A federal bankruptcy court has been asked to decide whether a deed of trust placed on Tulare’s Evolutions gym, and its adjacent property, is legal.
The Tulare Local Healthcare District, which owns Evolutions, filed a new lawsuit against Healthcare Conglomerate Associates (HCCA) on January 23, claiming the company’s move to place a lien on the gym just one day before the district filed bankruptcy wasn’t authorized by the district or the contracts it had in place with HCCA.
The district’s suit also claims that the lien constitutes a “preferential transfer” of assets, favoring the company over the district’s other debtors within 90 days of the bankruptcy filing. Preferential transfers can be “clawed back” under the bankruptcy code.
“The board urgently is trying to obtain bridge financing in order to reopen our hospital. If there is any silver lining to our temporary closure, it is that we now know how critical our hospital is to the overall medical needs of our county,” said Kevin Northcraft, chairman of the hospital’s new board of directors.
“We hope to obtain a loan using Evolutions as a lien. There is an unauthorized loan and lien processed by HCCA that we are trying to cancel as soon as possible,” he added.
The deed, and new suit
That deed was signed September 22 by Dr. Benny Benzeevi, the CEO of HCCA, who represented himself on the form as the CEO of “Tulare Local Healthcare District d/b/a Tulare Regional Medical Center.”
The deed was to secure multiple promissory notes for money HCCA allegedly loaned to the hospital, which the hospital describes in its suit as “disputed.”
Marshall Grossman, an attorney representing HCCA, dismissed claims that the deed wasn’t authorized.
“Their position is one of fiction and a lack of accuracy, which is apparent to anybody who takes a minute to read the Management Services Agreement,” Grossman said. “The Management Services Agreement was in full force and effect at the time these bankruptcy proceedings were filed.
“Section 4(j)(i) 2-3 expressly provides that if HCCA advances funds, then the Management Services Agreements itself creates a security interest in all district assets, which HCCA can perfect through whatever instruments may be appropriate to do so.”
The Management Services Agreement, one of multiple contracts entered into by former hospital board members, allowed HCCA to unilaterally issue promissory notes if the hospital was unable to reimburse the company for day-to-day expenses.
The sections cited by Grossman appear to allow the company to place the deed against Evolutions.
In a prior filing, the district called those notes “fraudulent and void,” but their legitimacy isn’t disputed in the January 23 suit — nor is their legitimacy being confirmed.
“The issue about the notes will be determined in a different kind of proceeding,” Riley Walter, the district’s bankruptcy attorney, told the Voice. “We’re not conceding that any money is owed to HCCA, but a court’s going to have to rule on that at some point.”
HCCA claims the notes total $10,233,950.05; under the Management Services Agreement and its associated contracts, the company was authorized to unilaterally make interest-bearing loans to the district if it deemed that the district wasn’t able to repay the company.
“Manager shall have the right, but not the obligation, in its sole and absolute discretion, to advance funds or agree to undertake to advance funds to any Person, as a loan to the District and to meet the shortfall caused by the District’s failure,” the agreement reads.
The text of the contract also appears to have allowed the company to have power of attorney over the district, which it could use to “prepare and execute” security instruments, such as deeds, to “perfect and continue its security interest” on the loans it was able to unilaterally advance.
“What this adversary proceeding is about is to invalidate or avoid the deed of trust that was recorded against Evolutions; and, yes, the guts of the [proceeding] is that they were not authorized to do so, and it was a preferential transfer,” Walter said.
Grossman also dismisses claims that the promissory notes are fraudulent or unauthorized. The contract allowed the notes to be extended to the district, and they exist, he said.
“The notes are not fraudulent — the notes exist, demand was made for the payment of the funds by HCCA on the district. The district didn’t pay its obligations — so, under their deal, there was the right on the part of HCCA to advance the funds necessary to meet obligations,” he said. “They exist. They were authorized under the terms of the contract. They were provided under the terms of the contract. The only thing that lacks credibility is the claim that they do not exist or were not authorized.”
HCCA files to move its suit back to Los Angeles County
Separately, the hospital’s former management company filed to move its lawsuit against the hospital back to Los Angeles County.
Under the terms of the Management Services Agreement, still in effect when HCCA’s suit was filed, any litigation regarding the agreement was to take place only in the Los Angeles County Superior Court.
“This is fairly common in a suit like this, where a lawsuit’s filed in one place and a bankruptcy is pending in another, so you remove it to the place where the bankruptcy is, then people enter into battle over which court should hear it,” Walter said.
When the Voice spoke to Walter, he had not yet had a chance to read the suit.
“HCCA, to its credit, had told me it would be coming,” he said.
In a filing, the company’s lawyers claimed that the Tulare Local Healthcare District’s countersuit against HCCA was a “smorgasbord of claims and theories” and stated that moving the case back to Los Angeles was required by law.
“Here, remand of the Lawsuit is required because the removal of the Lawsuit was in direct
violation of federal law,” the filing reads.
The company’s filing additionally states that even if the move from Los Angeles County were legal, it shouldn’t have been moved to the Fresno bankruptcy court.
“The law is crystal clear. If you’re going to seek removal of a case from the state court to the federal court, you must remove it to the federal district court in that area. You can’t go forum shopping throughout the United States to find what you think may be a more favorable court,” Grossman said. “That’s a recipe for chaos. The lawyers for the district acted in direct violation of the applicable statute, which required removal to the local district court, which is the Central District in California. All they had to do was move it to that district court, instead of forum shop.”
The company’s filing accuses Northcraft of forum shopping, quoting prior statements regarding the contract between HCCA and the Tulare hospital.
“In his comment to the public and the media, the now Chair of TMRC Board
expressed his disdain for Los Angeles in attacking HCCA, announcing that the District should
‘renegotiate or throw out the current HCCA contract…. [and] do it ‘the Tulare way’—not the
Southern California divisive, divisive secretive, and machine politics way,’” the filing reads.
The management Services Agreement “as approved by members of the board” provides the ground work for HCCA outrageous claims. Thus, the primary responsibility for this tragedy rests on Dr. Parmod Kumar. This demonstrates the contempt and disrespect he holds (and probably always has held) for our community. Let us not forget. Never again!
Geez, it was a contract with the duly elected Board, forget who was on the board you guys elected the board. If the board agreed to this, it doesn’t matter who was on the board. Offer, consideration, agreement…. This was a contract.
Forget who was on the board?!? Their failure to read the contract as they were entrusted to is why we are where we’re at to begin with. It is totally and completely their fault, their negligence.
I too blame Dr Kumar and the other board members, but mostly Dr Kumar since he’s been on that board since 1998.
HOW COULD HE LET THIS HAPPEN? DID HE EVER HAVE OUR HOSPITAL IN HIS BEST INTEREST?
WHEN HE WAS ON PEER REVIEW IN 2013 THAT’S WHEN THE WHEELS IN HIS HEAD STARTED AND HE HAD TO COVER UP WHAT WAS GOING ON.
SINCE HE WAS ON THE OVERSIGHT FOR THE BOND ISSUE, HE CAN BE BLAMED AGAIN.
Old news, are you running out of material to publish??? We NEED our hospital back. This board is incompetent. Stop blaming and do something about it. I guess Ben was not that bad after all. Tulare at least had an Hospitsl and 540 people didn’t have to look for jobs!!
“The Tulare Local Healthcare District, which owns Evolutions, filed a new lawsuit against Healthcare Conglomerate Associates (HCCA) on January 23,”
Old news! If you work in the Bankruptcy Court and saw the lawsuit before anyone else, that’s my bad, I guess. For everyone else, it’s not old.
You need new comments Ben/Mickey…..get new material yourself!
Had jobs for which they were not paid….. actually I wouldn’t call that a job, I would call that volunteer work……all while Benny got fat and richer….
I can’t believe anyone would defend Bensleazy!! Are you kidding me.. They have bled the community of a hospital.. A beautiful tower sets an empty shell due to past board and CEO, Boluki..
Just because someone calls the kettle black doesn’t mean they are defending anyone over another. A contract is a contract, the board agreed to this. Just own it. That said, if illegal activity could be proven then all of this is moot but as of right now Tulare and it’s citizens own this legal contract. That a hospital that’s been closed for 4 months with 500 people out of work. You guys own it. Try thanking your local doctors for not referring patients to the hospital in 2017 and drying up revenue. The DA might think about going after local doctors for cullution and the Board might think about a class action lawsuit on behalf of the citizens of Tulare against the Doctors for the position they put the hospital in.
“You guys own it”…..obviously novested interest in this community or its people…..go stir the pot somewhere else.
I have heard the board and other people saying the goal was to get rid of Ben and the old board….Now the same people can’t even face the public cause the new board failed miserable!
What a joke, we have NO hospital! Let’s not forget one thing “ we had an hospital “ and “we had jobs”
You just justified selling your soul to the devil….impressive.
Ignorant people is what got us here in the first place. I am sick to death of you nay sayers that have not hauled your dumb butts to the board meetings to hear what is really going on! Every step this board takes is still being blocked by Benny boy and his high priced lawyers. Can you not get that through. your thick skulls? Compound that with the number of government hoops they have to jump thru, the absolute utter mess the hospital records were in, the massive amount of shredding Benny’s group did, trying to find where the money all disappeared to, dealing with disgruntled employees, dealing with unpaid vendors……this will not happen overnight. Just when they think the can see the light at the end of the tunnel this ass pulls something else!
Be part of the solution or shut the hell up! People like you are the reason almost every facet in Tulare is under siege. Idiot Mayor, problems at cemetary, police dept woes, the list goes on and in.
Help or be quiet!
One thing I’ve learned from the campaign for and against Measure I and the election campaigns of Kevin Northcraft and Sherrie Bell, is that HCCA is effective at having a few people monitor social media and change the narrative of the article by posting negative comments and misinformation about the subject of the article and make it seem as though many people share that view. On Facebook the number of “fake” profiles to discredit and misinform was plentiful. These profiles were easy to detect because the profiles had no “friends”, no photos, and often the profile picture was traceable using Google images. It created the illusion that many in the community shared the same feeling, when in reality it was just a few people, including paid professionals. Now that the hospital district has cut ties with HCCA one might assume that they no longer have any reason to cast doubt on the new board and direction of the district. However, the continuing legal filings, the leverage they may want to gain in negotiations, and for pure spite, I believe they are continuing this practice using the ability to comment anonymously on the Valley Voice website. I appreciate that the Voice allows for comment after its articles, but I do caution readers that the use of anonymous comments may be used to sway the reader’s perception. I also think that if the Voice uses anonymous comments in their news articles, they have a responsibility to the reader to ascertain that these are not repetitive views coming from the same source. So keep reading and commenting, but be discerning when reading anonymous comments.
Mickey is a Benny clonie and lloyd is related to her. Both have no clue and have nothing better to do than to post negative things on here. Everyone has their options, but just consider your source when choosing what and who to believe. Because of Benny and Kumar the hospital is a mess.
Chris, I appreciate your comments but for the same reason you stated that folks were trying to be looked up by friends or Google searches, is the very same reason people choose to post anonymously. The last two years has been bitter, down right nasty. Board members as well as People who worked for HCCA have families and whether there was or is agreement on an issue, to call people out specifically by name and throw out accusations is irresponsible. That I don’t agree with. The Board by choosing to be part of an elected body, by choice put themselves into the fray. Employees didn’t. That’s the difference, they too have thoughts to share, not every poster who disagrees with this Board is Bennye. Yes, people can go to Board meetings and speak during public comment, but the Board cannot respond or take action. By placing comments in the VV, people know they won’t get blocked on the Citizens Group page. VV created a safe forum for folks to dialogue, let’s just have a little civility.
Again you missed my point…the anonymity allows for one person to create the voice of many or paid public relations professionals to sway opinion with false facts. I’m not asking for anything but for the reader to take that into account when reading commentary. And you don’t need to explain to me about why people may want to remain anonymous. My family has been the target of the anonymous “friends” and paid professionals acting on behalf of HCCA with vicious and vile falsehoods and even threats…and it has only served to strengthen our resolve and insure that we will never lose sight of the long term goal of returning the hospital to the people it serves.