Jeffrey Thompson fights Chartered Health Plan sale

February 26, 2013

Thompson’s lawyers are hoping to stop, or at least stall, the sale of his Chartered Health Plan. (C-SPAN)

Businessman Jeffrey E. Thompson is mounting a last-ditch effort to prevent the District from dismantling the firm he built into the city’s dominant manager of government-funded health care for the needy.

On Friday, the city asked a D.C. Superior Court judge to approve a plan to sell Chartered Health Plan’s most valuable assets — its name, provider contracts and patient rolls — to the Philadelphia-based AmeriHealth Mercy Family of Cos. for $5 million.

Chartered has been under the control of a city-appointed receiver since October, when auditors found financial irregularities in its books and dangerously low levels of financial reserves. That followed months of scrutiny for Thompson and his companies after federal agents raided his offices in connection with a campaign finance investigation, and he was later implicated in funding an unreported “shadow campaign” for Mayor Vincent C. Gray in 2010.

Later Friday afternoon, lawyers for Chartered’s corporate parent — D.C. Healthcare Systems Inc., or DCHSI, owned solely by Thompson — filed papers with the court opposing the city’s request for a speedy decision on the matter.

The sale, attorneys David Killalea and John Ray wrote, “effectively liquidates Chartered” and “thus would threaten the very existence” of the parent company, given that Chartered is its sole source of revenue. The lawyers asked Judge Melvin R. Wright to delay making any decision in the case until mid-March.

The District had argued that the sale demanded quick approval to have AmeriHealth ready to assume Chartered’s affairs when its current contract with the city expires April 30. But Thompson’s lawyers argued that there “is no true exigency” and that if the matter were decided next week, as the city requested, the holding company would be “prejudiced in its ability to respond on the merits and protect its very existence.”

In a reply filed late Monday, city lawyers argued that Thompson essentially has no say in what happens to Chartered now that it is in receivership. They also defended the need to move quickly, arguing that otherwise, “the transaction that [the receiver] has proposed to salvage some value for Chartered’s stakeholders simply cannot happen.” And they noted that Thompson had “plenty of opportunities” to solve Chartered’s problems — including through a sale to AmeriHealth Mercy — before the company was placed in receivership.

“DCHSI had six months and more to come up with a suitor, and was unable to do so,” the city lawyers wrote. “DCHSI cannot now claim surprise, prejudice and ill treatment as a result of a solution that the [receiver] has proposed in the face of the obvious deadlines, challenges and realities created, in no small measure, by DCHSI or its owner.”

Wright has not yet responded to the city’s request for an expedited hearing in the case. Neither Killalea nor Ray responded to requests for comment Tuesday.

The receiver, Daniel L. Watkins, briefed Mayor Vincent C. Gray and members of the D.C. Council Tuesday morning. Among other matters, he discussed the potential that as much as $40 million in unpaid medical bills could be left in limbo should the sale be approved.

Watkins is hoping that those bills will be covered once the city approves a retroactive reimbursement of some pharmacy costs, perhaps as much as $60 million or more, dating back to 2010. But city officials are fighting the repayment, arguing that Thompson knowingly took the risk that the rates he agreed to with the city might not cover Chartered’s costs of care.

David A. Catania (I-At Large), the former chairman of the health committee and a longtime thorn in Thompson’s side, asked Watkins why he seemed more intent on squeezing taxpayers for payments than Chartered’s owner.

“I want to know what you’re doing to go after Jeff Thompson,” he said. “Is this not the clearest case ever for piercing the corporate veil and going after him for individual liability? …  Why aren’t you suing him to take his last nickel before you come to us for $50 million?”

Watkins said he is pursuing claims against Thompson, including more than $3 million in income tax refunds that auditors believe should have been credited to Chartered’s books. “It’s part of a receivership and pursuing claims against the holding company and its shareholder are part of that as well,” he said, referring to Thompson.

“I want you to go there first,” Catania said.

“I hear you,” Watkins replied.

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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Mike DeBonis | February 26, 2013