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Ultimedís demise

Accusations of 'malfeasance' leveled against Detroit HMO

Harley K. Brown
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Published 7/12/2006

While Bill and Angela Calder of Belleville were being hounded by creditors seeking thousands of dollars in unpaid medical bills, executives of the company that was supposed to be providing their health care coverage were living the high life, using a corporate credit card to fund everything from trips to Las Vegas to pricey meals and limo rides, according to court documents.

The documents — including summaries of credit card records — were filed in Ingham County Circuit Court as part of the state's takeover and liquidation of Ultimed HMO, a company controlled by Detroit businessman Harley K. Brown.

The Calders were part of a program established by Wayne County to help provide medical coverage to employees of small companies. Employees, their employers and the county each paid one-third the cost of insurance premiums. Ulticare, another in a web of companies under Brown's control, provided the coverage. Complaints that the company wasn't paying providers were widespread, as were tales of misery when those providers went after patients to collect on the unpaid bills. In 2003 alone, when a blood vessel in Bill Calder's brain burst, sending him to the hospital for emergency surgery, the county received more than 1,500 complaints regarding Ulticare.

Because of Ulticare, the Calders continue to struggle under the crushing weight of $15,000 in medical bills.

But the case involves more than just one company. State officials say Brown oversaw an "elaborate holding company system" that involved at least seven businesses including Detroit's United Community Hospital.

According to filings made on behalf of the state's Office of Financial and Insurance Services (OFIS) by the Michigan Department of Attorney General, it's alleged that the company's directors "siphoned millions of dollars from Ultimed and treated the accounts of this small, financially troubled HMO like their own personal bank account."

At the time, Ultimed — which provided health coverage for Wayne County's indigent population — was receiving about $15 million a year in taxpayer money through its participation in the county's PlusCare program. Ultimed eventually lost its contract with the county.

A summary itemizing "highlights" of expenses charged to the company's American Express credit card account from 2002 through 2004 shows the company funded trips to the Virgin Islands, China, Japan and Las Vegas and also paid for "lavish hotels and meals at top-end restaurants" as well as golf outings at such prestigious clubs as Augusta National. The lustrous Bellagio was a favorite place to stay in Las Vegas; Mario's restaurant was a favorite Detroit dining spot.

"While the directors were draining these funds from Ultimed's accounts, the claims of Ultimed's members and the hospitals, physicians, and other health care professionals who provided these services were going unpaid," it's alleged.

"The suggestion that these expenditures were Ultimed business-related is ludicrous," argue lawyers for the state. "Ultimed was a small HMO having approximately 2,000 members. The company's authorized service area was limited to, and the majority of its members resided in, Wayne, Macomb, and Oakland Counties. Given the nature of Ultimed's business, it is untenable that these extravagant expenditures were necessary for the company's successful operation."

It appears from the filings that Ultimed's corporate credit card was used to help finance Brown's efforts to become a fight promoter and manager as he handled the attempted comeback of famed Detroit boxer Tommy "The Hitman" Hearns.

The state took control of the troubled insurer earlier this year, with the Office of Financial and Insurance Services obtaining a court order to appoint a "rehabilitator" to oversee Ultimed's operations and determine if it was financially stable enough to remain in business.

It wasn't.

With the state claiming Ultimed's assets amount to less than $900,000 while its debts total nearly $14 million, the company was declared insolvent. Ultimed is now in the process of being liquidated.

With most of the assets expected to be eaten up by "administrative costs" associated with the liquidation, it is "unlikely that any money will remain to pay the claims of Ultimed's legitimate, third-party creditors," it's asserted in court documents.

Attempts to contact Brown, president and CEO of Ultimed until the state takeover, through his lawyer, David K. Tillman, were unsuccessful. Tillman declined to answer questions for this article.

Metro Times has been following Ultimed since we first published the results of our investigation of the company and its affiliates more than two years ago ("Ill begotten," March 31, 2004). At that time we revealed that Ultimed and Ulticare — both of which had contracted with Wayne County to provide health coverage under two different programs — were causing financial havoc for patients and providers alike by failing to pay for treatments clients claimed should have been covered.

Court documents now indicate that part of the reason for Ultimed's failure to pay claims was the diversion of money from the HMO to affiliate companies. Records indicate that $7.4 million was transferred from Ultimed to Detroit's United Community Hospital, another entity controlled by Brown.

"While the liquidation staff continues to investigate the goods and services that the hospital allegedly provided to Ultimed in exchange for some of these transfers, nearly $3 million of the total amount was diverted without any justification because Ultimed received no consideration in return," according to court records.

There may be more.

The OFIS is looking "at all options to recover funds" that could be used to pay some of Ultimed's creditors, says department spokeswoman Kathy Fagan.

Also, until now, it's just been lawyers from the Insurance and Banking Division of the attorney general's office working on the case. But in recent weeks the Criminal Division has begun looking into the matter, says Nate Bailey, spokesman for the attorney general.

With the elaborate system Brown created, and the lax bookkeeping standards regulators say he used, there are plenty of places to keep looking.

And, as lawyers for the state informed the court, given that the "abuses" disclosed so far been uncovered in less than six months, it is "possible, if not likely, that additional diversions and misappropriations of Ultimed's assets will be discovered as the liquidation proceeds."

Curt Guyette is Metro Times news editor. Contact him at 313-202-8004 or cguyette@metrotimes.com.

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