Bankruptcy trustee accuses hospital operators of financial malfeasance

The liquidating trustee has sued the officers of the now bankrupt Hudson Healthcare Inc., claiming the former operators of Hoboken University Medical Center engaged in mismanagement and fraudulent transfers of funds, reported Law360.

The lawsuit, filed by Bernard A. Katz in the U.S. District Court in New Jersey, alleges Hudson CEO Harvey Holzberg and Chief Financial Officer DiVito, along with the board of trustees, were negligent in the management of the hospital, which HHI operated between 2007 and 2011.

"Holzberg and DiVito negligently managed and reported financial results, while the HHI board defendants abdicated their statutory, contractual and fiduciary duties of management and oversight and ignored numerous red flags that should have prompted further inquiry," the complaint read, according to Law360.

The lawsuit also claimed Hudson Healthcare executives wasted the $22 million cash infusion it had received from the hospital's prior owner, Bon Secours New Jersey Health System, and falsely reported an operating profit in 2007 when it was actually losing money.

New owners took over the hospital in 2011, although Hudson still owes creditors $30 million, according Law360. The transition was far less orderly than other recent hospital transitions, such as LifeCare Holding's recent sale of its long-term facilities to one of its creditors, the Associated Press reported.

This past fall, Pennsylvania's Saint Catherine Medical Center faced lawsuits from its Chapter 7 bankruptcy trustee, as well as from two former employees. Saint Catherine trustee William G. Schwab filed seven complaints, alleging the medical center and its chief executive breached fiduciary duty of care and allowed the facility to incur more debt, FierceHealthcare previously reported.

To learn more:
- read the Law360 article (subscription required)
- here's the Associated Press story