Some federal funds meant to lighten the burden of taxpayers in the Tulare Local Healthcare District weren’t used for that purpose, Tulare County District Attorney Tim Ward told the public Wednesday night. Ward also updated the district’s board, and public, on his office’s investigation into Healthcare Conglomerate Associates (HCCA).
The district was qualified to issue Build America Bonds in 2009 under a scheme that subsidized some of the district’s interest rates. The funds would be paid to the district, which would then pass the funds along to the Tulare County Tax Collector’s office.
“The U.S. Treasury made a direct payment to Build America Bond issuers in the form of a 35% subsidy of the interest they owed to investors. Since the effective cost of borrowing was reduced for issuers, they were able to offer the bonds to investors at competitive rates in the markets,” according to an Investopedia.com article.
From 2010 through 2015, those disbursements went through without any problems — but then they didn’t. From August, 2015 through the entirety of 2017, Ward told the board, nearly $4m of those funds went elsewhere — though he was not able to state where, exactly, they went.
The disconnect was discovered in late 2017, Ward said.
“Our investigation discovered that it appears the payment went from the IRS, to the district — it did not, however, pass from the district to the Tulare County Tax Collector and Auditor’s office,” he said. “Since the tax rolls had to go out, those tax bills were sent out; and, in August of 2015, the taxpayers of Tulare paid interest on that bond that they were otherwise not obligated, through this program, to pay.”
Similarly, there were two additional payments in 2016, and two payments in 2017, that did not go to the tax collector’s office. Payments have since resumed to the tax collector’s office, Ward said.
“We estimate that the taxpayers; the residents and business of the city, during those times, paid hundreds of thousands of dollars that they were not otherwise obligated to pay,” Ward said. “Our investigation is ongoing — there may be an instance where some of the money went from the district, straight back to the bank and not to the auditor’s office — that’s going to be something that we’re going to continue to look at.”
Revealing the information won’t compromise the larger criminal investigation into Healthcare Conglomerate Associates, Ward said.
“That relationship is separate from our criminal investigation. It’s almost an ancillary part of it — obviously the use of this money is something that we’re looking at,” he told reporters. “But, we’ve weighed it, and our determination is that disclosing that to the taxpayers will not have an adverse effect on our investigation.”
Kevin Northcraft, the board’s chairman, said that hospital officials found out about the misused funds one to two weeks ago.
“It hasn’t been that long,” Northcraft said. “I didn’t even know the amount.”
Mounting Efforts
Wednesday’s night update was the last public update Ward would give, he told the board.
He said his office first stepped into the investigation when Dr. Parmod Kumar, through his attorney, alleged the board committed a Brown Act violation by having three board members present for board member Senovia Gutierrez’ swearing-in ceremony.
The next battle was over Gutierrez’ status as a board member — the existing board and its attorney said she was not, because her recognition had not been agendized.
His office considered Gutierrez a board member as of her first meeting, since she had been sworn in, he said, and did not consider the swearing-in ceremony a Brown Act violation.
That morphed into a “narrow, precise” investigation into the Southern Inyo Hospital, previously managed by HCCA, after being given “actionable information” by members of the community. The scope of the investigation widened after two warrants were served at the hospital.
At the Inyo hospital, officials seized multiple USB drives’ worth of information.
“[Investigators] believe that a number of things have been transferred — equipment, medications — that those things have been transferred from Tulare to Inyo,” Ashley McDow, an attorney for the Southern Inyo district, told the US Bankruptcy Court in October, 2017.
Investigators have now served nearly 30 search warrants, a large amount served on financial institutions, Ward said. The amount’s nearly doubled from when Ward spoke at a March 6 Tulare County Board of Supervisors meeting, when he said approximately 15 were served.
“This is in no small way a financial crime, and we are tracing — because everyone wants to know, where did the money go — and a majority of our work has been on financial institutions,” Ward said.
Ward said he wasn’t able to comment on warrants that have already been served outside of those made public — such as the Tulare Regional Medical Center, Southern Inyo Hospital, and the residence of Dr. Benny Benzeevi — as a pattern of past warrants could tip off those that the office has yet to search.
In March, he told the supervisors that investigators have gone so far as Farmington Hills, Michigan, to search an accounting firm.
“Travel so far — we’ve had three trips to Inyo County alone, Los Angeles, Fresno, and San Diego; working with our investigative partners from an outside agency, two trips to Orange County, for service of search warrants there,” Ward said.
While Ward’s office continues to travel across the state, travel has largely dissipated, he said.
Investigation Not Political
Ward was emphatic to reporters that his investigation into Healthcare Conglomerate Associates wasn’t motivated by the upcoming election.
His opponent, Matt Darby, and members of the community charge that the investigation was opened due to the prospect of facing an opponent.
“If it were political on a case like this or any case, I could make decisions based on political expediency and not the long term of the case,” Ward said.
“That would help me politically — it would help me politically if I would have announced day one that I’d started an investigation, but we didn’t do that to save the integrity of the case. Time and time again we always get asked, why didn’t you do this before?
“And, as members of the community are now starting to stand up and speak out — because they came to us. In fact, I just found this out not too long ago: the group that came to us did not come to us first. They didn’t go to the Tulare Police Department. They went to an outside state agency, and you know what they were told? No,” he said.
“We’re not going to do an arrest just because of the election, we’re not going to issue a search warrant — if we were doing that, we would announce to the media the day we were at Dr. Benzeevi’s house,” he added. “One could say that would have been politically expedient for me, to publicly announce — hey […] you should be at Dr. Benzeevi’s residence, right? So that would be front page and center. But did we do that? No.”
Politics doesn’t belong in the courtroom, he said.
“It’s sad that my opponent is continuing to try to use this investigation to gain political favor,” Ward added.
Ward was asked by one journalist whether he was concerned that Darby’s election could impact the case.
Regardless of potential electoral changes, he said that Chief Investigator Lindy Gligorijevic was one of the “finest in the state” — and that she “going to make sure that her department, her bureau, investigates this case.”
But a potential change wasn’t something he was worried about.
“I’m confident that I’m going to continue to lead this office,” Ward said.
The Warrant on Benzeevi’s Home
Ward spoke to the board two days after news broke that his department had searched the home of Dr. Benny Benzeevi, the CEO of Healthcare Conglomerate Associates, which managed the hospital under a contract from 2014 through November 2017.
Attorneys representing HCCA and Benzeevi have repeatedly denied any allegations of wrongdoing.
“It appears that the [Tulare County] DA has been badly mislead, and the taxpayers are paying a high price for it,” Marshall Grossman, an attorney for HCCA, told the Voice in response to reports of the search.
Grossman has previously stated that taxpayers were “footing the bill here on charges in and out of court which lack foundation.”
The warrant on Benzeevi’s home was served on April 4 by the Tulare County District Attorney’s office and an agent with the FBI.
On Wednesday night, Ward declined to state why the FBI was involved.
“I can tell you that the FBI has been, and will continue to participate and assist us,” Ward said. “Why they’re doing is more appropriately answered by them.”
Investigators claimed his home could contain evidence of embezzlement and misappropriation of funds/property, misappropriation of public funds, procuring an unlawful loan, fraudulently altering accounts, refusal to transfer public funds, theft of money/property under false pretense, and knowingly presenting false documents for financial gain — among others.
They sought — and received — permission to search Benzeevi’s home for documents relating to the operation of Tulare Regional Medical Center, the Southern Inyo Hospital, the Tulare Local Healthcare District, the Southern Inyo Healthcare District, and HCCA, which was involved with all four entities.
The warrant also sought any information relating to other companies owned by Benzeevi, including Vi Healthcare Finance, Medflow, and Tulare Asset Management.
All four have done business with either Tulare Regional or Southern Inyo.
The Southern Inyo district’s board voted to open a line of credit with Vi Healthcare Finance. Its board members claim that missteps by HCCA forced them to turn to the line of credit; according to bankruptcy filings, the district plans to file a suit against the company.
Medflow previously managed the emergency department at Tulare Regional; Tulare district officials claim that HCCA walked away with $3m after obtaining an unauthorized loan under the district’s name and transferring the money to Tulare Asset Management.
Potential Conflicts of Interest?
Investigators also sought evidence of conflict of interest violations; the cited law, Government Code 1090, states that members of districts “shall not be financially invested in any contract made by them in their official capacity.”
“An individual shall not aid or abet a Member of the Legislature or a state, county, district, judicial district, or city officer or employee in violating [the prohibition],” the law states.
Communications “with or about past or current TLHD board members” and “TLHD board meeting minutes and resolutions or any notes, documents, or communications related to TLHD board meeting minutes or resolutions” were sought under the warrant as well.
Ward stated he was unable to comment whether the investigation was looking into actions made by board members or employees.
The Tulare County District Attorney encourages anyone with information regarding the investigation to contact his office. The office is available by phone at (559) 636-5494.