Suit Says White Knight Doomed Peninsula Hospital
Before Peninsula Hospital shut down for good, a white knight stepped in, pledging to save the troubled medical center through millions of dollars in loans. However, a new lawsuit claims that the white knight had shady colors. The suit says Steven Zakheim and Revival Home Health Care, were really running an illegal scheme which put the final nail in the coffin of one of only two Rockaway hospitals.
A lawsuit was filed under the United States Bankruptcy Court for the Eastern District of New York at the end of August by Lori Lapin Jones, the Chapter 11 Trustee of Peninsula Hospital, who alleges that Zakheim offered loans to the hospital as a way to take control and “integrate it into his health care empire,” the lawsuit says. Jones alleges that Zakheim’s loan was part of a plan to milk the hospital for revenue that would be transferred to other Revival entities. Through fraud and mismanagement, Revival ran Peninsula into the ground.
The lawsuit is against Zakheim, his affiliates and his companies, including his wife, Faye, Todd Miller, Ari Weiss, Isaac Soskin and corporate defendants Revival Funding Co. LLC., Revival: Acquisition Group LLC, Gamzel, NY, Inc., Metropolitan Home Health Products Inc. d/b/a MetroStar, Senior Script Pharmacy, Revival Pharmacy LLC, and NAE Edison, LLC d/b/a Edison Home Health Care.
The filed civil racketeering charges against Revival and Zakheim include false and misleading declarations filed with the Bankruptcy Court, false and misleading representation made to the New York State Department of Health to obtain consent to finance Peninsula, Peninsula’s CEO transferring paychecks from the hospital to Steven Zakheim’s and Revival Home Health Care’s bank accounts, continuous payments made to Peninsula’s CEO by Revival HHC, daily reports regarding Peninsula sent to Zakheim, disclosure of patient information to Zakheim so he could direct discharges to his other businesses and payment the night before bankruptcy to one of Zakheim’s businesses even though no payment was due and no invoice was submitted.
Zakheim had been blacklisted by the State Department of Health following several fraudulent practices. In 2003, he submitted a false application for an emergency medical technician license by claiming that he had never been convicted of a crime. He failed to mention that he had been convicted of a misdemeanor for sexual assault. There was also a case against Zakheim and his ambulance companies, Metropolitan Ambulance & First Aid Corp. and Metro North Ambulance Corp., “alleging that he caused the use of hundreds of forged documents for the purpose of defrauding Medicare of millions of dollars,” the lawsuit states. Zakheim had also "pled guilty to making an illegal campaign contribution” in 2004.
Zakheim’s wife, Faye Zakheim purchased Revival HHC in 2005. The Zakheims needed Certificates of Need to operate the facility, but the Department of Health required that Steven Zakheim sign an affidavit in 2005 stating that he would not have any involvement in Revival Home Health Care's operations or finances following his behavior. The lawsuit claims that the affidavit was false as Zakheim went on to be the main decision maker behind Revival HHC, despite his wife being the owner. Isaac Soskin was made the CEO of Revival, but he would report to Zakheim.
Zakheim owned and controlled several health care companies and “in 2011, [he] saw an opportunity to acquire control over [Peninsula Hospital] and to integrate it into his health care empire,” the lawsuit says.
Fearing that the DOH would not approve the deal if he was involved, Zakheim used Faye Zakheim and Isaac Soskin to form two entities, Revival Funding Co. LLC and Revival Acquisition Group LLC., to serve as the secured lender and acquirer of Peninsula. Yet “both entities were completely controlled by Steven Zakheim,” the lawsuit says. Through the entities’ loans to Peninsula, Zakheim was able to take control of the hospital. He appointed Todd Miller as the CEO of Peninsula, who reported to Zakheim and protected his interests.
Miller had no hospital management experience, but he did work for Zakheim for several decades. He was made President of the hospital while still acting as Chief Operating Officer for Revival. Miller received a $30,000 a month salary from Peninsula, but the suit alleges that he transferred his paychecks to Zakheim and Revival HHC. After all, it wasn’t needed. He was still receiving a $28,750 a month salary from Revival HHC and they were paying his $90,000 a year Manhattan rent, the lawsuit claims.
Zakheim allegedly used Miller as his puppet so that he could indirectly have control of the hospital. The suit says that Zakheim told Miller to alter the patient-intake process so that Zakheim could keep track of the doctors that were bringing in the most money relative to their salaries.
Zakheim also used Peninsula as a customer for his other medical companies. He required that daily reports would be sent to him regarding discharged patients and the daily operations of the hospital, which allowed him to create opportunities for his other businesses. The suit alleges that Zakheim told Miller to have all discharged patients who needed home care referred to his businesses, MetroStar and Revival HHC. He also encouraged Isaac Newman, MetroStar’s director of operations, to sell more medical equipment to Peninsula’s patients.
Peninsula’s lab had serious problems, but President Miller didn’t try to fix them until several months later, which the suit alleges “led directly to the suspension of the lab and the DOH Orders.” On February, 23, 2012, the DOH had the lab closed due to "serious deficiencies in the administration and operation relating to the clinical laboratory,” the lawsuit says. The lab suspension was the final strike for Peninsula. A Trustee was appointed in March 2012. The hospital officially closed a month later.
When Miller found out about the lab suspension, he immediately emailed Zakheim, who replied, "Can't we bribe anyone?" Jones found the conversation through subpoenaed emails between the two.
All of this information came to light through Jones’ subpoena power. Much of the information was obtained through her investigation of documents, including email exchanges between Zakheim and Miller. The lawsuit alleges that the state, despite having suspicions, did not have the power to fully investigate whether or not Zakheim was backing Revival at the time.
Through the lawsuit, the Trustee, Jones, hopes to seek “damages against Steven Zakheim and others acting in concert with him, recover transfers made to Steven Zakheim and related entities and to subordinate or expunge all claims asserted by the Revival entities, for the benefit of the Debtors’ estates and their creditors.”
The lawsuit alleges that due to Zakheim’s scheme, Peninsula “suffered actual damages in an amount to be determined at trial, but believed to be at least several million dollars.” The suit also claims that Peninsula is entitled to the costs of the suit, including attorney fees.
The resolution of the lawsuit is not certain, as Zakheim lost his battle to cancer on September 4th, 2013.