Mark Kronfeld, trustee of the SHC Creditor Litigation Trust, filed a 178-page amended complaint Nov. 21 seeking to recover more than $3.4 billion against bankrupt Dallas-based Steward Health Care’s former CEO Ralph de la Torre, MD, and other system “insiders.”
“The misconduct of these insiders and their enablers caused massive disruption to the 31 hospitals Steward operated, adversely affecting 30,000 employees and millions of patients,” the filing said. “While this action will not reopen closed hospitals or provide care to Steward’s patients, it may shine a light on the greed that ‘thrives in the dark’ in the healthcare industry.”
The complaint, obtained by Becker’s, succeeds the initial 68-page lawsuit Steward filed July 15 in bankruptcy court.
Multiple defendants were added in the amended complaint, including Mark Rich, who served as Steward’s CFO and head of business development from 2013 until 2017 and then as president in 2023.
The complaint accused Mr. Rich of helping engineer Steward’s 2016 sale-leaseback deal with Medical Properties Trust, the system’s former landlord, which funded a nearly $800 million dividend payout in October 2016 that allegedly left the company insolvent. The filing alleges Mr. Rich received more than $2.5 million from the payout and collected additional bonus payments that the trustee aims to recover. Mr. Rich also allegedly certified financial statements that showed Steward’s liabilities exceeded its assets.
While the 2016 transaction allegedly secured more than $1 billion for Steward, it left the system with heavy mortgage and lease obligations. Instead of stabilizing the business with the funds, the complaint alleged affiliates of Steward’s then-private equity owner, Cerberus Capital Management, collected around $719 million in cash distributions and system insiders took home millions, leaving Steward dependent on additional sale-leaseback deals to stay solvent.
Dr. de la Torre allegedly received $38.3 million in dividend payments, plus an added bonus, on or around Oct. 3, 2016, and former Steward executive vice president for physician services Michael Callum also allegedly received around $4.2 million.
“The result was a zombie hospital chain that limped along for the next eight years, mostly through other equally dubious sale-leaseback transactions providing cash infusions that gave the surface impression of a thriving business, while executives privately conceded it was insolvent all along,” the amended complaint said.
Overall, the new filing featured 28 causes of action, a broader description than the initial lawsuit.
The original lawsuit’s complaints centered around a $111 million dividend paid in January 2021 when Steward was allegedly insolvent, with claims much of the dividend went to Dr. de la Torre, Mr. Callum and First Bristol Corp. Co-CEO James Karam. It also alleged Dr. de la Torre pushed a $1.1 billion acquisition of five Dallas-based Tenet Healthcare hospitals in Florida, despite an initial $895 million value, due to his “personal desire to build a hospital empire in the Miami area, rather than on any independent financial analysis,” the lawsuit said.
In early October 2024, Dr. de la Torre “amicably separated” from Steward after he sued the U.S. Senate Health, Education, Labor and Pensions Committee Sept. 30. The committee had held him in contempt for skipping a hearing he was subpoenaed to attend. He has also faced criticism for maintaining an expensive lifestyle as Steward was forced to sell or close its hospitals.
“Dr. de la Torre firmly disputes the allegations in the latest complaint,” a spokesperson said in a Dec. 2 statement shared with Becker’s. “These claims misrepresent his actions and character. He will vigorously defend himself against them and looks forward to the opportunity to clear his name.”
Becker’s has reached out to Mr. Rich, Mr. Kronfeld and Steward’s legal representatives for comment and will update this story should more information become available.
