Monday, October 26, 2020

Healthcare Conglomerate Associates executives charged with money laundering, embezzlement

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The Tulare County District Attorney has charged executives of the ousted company that ran Tulare Regional Medical Center with more than 80 combined felony and misdemeanor criminal counts, including suspicion of embezzlement, conspiracy, money laundering, grand theft, and campaign finance violations.

Named in the charges were Healthcare Conglomerate Associates CEO Dr. Yorai Benzeevi, HCCA CFO Alan Germany, and HCCA attorney Bruce Greene.

The charges are the latest dramatic chapter in HCCA’s controversial three-year administration that led to patient deaths, a failed bond measure, recall elections, payrolls being missed, closure of the hospital, bankruptcy, and the eventual 2018 takeover and reopening by Adventist Health of the Tulare public hospital.

Greene and Germany face potential maximum sentences of well over a decade should they be found guilty of all of the charges and allegations, and Benzeevi is facing in excess of four decades in prison, the Tulare County District Attorney’s Office wrote in a press release.

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“It is alleged that the defendants used control of public hospital entities to enrich themselves through the improper use of taxpayer and private loans, and other public integrity crimes,”  the Tulare County District Attorney’s Office wrote in a press release.

Tulare County District Attorney Tim Ward estimates prosecutors spent $1.5 million in staff hours and overtime, travel, and associated costs during the 13,500 hours of the investigation.

“We are grateful for the support and patience of the community, as well as the Tulare County Board of Supervisors during this unprecedented investigation,” Ward said.

The sprawling investigation spanned over six states including Arizona, Idaho, Maine, Georgia, Colorado, Michigan, and Washington D.C., Ward said. Fifty-eight total search warrants were served.

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The DA’s office is in the process of contacting attorneys for the defendants to arrange for their surrender on the charges, the Tulare County District Attorney’s Office wrote in a press release.

The Times-Delta left a message with Greene seeking comments on the charges. On the lawyer’s webpage with the national firm BakerHostetler, Greene touted his experience with HCCA.

“Represented a hospital management company in the negotiation of a management agreement with options for a joint venture and the purchase of hospitals in California,” according to the webpage.

BakerHostetler has offices in New York City, Los Angeles, Chicago, Dallas, and San Francisco, as well as several other major cities. Greene is listed as a partner in BakerHostetler’s Los Angeles office.

The Times-Delta/Advance-Register has also reached out to the other defendants to seek comment on this breaking story. The story will be updated as more information is released.

Citizens for Hospital Accountability, a grassroots Tulare organization formed in reaction to concerns about HCCA’s running of the hospital, initially called for the DA’s office to investigate alleged wrongdoings at the hospital in 2017.

“These three individuals did irreparable harm to our hospital, its employees and their retirement funds, its patients who trusted their health to this hospital, and the grieving families who have been devastated by the unnecessary deaths of their loved ones,” Citizens for Hospital Accountability said in a press release. “We look forward in anticipation to the day when justice will prevail, and to a time when Benzeevi, Germany, and Greene will no longer be free to prey on other unsuspecting victims.”

Among the charges filed:

  • Benzeevi: Grand theft, conspiracy, money laundering, and multiple counts of embezzlement by a public officer.
  • Germany: Conflict of interest, grand theft, and multiple counts of embezzlement by a public officer.
  • Greene: Conflict of interest, grand theft, conspiracy, money laundering, and multiple counts of embezzlement by a public officer.

HCCA’s controversial start

In December 2013, Benzeevi, his brother Iddo Benzeevi, and Jim Doty created the newly formed HCCA to bid on a lucrative contract running the troubled Tulare hospital.

In its successful presentation to the TRMC board of trustees, HCCA said it would turn the hospital’s shaky finances around and complete construction of a long-delayed hospital expansion tower project.

Some board members knew Dr. Benzeevi because he had been a TRMC emergency room physician and through Medflow, an organization he formed, held the contract to manage the TRMC emergency department.

HCCA’s hiring created controversy, though. Concerned citizens questioned whether a newly formed company with no track record running a hospital could be effective. Critics also questioned the lucrative monthly fee — at about $225,000 a month —  HCCA was awarded to run the hospital.

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In a 2013 interview, Dr. Benzeevi conceded he had no experience turning a hospital around but added: “Like Henry Ford said, I may not be the best engineer, but I know where to find the best engineers.”

HCCA was officially hired by the TRMC board to run the hospital in January 2014.

Another concern: HCCA and the TRMC board were both represented by Greene, who had long been the attorney for Benzeevi. Community critics questioned whether one attorney could represent the interest of both a company hired to run a hospital and its governing board.

(In 2019, the hospital district sued Greene for allegedly breaching his fiduciary duties to look out for the district’s best interests. That court case is currently being litigated in Kern County.)

Early success, troubling signs

Throughout 2014 and 2015, TRMC seemed to have turned a financial corner. Dr. Benzeevi earned praise from the elected TRMC board because monthly financial reports no longer showed red ink.

Court filings on Tuesday, though, allege HCCA was extending loans to cover up the hospital’s losses, the DA’s office said.

In early 2016, HCCA was awarded a contract to run the struggling Southern Inyo Healthcare District, including a rural hospital, a clinic, and a skilled nursing facility in Lone Pine. (Some of the charges filed Tuesday involved crimes alleged to have incurred in Inyo County, the DA’s office alleges.)

By mid-2016, though, cracks began to show in HCCA’s management of the hospital. Community critics questioned HCAA’s rosy economic reports, conflicts with doctors broke out and complaints about the quality of care at the hospital mounted.

“Benzeevi infiltrated our community and wreaked havoc upon our citizenry with his blatant and brazen disregard for proper healthcare and for our district hospital,” Citizens for Hospital Accountability said in a press release.

In August of 2016, Tulare voters dealt HCCA a major blow when they overwhelmingly rejected Measure I, which would have funded the completion of the hospital’s empty tower.

Soon after the Measure I defeat, discord over HCCA’s day-to-day operations began to surface. Fewer patients were going to the hospital and the number of surgeries and births dwindled.

In September 2016, employees and residents were informed by HCAA there was a severe cash shortage.

In November of 2016, the California Department of Public Health found after-hours staffing shortages at the hospital contributed to the death of two patients.

By mid-2017, the hospital and HCCA were in full crisis mode, fighting off constat criticism by community groups, financial woes that caused the hospital to miss payroll, and a recall campaign against then TRMC board member and HCCA supporter Dr. Parmod Kumar.

It’s that recall campaign that led to the campaign finance violations.

Political dirty tricks

HCCA violated California campaign finance regulations, the Tulare County DA alleges, when the company failed to report a $230,000 payment to a political consulting firm hired to defeat the July 2017 recall election against Kumar.

For the $230,000 fee, Psy-Group promised it would “uncover and deliver actionable intelligence” against HCCA critics and supporters of the recall.

In addition, Psy-Group promised to set up bogus “grassroots” organizations to “advance HCCA’s interests.”

Finally, Psy-Group vowed to make sure its efforts against HCCA critics and recall candidate Senovia Gutiérrez would be concealed from voters.

Psy-Group firm allegedly botched an attempt to frame Gutiérrez on bribery charges during the Kumar recall election. The effort included sending her a check with Gutiérrez’s name misspelled.

At the same time, pro-HCCA websites with names such as Tularespeaks.com, Tulareleaks.com, and Draintulareswamp.com started to appear on the internet. The sites attacked HCCA critics and Gutiérrez.

All three sites disappeared after the election.

Psy-Group’s apparent efforts on behalf of HCCA were a spectacular failure. Kumar was crushed in the election, with 81 percent of voters voting to recall him. After a long legal battle, Gutiérrez was eventually seated on the TRMC board.

After Gutiérrez was seated and another legal battle, the newly formed anti-HCCA TRMC board majority essentially fired HCCA in October 2017.

After additional court hearings, a bankruptcy and another election, Adventist Health took over the Tulare hospital in 2018.

Investigations launched

In 2017 and 2018, a series of warrants were served across the country in regard to TRMC’s management by HCCA.

The searches netted FBI agents and investigators several computers, cell phones, electronic devices, information storage items, pricey designer handbags, and financial and bookkeeping documents related to Tulare hospital’s management.

The DA’s office collected 30 terabytes of digital evidence during its investigation, Ward said.

“To put that in context, it would take nearly 45,000 standard CD-ROM discs to hold the information,” Ward said.

By October 2018, the Tulare County District Attorney seized $1.6 million in bank accounts controlled by Dr. Benzeevi.

At the core of the hearings was a Chase bank account that was opened by Dr. Benzeevi when he ran the Tulare facility. Hospital revenue was funneled into that account.

HCCA was allowed to use it to repay itself any debt owed by the district, according to Benzeevi’s lawyers.

With the charges Tuesday, the Tulare County District Attorney’s Office apparently forcefully rejected those legal arguments.

“Over the past three years, [the DA’s office] have methodically persevered to investigate the most complex case of white-collar crime in Tulare County history,”  Citizens for Hospital Accountability said in a press release. “We are appreciative of the leadership of Tulare County District Attorney Tim Ward and his investigators … for their tireless work on behalf of our community.”

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