Judge Freezes Assets of Lender That Defaulted on Loans to Hospitals
On Monday, U.S. District Judge David Carter shut down Medical Capital Holdings after the medical lender defaulted on financing for the Integrated Health Care Holdings hospital group and allegedly defrauded investors, the Orange County Register reports.
Carter appointed a receiver to oversee Medical Capital's accounting practices, froze the lender's assets and ordered the company to stop selling investments.
Inability To Sustain Financing
Last month, the Securities and Exchange Commission filed a lawsuit against Medical Capital and its executives for allegedly defrauding investors, wrongfully diverting funds and failing to inform investors of defaults.
In the past, IHHI relied on Medical Capital for long-term and short-term loans to help the hospital group finance its operations.
However, during the final quarter of 2008, IHHI reported that Medical Capital failed to advance credit to the hospital group. Beginning in early 2009, the lender stopped extending loans or issuing final payments on accounts receivable that the firm had bought from the hospital group.
Trouble for Orange County Hospitals
In its latest report to SEC, IHHI said Medical Capital's failure to extend funds creates "substantial doubt" about the hospital group's ability to remain in business.
IHHI operates four Orange County hospitals:
- Chapman Medical Center in Orange;
- Coastal Communities Hospital in Santa Ana;
- Western Medical Center-Anaheim; and
- Western Medical Center-Santa Ana.