- The Washington Times - Wednesday, March 10, 2004

Lawyers and consultants involved in the Greater Southeast Community Hospital bankruptcy case earned more than $1.1 million in January, just weeks before the facility’s administrators announced a round of layoffs to improve profit margins, according to court records.

The hospital last month laid off 62 employees, including 30 contract nurses. Hospital administrators said the cuts were necessary because Greater Southeast is losing too much money. Court records show the hospital lost $2.5 million in January.

Even so, attorneys representing the bankrupt firm that owns Greater Southeast — Arizona-based Doctors Community Healthcare Corp. — continue to earn high fees.

The law firm Weil, Gotshal & Manges earned $513,000 in January, according to court filings. The firm has made $5.4 million since Greater Southeast went bankrupt in November 2002. Five other firms involved in the case as consultants or attorneys also took in hundreds of thousands of dollars last month, court records show.

Sources say a series of legal challenges have slowed the bankruptcy case, which was supposed to be finished earlier this year.

Last month, D.C.-based Hospital Holding Corp. and New Hampshire-based Specialty Hospitals of America Inc. filed legal challenges to block Doctors Community Healthcare Corp. executives from buying back Greater Southeast and Hadley Memorial hospitals in the District and two other hospitals in Chicago and California.

The legal challenges filed Feb. 18 in U.S. Bankruptcy Court seek to stop a group led by Paul Tuft, head of Doctors Community Healthcare Corp., from regaining control of the hospitals. Mr. Tuft and his associates bid approximately $150 million during a December 2003 auction of his company’s assets to buy back Greater Southeast, Hadley and two other hospitals.

Hospital Holding Corp. and Specialty Hospitals of America claim in court records that the December auction for the hospitals operated by Doctors Community Healthcare was “an orchestrated charade.”

“It is abundantly clear that the auction was nothing more than an orchestrated charade,” Donald R. Hartman, an attorney who represents Hospital Holding Corp., wrote in court papers. “This charade was discovered only after five wasted, incredibly expensive days of an unfair bidding process.”

Competing firms claim in separate legal challenges, also filed Feb. 18, that the auction was conducted in an unfair manner that violates court bidding procedures.

Specialty Hospitals of America filed a separate challenge, also on Feb. 18, seeking to block Mr. Tuft from buying back the hospitals, and submitted a bid to buy Hadley.

Mr. Hartman claims in court papers that competing bidders never received copies of the bid submitted by Mr. Tuft and his associates as required by bankruptcy auction procedures.

Each time competing bidders requested a copy of the document, they were advised that attorneys for Mr. Tuft and his associates “were working on the language of the bid,” according to legal papers filed by Hospital Holding Corp., which was formed by Dr. Peter Shin, a physician who runs a long-term care and nursing facility in the District.

Attorneys representing Doctors Community say in court papers that the legal challenges come from “disgruntled” bidders and that the U.S. Bankruptcy Court should approve Mr. Tuft’s reorganization plan.

Doctors Community purchased Greater Southeast in December 1999 and city officials began pouring tens of millions of dollars into its bank accounts as part of plan to privatize health care for low-income residents.

Despite D.C. government financing, Greater Southeast spiraled into its second bankruptcy in five years, repeatedly failed inspections and experienced frequent emergency- room staffing shortages. The hospital lost its license in August 2003, but regained it last fall.

Doctors Community Health Corp. also borrowed heavily from National Century Financial Enterprises Inc., of Ohio, which has been the subject of an ongoing federal investigation since November 2002.

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