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Peninsula trustee alledges fraud lead to closure

The trustee appointed to oversee Peninsula Hospital's bankruptcy is suing the for-profit health care company that managed the institution in its final days.
TimesLedger Newspapers

The trustee appointed to oversee the bankruptcy and eventual closure of Peninsula Hospital has accused a blacklisted health care executive of secretly operating the failed institution and running it into the ground for his personal gain.

Lori Lapin Jones filed a lawsuit in Brooklyn federal court late last month accusing Steven Zakheim of pulling the strings for Revival Home Health Care — the company that swooped down in a failed effort to save the Far Rockaway hospital in December 2011 — and funneling business to other companies he owned while bleeding the institution dry.

Zakheim died earlier this month. The lawsuit identifies a dozen other individuals and corporate affiliates with the executive as defendants.

In 2005, the state Department of Health refused to grant Zakheim a certificate he needed to run a medical company, citing a “cloud of Medicare or Medicaid fraud,” so when his wife Faye Zakheim purchased Revival in 2005, the two had to sign an affidavit stating he would have no involvement in the company.

Meanwhile, Peninsula found itself in a precarious financial position.

In 2011, it filed for Chapter 11 bankruptcy protection with about $34 million in assets and more than $70 million in liabilities. As part of the court-ordered agreement, Revival would lay out an $8 million loan to help keep the struggling institution afloat and appointed one of its executives, Todd Miller, as the hospital’s chief restructuring officer.

Jones, a Great Neck, L.I., bankruptcy attorney who was appointed trustee in March 2012, however, claimed that it was Steven Zakheim all along running the hospital.

“Steven Zakheim controlled the operations of Revival HHC and was a decision-maker at all times from 2005,” the lawsuit claimed.

In between the time Revival took over and Jones was appointed trustee, she claims, the private company directed at least $1.3 million in reimbursements to the “Zakheim enterprise,” expediting payments to these companies while others had to wait.

Jones said Zakheim saw Peninsula’s buying power as a way to get more aggressive pricing for his other companies.

“The debtors would serve as potential sources of revenue and would also serve as lucrative sources of business and profit for the other enterprise business lines,” she wrote.

While Revival and Jones battled in court over control of Peninsula, the Health Department essentially sealed the hospital’s fate in February 2012 when it closed the lab, citing untenable conditions.

The hospital closed its doors in April 2012.

Jones is suing for “damages in an amount to be determined at trial, but believed to be at least several million dollars, plus punitive damages.”

Reach reporter Rich Bockmann by e-mail at rbockmann@cnglocal.com or by phone at 718-260-4574.

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