U.S. Bankruptcy Court Judge Morris Stern ruled earlier this month that attorneys in a lawsuit by creditors saying they are still owed money from the previous owners of Bayonne Medical Center (BMC) may subpoena campaign records from Rep. Albio Sires (D-13th Dist.).
The attorneys will seek to determine if there was a business relationship between then-BMC Chairman Herman Brockman and OMNI Healthcare owner Avery Eisenreich, which would have constituted an alleged conflict of interest when both entities made a land deal in the final days before Bayonne Medical Center was taken over by new owners.
Attorneys for the creditors are seeking to prove that Brockman allegedly gave Eisenreich a deal for the purchase of the land far below market value.
Both men have denied such a connection in sworn statements. However, if the creditors can prove such a relationship, it may make it possible to void the land deal or to force Eisenreich to pay some $3 million that the creditors claim he underpaid.
It’s possible that campaign records could show a relationship.
“They inaccurately reported Avery to be an employee of Brockman Pharmacy.” – Fred Gruen
The creditors’ suit was filed in 2009 against the former hospital trustees, officers, and the accounting firm for the former Bayonne Medical Center in U.S. Federal Bankruptcy Court. The suit seeks to recover millions lost as a result of actions leading up to a Chapter 11 bankruptcy filing in 2007 by BMC.
Some aspects of the suit were settled in 2009. But the most serious allegations of possible wrongdoing – including alleged forgery and alleged unmet promises to pay millions of dollars – remain unresolved.
One way the creditors want to recover money is to void the deal for the telephone property by showing there was a conflict of interest between the seller and purchaser. They also want to show that the two parties originally agreed to a higher selling amount. That way, they can push OMNI to pay more for the land.
(The hospital’s current owners, IJKG of Iselin, purchased the hospital in February 2008 to run as a private hospital, and are not involved in the legal dispute.)
Who promised, and who paid?
The creditors’ suit, filed by Allen J. Wilen in his capacity as liquidating trustee and representative for the bankrupt estate of the former Bayonne Medical Center, targets OMNI Healthcare.
Part of the legal action has the creditors suing OMNI for $5 million that they say OMNI allegedly promised, but didn’t pay, for the old telephone property. The money, according to the suit, was supposed to have been paid in five $1 million installments beginning in June 2006.
Court records show that the first $1 million installment was listed on hospital records as “a loan,” not a payment, and was deducted from the final sale price of the $2 million that OMNI eventually paid.
But Connell Foley, the lawyer for the former owners of BMC, said the hospital allegedly listed the $5 million as an asset on its balance sheet, even though it never received the money.
OMNI argued that the promise was not binding and the company paid the hospital just over $2 million, nearly all of which went to fees concerning the sale of the former telephone building.
The suit also alleges that OMNI gave BMC a $1 million “promissory note” bearing the apparent signatures of then-BMC President/CEO Robert H. Evans and BMC Board Chairman Herman Brockman.
But in dispositions, Brockman said the signature was not his.
The creditors have been trying to prove Brockman and Eisenreich had a relationship and allegedly conspired to get the land deal done.
Both Eisenreich and Brockman told the court in depositions that they had no relationship other than as negotiating partners in Nov. 29, 2006.
But campaign finance records examined by the Community News may suggest otherwise.
Campaign records may be wrong?
In August, the Bayonne Community News learned that OMNI owner Eisenreich had made a number of political contributions, including many to Rep. Sires, in which Eisenreich was listed as a pharmacist in the employ of Brockman Pharmacy, which was owned by the former chairman of the BMC board until 2006.
Campaign finance records show that Eisenreich was listed as a Brockman employee when he made a $2,100 contribution to the Sires campaign on Feb. 6, 2006. He was also listed as a Brockman employee for a $1,000 contribution to Sires on Jan. 15, 2010 (after Herman Brockman was no longer involved with the company).
Other candidates’ campaign records over the last five years show Eisenreich as either the partner of OMNI asset management, or manager of Harbor View Health Care Center. But in both the 2006 and 2010 contributions to Sires he was listed as an employee of Brockman.
In requests for more information about these contributions, the Community News was told by officials at Sires’ office that they assumed Eisenreich had acquired Brockman’s business in a deal that took place some point after the sale of hospital land in 2006.
While there is no allegation of wrongdoing against Sires, attorneys for the creditors want to determine if there was a personal relationship between Brockman and Eisenreich at the time the telephone property was sold.
The Community News’ request for information was presented to the court in early September, temporarily stalling Eisenreich’s motion to have the case dismissed.
Fred Gruen, attorney for Eisenreich, argued that the campaign contribution description was wrong. In a sworn statement issued to the court on Sept. 13, 2011, Eisenreich said: “I have never been an employee of Brockman Pharmacy or any other entity associated with Herman Brockman and have never been a pharmacist, and never told anyone the contrary. I do not know who and when and why [Sires’] treasurer reported this inaccurate information in the subject campaign financial report.”
Gruen, seeking to block a move to further explore the facts behind the Sires contribution, presented to the court sworn testimony from Brockman saying that he sold the pharmacy in 2006, and that none of his family members were associated with the current business
Other sources connected with the hospital transition board that succeeded Brockman prior to the sale of the hospital claim that Eisenreich did not purchase Brockman’s Pharmacy as claimed.
“The election campaign reports were prepared and signed by a politician’s treasurer, Ada Morel,” said Gruen in the Sept. 19, 2011 statement the court. “They inaccurately reported Avery to be an employee of Brockman Pharmacy.” Gruen speculated that the election staff must have simply repeated the error in the 2010 report.
Judge Stern, however, rejected Gruen’s motion and agreed to allow attorneys for the creditors to seek backup documentation from Sires’ office in regards to both the 2006 and 2010 contributions.
On Oct. 10, the staff of Sires’ campaign office confirmed receiving the subpoenas for information.
$25M nursing home underway
At stake is the future of the proposed $25 million nursing home on that property, which the city sees as the central piece in a medical service zone for the Broadway shopping district – part of its efforts to revitalize the area.
The 120-bed facility would be the first nursing home in the city of Bayonne, but work was stopped at the site as a result of the legal squabble. The latest legal delay came at a time when OMNI had filed a motion for the court to dismiss the charges, which would have allowed the work to continue.