Goldner Capital Management, a private equity firm once prominent in the skilled nursing sector, has filed for bankruptcy and placed blame on what it calls a COVID-era lending “scheme.”
In a Chapter 11 petition filed last week in US Bankruptcy Court for the Eastern District of New York, Samuel Goldner said both GCM and several of its subsidiaries have few assets but somewhere between $10 million and $50 million in debts.
GCM is solely owned by the Goldner Family Trust and managed by Samuel Goldner.
The firm has focused on post-acute healthcare, primarily investing in real estate and the operations of skilled nursing facilities. At its peak, Goldner wrote in a statement accompanying his filing, the company had assets in seven states, with facilities that employed more than 6,500 people.
But the New York-based firm has faced increasing regulatory scrutiny, in addition to mounting financial pressure that Goldner traced back to the advent of COVID in 2020 and commensurate increases in operating and labor costs.
“As a result of the increased costs, and federal and state reimbursements falling short, it left entities like the Debtor in a tenuous position,” Goldner wrote. “In Missouri, for example, government reimbursement for GCM facilities was zero.”
Late last year, the Centers for Medicare & Medicaid Services terminated Goldner-owned Viviant Healthcare of Bristol, TN, from the Medicare program. That followed the transfer of two other buildings in Goldner’s Vivant portfolio being transferred to the Ensign Group after a state-initiated receivership.
At the time, Nursinghomedatabase.com reported that the trust had at least a 5% ownership stake in 14 facilities in six states, but many had been hanging on by a thread, according to various news outlets.
Goldner himself is also the target of several lawsuits, including one filed last month by a former partner in a captive insurance company providing coverage for GCM’s nursing homes and others.
‘Trojan horse’ scheme?
In his Oct. 2 bankruptcy filing Goldner said his major losses are due to a more than $20 million in loans his Missouri-based entity secured from Capital Source, which is owned by Capital Foresight. He alleges a Trojan horse-like fraud, in which Foresight’s managers then leased or sub-leased 20 facilities and quickly stopped paying rent — allowing the lending company to seize his assets “and take GCM’s entire enterprise value for itself.”
The operator was paying off the loan first, Goldner wrote, rather than meeting its rent obligations to GCM, which in turn lost a purchase option with Omega for 11 facilities valued at $42.6 million to $60.35 million.
“The concerted effort by Capital Foresight is unmatched and audacious when seen through the lens of good faith and fair dealing,” Goldner wrote.
Calls to a number listed for Capital Foresight in California rang unanswered Tuesday.
Goldner’s statement is complex and reflective of the kinds of deals often seen among related parties and private equity investors. The Biden administration has been highly critical of their involvement in the nursing home sector, although federal data shows prevalence has dropped from 8% to 5% since 2018.
Sam Brooks, director of public policy for The National Consumer Voice for Quality Long-Term, tracks private equity deals in the skilled nursing sector. He said he was not surprised to learn of the bankruptcy filing.
“PE [firms] are not in the nursing home space to provide good care. They are in it to turn a profit in five to seven years,” Brooks said. “They exploit the lack of transparency most for-profit operators do, but just to a greater degree.
“Bankruptcy is probably just their exit strategy,” he added. “In the meantime, thousands of residents have likely suffered in their nursing homes.”
Last summer, Consumer Voice highlighted Goldner’s business practices in response to a request from the Department of Justice, the Department of Health and Human Services and the Federal Trade Commission on examples of “corporate greed” in healthcare.
It cited unpaid vendors in the wake of GCM closures, including in Missouri, where the firm “failed to pay vendors hundreds of thousands of dollars, resulting in numerous lawsuits.”
Last week, Goldner tried to paint those debts as a result of his bad deal with Capital Foresight, arguing the lender’s actions “are causing an avalanche of other defaults to third parties.”
He said the firm and its subsidiaries intend to “rehabilitate their businesses” and “seek all appropriate relief” against Capital Foresight and leaders involved in the subleases.
“The Debtor believes that with the protections of this Court and the Bankruptcy
Code, it will be able to protect its remaining assets, maximize value of the estate for creditors,
and propose a meaningful, feasible and confirmable plan of reorganization,” he wrote.
More legal, financial problems
The bankruptcy, however, is far from Goldner’s only legal challenge. In addition to the firm being sued for unpaid obligations at its skilled nursing facilities, Goldner could be on the hook for substantial compensatory and punitive damages in the insurance company fiasco.
After first being targeted themselves, two officers with Sherbrooke Corporate have filed suit in North Carolina Superior Court, arguing that he operated that business as he has his others.
“Defendant Goldner’s pattern of business is to raise a large amount of capital, purchase assets, leverage vendors’ time and energy, and refuse to pay his bills once due,” they wrote, “Not only has Defendant Goldner refused to pay $5,808,326.38 in premiums owed to Sherbrooke, leading to the company’s insolvency and shutdown, but he has wrongfully seized control of the company’s operations and intentionally failed to administer its remaining open claims.”
They noted a judgment requiring Goldner to pay ShiftMed nearly $500,000 is one of over a dozen others that include “defaults on loans, breaches of various contracts, failures to pay various types of debts, and disputes between Defendant Goldner and limited partner investors.” They said he owes “no less than $50 million to third parties across all known breaches of contract and lawsuits against him.”
The plaintiffs in the insurance captive case want the court to remove Goldner as director and account for any profits he made while in control of the company.
Goldner, in GCM’s bankruptcy filing, said he would have no funds available to pay unsecured creditors after any of the firm’s administrative expenses are paid.
