Tuesday, August 26, 2003

Greatest bankruptcy story ever told

The Lee County Community Hospital went bankrupt, and was auctioned off by the bankruptcy court for money than enough money to pay all the creditors with some money left over for charity, as described here in the Kingsport Times interview with the head man of the successor entity, Mark Crawford of Lee Regional Medical Center, a subsidiary of Health Management Associates of Naples, FL.

The article says, in part:

The hospital filed for bankruptcy protection on July 20, 2000, after revelations of a massive fraud committed by the former chief executive officer, a doctor, a physical therapist and a lawyer who served on the board of directors. All four eventually received federal prison terms and at least two - the doctor and the CEO - are still incarcerated.

The men were convicted of participating in a $7 million kickback scheme involving contracts brokered by former CEO James Luther Davis, who remains in prison. Dr. Richard Norton also remains in prison. Two others prosecuted were physical therapist Michael Redman and Charles Fugate, a former board of directors chairman.

The hospital went on the auction block in April 2001, and HMA prevailed with its top bid of $24.9 million, which included cash, assumption of debt and other issues. Although a final order has not been entered, the case has all but concluded, and all creditors are expected to be paid in full by the end of the month, said A. Carter "Chip" Magee, bankruptcy lawyer for the defunct hospital.

After all debts are settled, there will be approximately $1.5 million left over for the establishment of a trust fund that can be used to help financially and medically needy Lee County residents obtain health care, said Magee.

Crawford clarified Thursday that this trust fund will be governed not by his facility's board of directors, but by the former LCCH board of directors. Magee has said the trust fund's bylaws call for the board to govern only until a new board of Lee County residents can be elected.

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