Jimmy Mitchell knew what he wanted when he had to find a nursing home for his 88-year-old mother.
“Honesty, integrity with the patient’s concerns in heart and not just for financial gain,” the St. Matthews resident said.
He said he is satisfied with the care she has received at Orangeburg Nursing Home, and the S.C. Department of Health and Environmental Control reports no major quality-of-care problems at the home.
But Mitchell said he was surprised when told that the home had filed for Chapter 11 bankruptcy protection. He and at least three other residents’ families had not heard of the bankruptcy at least three weeks after its March 6 filing.
The 88-bed home’s financial difficulties appear to have started when its owners died in a plane crash in August 2000. During the following six years, court records and interviews show a tumultuous financial history including:
Multiple lawsuits in federal courts and courts in two states, with millions of dollars at stake. Cases have been argued in a Georgia probate court, two bankruptcy courts, Orangeburg County court, the Georgia Supreme Court and a federal appeals court.
Claims that the man who controlled the estate of the company’s late owner misspent hundreds of thousands of dollars.
Orangeburg Nursing Home Inc.’s Chapter 11 bankruptcy filing has drawn the attention of state and federal officials, who want to make sure that patients receive proper treatment and that the area has nursing home beds available for low-income Medicaid patients.
“Our level of concern is high to see that we make sure the level of care doesn’t change,” said Dale Watson, long-term care ombudsman of the Lt. Governor’s Office on Aging.
Aging spokesman David Lucas said it’s also important the Orangeburg area have enough nursing home beds available for low-income Medicaid patients.
“There’s sort of a generalized shortage of beds statewide,” he said.
A federal bankruptcy judge this month appointed Watson to oversee medical conditions at the nursing home. She must file reports with the court every 60 days.
Crash
On the morning of Aug. 8, 2000, the tarmac at Augusta’s Daniel Field was filled with smoke and torn metal from the plane crash that killed Thelma Allgood; her husband, former Georgia Senate Majority Leader Thomas Allgood, and the pilot.
The crash set off a series of battles over the couple’s holdings that included Orangeburg Nursing Home, a nursing home management company and five nursing homes in Georgia.
By December 2001, after a dispute among survivors, a judge in Richmond County, Ga., placed Clyde Ray in charge of the estate of his late sister.
After nearly three years in charge of the Allgood estate, an October 2004 decision by the probate court in Richmond County, Ga., removed Ray as the administrator. The court found that Ray had:
Transferred Orangeburg Nursing Home to his ownership.
Paid himself $42,000 over two months from the estate.
Loaned $375,000 from the estate to Orangeburg Nursing Home.
Paid himself and his sister more than $360,000 from the sale of a portion of the estate’s property.
The probate court ordered Ray to repay the money with interest, a decision upheld by the Georgia Supreme Court. Richmond County Probate Court records show that Ray has met his obligations.
In an interview, Ray said his time as administrator was “a nightmare,” and he was not aware that his actions were wrong. He refused further comment.
Battles with lenders
While Ray was running the estate, its Georgia nursing homes and its nursing home management company, Allgood Health Care Inc., landed in bankruptcy. Court records show that the companies’ largest creditor, National Health Investors Inc., decided in December 2002 to collect more than $20 million in loans. By January 2003, the Allgood companies filed for Chapter 11 bankruptcy protection, in which debtors seek to reorganize their debts and stay in business. But by February 2006, the case had been converted to Chapter 7 bankruptcy, which liquidates the business.
Following the deaths of the Allgoods, National Health Investors took another look at the loans it had made between 1992 and 1998.
“NHI thought all this money would be in the estates, and they tried to force it into bankruptcy,” said Allgood Health Care’s former accountant, George Clark.
According to Clark and the debtors’ bankruptcy attorneys, James McCallar and James Wilson, the estate was making its payments to National Health and its other creditors when National Health demanded full repayment. Each reflected a degree of uncertainty as to why National Health decided to push Allgood into bankruptcy by claiming a default on its loan.
“It was like it was something personal going on,” Clark said.
However, McCallar said that the end of the three-year bankruptcy reflected the intentions of National Health.
“They just wanted possession of the nursing homes; it’s what they wanted from the beginning,” he said. “Obviously, look at the end result. Their (NHI) desire was to take control of the nursing homes, and ultimately they did.”
National Health, a publicly traded company based in Tennessee, would not comment.
Wilson repeated Clark’s assertions and said the move by National Health was unexpected.
“There were a lot of personality differences between the Allgoods and the lender,” Wilson said. “A lot of the personality differences were directed at Clyde Ray.”
National Health and the Allgood companies disagreed over issues involving collateral for the loans. Initially, McCallar said National Health claimed a default on its $22.75 million in loans because of a $100,000 credit that it could not account for. National Health used the dispute to start foreclosure proceedings against Allgood’s Georgia assets, which led to the bankruptcy filing.
The $100,000 was “extremely insignificant” compared to the size of the loan, McCallar said. “Defending the companies, it’s a diverting and expensive proposition.”
Wilson said that during the 3-1/2-year bankruptcy, National Health was unwilling to negotiate with Allgood over its plans to reorganize and repay its creditors. National Health “never made an offer,” Wilson said, and court records show that National Health opposed several of Allgood’s reorganization plans.
“So it was thought best to convert it to Chapter 7,” McCallar said.
By August 2006, National Health, the estate and the Ray family settled their claims and parceled what was left of Thelma Allgood’s once-prominent nursing home group. Court records show that the settlement included:
Transfer of Orangeburg Nursing Home to National Health.
Payment of $411,926 to the estate by Clyde Ray.
Payment of 96 percent of the estate’s remaining cash to National Health.
A quick sale
Four days after National Health received ownership of Orangeburg Nursing Home, the company sold it to a single investor, Calvin Alexander II, of Escondido , Calif. Efforts to find documents showing the sale price were unsuccessful.
More legal issues started a short time later, when mortgage company Capmark Finance Inc. claimed that the nursing home defaulted on a $3.6 million loan.
According to foreclosure documents filed by Capmark in December 2006 in Orangeburg County, the company claimed that Orangeburg Nursing Home, which grossed $4 million last year, had not made mortgage payments since June.
Capmark also claimed in court records that it paid $42,000 in city and county taxes last November to keep the home from government seizure.
Capmark said in October it told Orangeburg Nursing Home that it was in default.
Capmark filed foreclosure proceedings in January, and Orangeburg Nursing Home filed for Chapter 11 bankruptcy on March 6, court records show.
Efforts to reach Alexander were unsuccessful. A call to the phone number he filed with the Department of Health and Environmental Control was answered by an individual claiming to represent Alexander. The man would not identify himself.
“I can summarize Mr. Alexander’s position in two words: ’No comment,’” he said before hanging up.
The chief administrator of Orangeburg Nursing Home and its lawyers have refused to comment on its bankruptcy.
’A mess’
Despite more than six years of lawsuits, Jimmy Mitchell is only concerned with the outcome of one company. He said he hopes that Orangeburg Nursing Home will make necessary changes and continue what he said has been the quality service his mother has received there.
However, he said the government is “failing people” in its lack of regulations on the nursing home industry.
Mitchell was not the only one surprised by the bankruptcy. So were state regulators.
“Expected? Not for us. I know the local ombudsman was certainly surprised also,” said Watson, ombudsman of the state’s Office on Aging. “From what I understand, the care has been good there.”
Watson said she was aware of “the big mess down in Georgia.”
“People could possibly have seen it” headed toward Orangeburg, she said. “But a lot of times you see something coming, but you hope it will right side before it makes its way.”
She said no agency regularly inspects the finances of a nursing home, so the only warning about a home’s financial difficulties would come through complaints by residents, family or staff.
“It’s pretty much like a business,” she said. “As long as they’re meeting payroll and things of that nature, and no one alerts DHEC to the fact that something is wrong, then they’re going to assume as long as patients are being fed, as long as they’re meeting payroll, that everything is OK.”
State records show no major quality-of-care issues involving Orangeburg Nursing Home, and federal Medicare and Medicaid laws require weekly inspections of medical facilities operating under bankruptcy protection.
“We’ve seen facilities in the past stumble through some difficulties, then they move forward and become strong facilities again,” Watson said. “I’m not sure if one instance is going to make people say, ‘You’re weak and something’s wrong.’ All businesses have an ebb and a flow kind of thing.”
From The Carolina Reporter, a publication by senior-semester students at The University of South Carolina’s School of Journalism and Mass Communications. This story was edited by John Murray.
