Universal Health Care trustee trying to recoup payouts

Published Dec. 16, 2014

Before Universal Health Care declared bankruptcy last year, it spent more than $1 million on personal expenses of founder Dr. Akshay Desai including charitable donations and political contributions.

Now recipients of that largesse are "potential targets" of a bankruptcy trustee seeking to recoup at least some of the money, according to a recent filing in federal bankruptcy court in Tampa.

Bankruptcy trustee Soneet Kapila lists 150 individuals and organizations that might have benefitted financially before Universal's collapse. They range from former Florida House Speaker Will Weatherford to the Salvation Army to South Carolina Gov. Nikki Haley.

There is no suggestion that recipients of Desai's corporate-funded generosity did anything wrong. However, they could have to turn over the money to help pay claims by banks and other creditors of St. Petersburg-based Universal and its sister company, American Managed Care.

In his filing, Kapila said his investigation had been "hampered and slowed'' by indications that Desai and other top executives would invoke the Fifth Amendment against self-incrimination if questioned about their expenditures.

Under Desai, Universal had grown into a large Medicare insurer, at its peak a $1.5 billion business with more than 140,000 members in 23 states.

Behind the scenes, however, the company was in turmoil.

Its collapse in early 2013 came amid regulatory accusations of fraud, embezzlement and diversion of funds. A federal grand jury has been investigating Desai and other top managers though no one has been criminally charged.

Universal's implosion cost nearly 1,000 employees in St. Petersburg their jobs and left thousands of Medicare enrollees around the country scrambling to find new coverage. FBI agents raided Universal's downtown St. Petersburg headquarters, seizing computers and documents as part of an ongoing investigation.

In documents filed Nov. 30 as part of American Managed Care's liquidation plan, Kapila said the company paid "more than $1 million of personal expenses" for Desai. That included $64,515 for his personal estate planning and a "large and unjustified'' amount in bonuses and perks to Desai and his management team.

Desai's political and charitable contributions came to more than $1.3 million, with $356,277 of that paid out in the year before the bankruptcy filing. Much was paid via American Express.

An attached list of potential targets reflects Desai's one-time prominence in civic and political circles, including stints as a member of the state board of education and finance committee chair of the Republican Party of Florida.

Among those on the recovery list are the Republican Governors Association and several Republican politicians including Weatherford, state Sen. Jeff Brandes and former St. Petersburg Mayor Bill Foster.

Brandes, who represents parts of Pinellas and Hillsborough counties, received a total of $1,500 from Desai in more than one campaign, according to his campaign treasurer, Nancy Watkins. However, money remaining from those campaigns has been turned over to charity, she said.

Foster said "if I got anything, it would have been in 2009,'' referring to his first run for mayor.

Weatherford did not return a call for comment.

Outside Florida, names on the list include Georgia Insurance Commissioner Ralph Hudgens, whose office regulated Universal's operations there.

Also on the list are universities, law firms and non-profit organizations including the Red Cross, Metropolitan Ministries, the Dali Museum and the Poynter Institute.

The St. Petersburg-based institute, which owns the Tampa Bay Times, received a $5,000 donation from Desai in 2012, the institute's IRS filing shows.

A spokesperson for the Dali Museum, also in St. Petersburg, said the museum had no record of a donation from Desai or any of his companies.

Kapila, the bankruptcy trustee, said the appearance of an organization or individual on the list does not mean that either Universal or American Managed Care has a claim against it. But Kapila and Roberta Colton, counsel for the trustee, said in an interview Tuesday that they will continue to investigate everyone on the list as they move to confirm the company's liquidation plan. It's typically a 50-day process to get judicial approval.

"Once the plan is confirmed, all that's really left is litigation," Colton said.

Kapila noted that some companies and people on the list have already settled, the two biggest being BankUnited, which said it was fooled by forged Universal financial statements, and the state receiver for Universal's assets. Wake Forest University, which Desai's two oldest children attended, has returned a $25,000 contribution that he made while serving on the parents council of the school.

It's not unusual for trustees in complex bankruptcy cases to file "clawback" suits against parties who might have gained financially before a bankruptcy filing.

As trustee in the bankruptcy of boy band promoter Lou Pearlman, Kapila filed nearly 700 clawback cases seeking to recover some of the $300 million that investors had poured into Pearlman's investments. Eventually, Kapila withdrew nearly a third of the suits after some victims argued that they had never profited from Pearlman's fraud but, in fact, had lost much or all of their principal investment.