Monday, September 16, 2013

The real reason Peninsula Hospital closed

From Crains:

Peninsula Hospital Center was awash in red ink two years ago when a white knight suddenly arrived on the scene, pledging millions of dollars in loans and promising to save 1,000 hospital jobs by taking over the Far Rockaway, Queens, institution.

It wasn't long, however, before the plan cobbled together by affiliates of Revival Home Health Care, a Brooklyn home-care agency, dramatically unraveled. Instead of saving Peninsula, the company doomed it. Within weeks, Peninsula declared bankruptcy. The Revival team was accused of mismanagement. A judge-appointed Chapter 11 trustee soon took over, closed the hospital, and sold Peninsula's nursing home.

Now the trustee, Lori Lapin Jones, is going after Revival Home Health Care. In late August, she filed civil racketeering charges against Revival, its related entities, its owners, the former president of Peninsula and business associates. Citing the Racketeer Influenced and Corrupt Organizations Act, she alleges the defendants committed fraud, falsified information to the bankruptcy court and creditors, and lied to the state Department of Health.

Peninsula "suffered actual damages in an amount to be determined at trial, but believed to be at least several million dollars, plus punitive damages," according to the lawsuit.

In the eyes of Ms. Jones, Revival's offer to save Peninsula was an elaborate plot to milk the hospital for revenue that would be diverted to a web of Revival entities. She alleges that the engineer behind the plot was Steven Zakheim, a Brooklyn health care executive who had already been blacklisted by the state Department of Health for misconduct and whose involvement would have been a red flag for regulators—had they been told he was bankrolling the plan.

Mr. Zakheim's wife, Faye, owned Revival, but the lawsuit claims that Mr. Zakheim controlled all Revival entities as well as several other related companies. The Peninsula takeover was Mr. Zakheim's "illegal scheme to acquire the debtors [Peninsula and its nursing home] and integrate them into his health care empire," according to the lawsuit. Mr. Zakheim and Peninsula's president, who was secretly on Revival's payroll, duped the DOH in part because the state did not have the power to fully investigate its suspicions that Mr. Zakheim was backing Revival, the suit alleges.

It was only through Ms. Jones' broad powers, granted under bankruptcy law to pursue millions of dollars owed to Peninsula's creditors, that Mr. Zakheim's allegedly deep involvement in Peninsula came to light.

But the resolution of the suit, filed in late August, is far from certain. Mr. Zakheim died earlier this month.

Using the trustee's subpoena power to access documents and take depositions, Ms. Jones describes—through daily email exchanges between Mr. Zakheim and Mr. Miller—how Mr. Zakheim was allegedly pulling the strings at Peninsula for his own gain. He hired a longtime Revival executive, Todd Miller, as the hospital's president, even though Mr. Miller did not have any hospital management experience. Mr. Miller reported directly to Mr. Zakheim. Mr. Zakheim was even given an authorized Peninsula identification card in September 2011 that allowed him to "come and go throughout the facilities as he pleased."

On Feb. 23, 2012, the DOH suspended the hospital's lab services after finding "serious deficiencies in the administration and operation relating to the clinical laboratory," according to the lawsuit. That was the hospital's final blow. When Mr. Miller learned the news, he immediately emailed Mr. Zakheim, according to subpoenaed emails.

Mr. Zakheim's response: "Can't we bribe anyone?"


Anonymous said...

I would disagree with Ms. Jones. Even if Zakheim did benefit personally from the acquisition of the hospital, wouldn't it have been better to keep it open and serving the neighborhood than as an abandoned ruin?

When Zakheim died last week, hundreds of mourners from the Far Rockaway Jewish community came to the funeral. Because he tried to keep the hospital open.

Anonymous said...

Oh, so it's ok to bribe someone and use fraud to obtain a failing hospital? And to put a puppet with no experience at the helm? Just so long as you keep it open (and rip off the hospital and the state)? Only Jews seem to think like this.

Anonymous said...

Anon No. 2:

No, we don't. What gives you that idea aside from your prejudices and hatred?

Anonymous said...

Wall Street has been doing this for decades.

Obama did this with all his "ereen energy" loans to cronies who pocketed the money and then went "bankrupt".

Anonymous said...

Again, anon. #2, do you want your hospital open or abandoned?