- The Washington Times - Sunday, April 30, 2006

The Rockville-based health care company that provides speech therapists for D.C. public school children is asking a judge to dismiss its bankruptcy case, saying the filing has scared off at least one big customer and that it is losing employees.

Atlantic Health Services Inc. said in court records filed last week that it has lost eight employees and a state contract in Maryland in the wake of its bankruptcy filing three months ago.

“In sum, this bankruptcy case has hindered the [company’s] efforts to maintain and grow its business,” Atlantic Health Services said.

Since January, the company has been attempting to restructure its debts, including financing on a 2004 Mercedes-Benz and $550,000 in personal loans by the chief executive and chief financial officer, bankruptcy records show.

The D.C. Board of Education approved a $992,775 contract with the company last May that includes three option years worth more than $1 million each. Atlantic Health also has held contracts with Montgomery County and the Maryland Department of Juvenile Services.

D.C. school system spokeswoman Roxanne Evans said school officials are monitoring the case but have not seen a drop in the level of services while the company has been in bankruptcy.

“There hasn’t been a disruption in the services,” she said. “But any time something like this happens, obviously you pay attention to the situation.”

Donald Gladstone, the company’s chief executive officer, did not a return a phone message.

Under a sweeping set of bankruptcy reforms that became law last year, the company has had to open its patient records to an ombudsman appointed by a Maryland bankruptcy judge to monitor care.

It was the first time an ombudsman was appointed in a Maryland bankruptcy case and the second time in the country since reforms were enacted last year, court records show.

Atlantic Health says it wants the bankruptcy case dismissed because it has struck a deal with a major creditor in the case.

The company filed for bankruptcy weeks after losing a D.C. Superior Court case in which another contractor won a judgment of more than $600,000, related to a business deal during the 1990s.

In the lawsuit, contractor Carmel Kalunga said she had a deal with Riverside Health Care Inc. to share revenues from a contract to provide occupational and physical therapy for D.C. schoolchildren.

Miss Kalunga argued that Atlantic Health Services, as Riverside’s successor, should pay the debt. Atlantic Health said it is a separate corporate entity and should not have to pay.

In court papers filed last week, Atlantic Health said it reached a settlement with Miss Kalunga to pay her $385,000 over five years, but that the deal also calls for the company to dismiss the bankruptcy case.

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