By Mark Hemingway, RealClearInvestigations
February 17, 2020
FBI agents last month raided the home of the CEO of a bankrupt hospital chain and one of its hospitals in Pennsylvania in new signs of trouble for a company central to accusations of influence-peddling by James Biden, brother of former Vice President Joe Biden.
The federal investigation was disclosed in documents filed this month by the acting U.S. trustee overseeing the bankruptcy case of Florida-based Americore Holdings, which is in the business of acquiring and managing rural hospitals.
The filing in Kentucky by the federal trustee, Paul A. Randolph, seeks the appointment of a trustee specifically to oversee the bankruptcy case, or otherwise the dismissal of the firm’s filing for Chapter 11 bankruptcy protection from creditors. It said the company’s CEO, Grant White, had “grossly mismanaged” his business; “has not operated the hospitals in a manner that is consistent with public safety”; and “improperly siphoned money from the Debtors for his personal benefit.”
The firm declared bankruptcy in December. On Jan. 29, the court documents say, the FBI raided White’s home at a location unspecified and, the next day, one of its hospitals, Ellwood City Medical Center in Pennsylvania. A week later a Kentucky court granted a motion to remove White as CEO.
White did not respond to requests for comment and efforts to reach his company by phone were unsuccessful.
The federal trustee’s filing did not mention the younger brother of the current Democratic presidential candidate. This past summer, however, James Biden and White were named in a lawsuit alleging fraud, along with Biden’s partner, hedge fund manager Michael Lewitt. The lawsuit, filed by Tennessee businessman Michael Frey and his partner Dr. Mohannad Azzam, owners of Diverse Medical Management, also named Amer Rustom, another investor in Americore along with Biden and Lewitt.
The lawsuit alleges that James Biden had a prominent role in the company. One exhibit filed in the lawsuit is a photograph of an Americore business card that Biden reportedly handed out listing him as a “principal” in the company.
Frey alleges that when Diverse Medical Management and Americore were in talks to merge, Jim Biden promised to exploit his brother’s political influence as vice president to attract international investors and make the venture successful.
Lewitt is alleged to have alluded to the Vice President’s clout in a text message to Frey to calm the latter’s worry about legal liability to his firm over an acquisition: “Jim [Biden] told me. Don’t worry every time someone threatens to sue you you’re with us now nobody is gonna touch you.” According to the lawsuit, “It was Frey’s understanding that Lewitt was implying that DMM [Diverse Medical Management] was ‘protected’ because of Jim Biden’s connections.”
The lawsuit also alleges that after failing to deliver on several promises made to Frey and Azzam, Biden took control of their dealings with Americore. “Biden instructed that Plaintiffs should no longer speak with Americore and White, but instead should deal exclusively with the Investor Defendants and their respective agents going forward, who would ensure that Plaintiffs’ model would find its way into hospitals and thrive,” the lawsuit says.
Throughout these dealings, Biden and the other defendants in the lawsuit are said to have pushed Frey and Azzam to take out loans and buy up failing rural hospitals that they hoped to turn around. They made these investments with their own money, on the assurance that they would be paid back when Biden helped secure investments from Dogan Holding—one of Turkey’s largest conglomerates.
According to the lawsuit, Biden inadvertently texted Frey supposedly revealing his plans to take over Diverse Medical Management and cut out Frey and Azzam in the process: “We can wrap [Americore] into Frey’s entity further diluting them both in the process? After we take control of both. Just a thought. We must have complete control, too many moving pieces. Jim.”
Diverse Medical Management found itself financially overextended and unable to make payroll before filing the lawsuit.
Last August, a spokesman for Biden disputed the claims in the lawsuit, saying, “It is nothing more than a cynical attempt to manipulate the press by taking advantage of Jim Biden’s public profile as the brother of a presidential candidate.”
More recently, it appears that a rift has grown among the defendants in the Americore lawsuit. A week after the FBI raids, a motion was filed on behalf of Lewitt’s hedge fund, Third Friday Total Return Fund, seeking to remove White as CEO of Americore, and the motion was granted.
The filing contains unsparing criticism of White on behalf of Lewitt. It contends White does business in an “unethical manner, consistently breaches contracts, violates loan agreements, deliberately misleads lenders, vendors, and employees, and consistently acts in a manner that damages the reputation and prospects of Debtor,” reads the motion. “Mr. Lewitt worked with Mr. White for over a year and found him to be unsuited for managing and business, let alone hospitals.”
The raids were not the first time the FBI has investigated matters related to Americore. It got involved last August when, soon after the lawsuit was filed, Frey received an envelope at his home containing a thinly veiled threat. “Inside the envelope was what appeared to be blood-stained currency from a Middle Eastern country commonly known as a haven for terror groups and a ‘torture ticket’ — a voucher for the infliction of torture,” according to Knox News, which reviewed the contents of the envelope.
Knox News said it did not name the Middle Eastern country at the request of federal authorities.