Nursing Home neglect trial fights shell company transfers

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As nursing home litigators, we fight shell company transfers on most nursing home case we litigate.  It almost becomes standard.  I applaud this family for continuing the fight beyond the verdict and to actually find out where does the money go?

Background:  Juanita Jackson died in July 2003, five weeks after she was removed from a Florida nursing home where her family said continual neglect led to multiple bedsores, malnutrition and a fall that injured her head. The estate filed suit, went to trial and got a verdict of $110 million.  This verdict was rendered four years ago.  Trans Healthcare Inc. and Trans Health Management Inc., which the  Jackson family claimed operated the homes, never appealed or paid the 2010 verdict — $55 million each — awarded by a state court jury in Bartow, Florida. Collection was thwarted through a complex transaction that sent Trans Healthcare’s liabilities to a shell company called Fundamental Long Term Care Inc., which had no assets, while creating a solvent nursing home chain that was protected from judgments, lawyers contend. The defendants including GTCR Golder Rauner LLC  argue that they were never responsible for negligence at the homes and weren’t involved in a scheme to send liabilities to an insolvent company, therefore they should not have to pay the verdict.

Current trial: The Jackson family has been trying to collect  the verdict for the past four years which has led the family through a maze of private-equity firms and shell companies to a bankruptcy court trial that began recently here in Florida  The lawyers for the Jackson family say they are not the only ones suffering from this shell game.  They say a corporate structure designed to transfer liabilities from the nursing home operator to a shell company without assets has kept five other families from pursuing wrongful death lawsuits or collecting.  The plaintiffs, who include the trustee for Fundamental Long Term Care as well as families of former residents, are asking U.S. Bankruptcy Judge Michael Williamson in Tampa to unravel the transaction, find GTCR committed breach of fiduciary duty, and rule the ultimate owners of the nursing home chain engaged in fraud.   They’re also seeking punitive damages.  The defendants will ask Williamson to toss out the claims. The judge has already dismissed multiple defendants, including General Electric Capital Corp. and Ventas Inc., which were lenders to the nursing home companies.   “Plaintiffs wrongfully accuse these defendants of misconduct in an attempt to find a deep pocket,” lawyers for GTCR said in a filing. The GTCR defendants “did not engage in a scheme to shed or avoid liabilities,” the lawyers said.

The trial is scheduled for 12 days in all, with the final day set for next month. Williamson won’t issue a decision until after the parties file post-trial briefs once testimony has ended.

At the heart of the lawsuit are two linked 2006 transactions involving Trans Healthcare Inc., or THI, and its Trans Health Management Inc. unit, THMI. By early 2006, the THI companies were facing more than 150 lawsuits in at least 15 states, “most of those brought by nursing home residents for negligence, neglect and abuse,” according to the plaintiffs.

Fundamental Long Term Care Holdings LLC, based in Sparks, Maryland, acquired all the stock of two Trans Health entities, THI of Baltimore and THI of Nevada, the judge ruled in May. In a second sale, THI sold all of its stock in THMI to Fundamental Long Term Care Inc.   While the names are similar, the assets and owners were different. Fundamental Long Term Care Holdings LLC, referred to as FLTCH in court papers, kept the unencumbered assets, including real estate and more than 100 nursing homes nationwide, while Fundamental Long Term Care Inc. was saddled with the liabilities, the plaintiffs claim.

If it seems confusing, it is.  Nursing Homes have perfected a shell game that keeps plaintiffs on their toes and many times trying to find a needle in a haystack to find where the money goes and who actually controls the nursing home.    We hope the Jackson family find the answers they need to collect on their judgment.

The case is In re Fundamental Long Term Care Inc., 11-bk-22258, U.S. Bankruptcy Court, Middle District of Florida (Tampa).

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