Bloomberg News

Hoboken Hospital Lawyer Quit Rather Than Participate in Fraud

September 14, 2011

Sept. 14 (Bloomberg) -- The former attorney for Hudson Healthcare Inc., the nonprofit operator of Hoboken University Medical Center in New Jersey, said he quit rather than take part in an attempted fraud by the Hoboken Municipal Hospital Authority.

“I will not participate in the fraud I believe your team of lawyers is attempting to perpetuate in the bankruptcy court,” Donald Scarinci said to Hudson Healthcare attorney Joseph DiPasquale, in an e-mail filed with court papers on Sept. 12. “As everyone knows, I resigned from HHI precisely because I could not and would not be a part of any of this.”

Scarinci, a partner at Scarinci & Hollenbeck, was general counsel for Hudson Healthcare until mid-July, when he resigned. Hudson Healthcare filed for Chapter 11 protection Aug. 1 in Newark, New Jersey, while the hospital is being sold.

“I was a first hand witness to a pattern of conduct by HMHA members to intimidate, threaten, control, abuse, and attempt to force” the chief executive officer and other members of the Hudson Healthcare board to “take actions adverse to its charter and otherwise violate the laws of the State of New Jersey,” Scarinci said in court papers.

The hospital itself is owned by Hudson Healthcare, an authority established by the city of Hoboken when it took over the facility in early 2007. Hudson Healthcare is the operator of the hospital.

City Guarantee

The hospital’s bonds are guaranteed by the city. A 2007 bond issue of $51.6 million was refinanced a year later. Since the money raised was invested in U.S. government securities, which repay the debt, the bankruptcy doesn’t have any effect on bondholders. A 2009 bond issue of $9.72 million was redeemed by the hospital this month.

The hospital lost $39 million from 2008 to 2010 on revenue of $375 million, a court filing said. Revenue in 2010 was $132 million. The Chapter 11 case is designed to allow operations at the hospital to continue until the sale can be completed. At that time, Hudson Healthcare’s contract to operate the hospital will terminate.

The case is Hudson Healthcare Inc., 11-33014, U.S. Bankruptcy Court, District of New Jersey (Newark).

--With assistance from Martin Braun and Bill Rochelle in New York. Editors: John Pickering, Andrew Dunn

To contact the reporter on this story: Dawn McCarty in Wilmington at dmccarty@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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