Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Support Our Annual Fund Drive! We only ask one time of year, but when we do, we mean it. Without your support we can’t continue to bring you the very best material, day-in and day-out. CounterPunch is one of the last common spaces on the Internet. Help make sure it stays that way.
FacebookTwitterGoogle+RedditEmail

She Wants to Talk About Dirty Legal Dealings? Remember the Nursing Home Scam?

by ALEXANDER COCKBURN

In their last debate in South Carolina Hillary Clinton questioned Barack Obama about his ties to a real estate developer As the Washington Post reports it earlier this week,

In 1993, he [Obama] became an associate lawyer with a small Chicago firm, Davis, Miner, Barnhill and Galland. It was during this time that he first became involved with a real estate developer named Antoin “Tony” Rezko, who was subsequently indicted on charges of fraud, extortion and money laundering and will go on trial on Feb. 25. According to the Chicago Sun-Times, Obama received $168,000 in campaign contributions from Rezko and his associates after 1995. Obama has denied doing any legal work directly for Rezko or his companies. During Monday night’s debate, he said that he had done “about five hours’ worth of work” on a joint real estate development project involving Rezko and a Chicago church group. investigations by Chicago newspapers have not produced evidence that he represented Rezko in a slum landlord business. What has been demonstrated so far is that he did some due diligence legal work for a joint venture between Rezko and a Chicago nonprofit. Two Pinocchios for Clinton. (*ONE PINOCCHIO: Some shading of the facts. TWO PINOCCHIOS: Significant omissions or exaggerations.)

If Hillary Clinton wants to start excavating legal work and slimy clients, she will soon be buried in the vast mountain of manure in the archives of her old Arkansas firm, Rose Law, a very powerful institution in the state of Arkansas, where corporate and political axes of power met, to the great profit of the firm’s partners, including Hillary Clinton.

Here’s just one case, which I wrote about in The Nation in 1994. where Mrs Clinton and her firm were central to a vast and methodical scheme of profiteering-gouging tax- payers and, above all, the defenseless residents of nursing homes in four states, including Arkansas.

JoAnn Wypijewski and I reconstructed the story here with the help of Roy Drew, a private stock analyst working in Little Rock, who unearthed the scandal.

Nursing home ripoffs and the Rose Law Firm led us not only to Hillary Clinton but to other familiar White House names, most prominently associate White House counsel William Kennedy; also to the moneyma- chine set up by Bill Clinton when he was still ,Governor of Arkansas-the Arkansas Develop- ment Finance Authority, whose former chief is now ensconced in the US. Agriculture Depart- ment, having informed us often enough in 1992 that he was a man totally independent of the Governor. Bill sat in the Governor’s mansion in Little Rock, ultimate arbiter of the pools of money that could be dispensed’by ADFA in the form of long-term loans financed through the sale of tax-exempt bonds. A few blocks away sat his wife, in the law firm setting up deals, that called on that money. The world of Bill and Hill , disclosed by.the saga of Bever- ly Enterprises, one of the largest owners bf nursing homes in America and until January of this year part of the vast invest- ment portfolio of Arkansas’s Stephens Inc., offers us impor- tant truths about the present incumbents of the White House. These days, questioned about the Whitewater/Madison Guar- anty imbroglio, the First Couple seek to give the impression of a pair of babes, venturing a modest investment and left with nothing to show but red ink.

This is nonsense. Far from being hayseeds in a Southern bacliwater, Bill and Hillary were players in the politico-financial fast lane. Sometimes the advocates of single-payer health in- surahce wonder why self-styled populists like Bill and Hillary opted for “managed care,” a honeypot for insurance compa- nies and law firms. The story of Beverly Enterprises opens a window to understanding.

In 1989, with debts of $850 million, Beverly Enterprises was facing bankruptcy. Its strategy for survival was to sell off some of its 845 nursing homes throughout the country as quickly as possible for as much as possible. Forty-five of those homes were in Iowa, and in August of 1989 Beverly sold them to Ventana Investments, a company owned by a man named Bruce Whitehead, an entrepreneur/hustler from Amarillo, Texas. But Whitehead didn’t make a straight deal. He also set up a charity called Mercy Health Initiatives, whose nonprofit status he used to wheedle $86 million in tax-exempt bonds out of the Iowa Finance Authority. When Whitehead approached the authority for the money, he insinuated that if the state did not comply he would pulI out of the deal and the nursing homes would most likely close, tossing some 3,000 old folks out of their beds. The state came through with the money. Whitehead said he needed to buy the homes, and Mercy Health threw in $6 million in promissory notes for fees to Whitehead and the underwriters, bringing the tab for the deal to $92 mil- lion. This transaction gave Beverly an immediate cash infusion of $10 million. It landed Whitehead a profit of $6.5 million, personal ownership of four homes worth $1.8 million and a $5 million contract for a construction company he owned. As an Iowa District Court later determined, Whitehead had grossly inflated the value of the homes; which were actually worth $47 million. And while he and Beverly skipped off with their profits (Whitehead no longer has any tie to the homes), Mercy Health was burdened with debt that added as much as $6 million a year to the cost of health care at the homes. This in turn was shouldered by the old people, who saw their daily charges go up by as much as 14 percent. Mercy Health was itself less a charity than a shell, an entity that Iowa Judge Gene Needles said “served no legitimate pur- pose and was used primarily to obtain tax-exempt financing, shield the parties using the facilities from liability and obliga- tions as owners and evade the payment of property taxes.” He also called Beverly and Whitehead “unconscionable” profiteers.

Judge Needles made that statement on September 13,1991, in a ruling favoring Iowa state tax assessors who had cha- lenged Mercy Health’s tax-exempt status. He was upheld in that opinion by the Iowa Supreme ,Court on May 19, 1993, two months before Vince Foster died and around the time Hillary Clinton was blasting sectors of the health care industry for their “unconscionable profiteering.”

Foster and H.R.C. are not incidental to the story. Rose Law was up to its neck in the Iowa deal, and was contriving exact- ly the same outrageous piracy in Little Rock itself in 1989. In fact, Rose Law was responsible for putting together Beverly four-state bid to dump nursing homes, each case involving Whitehead and all similarly designed to get fast cash to the ailing company. If all four deals had gone through, the total transaction would have been worth $300 million, according to internal company documents disclosed in the discovery process for the court action in Iowa. Perhaps $3 million of that would have gone to Rose, with a sizable portion distrib- uted among its partners: Foster, Kennedy, Web Hubbell and Hillary Clin- ton among them.

The company documents provide a projected schedule of how the deals were to have happened: in July of 1989, Arkan- sas; in August, Iowa; in September, Nebraska; and in October, South Dakota. Arkansas was to have been the first because, as Drew reasons, “that’s where the political juice was.” But all of Rose Law’s manipulations in this arena were a secret in Arkansas in 1989. An election year was coming up, and newspapers there had long been in the habit of swiping at Hillary and her Rose colleagues for profiting from their association with the Governor. Sheffield Nelson, already an- nounced as an opponent of Clinton for the governorship, would have had rich sport pointing out that the Governor’s wife and friends stood to gain handsomely from brokering an $82 million ADFA bond deal over Beverly’s nursing homes. The Arkansas deal alone represented perhaps $SOO,OOO to Rose Law. So on paper in Arkansas, Beverly was not represented by Rose Law but by Joe Giroir, formerly a managing partner of the firm but at the time in his own practice. In all the papers for the ADFA deal, Rose Law is never mentioned as Beverly’s attorney, even thoughthe documents discovered through legal action in Iowa clearly show Rose Law, and William Kennedy specifically, as handling both deals.

The deal in Arkansas was structured just as it was in Iowa: Beverly was to sell its nursing homes via Ventana to Pride House Health Care, a charity created by Whitehead with no employees, no working assets and an appointed board of three people. To finance the deal, Whitehead went to ADFA for the $82 million in tax-exempt bonds. ADFA had been set up by Clinton in 1985 ostensibly to stimulate development and in- vestment in Arkansas. A prototypical piece of “remaking gov- ernment,” it was a private corporation that operated within the state structure. Clinton appointed the board, which served at his pleasure-but without accountability to the taxpayers and without oversight by the Federal Reserve, F.D.I.C. or any out- side government authority. On the ADFA board in 1989 was James Stobaugh, who was then the president of Worthen Bank in Pine Bluff, Arkansas. Also on the board was Bobby Ste- phens, no relation to the scion of Stephens Inc., Jackson Ste- phens, but nicely positioned as an executive vice president of Beverly Enterprises. Neither Stobaugh nor Stephens recused himself from the vote to issue the bonds to Pride House, a vote that was unanimous. As Drew says, “The whole thing had to be wired for a guy from Amarillo to walk into Arkansas and get them to vote unanimously on an $82 million bond deal.” As it happened, the Arkansas deal that should have gone so smoothly hit the skids. First, there was a shift in under- writers, throwing off the deal’s timing and extending its proc- ess. Second, Drew discovered Beverly’s prospectus to ADFA and started asking questions about why a middleman who had nothing to recommend him and who had set up ‘a company that was clearly a shell should be the beneficiary of state lar- gesse. Drew didn’t know at the time that Rose was represent- ing Beverly, but he knew that the conflicts of interest in the Stephens-Beverly-ADFA nexus were thick, and the Arkansas Democrat-Gazette started pounding away at the story.

Through it all, Bill Clinton said nothing. It was not until the state’s attorney general accused Beverly of offering him a $100,000 bribe that the deal fell through. In December of 1989, Clinton was forced to nix the ADFA loan and made a statement about how Beverly et al. “tried to milk us like an old, full cow.”

Of course, back in ’89 when Clinton was using his home- spun rhetoric io present himself as the state’s guardian against corporate exploitation, he never let on that Rose Law was the forward guard for those exploiters. Since then, he and HiUary and anyone else who’s asked from the firm have stonewalled questions about the case. Drew makes an apt observation: “The Rose Law Firm put this thing together, and if they were proud of what they were doing, why did they hide behind Joe Giroir?”

Just how much money Rose Law and its partners like Hil- lary stood to gain from these various deals affecting the health care of thousands of old people is a matter of speculation; as noted above, it might have been $3 million on the $300 mil- lion deal as originally envisaged. Drew says, “If you need money and I’m a money finder and I’m working for you, I’m going to take a point-that’s 1 percent-at !east, for finding you the money. Rose worked in Arkansas for a long, long time on these deals. They had to work on all four simultaneously, learn the law in all the states and figure out their strategies for each; and they weren’t working for free. For some point of comparison, think of this. When Rose was working for the F.D.I.C. against Frost & Co., which had put together inaccurate audits on Madison Guaranty, they obtained a settlement of $1 million for the government. Their fee on that was $400,OOO. My understanding is that they separate these fees among the partners. If Hillary Clinton made a buck-if she made even one dollar on those nursing home deals-she shouldn’t be on the stump talking about unconscionable profits.”

 

 

 

 

Alexander Cockburn’s Guillotined! and A Colossal Wreck are available from CounterPunch.

More articles by:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine

minimag-edit

September 28, 2016
Eric Draitser
Stop Trump! Stop Clinton!! Stop the Madness (and Let Me Get Off)!
Ted Rall
The Thrilla at Hofstra: How Trump Won the Debate
Patrick Cockburn
Cracks in the Kingdom: Saudi Arabia Rocked by Financial Strains
Lowell Flanders
Donald Trump, Islamophobia and Immigrants
Shane Burley
Defining the Alt Right and the New American Fascism
Jan Oberg
Ukraine as the Border of NATO Expansion
Ramzy Baroud
Ban Ki-Moon’s Legacy in Palestine: Failure in Words and Deeds
David Swanson
How We Could End the Permanent War State
Sam Husseini
Debate Night’s Biggest Lie Was Told by Lester Holt
Laura Carlsen
Ayotzinapa’s Message to the World: Organize!
Binoy Kampmark
The Triumph of Momentum: Re-Electing Jeremy Corbyn
David Macaray
When the Saints Go Marching In
Seth Oelbaum
All Black Lives Will Never Matter for Clinton and Trump
Adam Parsons
Standing in Solidarity for a Humanity Without Borders
Cesar Chelala
The Trump Bubble
September 27, 2016
Louisa Willcox
The Tribal Fight for Nature: From the Grizzly to the Black Snake of the Dakota Pipeline
Paul Street
The Roots are in the System: Charlotte and Beyond
Jeffrey St. Clair
Idiot Winds at Hofstra: Notes on the Not-So-Great Debate
Mark Harris
Clinton, Trump, and the Death of Idealism
Mike Whitney
Putin Ups the Ante: Ceasefire Sabotage Triggers Major Offensive in Aleppo
Anthony DiMaggio
The Debates as Democratic Façade: Voter “Rationality” in American Elections
Binoy Kampmark
Punishing the Punished: the Torments of Chelsea Manning
Paul Buhle
Why “Snowden” is Important (or How Kafka Foresaw the Juggernaut State)
Jack Rasmus
Hillary’s Ghosts
Brian Cloughley
Billions Down the Afghan Drain
Lawrence Davidson
True Believers and the U.S. Election
Matt Peppe
Taking a Knee: Resisting Enforced Patriotism
James McEnteer
Eugene, Oregon and the Rising Cost of Cool
Norman Pollack
The Great Debate: Proto-Fascism vs. the Real Thing
Michael Winship
The Tracks of John Boehner’s Tears
John Steppling
Fear Level Trump
Lawrence Wittner
Where Is That Wasteful Government Spending?
James Russell
Beyond Debate: Interview Styles of the Rich and Famous
September 26, 2016
Diana Johnstone
The Hillary Clinton Presidency has Already Begun as Lame Ducks Promote Her War
Gary Leupp
Hillary Clinton’s Campaign Against Russia
Dave Lindorff
Parking While Black: When Police Shoot as First Resort
Robert Crawford
The Political Rhetoric of Perpetual War
Howard Lisnoff
The Case of One Homeless Person
Michael Howard
The New York Times Endorses Hillary, Scorns the World
Russell Mokhiber
Wells Fargo and the Library of Congress’ National Book Festival
Chad Nelson
The Crime of Going Vegan: the Latest Attack on Angela Davis
Colin Todhunter
A System of Food Production for Human Need, Not Corporate Greed
Brian Cloughley
The United States Wants to Put Russia in a Corner
Guillermo R. Gil
The Clevenger Effect: Exposing Racism in Pro Sports
David Swanson
Turn the Pentagon into a Hospital
FacebookTwitterGoogle+RedditEmail