- The Washington Times - Wednesday, November 2, 2005

Hundreds of organizations — including law firms, nonprofit groups, the fundraising arm of the University of the District of Columbia and a jewelry store — have found themselves in the cross hairs of creditors of the parent company Greater Southeast Community Hospital, court records show.

This week, a judge upheld the right of a liquidating trust of creditors to pursue millions of dollars from the former chief executive of Doctors Community Healthcare Corp. (DCHC), Paul R. Tuft. The trust is seeking to recoup company funds spent leasing a corporate jet through a separate entity that Mr. Tuft co-founded, records show.

Judge Martin S. Teel Jr., in a 65-page opinion issued Monday, also questioned millions of dollars in corporate loans that financed “highly personal” purchases, including a divorce settlement, a house, a car and a donation to UDC’s fundraising arm.

But the lawsuit against Mr. Tuft and other DCHC executives in which Judge Teel issued his opinion this week is just one of hundreds of cases that the creditors group has filed during the past year in U.S. Bankruptcy Court in the District.

In the lawsuits, the trust is seeking hundreds of millions of dollars from entities that received money from DCHC or its executives before the health care company’s collapse in 2002. DCHC, which also owns Hadley Memorial Hospital, emerged from bankruptcy protection last year.

The trust has challenged thousands of financial transactions under various legal theories, including “fraudulent conveyance,” “tortuous conduct” or “preferential transfer.”

“Fraudulent conveyance is basically a theory that exists that says before a person or a company can be generous, first they have to be responsible to the creditors,” said William T. Vukowich, a bankruptcy specialist and professor at Georgetown University School of Law.

In attempting to recoup funds for DCHC’s creditors, the liquidating trust is seeking more than $200 million from private law firms that worked for DCHC, saying faulty legal advice approved of excessively high-interest borrowing deals that saddled the company with massive debt.

In addition, the trust also is targeting smaller entities. Many local businesses, including nonprofit groups that received funds from DCHC, also have been targeted. Last year, for instance, the trust filed a lawsuit seeking approximately $50,000 from the DC Action for Children, a local nonprofit advocacy group.

The advocacy group is challenging the lawsuit, saying it lacks legal grounds.

A similar lawsuit was filed against the University of the District of Columbia for more than $260,000. UDC has filed a motion to dismiss the complaint.

In addition, the trust has filed an action to recoup more than $17,000 from Albert’s Diamond Jewelers, of Chicago.

The trust also is seeking to collect millions of dollars from Mr. Tuft and other DCHC executives.

DCHC “directors and officers enjoyed a lifestyle of unique comfort,” including “excessive salaries, forgiven loans and free access to chartered planes and limousines,” attorneys for the trust stated in legal filings.

Many “non-DCHC personnel” took advantage of the company’s chartered jet service, including friends, family and unnamed government officials, the trust said.

Mr. Tuft and his attorneys declined to comment. However, they have sought to dismiss the trust’s complaint, calling the lawsuit “a hindsight attempt to impose liability for good faith business decisions made many years ago.”

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