- The Washington Times - Monday, June 19, 2006

A group representing creditors of the parent company of Greater Southeast Community Hospital has struck a $25 million settlement with the company’s former chief operating officer.

The agreement settles claims that Arizona-based Doctors Community Healthcare Corp.’s (DCHC) former Chief Operating Officer Melvin Redman squandered millions on excessive salary and the use of a corporate jet.

Under the deal, a liquidating trust representing creditors also has pledged not to prosecute claims against Mr. Redman’s son, Scott, the company’s former vice president for operations.

Melvin Redman was chief operating officer at DCHC until just before the company filed for bankruptcy in November 2002.

DCHC, which recently announced plans to sell District-based Hadley Memorial Hospital, has operated Greater Southeast since 1999. It is the only full-service hospital east of the Anacostia River. The company emerged from bankruptcy protection in 2004.

Still, several former and current company executives are facing hundreds of millions of dollars in claims filed by the liquidating trust charged with recouping money for creditors.

The trust says the executives received excessive salaries, forgave loans to themselves and spent millions on a corporate jet while the company plunged into debt and its hospitals struggled to make ends meet.

However, the executives have argued in legal filings that DCHC has a history of making over troubled hospitals in urban communities. They say the trust is questioning “good-faith business decisions” made “many years ago.”

A judge has yet to rule on the settlement.

An attorney for DCHC executives, including Chief Executive Officer Paul R. Tuft, has expressed concern about Melvin Redman’s agreement, saying the former executive has agreed to the deal only because he is “not on the hook for even one dollar.”

Instead, the settlement will be funded through insurance money, according to filings by an attorney for Mr. Tuft and other DCHC executives, who are covered under the same insurance policy.

A hearing on the settlement is scheduled in federal bankruptcy court in the District on June 29.

As part of the agreement, the liquidating trust has agreed to drop its claims against Scott Redman. The trust says he received a $270,000 salary as vice president of operations for the company but lacked any experience for the job.

The settlement with Melvin Redman is the first such agreement in the trust’s bid to recoup hundreds of millions of dollars from current and former company officials, including Rebecca Parrett, an executive at Ohio-based National Century Financial Enterprises (NCFE).

DCHC was one of hundreds of companies that relied on NCFE for financing.

Last month, Miss Parrett was indicted with six other NCFE executives on fraud, money laundering and conspiracy charges.

Prosecutors cite a $3 billion securities fraud scheme involving unsecured loans to health care companies owned by NCFE or its shareholders.

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