As its stack of unpaid vendor obligations climbed, now-bankrupt Steward Health Care paid private investigators millions of dollars to follow and uncover compromising information on individuals who its executives viewed as opponents, according to materials obtained by the Organized Crime and Corruption Reporting Project, an investigative journalism organization.
The documents, which were also reviewed and reported on by the Boston Globe’s investigative Spotlight Team, comprised emails, encrypted messages, voicemail and financial records.
Together, they reportedly outline investigative firms’ surveillance of a critical former executive, a British financial analyst and a Maltese politician on behalf of Steward.
The investigators pored through the first target’s phone for sexually explicit messages, followed and recorded the analyst’s family for nearly a week, and circulated an allegedly fraudulent bank wire transfer that implicated the politician in a multimillion-dollar passport bribe, according to the reports.
The health system reportedly spent over $7 million on these intelligence services from 2018 to 2023, money for which was authorized by top executives—CEO Ralph de la Torre, President Mark Rich and Steward International CEO Armin Ernst—and largely overseen by the health system’s general counsel, Herbert Holtz.
Holtz, in communications obtained from within the health system characterized the investigations as a “spare no expenses mission” when the company’s accountants questioned the payments. These bills were prioritized over other expenses related to running the company’s failing hospitals.
For-profit Steward declared bankruptcy in May and has been working to auction off its 31 hospitals and other assets, such as its physician group. For months prior, reports had circulated describing millions of dollars of unpaid vendor bills and strategic decisions from executive leadership to extract short-term gains in exchange for the system’s long-tern sustainability.
The extensive investigative reports note that it is unclear whether Steward’s surveillance broke any U.S. or international laws but cited corporate espionage experts who described the actions as “weird” and “beyond the lines” for a hospital system.
In statements given to the publications, Holtz and a representative of the health system said that the counsel acted appropriately, ethically and legally at all times and said attorney client privilege prevented further elaboration. The intelligence firms reportedly hired by Steward, all located in the U.K., also said their operations were compliant with all laws and regulations in their relevant jurisdictions.
The former executive, who remained unnamed in the reports due to the sensitive nature of the obtained information, said he was unaware of the surveillance prior to being informed by the reporters.
The analyst, Fraser Perring, who had written a report critical of Steward’s financial decisions, was seen filmed in home watching television with his partner in one of the materials obtained by reporters. Perring told reporters he had filed a police report when his 11-year-old daughter “became terrified by seeing the same people follow us.” He described the surveillance as an invasion of privacy, according to the reports, and said the behavior was “particularly shocking” in light of the company’s other pressing financial issues.
Surveillance of the Maltese official came amid a troubled $4.2 billion hospital deal Steward had with the country’s government. The health system blamed the country’s health minister, Chris Fearne, for delayed payments.
An intelligence firm it hired later disseminated a bank wire transfer record suggesting a $3.5 million transaction sent by a business partner of Vladimir Putin who had obtained a Maltese passport despite sanctions. Maltese police and a bank involved in the alleged transfer dispute its legitimacy.
Monday’s reporting will do little for Steward’s recent image as a healthcare industry profiteer. Government leaders, providers and others have held the company up as a case study on corporate greed within the industry, turning its bankruptcy proceedings into a hotly watched affair.
Meanwhile, word came down just last week that a cornerstone of its liquidation plans, a physician group sale to UnitedHealth’s Optum, is no longer in the cards.