A Hospital Heist Seeks Protection in the Ponzi-Friendliest Court in America [View all]

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Steward Health just filed for bankruptcy in Houston’s scandal-plagued, private equity-pilled bankruptcy court.

BY MAUREEN TKACIK MAY 6, 2024

A massive chain of crumbling safety net hospitals that Sen. Elizabeth Warren (D-MA) has described as a “ponzi scheme” filed for bankruptcy protection today in the notoriously “debtor friendly” Southern District of Texas bankruptcy court, bringing new urgency to the glacial effort—inasmuch as one exists—to stabilize the hospitals’ finances and bring their jet-setting plunderers to justice.

The hospital chain in question is, of course, Steward Health, a Boston-born, Dallas-headquartered collection of about 30 nightmarish hospitals mostly located in Florida and Massachusetts, from which insiders have siphoned well over $1 billion. Steward now owes nearly $300 million in unpaid compensation to physicians and other staffers and about $558 million to its top 30 non-insider creditors, including the Center for Medicare and Medicaid Services.

The bankruptcy court is the Houston-based “complex cases panel” in Texas’s southern district, founded by the notorious Judge David R. Jones, who resigned in disgrace last fall after a small creditor in the bankruptcy of the oilfield services firm McDermott International revealed in a court filing that Jones was the live-in boyfriend of one of the attorneys working the bankruptcy, as well as dozens of others over which he had presided. In just one of the many details that connect the two scandals, McDermott’s then-chief financial officer John R. Castellano has been named Steward's chief restructuring officer.

As the Prospect explained in our investigation of the court, the complex cases panel has for years been the foremost destination of ponzified companies seeking to avoid questions and accountability. In the alleged name of speed and “efficiency,” Judge Jones and his former law partner Marvin Isgur quickly canceled all kinds of debts owed to small businesses, asbestos-poisoned retirees, unionized workforces, and retail investors. In the process, they let off the hook private equity firms and other corrupt insiders that had looted oil and gas drillers, retailers, restaurant chains, a prison health care contractor and at least one hospital chain, Pipeline Health, whose dubious 2022 bankruptcy plan was financed by a real estate investment trust called Medical Properties Trust, which also has deep financial ties with Steward.

https://prospect.org/health/hospital-heist-steward-friendly-bankruptcy-court-texas/