- The Washington Times - Monday, February 27, 2006

A Rockville-based company that has won a multimillion-dollar speech therapy and health services contract with the D.C. public school system has been hit with a claim for more than $500,000 in unpaid federal taxes.

Atlantic Health Services Inc. also is bankrupt and owes about $600,000 to a local contractor that sued the company in D.C. Superior Court over a business deal gone awry.

The company remains in business while seeking to restructure it debts, which include financing on a 2004 Mercedes-Benz and $550,000 in personal loans by the company’s chief executive and chief financial officer, bankruptcy records show.

The company’s chief executive, Donald Gladstone, did not return phone messages yesterday.

The company filed for Chapter 11 in U.S. Bankruptcy Court in Greenbelt in January.

The U.S. Office of the Trustee — an arm of the Department of Justice that oversees bankruptcy cases — yesterday filed a motion to appoint a patient care ombudsman in the case.

The appointment of an ombudsman is a requirement under a sweeping set of bankruptcy reforms that became law last year. The ombudsman monitors patient care, interviews patients and reports findings to the court.

Atlantic Health is one of the largest providers of physical and speech therapy services to the D.C. school system and the D.C. government. In addition, the company has contracts through Montgomery County and the Maryland Department of Juvenile Services.

The bankruptcy petition was filed just weeks after a D.C. Superior Court judge ruled that Atlantic Health Services owes about $600,000 to a company called Therapy Providers. The ruling stemmed from a lawsuit over a D.C. schools contract during the 1990s, D.C. Superior Court records show.

In the lawsuit, Therapy Providers said it had a deal with a company called Riverside Health Care Inc. to share all revenues generated through a contract to provide occupational and physical therapy for D.C. schoolchildren.

Therapy Providers argued that Atlantic Health Services, as Riverside’s successor, should pay that debt.

Atlantic Health said it is a separate corporate entity and should not have to pay.

The decision against Atlantic Health is under appeal, court records show.

Compounding the company’s financial woes, the Internal Revenue Service this month filed a claim for $587,661 against the company in bankruptcy court.

Last year, the D.C. Board of Education awarded the company a contract worth $992,775 to provide the school system with “monolingual and bilingual speech language pathologists,” a board resolution says. D.C. school officials did not return phone calls by deadline yesterday.

The contract with the school system included four option years worth up to $4 million through 2009.

According to its Web site, www.atlantichealthservices.com, the company is a privately owned therapy and nursing services provider that began in 1999, with a staff of physicians, pharmacists, psychologists and social workers.

Bankruptcy records indicate that the company has 65 employees.

In recent weeks, Atlantic Health has sought permission from a bankruptcy judge to authorize a line of financing to keep the company in business, saying otherwise it would lose the opportunity to compete for lucrative contracts and would have to lay off employees.

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