Two important court hearings for the Tulare Local Healthcare District will be held this August — one on August 2, to approve a slate of agreements between Adventist Health, and another, August 15, to potentially decide the fate of the controversial Evolutions Gym deed.
The US Bankruptcy Court court must approve Adventist Health’s partnership with the district on August 2 for its hospital, Tulare Regional Medical Center, to reopen under Adventist’s management.
Later in the month, the district will request the court issue a summary judgement voiding Healthcare Conglomerate Associates’ (HCCA) deed on the gym.
The district is seeking approval from the court as soon as possible to ensure that the lease proposal can make the ballot for the November 5 election.
Adventist would lease the hospital for 30 years. After the first 66 months, Adventist would be able to renew in 5 year terms — or walk away from Tulare Regional. The district would not have the same option.
In the August 2 proceeding, the district is seeking an interim order allowing $1m in financing; a later hearing on August 9 would be held for the other $9m.
It’s also seeking approval for Adventist to manage the hospital on an interim basis, lease the hospital upon the voters’ approval, and purchase the hospital’s equipment on a fair-market value basis.
“The funds authorized will be used to avoid immediate and irreparable harm to the District and to fund critical reopening costs and repairs pending the August 9, 2018 hearing,” the filing reads.
Legal filings made by the district’s attorneys state that multiple properties held by the district would be presented as collateral for the loan; including the properties below, but specifically excluding the hospital itself:
- 591 E. Merrit Ave,
- 979 N. Gem St,
- 874, 890, 906, 922 N. Cherry St,
- 793, 795, 799 N. Cherry St,
- 1050 N. Cherry St,
- and a subordinated (secondary) interest in Evolutions and its adjacent lot, pending the resolution of the deed of trust
During the first year of Adventist’s lease of the hospital — if approved by the voters — rent would be fully offset against the $10m loan. Subsequent months would have half of Adventist’s rent going to offset the loan, and the other half headed to the district, until the loan is paid off.
The lease would allow Adventist the option to purchase the hospital after the hospital either became seismically compliant or finished construction of its incomplete tower project, according to statements by Todd Wynkoop, an attorney for the district, at a Wednesday district board meeting.
According to a presentation given to the board by Wynkoop, the process of preparing the hospital for reopening could span from August 8 to October 28; from October 28 to November 5, Adventist would manage the hospital for the district.
If the election fails, Adventist would exit the agreement, the loan would be payable over 5 years, and the district would need to either manage the hospital itself or find a new management partner.
The issue will be heard on August 2 at 9:30am, at the Robert E. Coyle US Courthouse, 2500 Tulare St, Fresno, in Courtroom 13.
A bankruptcy court judge will decide whether the issue of the Evolutions Gym deed can be quickly resolved on August 15 at 1:30pm in the same courtroom of the Coyle courthouse.
In filings earlier this month, the district’s attorneys have claimed that the deed, placed on Evolutions and its adjacent vacant lot, is invalid since HCCA CEO Dr. Benny Benzeevi wasn’t authorized to execute it.
“We believe the lien of the Evolutions building and adjacent property is illegal,” Kevin Northcraft, president of the hospital’s board, told the Voice in July. “It has kept us from borrowing against the property to fund the reopening. We have many times asked HCCA to cancel it; but, of course, they have refused and continue to place roadblocks to reopening.”
The filings further state that HCCA’s contract with the district only allowed it to file Uniform Commercial Code financing statements, not file liens against the hospital’s property. They also outline the process that HCCA officials, including Benzeevi and HCCA CFO Alan Germany, allegedly underwent to secure a $3m leaseback against some of the district’s assets.
HCCA’s attorneys have now filed their rebuttal to those claims.
“Under the terms of the [Management Services Agreement, the contract between HCCA and the district], HCCA had the authority to manage the District on a day-to-day basis. Yorai Benzeevi, M.D. (‘Benzeevi’), the managing member of HCCA, has acted as CEO since 2015,” HCCA’s filing reads. “During that time, the District’s board never formally questioned Benzeevi’s authority to act as CEO of the District. Since entering into the MSA, the District’s board never formally or informally questioned HCCA’s authority to appoint a CEO.”
HCCA’s filing states that the Tulare Local Healthcare District didn’t prove that Benzeevi didn’t have the power to execute the deed.
“Because the District has not satisfied its burden, HCCA is not obligated to produce any evidence to demonstrate the existence of a genuine issue of material fact. The Court may deny the Motion on this basis alone,” the rebuttal reads.
The filing also states that the broad language of the contract gave HCCA power to execute a deed of trust, even if the contract does not specifically state that fact.
In a declaration made under penalty of perjury, Germany disputes multiple claims the district made. He denied the district’s claim he perceived the electoral swing the district faced would be “adverse to [his] economic interest,” among others.
The HCCA filing references that declaration to state that the district’s facts and assumptions are unsupported.
The declaration also states that counsel advised him the early board meetings held by Senovia Gutierrez, Mike Jamaica, and Kevin Northcraft were “of no effect,” and that the district’s controversial resolutions allowing HCCA to seek up to $22m in financing were thus still in effect.
He also disputes that he ever served as the CFO or Chief Operating Officer of HCCA; the district’s filings claim that he did.
“I was never an employee of HCCA or the District. I was never the CFO or COO of HCCA,” the declaration reads. “Instead, I contracted directly with the District in August 2014 and, as an independent contractor, served as Interim Chief Financial Officer for TRMC.
“In February 2015, I contracted with HCCA to serve as CFO and COO of TRMC (not HCCA). In January 2016, my contract with HCCA was extended through January 2019.”
Multiple promotional materials made by HCCA, legal filings made on the company’s behalf, and other documents directly contradict that claim.
A November 2016 presentation created by HCCA billed Germany as the “Chief Financial Officer/Chief Operating Officer Healthcare Conglomerate Associates,” and a declaration made by Benzeevi in October 2017 states that Germany was HCCA’s Chief Operations Officer.
Additionally, HCCA’s website continues to state that Germany is the “Chief Financial Officer/Chief Operating Officer.”
Editors’ note: A correction has been made to the second-to-the-last paragraph to clarify that multiple documents state Alan Germany was the CFO/COO.