Steward Health Care Blames Former CEO for Fraud and Bankruptcy
TL/DR –
Steward Health Care has accused its founding CEO, Ralph de la Torre, and three former colleagues of misappropriating hundreds of millions of dollars, leading to the hospital chain’s bankruptcy. The company alleges that the former executives defrauded the company of more than $245 million, enriching themselves while leaving the company undercapitalized and insolvent. CBS News investigations have documented allegations of how private equity investors and de la Torre allegedly extracted hundreds of millions of dollars from the company through real estate sales, while health care workers and patients struggled to access necessary supplies.
Steward Health Care Alleges Misappropriation of Funds by Ex-CEO and Former Colleagues
Steward Health Care, a hospital chain that has been the subject of federal investigation, has blamed its financial difficulties on its founding chief executive in new court papers. The company accuses former CEO Ralph de la Torre and three of his former colleagues of misappropriating over $245 million and driving the chain into bankruptcy.
Charges Against Former Executives
The company alleges that de la Torre, Michael Callum, James Karam, and Sanjay Shetty engaged in misconduct with the goal of personal enrichment, at the expense of the company, its creditors, patients, and communities served by Steward.
Concerns Over Operational and Financial Management
Once the nation’s largest for-profit hospital chain, Steward operated hospitals across multiple states. The company accuses de la Torre of implementing costly lease-back arrangements for the chain’s expansion. A CBS News investigation previously documented these allegations, highlighting the struggle of health care workers and patients to receive essential supplies while millions in dividends were extracted from real estate sales.
Steward’s Financial Crisis and Impact on Patients and Employees
Records reviewed by CBS News revealed unpaid bills by Steward hospitals, risking shortages of life-saving supplies. The company’s financial crisis resulted in the layoff of approximately 1,200 workers. Massachusetts Gov. Maura Healey expressed disgust at the conduct of Steward executives. Despite these claims, a spokesperson for Steward stated that patient care was always the company’s priority and they deny any allegations suggesting otherwise.
Profitable Transactions and Allegations of Negligence
The court complaint lists three major transactions wherein de la Torre and executives allegedly profited while Steward hospitals were starved for funds. These include a $111 million dividend payout and an overpaid $1.1 billion deal for five Miami-based hospitals. The company also claims that de la Torre sold valuable assets and diverted the proceeds to himself and other board members while the company went insolvent. “De la Torre, Callum, and Karam were grossly negligent and breached their duties of care, loyalty, and good faith,” according to the court filing.
Ex-CEO’s Excessive Personal Spending Amidst Financial Crisis
While Steward’s hospitals were struggling, de la Torre’s excessive personal spending, including the purchase of a $30 million yacht, a multimillion-dollar Texas horse ranch, and two corporate jets valued at $95 million was reported by CBS News. Currently managed by a court-appointed administrator, Steward Health Care is attempting to recover funds from its former leaders to settle its debts. De la Torre, who founded the company in 2010, is at the center of a federal probe for potential fraud, embezzlement and violations of the Foreign Corrupt Practices Act. However, a spokesperson for de la Torre stated that the former CEO “disputes the allegations of wrongdoing and will vigorously defend himself against them.”
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