The former chairman of Qualis Care, a limited partnership established two years ago to provide healthcare billing and accounts receivable financing services, has been charged by federal prosecutors in a $35 million fraud against creditors.
The five-count criminal indictment filed May 23 by the U.S. attorney in Manhattan charges John Hall in a conspiracy to defraud creditors of Towers Financial Corp., the now-defunct healthcare receivables financing company. Towers was forced into bankruptcy in March 1993 following criminal and civil charges against Towers Chairman Steven Hoffenberg.
Last year, Hall was sued by Towers' creditors for allegedly bilking them out of more than $20 million (July 24, 1995, p. 4). The case is pending.
According to federal prosecutors, Hall entered an agreement with Towers' Chapter 11 trustee to create a new partnership that would build on Towers' former healthcare financing business and enhance the value of creditors' assets. The new partnership, later named Qualis Care, agreed to make a $5 million cash contribution, and the bankruptcy trustee agreed to contribute assets totaling $35 million.
Federal prosecutors allege that Hall and other conspirators created "the false appearance" that the required $5 million capital contribution had been made, and that triggered the $35 million contribution by Towers. Hall and the unnamed co-conspirators merely transferred the $5 million to Qualis and removed the money as soon as they gained control of the partnership's bank accounts, the complaint charges.
Hall allegedly embezzled an additional $4 million to $6 million from Qualis and one of its subsidiaries through wire transfers, the indictment said.
At deadline, Hall's attorney was not available to comment.