New PHC Trustee Should Look Closely At Who Runs The Vital Facility
The order to place a Chapter 11 Trustee at a business that is going through the bankruptcy and reorganization process is not to be taken lightly. The appointment of such a trustee is not unheard of, but it is highly unusual. Under the federal bankruptcy code, a Chapter 11 Trustee is only appointed when certain actions are suspected: fraud; dishonesty; incompetence or gross mismanagement on the part of the present management. The fact that attorney Lori Lapin Jones, a well-known bankruptcy attorney with a background in health care, now has operational control of Peninsula Hospital Center shows that something is rotten at the vital facility. Court sources say that the appointment of Jones is due to a number of factors. Among them, the hospital’s clinical laboratory was closed for a litany of problems nearly two months after an internal report alerted hospital management to the problems and they did little to rectify the problem. To the court, that called to mind the words “gross mismanagement.” To our mind, there is also a question of fraud. When Revival cut a deal with the operating committee of board members last September, the for-profit corporation demanded that the committee hire Revival official Todd Miller as its CEO. It had little choice but to do so. For several months, Miller continued to be paid by Revival and his $30,000 a month PHC salary was supposedly remanded to Revival. That gives lie to the fiction maintained by Revival and the State Department of Health that Revival is simply a lender and has nothing to do with the operation of the hospital. The trustee also has to look at Peninsula’s financing by Steve Zakheim, who has had some run-ins with the state over the years and who signed a 2005 agreement that he would have nothing to do with the operation of Revival, a company now owned by his wife. Board members have told The Wave, however, that Zakheim sits in at board meetings and is an “unofficial advisor” to his wife and the board. There certainly are conflicts of interest galore, because a for-profit corporation cannot run a hospital in New York State without going through a strict vetting procedure and without state permission. Does that conflict of interest rise to become fraud? That is for Jones to decide. We hope that she does a thorough job and that the truth comes out. Jones’ mandate is not to save the hospital, but to insure that the hospital’s creditors get a fair deal. We hope she can save the hospital as well.