Bankruptcy battle gets ugly

A suit filed by unsecured creditors to collect money they lost when the Bayonne Medical Center went bankrupt two years ago has raised allegations of possible wrong doing, including alleged forgery and alleged unmet promises to pay millions of dollars.
The suit, which was filed by Allen J. Wilen in his capacity as liquidating trustee and estate representative for the bankrupt estate of the former Bayonne Medical Center, targets Omni Healthcare – which is constructing a new senior care facility adjacent to the existing hospital – and other entities as part of a complicated legal action in which more than 70 unpaid companies are seeking to collect as much as $50 million in bills left unpaid as a result of the bankruptcy and eventual sale of the medical center.
IJKG of Iselin purchased the hospital in February 2008 to run as a private hospital, but is not involved in the legal dispute.
Part of the legal action has the former owners of BMC suing Omni for $5 million allegedly promised but not paid. The money, according to the suit, was supposed to have been paid in five $1 million installments beginning in June 2006.
But according to court records, the first $1 million installment was listed as “a loan,” not a payment, on hospital records, and was deducted from the final sale price of the $2 million Omni eventually paid.
Connell Foley, the lawyer for the former owners of the debtor hospital, 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 pledge was not binding and the company paid the hospital just over $2 million, of which nearly all went to fees concerning the sale of the former telephone building.
Making the matter even more confusing, the suit contends 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.
Foley is seeking to get the bankruptcy court to restore the originally agreed upon $6 million sale price, so that some of the old debts to unsecured creditors might be paid.
Many of these creditors were paid only a small portion of their bills prior to the bankruptcy in April 2007.
Evans, Brockman and others on the original hospital finance board also face suits from unpaid vendors who are seeking to collect on a $10 million hospital insurance policy.
Bankruptcy Court Judge Morris Stern, who oversaw the bankruptcy and resale of the Bayonne Medical Center, will have to rule on the Omni motion.
Because the matter is in litigation, Omni representatives have declined comment.
The matter may also be under investigation by federal authorities since several prominent officials involved with the bankruptcy confirmed that agents of the Federal Bureau of Investigation have taken records concerning previous financial dealings at Bayonne Medical Center when operated under Evans.
“They came in here earlier in the year and took a lot of records,” said one official connected with the hospital.