Concerned about possible “serious violations” of the laws that govern nonprofit organizations, the office of Tennessee Attorney General Bob Cooper is seeking to intervene in a lawsuit filed early this year against Murfreesboro-based National Health Investors Inc.
Assistant Attorneys General Jeremy E. Pyper and William F. McCormick submitted their motion late last week to Nashville's U.S. Bankruptcy Court, where Care Foundation of America filed suit against NHI on Jan. 2 as part of its Chapter 11 case.
The foundation claims NHI manipulated sympathetic board members into business dealings that deprived it of $25 million over the course of nine years. NHI, a real estate investment trust, created Care Foundation in 1999 to assume ownership of six Florida nursing homes NHI had financed.
Care Foundation came under the control of a new slate of directors after the AG's office first raised questions last year about its relationship with NHI. That board decided to take legal action against NHI.
“Care Foundation’s allegations, if true, represent serious violations of the Nonprofit Act and Tennessee common law concerning the assets of nonprofit corporations,” the AG's motion states.
Alex Fardon, one of the attorneys from Harwell Howard Hyne Gabbert & Manner PC who are representing NHI, called attention to the fact that the AG's motion “merely repeats CFA's allegations and then says, 'if true,' those allegations create viable claims.”
While saying he appreciates that the AG's office has a responsibility under the law to oversee nonprofit entities, Fardon said, “we do not believe intervention here is warranted.”
In a quarterly report filed with the Securities and Exchange Commission on May 5, NHI stated that it “adamantly denies CFA’s claims and intends to vigorously defend against CFA’s complaint,” while warning that an “unfavorable outcome” in the case “could have a material adverse effect” on NHI.
Los Angeles Superior Court
Auerbach Acquisition Associates Inc. v. Greg Daily. Punitive damages awarded May 15. Following on its decision to award California businessman Douglas Shooker (owner of Auerbach) $300 million in compensatory damages against Nashville entrepreneur Daily, the L.A. jury added $50 million in punitive damages.
Shooker sued Daily over a stake in payment processor iPayment Inc. that Shooker claimed he was denied through manipulation by CEO Daily nearly a decade ago. The company has since gone public and then private again, and after a seven-year legal battle, the jury awarded Shooker an amount based on what his share of it would now be if he had been able to retain it.
James N. Penrod, Daily's attorney from the San Francisco office of national firm Morgan, Lewis & Bockius, has previously said his client would appeal.
Daily filed for Chapter 11 protection just after the initial damages ruling came down. In a disclosure filed in bankruptcy court last week, Daily indicated that he owes Morgan Lewis $3.5 million in legal fees and expenses.
He also told the court that neither he nor wife Collie Daily, who was named last month to co-chair the 2010 Swan Ball, have any current income except the $14,600 a month they receive in interest and dividends. Greg Daily stopped taking any salary or stock options at iPayment two years ago.
United States District Court
USA v. James W. Carell et al. Filed May 18. The feds claim Nashville philanthropist and longtime healthcare executive Carell, with his home-health company CareAll, is liable for $18 million in damages and civil penalties for taking part in an alleged scheme to overbill Medicare.
The complaint says Carell, younger brother of the late Central Parking CEO Monroe Carell Jr., installed a “sham owner” of three home health agencies that he and his company really owned. The company “reaped high profits” by billing the agencies for management fees “at its discretion,” and the agencies then passed those costs on to Medicare, the lawsuit alleges.
Carell's attorney, William T. Ramsey of Neal & Harwell PLC, called the government's assertions “ridiculous.” He noted that a previous run-in with the feds over reimbursement, back in the 1990s, led to a legal decision in his client's favor. Ramsey said this case covers similar legal ground.
Carell “will vigorously defend this case,” Ramsey said, and will also seek payment from the government of more than $1 million it owes CareAll.
Plaintiff's attorneys: Middle Tennessee U.S. Attorney Ed Yarbrough and Assistant U.S. Attorney Ellen Bowden McIntyre.