In February, a group of doctors in Clearwater decided to cut a partner from their radiation oncology practice by legally dissolving the partnership, then regrouping under a new name without him.
Three weeks before the partnership formally ended May 31, however, the doctors applied for and received a $222,700 Paycheck Protection Program loan, a federally backed payment designed to assist struggling small businesses during the coronavirus pandemic. Most of the loan went toward forgivable expenses like rent, utilities and payroll, including nearly $50,000 in bonuses for the firm’s staff of 16, according to company emails.
The ousted doctor is now suing his former partners, saying he believes he was unfairly pushed from the practice. His name is also on the application for the loan. And he doesn’t want to be on the hook for remittance.
“This entity was knowingly being dissolved,” said Hiral Shah, a former partner with Pinellas Radiation Oncology Associates, which now operates as Premier Radiation Oncology Associates. "And I don’t want my name associated with something like that, saying, ‘Hey, we want to take a couple hundred thousand dollars, even though we’re dissolving it.’”
In its rush to get relief money out, the U.S. Small Business Administration did not offer comprehensive guidance about who could apply for small business loans. This led to many loans that, in retrospect, look questionable: Loans to profitable public companies, loans to corporate conglomerates, loans that led to fraud charges. (The Times Holding Company, which encompasses the Tampa Bay Times and related publications, received an $8.5 million loan.)
Applicants had to affirm that “current economic uncertainty makes this loan request necessary to support … ongoing operations.”
But Pinellas Radiation Oncology Associates was folding — on paper, at least — for reasons unrelated to COVID-19. Shah said the practice made $3.5 million last year, and had more than $1 million in assets at the time of the loan. As an essential business, it remained open during the pandemic and did not see a significant decline in business, he said, making the loan seem “a little bit sketchy.”
“You don’t have to prove that you need the money,” Shah said. “But we didn’t need the money.”
After more than a half-dozen voicemails and emails to Shah’s former partners and their representatives, one doctor, Michael Gauwitz, responded by email, saying they learned about the loan program in March — a month after filing their notice of dissolution with the state.
“After discussion with our accountant and health care attorney, it appeared that we did qualify to apply for the PPP loan,” he wrote. “Pinellas Radiation followed all the rules in utilizing the loan money properly.”
Gauwitz did not respond to follow-up questions. A lawyer defending him and other doctors in Shaw’s lawsuit declined to comment.
Shah’s suit seeks damages from the other doctors, claiming they impeded his ability to retain patients, since he no longer had access to the firm’s radiology equipment. In a May motion to dismiss, the other partners alleged that Shah “did not market his practice and generated the fewest consults for new business, caused disruption with the staff, paid draws in excess of what he was due in 2019, and disrupted plans to acquire new equipment and build a vault for the new equipment.” Shah disputes the claims.
The practice’s loan application was handled and signed by the practice’s accountant. Shah said he was not involved in the application process, but because he still owned more than a 20 percent stake, his name was required to be on the form. According to emails provided by Shah, the firm used its loan to pay, among other things, $26,221.14 in staff payroll, $43,939.78 in doctor payroll, and $49,994.25 in staff bonuses.
Even if the practice spent its loan money on forgivable expenses — including bonuses — experts are mixed on whether this was the type of business the loan program was meant to benefit.
“If it was my customer, and I was aware of that, I don’t think I would make the loan, personally,” said Bernie Dandridge, an agricultural and small business development specialist at Florida Capital Bank in Jacksonville.
That said, “if the employees were compensated, then it appears that the PPP program successfully accomplished what it was intended to do," Dandridge said. "If they followed the rules, regardless of what their current ownership is, or the current status of the company, they should be able to have it converted into a grant and not worry about having to pay it back.”
As long as the firm can show receipts proving the funds went largely to employees, it should be in the clear, said Tampa bankruptcy attorney Megan Murray.
“If they were used in the proper way and trickled down to what I’ll call the intended recipients, it seems like they would still be entitled to move on,” she said.
Documents filed as part of Shah’s lawsuit outline their plans for doing so. After voting to dissolve and reform without Shah, the other partners would purchase the old firm’s assets, appraised at $113,400, and reopen with largely the same staff and clientele in the same space at the Countryside Cancer Center on McMullen Booth Road. That’s where the practice now operates under its new name.
Aside from the fact that he’s no longer there, Shah said, “the business never really changed.” Patients who went there in May, when the practice got its loan money, would notice little difference today. Now that he’s out of the partnership, he wants that much to be clear.
“I don’t want to have my name associated with a loan, and my interests associated with a loan, that I had objections to, and I personally don’t think is reasonable," he said. “I don’t think that’s what the PPP loan program was for.”
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