D.C. judge supports selling Chartered Health’s assets, over owner’s disapproval

A D.C. judge on Friday endorsed a plan to sell off the major assets of Chartered Health Plan, the city’s largest manager of health care for low-income residents, over the objections of its owner.

Chartered’s holding company, owned by businessman Jeffrey E. Thompson, filed papers last month in an effort to stop the $5 million sale to the AmeriHealth Mercy Family of Companies. David Killalea, the attorney representing the holding company in court Friday, argued that the city and the receiver had unfairly orchestrated efforts to dismantle the company rather than keep it in business.

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Killalea called it at various points “an absolutely unprecedented situation in the annals of United States rehabilitation proceedings” and a “liquidation in sheep’s clothing.”

But Superior Court Judge Melvin R. Wright refused to block the sale. “I think they have acted appropriately,” Wright said of the city and the receiver, adding that Chartered’s 100,000-plus enrollees and affiliated providers “will be severely affected if this sale is not approved.”

Killalea told Wright that he intended to seek an emergency stay of the sale while the matter is taken to an appeals court. He did not comment after the proceeding.

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

Under the receiver’s control, Chartered chose not to bid to renew its Medicaid managed-care contract with the District government, which was worth $355 million in 2011. AmeriHealth Mercy did bid; if it wins a contract, it will acquire Chartered’s name, provider contracts and patient rolls.

On Wednesday, the District’s Contract Appeals Board rejected an attempt by the holding company to cancel the Medicaid contract award. Killalea asked Wright on Friday to intervene by “calling a short timeout” and hearing more thorough arguments later this month on the contracting matter.

But receiver Daniel L. Watkins told Wright that Killalea was attempting to “un-ring several bells” on Thompson’s behalf and that Chartered was not financially qualified to bid when the contract proposals were due in early December.

“This holding company had a year to get this in order” and put itself in a position to bid, Watkins said. “They didn’t do it.”

 
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