Santa Paula Memorial Hospital Creditors Claim $10 Million in Damages Resulting From Alleged Mismanagement

Creditors for Santa Paula Memorial Hospital last week made a claim of $10 million against the hospital board, alleging problems with hospital operations and misuse of funds, the Ventura County Star reports (Wilson, Ventura County Star, 7/1). The 49-bed facility, which operated the only emergency department between the cities of Santa Clarita and Ventura, closed in December. The hospital's board of trustees filed for Chapter 11 bankruptcy protection in federal court in Santa Barbara three days after the closure. Court documents list no claims or creditors, but board members have said that the not-for-profit hospital has debts of about $7.5 million and about 400 creditors (California Healthline, 6/30).

In a letter sent Friday to Jay Michaelson, the hospital's bankruptcy attorney, Alan Stomel, the attorney for the creditor's committee, alleged that the board of trustees did not fully fund an employee pension plan; misused hospital endowment funds; did not adequately supervise hospital administrators; and mismanaged the hospital, according to the Star. Stomel said that the creditors' claim is based on a preliminary investigation that showed that damages exceed $10 million. In his letter, he requested a meeting with Michaelson to resolve the claim "fully and amicably" or the committee would pursue "all legal rights, including the filing of a suit as necessary." Any money that the creditors receive from the claim would come from a hospital insurance policy covering the actions of the board of trustees, Agi Kessler, chair of the creditors' committee, said. She added that the claim is separate from any money the creditors could receive through the hospital's bankruptcy case.

Michaelson said he did not believe the allegations were true, adding that the creditors might be pressing the claim now in case the board's insurance policy expired. Michaelson noted that the hospital already has made arrangements to extend the policy because it was set to expire early this month. Michael McQueen, an attorney for Santa Paul Memorial, said that the accusations were conclusions rather than facts, the Star reports (Ventura County Star, 7/1).