century founder Lance Poulsen, 62, of Port Charlotte, Fla., faces 47 federal counts. He appeared Monday in U.S. District Court in Fort Myers, Fla., and was released on bond.
"My client has violated no law and has intended since the beginning to fight any charges against him vigorously," said Poulsen's lawyer, Thomas Tyack. Poulsen already is fighting similar charges in a civil case brought by the Securities and Exchange Commission.
Three other former executives had helped the government in 2003 and 2004 by pleading guilty to participating in the scheme. Prosecutors are seeking $2 billion in forfeited property.
If convicted, the defendants could get up to 20 years in prison and a $500,000 fine for each money laundering and money laundering conspiracy charge, up to 20 years in prison for certain wire and mail fraud charges and up to five years in prison and a $250,000 fine for each of the other charges.
Kathy Patrick, a lawyer for a group including the state of Arizona and a London bank that invested more than half of the $3 billion, called it "the biggest case you've never heard of."
Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
"My client has violated no law and has intended since the beginning to fight any charges against him vigorously," said Poulsen's lawyer, Thomas Tyack. Poulsen already is fighting similar charges in a civil case brought by the Securities and Exchange Commission.
Three other former executives had helped the government in 2003 and 2004 by pleading guilty to participating in the scheme. Prosecutors are seeking $2 billion in forfeited property.
If convicted, the defendants could get up to 20 years in prison and a $500,000 fine for each money laundering and money laundering conspiracy charge, up to 20 years in prison for certain wire and mail fraud charges and up to five years in prison and a $250,000 fine for each of the other charges.
Kathy Patrick, a lawyer for a group including the state of Arizona and a London bank that invested more than half of the $3 billion, called it "the biggest case you've never heard of."
Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The Poulsens lent Bush their company jet during his campaign and gave more than $40,000 last year to the Florida Republican Party
Up to $2.5 billion in National Century money is unaccounted for, and an additional $400 million is missing from reserve funds used to back National Century bonds, according to company officials.
The Justice Department, the Securities and Exchange Commission and the Department of Health and Human Services, which investigates Medicare fraud, are looking into National Century's finances. Dozens of lawsuits around the country accuse Poulsen and National Century of defrauding investors and employees by skimming money from medical firms.
National Century, whose bonds carried Moody's highest credit rating less than two months ago, is operating under bankruptcy-court protection.
The company's rapid slide has revealed the financial strains in part of the nation's health care safety net. Unable to wait weeks or months for insurance companies to pay claims, 60 ailing companies relied on cash from National Century to run their medical offices and facilities. At least seven — serving thousands of mainly low-income patients from Los Angeles to Washington — have filed for bankruptcy protection since National Century crashed.
In Washington, Greater Southeast Community Hospital and Hadley Memorial Hospital — owned by Doctors Community Healthcare, a firm seeking bankruptcy protection — could not pay independent doctors on contract for several weeks. And Greater Southeast was forced to turn away emergency ambulances last month after the health care firms that provided contract nurses withdrew some nurses because of the cash squeeze.
Meanwhile, Poulsen and his wife, Barbara, have kept a low profile since mid-November, when FBI agents raided National Century's offices in Dublin, Ohio, and hauled away a truckload of computers and records. Poulsen's lawyer declined to make him available for an interview.
"Lance Poulsen is the most slippery character I've seen in my life," says Vicki Buba, an attorney at Stone Pregliasco Haynes Buba, which represents employees of a health care firm suing National Century in Louisville. "He and his people are getting away with murder."
The Justice Department, the Securities and Exchange Commission and the Department of Health and Human Services, which investigates Medicare fraud, are looking into National Century's finances. Dozens of lawsuits around the country accuse Poulsen and National Century of defrauding investors and employees by skimming money from medical firms.
National Century, whose bonds carried Moody's highest credit rating less than two months ago, is operating under bankruptcy-court protection.
The company's rapid slide has revealed the financial strains in part of the nation's health care safety net. Unable to wait weeks or months for insurance companies to pay claims, 60 ailing companies relied on cash from National Century to run their medical offices and facilities. At least seven — serving thousands of mainly low-income patients from Los Angeles to Washington — have filed for bankruptcy protection since National Century crashed.
In Washington, Greater Southeast Community Hospital and Hadley Memorial Hospital — owned by Doctors Community Healthcare, a firm seeking bankruptcy protection — could not pay independent doctors on contract for several weeks. And Greater Southeast was forced to turn away emergency ambulances last month after the health care firms that provided contract nurses withdrew some nurses because of the cash squeeze.
Meanwhile, Poulsen and his wife, Barbara, have kept a low profile since mid-November, when FBI agents raided National Century's offices in Dublin, Ohio, and hauled away a truckload of computers and records. Poulsen's lawyer declined to make him available for an interview.
"Lance Poulsen is the most slippery character I've seen in my life," says Vicki Buba, an attorney at Stone Pregliasco Haynes Buba, which represents employees of a health care firm suing National Century in Louisville. "He and his people are getting away with murder."
Since the bankruptcy, NCFE is being run by the New York-based turnaround specialists, Alvarez & Marsal.
National century bust
By Rutberg, Sidney
Publication: The Secured Lender
Date: Saturday, March 1 2003
Subject: Financial services, Bankruptcy, Asset backed securities
Location: United States
IMAGE ILLUSTRATION 1
National Century Financial Enterprises was billed as the largest and fastest growing receivables finance firm in the healthcare industry. Its receivables-backed paper was rated AAA by Moody's. It signed up for top-of-the-line software technology to control its ever-expanding business so that 300 employees could handle $3 billion in assets.
Since its founding about a dozen years ago, it said it purchased $15 billion in healthcare receivables and, with the help of Credit Suisse First Boston, it securitized $6 billion of them. The company claimed to have earned a net profit in 2001 of $40 million on revenues of $300 million. Trustees of the NCFE securitizations were also top-drawer bankers, J. P. Morgan Chase and Bank One. In short, NCFE was the hottest healthcare financial services organization in the country.
But in late October 2002 Moody's pulled the triple-A rating on the NCFE-sponsored receivables-backed notes and on November 18, 2002, National Century Financial Enterprises filed a bankruptcy petition under Chapter 11 in Columbus, Ohio, with some $3.35 billion in these notes outstanding. About a week earlier, Lance K. Poulsen, one of the founders and chief executive, left the company. The NCFE bankruptcy left many of its clients without financing and several took the Chapter 11 route. Since the bankruptcy, NCFE is being run by the New York-based turnaround specialists, Alvarez & Marsal.
By Rutberg, Sidney
Publication: The Secured Lender
Date: Saturday, March 1 2003
Subject: Financial services, Bankruptcy, Asset backed securities
Location: United States
IMAGE ILLUSTRATION 1
National Century Financial Enterprises was billed as the largest and fastest growing receivables finance firm in the healthcare industry. Its receivables-backed paper was rated AAA by Moody's. It signed up for top-of-the-line software technology to control its ever-expanding business so that 300 employees could handle $3 billion in assets.
Since its founding about a dozen years ago, it said it purchased $15 billion in healthcare receivables and, with the help of Credit Suisse First Boston, it securitized $6 billion of them. The company claimed to have earned a net profit in 2001 of $40 million on revenues of $300 million. Trustees of the NCFE securitizations were also top-drawer bankers, J. P. Morgan Chase and Bank One. In short, NCFE was the hottest healthcare financial services organization in the country.
But in late October 2002 Moody's pulled the triple-A rating on the NCFE-sponsored receivables-backed notes and on November 18, 2002, National Century Financial Enterprises filed a bankruptcy petition under Chapter 11 in Columbus, Ohio, with some $3.35 billion in these notes outstanding. About a week earlier, Lance K. Poulsen, one of the founders and chief executive, left the company. The NCFE bankruptcy left many of its clients without financing and several took the Chapter 11 route. Since the bankruptcy, NCFE is being run by the New York-based turnaround specialists, Alvarez & Marsal.
Bankruptcy of National Century Financial Enterprises Inc casts wide net
Bankruptcy of national century casts wide net - Industry Scan: In the News - National Century Financial Enterprises Inc.'s bankruptcy filing affects healthcare companies
Healthcare Financial Management, Jan, 2003
The November 18 Chapter 11 bankruptcy filing by National Century Financial Enterprises (NCFE) may have far-reaching effects on the for-profit healthcare industry. The November 26, 2002, Wall Street Journal estimates that critical cash flow of more than 100 healthcare organizations depended on NCFE. According to an article in the November 19 Washington Post, the filing with the bankruptcy court for the Southern District of Ohio showed $3.8 billion owed to bondholders, but the actual amount was thought to be slightly less. Company memos indicate the financial troubles surfaced internally three years ago, according to the Wall Street Journal.
At least five NCFE clients have filed for bankruptcy because of the company's collapse: Doctors Community Healthcare Corp., PhyAmerican Physician Group, Tender Loving Care (a Med Diversified unit), LifeCare Solutions, and Lincoln Hospital Medical Center.
NCFE may have strayed from the securitization paradigm, according to Mark Spradling, chair of the structured finance practice group at Vinson & Elkins LLP in Houston, Texas. "NCFE appears to have overestimated the expected collections on some of its securitization vehicles' receivables pools, thus causing a severe shortfall in the cash flow of the vehicles," said Spradling. "In addition, the 'evergreen' receivables sales agreements that NCFE and its clients executed appear to have lacked adequate provisions for the clients to terminate the arrangements. The clients' financial viability has been adversely affected because collections on the receivables have continued to be paid to NCFE."
Healthcare Financial Management, Jan, 2003
The November 18 Chapter 11 bankruptcy filing by National Century Financial Enterprises (NCFE) may have far-reaching effects on the for-profit healthcare industry. The November 26, 2002, Wall Street Journal estimates that critical cash flow of more than 100 healthcare organizations depended on NCFE. According to an article in the November 19 Washington Post, the filing with the bankruptcy court for the Southern District of Ohio showed $3.8 billion owed to bondholders, but the actual amount was thought to be slightly less. Company memos indicate the financial troubles surfaced internally three years ago, according to the Wall Street Journal.
At least five NCFE clients have filed for bankruptcy because of the company's collapse: Doctors Community Healthcare Corp., PhyAmerican Physician Group, Tender Loving Care (a Med Diversified unit), LifeCare Solutions, and Lincoln Hospital Medical Center.
NCFE may have strayed from the securitization paradigm, according to Mark Spradling, chair of the structured finance practice group at Vinson & Elkins LLP in Houston, Texas. "NCFE appears to have overestimated the expected collections on some of its securitization vehicles' receivables pools, thus causing a severe shortfall in the cash flow of the vehicles," said Spradling. "In addition, the 'evergreen' receivables sales agreements that NCFE and its clients executed appear to have lacked adequate provisions for the clients to terminate the arrangements. The clients' financial viability has been adversely affected because collections on the receivables have continued to be paid to NCFE."
F.B.I. Raids Headquarters of Health Services Lender
56 percent of the receivables come from affiliated companies, giving National Century an economic interest in both sides of a bond transaction -- a clear conflict of interest
MICHAEL ONEAL
Published: November 18, 2002
F.B.I. agents raided the headquarters of National Century Financial Enterprises Inc. in Dublin, Ohio, on Saturday, seizing the books and computer records of the troubled health care finance company.
The raid came as the company has been struggling with financial problems that began in late October and that may force it to file for bankruptcy as early as today.
Documents from court actions against the company have accused National Century of gross mismanagement and of hiding information. What is becoming clear is that for clients and investors, millions of health care receivables supposedly backing $3.35 billion in bonds, once AAA rated, may have never existed.
The former chairman and chief executive of National Century, Lance K. Poulsen, resigned both posts under pressure on Nov. 8 and could not be reached for comment.
Lawyers for the company's board, which is led by two bankers from J. P. Morgan Chase, said National Century and Alvarez & Marsal, a turnaround firm the board has hired, would cooperate with the F.B.I.
One of the lawyers, Paul E. Harner, said F.B.I. agents seized a number of records and computers on Saturday from National Century.
National Century is one of the largest health care finance companies in the country. It lends money to cash-short health care companies in return for taking over rights to their receivables -- payments expected from insurers and government programs like Medicare and Medicaid. It then packages those receivables into bonds and sells them to investors, who receive interest derived from the insurance payments. National Century gets a part of each transaction.
But last spring, new investors started to shy away from National Century bonds, depriving it of new capital. In response, the company took money from reserve accounts backing two bond trusts worth $3.35 billion. When investors discovered that almost $350 million was missing from a trust called NPF XII, they protested and National Century's finances began to fall apart.
Facing a liquidity crisis, National Century stopped making payments to hundreds of hospital and home health care clients. That, in turn, led two large clients -- PhyAmerica Physician Group in Durham, N.C., and Tender Loving Care, a unit of Med Diversified in Andover, Mass. -- to seek bankruptcy protection.
Now, National Century's clients and its bondholders, including Pacific Investment Management Company or Pimco, are battling for control of the remaining receivables.
But millions of those receivables may not exist. Instead, the company appears to have been using its bonds to prop up troubled companies like Med Diversified in which National Century or its officers -- including Mr. Poulsen and his wife, Barbara, -- either have an ownership interest or own outright. The bonds were underwritten by Credit Suisse First Boston and rated AAA until Oct. 25 by Moody's Investors Service.
One window to the company's operations is an affidavit filed on Friday in the Franklin County Court of Common Pleas in Columbus, Ohio. In the filing, Kenneth J. Phelan, a managing director of Bank One, which served as trustee for the NPF XII transaction, described a discussion with Sherry Gibson, an executive vice president at National Century. According to the affidavit, Ms. Gibson said that National Century lent more money to clients than it could support with patient receivables.
Rather, the company accepted real estate and even artwork as collateral, which violated the bond indenture. NPF XII is supposed to have about $2 billion in collateral. Of that, according to the affidavit, Ms. Gibson told Mr. Phelan that $800 million was in ''nonpatient specific receivables.'' In other words, 40 percent of the bonds are backed by collateral that has nothing to do with insurance payments.
According to the affidavit, Ms. Gibson also said that National Century failed to write off receivables that were more than 180 days past due, as required by the bond indentures. She explained that executives often reclassified the bonds as collateral in a category called ''150+ day.'' Likewise, Ms. Gibson said executives advanced monies to companies that provided receivables for services that had yet to be performed. If the service was never performed, this was not reflected in the books. And National Century kept lending the client money anyway, according to the affidavit.
As for the reserve funds securing the bond transactions, Ms. Gibson told Mr. Phelan that executives routinely moved money in and out of the accounts. They staggered the reporting days of the reserves so that they could make sure one was full on a given day, even if the other was not. As trustee, Bank One was supposed to monitor the activity, as was J. P. Morgan, which acted as trustee for a sister transaction called NPF VI.
Both banks have been sued by Med Diversified, which has accused trustees of not monitoring the bonds. But according to the affidavit, Ms. Gibson said that National Century had provided false information to Bank One ''to get it past the trustees or the trustees would not move the cash.''
Mr. Harner, the company's lawyer, said, ''We expect that all of these types of allegations will be fully investigated by independent parties.''
Until now, the extent of National Century's ownership in its clients was not known. But other papers in the bondholder suit outline that the company and its affiliates have major stakes in 10 of its biggest customers. As much as 56 percent of the receivables come from affiliated companies, giving National Century an economic interest in both sides of a bond transaction -- a clear conflict of interest.
MICHAEL ONEAL
Published: November 18, 2002
F.B.I. agents raided the headquarters of National Century Financial Enterprises Inc. in Dublin, Ohio, on Saturday, seizing the books and computer records of the troubled health care finance company.
The raid came as the company has been struggling with financial problems that began in late October and that may force it to file for bankruptcy as early as today.
Documents from court actions against the company have accused National Century of gross mismanagement and of hiding information. What is becoming clear is that for clients and investors, millions of health care receivables supposedly backing $3.35 billion in bonds, once AAA rated, may have never existed.
The former chairman and chief executive of National Century, Lance K. Poulsen, resigned both posts under pressure on Nov. 8 and could not be reached for comment.
Lawyers for the company's board, which is led by two bankers from J. P. Morgan Chase, said National Century and Alvarez & Marsal, a turnaround firm the board has hired, would cooperate with the F.B.I.
One of the lawyers, Paul E. Harner, said F.B.I. agents seized a number of records and computers on Saturday from National Century.
National Century is one of the largest health care finance companies in the country. It lends money to cash-short health care companies in return for taking over rights to their receivables -- payments expected from insurers and government programs like Medicare and Medicaid. It then packages those receivables into bonds and sells them to investors, who receive interest derived from the insurance payments. National Century gets a part of each transaction.
But last spring, new investors started to shy away from National Century bonds, depriving it of new capital. In response, the company took money from reserve accounts backing two bond trusts worth $3.35 billion. When investors discovered that almost $350 million was missing from a trust called NPF XII, they protested and National Century's finances began to fall apart.
Facing a liquidity crisis, National Century stopped making payments to hundreds of hospital and home health care clients. That, in turn, led two large clients -- PhyAmerica Physician Group in Durham, N.C., and Tender Loving Care, a unit of Med Diversified in Andover, Mass. -- to seek bankruptcy protection.
Now, National Century's clients and its bondholders, including Pacific Investment Management Company or Pimco, are battling for control of the remaining receivables.
But millions of those receivables may not exist. Instead, the company appears to have been using its bonds to prop up troubled companies like Med Diversified in which National Century or its officers -- including Mr. Poulsen and his wife, Barbara, -- either have an ownership interest or own outright. The bonds were underwritten by Credit Suisse First Boston and rated AAA until Oct. 25 by Moody's Investors Service.
One window to the company's operations is an affidavit filed on Friday in the Franklin County Court of Common Pleas in Columbus, Ohio. In the filing, Kenneth J. Phelan, a managing director of Bank One, which served as trustee for the NPF XII transaction, described a discussion with Sherry Gibson, an executive vice president at National Century. According to the affidavit, Ms. Gibson said that National Century lent more money to clients than it could support with patient receivables.
Rather, the company accepted real estate and even artwork as collateral, which violated the bond indenture. NPF XII is supposed to have about $2 billion in collateral. Of that, according to the affidavit, Ms. Gibson told Mr. Phelan that $800 million was in ''nonpatient specific receivables.'' In other words, 40 percent of the bonds are backed by collateral that has nothing to do with insurance payments.
According to the affidavit, Ms. Gibson also said that National Century failed to write off receivables that were more than 180 days past due, as required by the bond indentures. She explained that executives often reclassified the bonds as collateral in a category called ''150+ day.'' Likewise, Ms. Gibson said executives advanced monies to companies that provided receivables for services that had yet to be performed. If the service was never performed, this was not reflected in the books. And National Century kept lending the client money anyway, according to the affidavit.
As for the reserve funds securing the bond transactions, Ms. Gibson told Mr. Phelan that executives routinely moved money in and out of the accounts. They staggered the reporting days of the reserves so that they could make sure one was full on a given day, even if the other was not. As trustee, Bank One was supposed to monitor the activity, as was J. P. Morgan, which acted as trustee for a sister transaction called NPF VI.
Both banks have been sued by Med Diversified, which has accused trustees of not monitoring the bonds. But according to the affidavit, Ms. Gibson said that National Century had provided false information to Bank One ''to get it past the trustees or the trustees would not move the cash.''
Mr. Harner, the company's lawyer, said, ''We expect that all of these types of allegations will be fully investigated by independent parties.''
Until now, the extent of National Century's ownership in its clients was not known. But other papers in the bondholder suit outline that the company and its affiliates have major stakes in 10 of its biggest customers. As much as 56 percent of the receivables come from affiliated companies, giving National Century an economic interest in both sides of a bond transaction -- a clear conflict of interest.
Doctors Community Healthcare ; PhyAmerica Physician Group ; Tender Loving Care ; Med Diversified ; LifeCare Solutions ; Lincoln Hospital Medical Cente
Fallout Spreads After Collapse Of a Health Services Lender
MICHAEL ONEAL
Published: November 21, 2002
The collapse of National Century Financial Enterprises toppled another of its clients yesterday when Doctors Community Healthcare -- a company based in Scottsdale, Ariz., that owns five hospitals in low-income neighborhoods in Washington, D.C.; Chicago and Southern California -- filed for Chapter 11 in the Federal Bankruptcy Court for the District of Columbia.
Doctors Community joins several other major customers of National Century that have filed for bankruptcy since the health care finance company, based in Dublin, Ohio, began to come apart in late October. The PhyAmerica Physician Group in Durham, N.C.; Tender Loving Care, a unit of Med Diversified in Andover, Mass.; LifeCare Solutions in San Diego; and Lincoln Hospital Medical Center in Los Angeles have all sought Chapter 11 protection in the last two weeks after they stopped receiving payments from National Century.
Hundreds of other National Century clients are also scrambling to find alternative financing. Those that operate hospitals in depressed communities may be the hardest hit.
''This is a knife in the heart for those institutions,'' said Rick Wade, a spokesman for the American Hospital Association. With rising costs, slow-paying insurers and lots of uninsured patients, many hospitals in low-income neighborhoods ''are on the edge,'' he added.
National Century itself filed for bankruptcy on Monday and has become the target of both an F.B.I. investigation and allegations of gross mismanagement brought by its clients and holders of $3.35 billion worth of its asset-backed securities.
The company's former chairman and chief executive, Lance K. Poulsen, resigned both posts under pressure on Nov. 8.
The Doctors Community filing will provide protection from creditors to all five of its hospitals: Greater Southeast Community Hospital and Hadley Memorial Hospital in Washington; Michael Reese Medical Center in Chicago; Pine Grove Hospital in Canoga Park, Calif.; and Pacifica of the Valley Hospital in Sun Valley, Calif. The company issued a statement promising that wages and benefits would continue to be paid as the privately held company restructures.
But the troubles of Doctors Community have already affected medical services in one of Washington's poorest neighborhoods. Karen Dale, chief executive of Greater Southeast Community Hospital, said that while she was confident the quality of care had not been affected at her hospital, the number of patients it can care for has diminished because of the severe cash squeeze.
Two of the four companies that had been supplying nurses to Greater Southeast have withdrawn their employees because they were not being paid. The other two have reduced the number of nurses they will supply, Ms. Dale said. That means the hospital can accept fewer patients, especially in its intensive and critical care units. When its emergency room got too crowded over the weekend, for instance, Ms. Dale said the hospital was forced to divert ambulances to other hospitals.
Meanwhile, Ms. Dale is spending much of her time trying to persuade her doctors and nurses to stay put. ''The danger would be that the staff panics and decides to leave,'' Ms. Dale said. ''We are located in Ward 8 -- the area with the worst health indices and a lot of poor people. This is devastating.'' Greater Southeast was the lead hospital in a highly publicized effort to privatize the District of Columbia's health care system for indigents in 2001.
The troubles at Doctors Community began in late October when National Century, one of the largest health care finance companies in the country and the primary source of financing for most of its clients, began to fall apart. National Century lent money to cash-short health care companies in return for taking over rights to their receivables -- payments expected from insurers and government programs like Medicare and Medicaid. It then packaged those receivables into collateral for bonds and sold the bonds to investors, who received interest derived from the insurance payments. National Century gets a part of each transaction.
But last spring, after Fitch Ratings downgraded the bonds, investors started to shy away from National Century, depriving it of new capital. In response, the company took money from reserve accounts backing two bond trusts worth $3.35 billion. When investors discovered that almost $350 million was missing from a trust called NPF XII, it was clear National Century was facing a liquidity crisis. The company stopped making payments to hundreds of hospital and home health care clients and the value of its bonds collapsed.
Since then, a bondholder group has charged in the Franklin County Court of Pleas in Columbus, Ohio, that National Century owned large stakes in many of its biggest clients -- companies like Med Diversified and Doctors Community. Other documents in the Ohio court proceedings claim that the company was lending far more money to these clients than they generated in receivables. Instead, court papers say, National Century was taking real estate and even artwork as collateral for the loans, violating the bond indenture.
In effect, bondholders have charged, National Century was using its AAA-rated bonds to prop up distressed companies in which it had a direct ownership interest. Bank One, the trustee for a portion of National Century's bonds, said in a court filing that ''the evidence of systematic financial trickery continues to mount.''
Some of the bondholders are moving on. The Ambac Financial Group announced on Monday that it would write down 70 percent of its $174 million investment in the bonds. Others with big exposure include the Pacific Investment Management Company, which is a unit of Allianz, and Alliance Capital Management, which is a unit of AXA.
Investors in asset-backed securities are still questioning how bonds that had carried a top credit rating could now be worth just a fraction of their face value. Moody's Investors Service rated National Century's bonds AAA until Oct. 25. Credit Suisse First Boston underwrote the bonds, and J. P. Morgan Chase had two bankers on the National Century board, including Hal Pote, head of the audit committee. Deloitte & Touche audited the books. Both Bank One and J. P. Morgan were bond trustees.
Most of these securities are backed by mortgages and other assets with relatively predictable cash flows. ''They're supposed to be bullet proof,'' one specialist said.
MICHAEL ONEAL
Published: November 21, 2002
The collapse of National Century Financial Enterprises toppled another of its clients yesterday when Doctors Community Healthcare -- a company based in Scottsdale, Ariz., that owns five hospitals in low-income neighborhoods in Washington, D.C.; Chicago and Southern California -- filed for Chapter 11 in the Federal Bankruptcy Court for the District of Columbia.
Doctors Community joins several other major customers of National Century that have filed for bankruptcy since the health care finance company, based in Dublin, Ohio, began to come apart in late October. The PhyAmerica Physician Group in Durham, N.C.; Tender Loving Care, a unit of Med Diversified in Andover, Mass.; LifeCare Solutions in San Diego; and Lincoln Hospital Medical Center in Los Angeles have all sought Chapter 11 protection in the last two weeks after they stopped receiving payments from National Century.
Hundreds of other National Century clients are also scrambling to find alternative financing. Those that operate hospitals in depressed communities may be the hardest hit.
''This is a knife in the heart for those institutions,'' said Rick Wade, a spokesman for the American Hospital Association. With rising costs, slow-paying insurers and lots of uninsured patients, many hospitals in low-income neighborhoods ''are on the edge,'' he added.
National Century itself filed for bankruptcy on Monday and has become the target of both an F.B.I. investigation and allegations of gross mismanagement brought by its clients and holders of $3.35 billion worth of its asset-backed securities.
The company's former chairman and chief executive, Lance K. Poulsen, resigned both posts under pressure on Nov. 8.
The Doctors Community filing will provide protection from creditors to all five of its hospitals: Greater Southeast Community Hospital and Hadley Memorial Hospital in Washington; Michael Reese Medical Center in Chicago; Pine Grove Hospital in Canoga Park, Calif.; and Pacifica of the Valley Hospital in Sun Valley, Calif. The company issued a statement promising that wages and benefits would continue to be paid as the privately held company restructures.
But the troubles of Doctors Community have already affected medical services in one of Washington's poorest neighborhoods. Karen Dale, chief executive of Greater Southeast Community Hospital, said that while she was confident the quality of care had not been affected at her hospital, the number of patients it can care for has diminished because of the severe cash squeeze.
Two of the four companies that had been supplying nurses to Greater Southeast have withdrawn their employees because they were not being paid. The other two have reduced the number of nurses they will supply, Ms. Dale said. That means the hospital can accept fewer patients, especially in its intensive and critical care units. When its emergency room got too crowded over the weekend, for instance, Ms. Dale said the hospital was forced to divert ambulances to other hospitals.
Meanwhile, Ms. Dale is spending much of her time trying to persuade her doctors and nurses to stay put. ''The danger would be that the staff panics and decides to leave,'' Ms. Dale said. ''We are located in Ward 8 -- the area with the worst health indices and a lot of poor people. This is devastating.'' Greater Southeast was the lead hospital in a highly publicized effort to privatize the District of Columbia's health care system for indigents in 2001.
The troubles at Doctors Community began in late October when National Century, one of the largest health care finance companies in the country and the primary source of financing for most of its clients, began to fall apart. National Century lent money to cash-short health care companies in return for taking over rights to their receivables -- payments expected from insurers and government programs like Medicare and Medicaid. It then packaged those receivables into collateral for bonds and sold the bonds to investors, who received interest derived from the insurance payments. National Century gets a part of each transaction.
But last spring, after Fitch Ratings downgraded the bonds, investors started to shy away from National Century, depriving it of new capital. In response, the company took money from reserve accounts backing two bond trusts worth $3.35 billion. When investors discovered that almost $350 million was missing from a trust called NPF XII, it was clear National Century was facing a liquidity crisis. The company stopped making payments to hundreds of hospital and home health care clients and the value of its bonds collapsed.
Since then, a bondholder group has charged in the Franklin County Court of Pleas in Columbus, Ohio, that National Century owned large stakes in many of its biggest clients -- companies like Med Diversified and Doctors Community. Other documents in the Ohio court proceedings claim that the company was lending far more money to these clients than they generated in receivables. Instead, court papers say, National Century was taking real estate and even artwork as collateral for the loans, violating the bond indenture.
In effect, bondholders have charged, National Century was using its AAA-rated bonds to prop up distressed companies in which it had a direct ownership interest. Bank One, the trustee for a portion of National Century's bonds, said in a court filing that ''the evidence of systematic financial trickery continues to mount.''
Some of the bondholders are moving on. The Ambac Financial Group announced on Monday that it would write down 70 percent of its $174 million investment in the bonds. Others with big exposure include the Pacific Investment Management Company, which is a unit of Allianz, and Alliance Capital Management, which is a unit of AXA.
Investors in asset-backed securities are still questioning how bonds that had carried a top credit rating could now be worth just a fraction of their face value. Moody's Investors Service rated National Century's bonds AAA until Oct. 25. Credit Suisse First Boston underwrote the bonds, and J. P. Morgan Chase had two bankers on the National Century board, including Hal Pote, head of the audit committee. Deloitte & Touche audited the books. Both Bank One and J. P. Morgan were bond trustees.
Most of these securities are backed by mortgages and other assets with relatively predictable cash flows. ''They're supposed to be bullet proof,'' one specialist said.
HCA paid $361 million more in interest expense than it did in the same period a year earlier.
Tuesday, 09/04/07
HCA takes steady approach to reducing debt since sale
Company avoids major asset sales but cuts its costs
By GETAHN WARD
Staff Writer
HCA Inc. hasn't made any bold moves in the nine months since it went private.
It hasn't pared down like it did after its previous leveraged buyout, in the late 1980s. It hasn't sold dozens of hospitals or spun off whole divisions.
But it has kept an eye on costs, reducing the money it spends on marketing and travel, for example, while trying to increase cash flow.
"I don't think there's really been any major surprises one way or the other," said Matt Lawson, high-yield analyst with the credit research firm KDP Investment Advisors in Montpelier, Vt. "They're performing about as you would have expected before the LBO."
HCA's $33 billion sale last November to a group of private equity firms, senior executives and company co-founder Dr. Thomas F. Frist Jr. left the Nashville hospital chain company with $28 billion of debt. In the first half of the year, HCA has said, it reduced that debt by a net of $312 million.
The debt "has required more discipline as far as cost containment, but nothing out of the ordinary," said Dean Diaz, vice president and senior credit officer with Moody's Investor Service.
"Some people would have expected more sales to pay down the debt earlier, but they said assets sales were not part of the strategy," Diaz said. "They've pretty much stuck to what they said."
Chairman and CEO Jack O. Bovender Jr. declined to comment for this story, but in a speechin Junetothe Nashville Health Care Council, he said the nation's largest private hospital chain hasn't made any moves that it wouldn't have made as a publicly traded company.
Sales may be needed
Bovender has said HCA would continue to prune its portfolio where it made sense, although the deal didn't call for selling hospitals.
But Vicki Bryan, a senior high-yield analyst with the bond research firm Gimme Credit in New York, said that without aggressive asset sales it would be difficult for HCA to continue to chip away its debt load.
"The problem with HCA is that the interest cost is so high, it's absorbing an inordinate amount of their cash flow that could be used to pay down debt," she said. "When they get through paying their interest costs and capital expenditures, it leaves very little."
When the company was previously taken private, in 1989, it quickly sold several non-core holdings, including a clinical laboratory unit, a hospital management subsidiary and HCA's 50 percent stake in an insurance business. HCA went public again in 1992.
Today, the company could easily sell several under-performing hospitals to help it reduce debt, Bryan said. "We have found a number of facilities in the portfolio (generally in the coastal Atlantic states and Florida) that appear to perform below par," she said.
HCA is selling a hospital in Miami and sold both of its hospitals in Switzerland, but spokes man Jeff Prescott said it wouldn't discuss other possible sales or acquisitions.
But unless it sells more hospitals, HCA could have trouble paying down its debt, Bryan said. The investors who took the company private in November agreed to assume $11.7 billion of existing debt and borrowed an additional $16 billion to finance the deal.
In its second quarter, HCA paid $361 million more in interest expense than it did in the same period a year earlier.
That helped cut net income by $179 millionin the three months that ended June 30.
Bad debt still an issue
Besides divesting three hospitals, HCA has focused on driving down various operating expenses.
"We're in a difficult environment for (admissions) volume, and bad debt is still an issue for the industry, but the company is very actively managing its cost structure through that difficult industry environment," said Frank Morgan, a health-care analyst at Jefferies & Co. in Nashville.
For the recent second quarter, the amount of revenues HCA sets aside to cover unpaid medical bills rose to 11.2 percent from 10.6 percent last year. Also, overall admissions to its hospitals fell 1.5 percent compared with last year's second quarter.
In the first quarter, HCA reduced spending on marketing, travel and entertainment. In a conference call, Chief Operating Officer Richard Bracken said the company was tightening the belt on outside and image advertising but was continuing its outreach to doctors, whom HCA considers a key source of referral of patients.
During the second quarter, spending on salaries and benefits fell to 39.4 cents of every dollar of revenue from 41 cents a year ago, a change that analysts said reflects either a different mix of patients or changes in staffing levels at hospitals.
Prescott, the HCA spokesman, said that while the company has sold some hospitals, it also has replaced older hospitals in Kansas City and Atlanta with new facilities. At the end of its second quarter, HCA operated 170 hospitals and 107 outpatient surgery centers, compared with 176 hospitals and 92 surgery centers a year earlier.
The sale of two hospitals this year with a third transaction pending is consistent with how HCA has operated in the past, Prescott said. And since the leveraged buyout, donations through the company's foundation have remained consistent, averaging about $7 million a year, he said.
Morgan isn't as concerned about HCA's debt, citing its
9.7 percent increase in second-quarter earnings before interest, taxes, depreciation and amortization among recent positive developments.
He sees opportunities for HCA to refinance part of the debt like it did in February in a move that was expected to save $54 million in annual interest costs on about $12.8 billion of loans used to fund its buyout in November. "Looking at debt to EBITDA, it's a levered company, but the plan is to reduce the leverage over time," Morgan said.
HCA takes steady approach to reducing debt since sale
Company avoids major asset sales but cuts its costs
By GETAHN WARD
Staff Writer
HCA Inc. hasn't made any bold moves in the nine months since it went private.
It hasn't pared down like it did after its previous leveraged buyout, in the late 1980s. It hasn't sold dozens of hospitals or spun off whole divisions.
But it has kept an eye on costs, reducing the money it spends on marketing and travel, for example, while trying to increase cash flow.
"I don't think there's really been any major surprises one way or the other," said Matt Lawson, high-yield analyst with the credit research firm KDP Investment Advisors in Montpelier, Vt. "They're performing about as you would have expected before the LBO."
HCA's $33 billion sale last November to a group of private equity firms, senior executives and company co-founder Dr. Thomas F. Frist Jr. left the Nashville hospital chain company with $28 billion of debt. In the first half of the year, HCA has said, it reduced that debt by a net of $312 million.
The debt "has required more discipline as far as cost containment, but nothing out of the ordinary," said Dean Diaz, vice president and senior credit officer with Moody's Investor Service.
"Some people would have expected more sales to pay down the debt earlier, but they said assets sales were not part of the strategy," Diaz said. "They've pretty much stuck to what they said."
Chairman and CEO Jack O. Bovender Jr. declined to comment for this story, but in a speechin Junetothe Nashville Health Care Council, he said the nation's largest private hospital chain hasn't made any moves that it wouldn't have made as a publicly traded company.
Sales may be needed
Bovender has said HCA would continue to prune its portfolio where it made sense, although the deal didn't call for selling hospitals.
But Vicki Bryan, a senior high-yield analyst with the bond research firm Gimme Credit in New York, said that without aggressive asset sales it would be difficult for HCA to continue to chip away its debt load.
"The problem with HCA is that the interest cost is so high, it's absorbing an inordinate amount of their cash flow that could be used to pay down debt," she said. "When they get through paying their interest costs and capital expenditures, it leaves very little."
When the company was previously taken private, in 1989, it quickly sold several non-core holdings, including a clinical laboratory unit, a hospital management subsidiary and HCA's 50 percent stake in an insurance business. HCA went public again in 1992.
Today, the company could easily sell several under-performing hospitals to help it reduce debt, Bryan said. "We have found a number of facilities in the portfolio (generally in the coastal Atlantic states and Florida) that appear to perform below par," she said.
HCA is selling a hospital in Miami and sold both of its hospitals in Switzerland, but spokes man Jeff Prescott said it wouldn't discuss other possible sales or acquisitions.
But unless it sells more hospitals, HCA could have trouble paying down its debt, Bryan said. The investors who took the company private in November agreed to assume $11.7 billion of existing debt and borrowed an additional $16 billion to finance the deal.
In its second quarter, HCA paid $361 million more in interest expense than it did in the same period a year earlier.
That helped cut net income by $179 millionin the three months that ended June 30.
Bad debt still an issue
Besides divesting three hospitals, HCA has focused on driving down various operating expenses.
"We're in a difficult environment for (admissions) volume, and bad debt is still an issue for the industry, but the company is very actively managing its cost structure through that difficult industry environment," said Frank Morgan, a health-care analyst at Jefferies & Co. in Nashville.
For the recent second quarter, the amount of revenues HCA sets aside to cover unpaid medical bills rose to 11.2 percent from 10.6 percent last year. Also, overall admissions to its hospitals fell 1.5 percent compared with last year's second quarter.
In the first quarter, HCA reduced spending on marketing, travel and entertainment. In a conference call, Chief Operating Officer Richard Bracken said the company was tightening the belt on outside and image advertising but was continuing its outreach to doctors, whom HCA considers a key source of referral of patients.
During the second quarter, spending on salaries and benefits fell to 39.4 cents of every dollar of revenue from 41 cents a year ago, a change that analysts said reflects either a different mix of patients or changes in staffing levels at hospitals.
Prescott, the HCA spokesman, said that while the company has sold some hospitals, it also has replaced older hospitals in Kansas City and Atlanta with new facilities. At the end of its second quarter, HCA operated 170 hospitals and 107 outpatient surgery centers, compared with 176 hospitals and 92 surgery centers a year earlier.
The sale of two hospitals this year with a third transaction pending is consistent with how HCA has operated in the past, Prescott said. And since the leveraged buyout, donations through the company's foundation have remained consistent, averaging about $7 million a year, he said.
Morgan isn't as concerned about HCA's debt, citing its
9.7 percent increase in second-quarter earnings before interest, taxes, depreciation and amortization among recent positive developments.
He sees opportunities for HCA to refinance part of the debt like it did in February in a move that was expected to save $54 million in annual interest costs on about $12.8 billion of loans used to fund its buyout in November. "Looking at debt to EBITDA, it's a levered company, but the plan is to reduce the leverage over time," Morgan said.
Monday, October 8, 2007
The Successes of the Modern False Claims Act
Posted On: October 7, 2007 by Finch McCranie, LLP
Part 5: The Successes of the Modern False Claims Act--and How They Have Prompted a Wave of State False Claims Acts With Qui Tam Whistleblower Provisions
This is Part 5 of 6 by whistleblower lawyer blog of a detailed article for those wishing to know more about the principal qui tam whistleblower statutes, the federal False Claims Act and the new state False Claims Acts. It is part of a recently published article by whistleblower lawyer blog author Michael A. Sullivan, and this article is reprinted with the permission of the Georgia Bar Journal.
This Part 5 discusses the dramatic successes of the federal False Claims Act since its 1986 Amendments in recovering taxpayers' money wrongfully obtained by fraud and false claims.
IV. The Trend of Recent Recoveries Under the False Claims Act
Over the past two decades since the modern False Claims Act was established through the 1986 Amendments, the federal government’s recoveries of dollars have grown astronomically, especially in health care cases. The Department of Justice statistics [52] tell the story:
In 1987, the government’s recoveries in qui tam cases totaled zero, presumably because the 1986 Amendments had just taken effect; and total recoveries under the False Claims Act were just $86 million. The following year, qui tam and other False Claims Act settlements and judgments began a steady climb upward, exceeding $200 million by 1989, and $300 million by 1991. By 1994, the government’s recoveries broke the $1 billion mark for the first time, with $380 million of that amount attributable to qui tam case recoveries alone.
In 2000, the government recovered more than $1.5 billion, of which $1.2 billion was derived from qui tam actions. In 2001, the government recovered more than $1.7 billion, with almost $1.2 billion of that amount from qui tam cases. With the exception of 2004, in each year since 2000 the government has recovered more than a billion dollars per year under the False Claims Act, and qui tam actions were responsible for the lion’s share of those recoveries. For example, in 2003, government recoveries exceeded $2.2 billion, of which $1.4 billion came from qui tam cases. Similarly, in 2005, of the government’s total recovery of $1.4 billion, $1.1 billion of that amount came from qui tam cases.
In 2006, the Justice Department recovered a record of more than $3.1 billion in settlements and judgments for fraud and false claims. Of this record $3.1 billion in recoveries, 72% came from the health care field; 20% from defense; and 8% from other sources. Health care alone accounted for $2.2 billion in settlements and judgments, which included a $920 million settlement with Tenet Healthcare Corporation, the country’s second-largest hospital chain. Defense procurement fraud amounted to $609 million in recoveries, which included a $565 million settlement with the Boeing Company.
It is interesting that, while defense procurement fraud both inspired the Act and was the largest source of recoveries at the time of the 1986 Amendments, health care cases now lead in recoveries, as health care costs have grown as a percentage of the federal budget. By industry, in 1987 the defense industry was the largest source of cases under the False Claims Act. [53] The health care industry accounted for only 12% of cases under the False Claims Act in 1987; that percentage grew to 54% by 1997. [54]
Many health care fraud cases have addressed over-billing or up-coding, fraudulent cost reporting, billing for services not provided, and failure to furnish the required “quality of care.” [55] The breakdown of the Department of Justice statistics shows that government recoveries in the health care field have grown from less than $2 million in 1988 to more than $1.8 billion in 2003. Although the amounts recovered rise and fall each year, from 2001–2006 government recoveries from the health care field exceeded $1 billion in five out of six years.
The trend has continued in 2007, as the Office of Inspector General of the Department of Health and Human Services recently announced that it expects $2.9 billion in recoveries for Medicare, Medicaid, and other federal health and human services programs for the first half of fiscal year 2007. [56]
In short, the health care industry now consistently accounts for the vast majority of settlements and judgments obtained by the federal government for fraud and false claims.
Footnotes:
52 See Department of Justice statistics reprinted at http://www.taf.org/statistics.htm.
53 SYLVIA, supra note 12, § 2:13, at 63.
54 Id. § 2:14, at 64.
55. Id. § 2:14, at 65.
56. Department of Health and Human Services Office of Inspector General, Semiannual Report to Congress (October 1, 2006-March 31, 2007), at i, available at http://oig.hhs.gov/publications/docs/semiannual/2007/SemiannualFirstHalf07.pdf.
57 Recent significant recoveries under the False Claims Act in the health care industry include the following:
a. Tenet Healthcare Corporation: ($900 million settlement of several lawsuits in 2006 from allegedly improper billing practices), http://www.usdoj.gov/usao/cac/news/pr2006/088.html.
b. Serono, S.A.: ($704 million settlement of several lawsuits in 2005 from allegedly illegal schemes to promote, market, and sell Serostim, an AIDS drug), http://www.usdoj.gov/opa/pr/2005/October/05_civ_545.html.
c. Bristol-Meyers Squibb ($515 million settlement in September 2007 to resolve allegations of illegal drug marketing and pricing),
http://www.usdoj.gov/opa/pr/2007/September/07_civ_782.html.
d. Schering-Plough Corporation: ($435 million settlement in August 2006, arising from alleged illegal sales in marketing programs for its drugs, with $91 million to settle civil liabilities to the states for losses to state Medicaid programs), http://www.usdoj.gov/usao/ma/Press%20Office%20-%20Press%20Release%20Files/Schering-Plough/press%20release.pdf
e. Saint Barnabas Corporation: ($265 million settlement in 2006 of two lawsuits against the largest healthcare system in New Jersey, Saint Barnabas Corporation, to settle allegations that it defrauded the federal Medicare program), http://www.usdoj.gov/usao/nj/press/files/pdffiles/stba0615rel.pdf.
f. King Pharmaceuticals, Inc.: ($124 million settlement in 2005 of various lawsuits for alleged overcharges in Medicaid program to various federal and state government entities for its drug products),
Part 5: The Successes of the Modern False Claims Act--and How They Have Prompted a Wave of State False Claims Acts With Qui Tam Whistleblower Provisions
This is Part 5 of 6 by whistleblower lawyer blog of a detailed article for those wishing to know more about the principal qui tam whistleblower statutes, the federal False Claims Act and the new state False Claims Acts. It is part of a recently published article by whistleblower lawyer blog author Michael A. Sullivan, and this article is reprinted with the permission of the Georgia Bar Journal.
This Part 5 discusses the dramatic successes of the federal False Claims Act since its 1986 Amendments in recovering taxpayers' money wrongfully obtained by fraud and false claims.
IV. The Trend of Recent Recoveries Under the False Claims Act
Over the past two decades since the modern False Claims Act was established through the 1986 Amendments, the federal government’s recoveries of dollars have grown astronomically, especially in health care cases. The Department of Justice statistics [52] tell the story:
In 1987, the government’s recoveries in qui tam cases totaled zero, presumably because the 1986 Amendments had just taken effect; and total recoveries under the False Claims Act were just $86 million. The following year, qui tam and other False Claims Act settlements and judgments began a steady climb upward, exceeding $200 million by 1989, and $300 million by 1991. By 1994, the government’s recoveries broke the $1 billion mark for the first time, with $380 million of that amount attributable to qui tam case recoveries alone.
In 2000, the government recovered more than $1.5 billion, of which $1.2 billion was derived from qui tam actions. In 2001, the government recovered more than $1.7 billion, with almost $1.2 billion of that amount from qui tam cases. With the exception of 2004, in each year since 2000 the government has recovered more than a billion dollars per year under the False Claims Act, and qui tam actions were responsible for the lion’s share of those recoveries. For example, in 2003, government recoveries exceeded $2.2 billion, of which $1.4 billion came from qui tam cases. Similarly, in 2005, of the government’s total recovery of $1.4 billion, $1.1 billion of that amount came from qui tam cases.
In 2006, the Justice Department recovered a record of more than $3.1 billion in settlements and judgments for fraud and false claims. Of this record $3.1 billion in recoveries, 72% came from the health care field; 20% from defense; and 8% from other sources. Health care alone accounted for $2.2 billion in settlements and judgments, which included a $920 million settlement with Tenet Healthcare Corporation, the country’s second-largest hospital chain. Defense procurement fraud amounted to $609 million in recoveries, which included a $565 million settlement with the Boeing Company.
It is interesting that, while defense procurement fraud both inspired the Act and was the largest source of recoveries at the time of the 1986 Amendments, health care cases now lead in recoveries, as health care costs have grown as a percentage of the federal budget. By industry, in 1987 the defense industry was the largest source of cases under the False Claims Act. [53] The health care industry accounted for only 12% of cases under the False Claims Act in 1987; that percentage grew to 54% by 1997. [54]
Many health care fraud cases have addressed over-billing or up-coding, fraudulent cost reporting, billing for services not provided, and failure to furnish the required “quality of care.” [55] The breakdown of the Department of Justice statistics shows that government recoveries in the health care field have grown from less than $2 million in 1988 to more than $1.8 billion in 2003. Although the amounts recovered rise and fall each year, from 2001–2006 government recoveries from the health care field exceeded $1 billion in five out of six years.
The trend has continued in 2007, as the Office of Inspector General of the Department of Health and Human Services recently announced that it expects $2.9 billion in recoveries for Medicare, Medicaid, and other federal health and human services programs for the first half of fiscal year 2007. [56]
In short, the health care industry now consistently accounts for the vast majority of settlements and judgments obtained by the federal government for fraud and false claims.
Footnotes:
52 See Department of Justice statistics reprinted at http://www.taf.org/statistics.htm.
53 SYLVIA, supra note 12, § 2:13, at 63.
54 Id. § 2:14, at 64.
55. Id. § 2:14, at 65.
56. Department of Health and Human Services Office of Inspector General, Semiannual Report to Congress (October 1, 2006-March 31, 2007), at i, available at http://oig.hhs.gov/publications/docs/semiannual/2007/SemiannualFirstHalf07.pdf.
57 Recent significant recoveries under the False Claims Act in the health care industry include the following:
a. Tenet Healthcare Corporation: ($900 million settlement of several lawsuits in 2006 from allegedly improper billing practices), http://www.usdoj.gov/usao/cac/news/pr2006/088.html.
b. Serono, S.A.: ($704 million settlement of several lawsuits in 2005 from allegedly illegal schemes to promote, market, and sell Serostim, an AIDS drug), http://www.usdoj.gov/opa/pr/2005/October/05_civ_545.html.
c. Bristol-Meyers Squibb ($515 million settlement in September 2007 to resolve allegations of illegal drug marketing and pricing),
http://www.usdoj.gov/opa/pr/2007/September/07_civ_782.html.
d. Schering-Plough Corporation: ($435 million settlement in August 2006, arising from alleged illegal sales in marketing programs for its drugs, with $91 million to settle civil liabilities to the states for losses to state Medicaid programs), http://www.usdoj.gov/usao/ma/Press%20Office%20-%20Press%20Release%20Files/Schering-Plough/press%20release.pdf
e. Saint Barnabas Corporation: ($265 million settlement in 2006 of two lawsuits against the largest healthcare system in New Jersey, Saint Barnabas Corporation, to settle allegations that it defrauded the federal Medicare program), http://www.usdoj.gov/usao/nj/press/files/pdffiles/stba0615rel.pdf.
f. King Pharmaceuticals, Inc.: ($124 million settlement in 2005 of various lawsuits for alleged overcharges in Medicaid program to various federal and state government entities for its drug products),
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