Benzeevi funds hearing to continue in March

TONY MALDONADO tony@ourvalleyvoice.com

Arguments over the fate of Tulare Regional Medical Center manager Dr. Benny Benzeevi’s seized cash will resume on March 4.

Approximately $937,000 was seized by the Tulare County District Attorney’s office. They claim the cash came from an illegal transaction. Benzeevi’s lawyers claim that the transaction was explicitly allowed when the Tulare Local Healthcare District’s Board of Directors voted to let Benzeevi’s company, Healthcare Conglomerate Associates, seek out and execute loans on its behalf.

The district is the legal entity that owns Tulare Regional; Benzeevi’s company, Healthcare Conglomerate Associates (HCCA) managed the hospital from May 2014 until November 22, 2018.

While the entirety of the proceedings were initially slated to just last two weeks, the first two weeks were taken up by the District Attorney’s office’s arguments.

The seized funds came from a $3m sale-leaseback transaction executed by Benzeevi a month before the district filed bankruptcy: HCCA received $3m on August 31, and the district declared itself bankrupt on September 29.

The funds were wired directly into a bank account owned by “Tulare Asset Management.” Benzeevi’s attorneys claim that account was part of HCCA, though it was legally registered at Benzeevi’s home address at the time the proceeds were transferred into it; $2.4m of those funds were subsequently transferred to his personal account.

The judge in the case, Hon. John Bianco, signed the warrant allowing the district attorney’s office to seize the cash. He’ll also be the one to decide whether Benzeevi will get it back as the office continues to investigate his company’s time in Tulare.

The funds were wired directly into a bank account owned by “Tulare Asset Management.” Benzeevi’s attorneys claim that account was part of HCCA, though it was legally registered at Benzeevi’s home address at the time the proceeds were transferred into it; $2.4m of those funds

Auditor Testifies

Darrell Early, an Investigative Auditor with the California Department of Justice, testified regarding his findings during the series of hearings.

Early has prepared at least one Investigative Auditor Report, dated December 19, which states that he began assisting the Tulare County District Attorney’s office with the investigation in January 2018.

He examined multiple bank accounts as a part of his work, he told the court, including two HCCA accounts, Benzeevi’s personal bank account, and Tulare Regional Medical Center’s account.

$2.4m of the funds were transferred into Benzeevi’s account on September 13, 2017, Early told the court. Days earlier, on September 10, $499,727.93 was transferred to the Baker Hostetler law firm; Bruce Greene, Benzeevi’s preferred lawyer at the firm, would later send Benzeevi a letter dated September 29, 2017, advising that neither he nor his firm could further represent HCCA, Benzeevi, or any other affiliated entity.

Earlier in the hearing, Delbert Bryant, the hospital’s long-time controller, testified that the hospital’s profit and loss statements would include cash held in the Tulare Asset Management account.

Early stated that it was not proper under generally accepted accounting principles to count one company’s cash as another’s, leading Eliot Peters, an attorney for Benzeevi, to object -- an objection that Bianco sustained.

“The fact that Tulare Asset Management was in Dr. Benzeevi’s name does not mean it’s not a hospital account,” Bianco said. “Tulare Asset Management is a hospital account.”

Peters stated that an operating agreement showed Tulare Asset Management was a subsidiary of HCCA; after significant debate between Peters and Trevor Holly, an attorney for the district attorney’s office, Peters agreed to have a sealed envelope with the document delivered to the court.

On cross-examination, Early told Peters he hadn’t thoroughly read the Management Services Agreement, the contract between HCCA and the district that Peters states allowed HCCA to pay itself from the district’s bank accounts.

HCCA claims that the district owed it millions in loans the company extended so that the district could continue operating Tulare Regional, including loans for operations and payroll expenses.

Former CNO Testifies to Supply Problems

Angie Graziano, HCCA’s former Chief Nursing Officer, testified that starting in 2017, the hospital began facing supply issues.

Prior reporting has shown that the Tulare Local Healthcare District and Tulare Regional, under HCCA’s management:

• had at one point owed rent on its Hillman Clinic from February to September of 2017,

• had racked up $473,625.65 in past due bills to Southern California Edison, some dating as far back as January 2017,

• owed Tulare County for $132,622.08 in elections expenses, dating as far back as the August 30, 2016 Measure I Bond election,

• took out an $800,000 line of credit from Bank of the Sierra to repay Cardinal Pharmaceuticals, a drug vendor

Graziano said supply issues worsened by March 2017, resulting in weekly meetings with HCCA CFO Alan Germany to discuss supply issues; by April 2017, the situation had devolved so much that daily “huddles” were held at 9am and meetings at 11am to discuss vendors that had put the hospital on credit hold.

She told the court that in her 29 years of experience, she’d never before needed to hold daily meetings regarding supply problems.

By April, 20 vendors had put the hospital on a credit hold; that number spiked to upwards of 45 by August, she told the court.

Accountants Testify

Michael Certini, an accountant with HCCA, worked at Tulare Regional for three years -- he was initially an Accountemps temporary worker before being hired on permanently, he said.

During his time at HCCA, Certini said that he handled “cash and fixed assets,” the “month end close,” and the hospital’s general ledger.

Issues with the Cerner electronic medical center system compounded the hospital’s financial problems, he told the court.

Data wasn’t being properly transferred from Cerner into the hospital’s accounting systems, and though Cerner’s engineers were working with HCCA to attempt to fix the problem, the end result was erroneous entries in the hospital’s general ledger. Transactions weren’t being adjusted for “contractual allowances,” the difference in what a hospital charges for a service and what’s actually paid for the service by insurers, he said.

Delbert Bryant, the district’s longtime controller, also took the stand. After HCCA took over management of the district’s hospital, he became an HCCA employee.

In December of 2016, Bryant said HCCA’s first loan to the district occurred -- without it, employees’ paychecks would have bounced. The loans were memorialized in promissory notes, which HCCA could issue without needing the district’s permission: if the district couldn’t pay for operations, HCCA could choose to make an interest-bearing loan on the district’s behalf, and obligate the district to repay it.

In 2017, Benzeevi told Bryant that the district’s obligations to HCCA were “substantial and needed to be paid,” he claimed; additionally, the “daily sweep” process agreed to in the contract between HCCA and the district was never enacted, he claims.

By the spring of 2017, Bryant said that the hospital’s “cash on hand” was down to “less than $1 million for all obligations -- not just payroll,” and that the hospital sometimes had less than 3 days cash on hand.

The promissory notes weren’t made public until a September 2017 Visalia Times-Delta article; but, at some point, Bryant said a public records request was made that caused alarm bells to ring.

Benzeevi believed the request came from inside the accounting department, Bryant said, and told Bryant privately that he would find out who the requestor was and “sue them for every penny -- even take their house from them.”

Wilbourn Clarifies Resignation Date

Linda Wilbourn, a former district board member, resigned on August 23, 2017. That resignation was well-publicized by printed notices at the Evolutions Gym, where the board’s meetings were normally held.

Email were sent out by Bruce Greene, then the attorney for both HCCA and the district, that stated Wilbourn had resigned effective August 23 at 12:00pm.

That would have meant that even if Senovia Gutierrez were not a “real” board member -- at the time, Greene, HCCA, and Wilbourn did not consider her one, as they had not “seated” her -- simply having Northcraft and Mike Jamaica, another board member, present would have secured a quorum.

At some point, that fact became apparent, and Greene sent an email shortly after his first stating that Wilbourn “just advised” him her resignation was meant for August 24 at 8am.

Wilbourn testified that never occured -- she meant her resignation to be effective before the August 23 meeting.

Documents filed by the District Attorney’s office provide more insight into the “revision” of the resignation date.

“Linda Wilb[o]urn stated in a recorded interview that she had resigned from the TRMC Board on 08/23/17 effective 12:00 p.m. and that she had not requested to move the time of her resignation forward to the 24th and she had no reason to do so,” the document reads. “After that last court date, Mrs. Wilburn was interviewed by a private investigator who told her that he was working for Dr. Benzeevi’s legal team.

“He showed her a text to Bruce Greene from her phone dated 3:56 08/23/17 that stated that she wished to move her resignation date from 08/23/17 12:00 p.m. to 08/24/17 8:00 a.m,” it continues. “Mrs. Wilburn granted [Tulare County District Attorney Bureau of Investigations] investigators permission to retrieve the text from her phone and the texts were logged into evidence. Mrs. Wilburn stated that she does not remember sending the text. Investigation into this matter continues.”

Jamaica Takes The Stand

While Jamaica was asked to report to court for the first days of the trial, he was never called -- instead sitting in the hallway. He was finally called to testify on Feburary 5.

Jamaica said that he, too, had asked for financial documents, including a 30/60/90 day report on aging accounts payable. He had asked a month later, but still never received the documents, nor an explanation as to why he had not received them.

On cross-examination, Peters asked Jamaica how he came to the board. He told the court that Ray Fonseca had asked him if he was interested in joining the board, and eventually became his campaign manager; along the way, he met with members of Citizens for Hospital Accountability.

With that entry-point, Peters asked if his campaign had been financially supported by doctors who “had a financial interest in how the hospital was run,” following up by asking if Dr. Prem Kamboj had been a financial supporter.

Holly objected to the line of questioning; Peters defended it, stating that it would explain the opposition to HCCA’s management of the hospital, and that it showed the Citizens’ group “recruited” others who “support[ed] their agenda” to run for the board.

Peters’ questions, and statements, were reminiscent of prior statements made by HCCA and its representatives that critics of HCCA’s management, and governmental action taken against the hospital, were ultimately caused by “disgruntled doctors.”

One state inspection finding the hospital had a single “operating room on-call team” to cover “emergent surgeries and Caesarian-section deliveries” between 5PM and 7AM was characterized by HCCA’s public relations team as “the latest episode of the vicious attempts by a few disgruntled doctors set to vilify and destroy Tulare’s hospital.”

After another state report, HC- CA’s public relations team stated that “...frivolous and unwarranted complaints are nothing more than an inappropriate pressure tactic being used by the CMA and the old medical staff to force the Hospital out of business, or to force it to capitulate to the personal economic interests of the disgruntled physicians.”

Bianco did not find that the pointed questions were relevant, but allowed a wider question asking if Jamaica had received support from doctors who did business with Tulare Regional Medical Center to stand. Jamaica had, he said. Peters also asked Jamaica about his actions in a July 26, 2017 board meeting -- the meeting in which the board refused to seat Gutierrez.

After it became apparent that Gutierrez would not be seated and recognized as a board member, Jamaica said he left the meeting to deny former district board members Richard Torrez and Linda Wilbourn a quorum.