Bernstein-Burkley, P.C. Files Suits to Recover Funds for the Creditors of Brownsville General Hospital
PITTSBURGH, Sept. 5, 2007: Bernstein-Burkley, P.C. filed suits yesterday in Federal Bankruptcy Court in Pittsburgh to recover funds to distribute to creditors of former Brownsville General Hospital in Fayette County.
The firm, which represents attorney Robert S. Bernstein, the bankruptcy plan administrator for Brownsville General Hospital, filed several lawsuits yesterday to recover preferential transfers received by “favored” creditors of the nonprofit hospital shortly before it filed bankruptcy on January 24, 2006.
“We are trying to secure an equitable distribution of the hospital’s assets to all of the hospital’s creditors — not just some of them,” said Bernstein, an attorney and managing partner of Bernstein-Burkley, P.C. “Some creditors were treated better than others just before the hospital closed. This doesn’t mean those preferred creditors did anything wrong. It just means they got payments that should come back into the pot to be fairly distributed,” he said. The suits seek the total recovery of $979,915.70 from 29 creditors.
Among the hospital’s priority debts are payments due to former employees totaling almost $1 million. Bernstein has made partial distributions to those employees who didn’t get their last paycheck when the hospital closed abruptly just before the bankruptcy filing. “We are working through the many claims that have been filed,” Bernstein explained. “Some of the claims are unclear and confusing and we are contacting claimants to try to determine which parts of the claims can be paid now and which will have to await recovery of other assets.”
Bernstein also filed suit two weeks ago in Federal Bankruptcy Court against Brownsville Property Corporation and Brownsville Health Services Corporation, two related parties, contending that the 2005 transfer of the hospital property to one of them, the newly created nonprofit Brownsville Property Corp., was fraudulent as to creditors. “Basically, during the conversion of the hospital’s ownership from a non-profit to a for-profit, all the debt stayed with the hospital, but the valuable real estate was transferred to the new entity,” Bernstein said. “We believe the transfer of the hospital property to a third party was a fraudulent transfer under the provisions of the U.S. Bankruptcy Code and Pennsylvania law. In essence, it appears the hospital had sufficient assets to pay its creditors prior to the conversion, but not after. Creditors of the estate, including former employees, should not be left holding that empty bag,” Bernstein said.
There are few sources of payment for creditors, including employees, according to Bernstein. “In addition to the fraudulent transfer of the real property, we have another suit pending against Brownsville Health Services Corporation and West Point Health Corporation, seeking to recover loans of more than $500,000 and $1.2 million, respectively, owed to the hospital at the time of the for-profit conversion. We have an office condominium on the hospital grounds that we are in the process of selling. We are also trying to recover some funds that we believe were overpayments to the former CEO, and we are still trying to determine whether any of the patient accounts receivable are collectible. Ultimately, whether employees and creditors get paid will depend on how successful we are in recovering the money from Brownsville Property Corporation, Brownsville Health Services Corporation and West Point Health Corporation. We think we have solid claims, but this is not going to be easy, or quick.”