Stockholders of home-infusion provider Coram Healthcare Corp., Denver, have accused Coram's chief executive officer and a former board member of conspiring to benefit creditors over stockholders in the company's bankruptcy reorganization.
The stockholders' equity committee for the bankruptcy proceedings asked the bankruptcy court last week for permission to sue Daniel Crowley, Coram's chairman, CEO and president, and former director Stephen Feinberg, principal of New York-based Cerberus Partners. Cerberus is Coram's largest debtholder.
The equity committee alleges that Feinberg orchestrated a consulting relationship between Sacramento, Calif.-based Dynamic Healthcare Solutions, a consulting firm Crowley owns, and Coram. The relationship has "tainted the reorganization process," according to a written statement by the committee's attorney. U.S. Bankruptcy Court Judge Mary Walrath also cited the consulting relationship when she rejected Coram's first reorganization plan in December.
The consulting relationship was well-known within Coram and in the investor community, said Kurt Davis, a Coram vice president and spokesman. "This feels to us like an attempt to shake down the parties involved, to get some equity, whether it's there or not," Davis said. Coram's independent board members also issued a statement calling the equity panel's charges "demonstrably false."
The equity committee accused Crowley and Feinberg of misallocating cash to debtholders and of pursuing business unit sales at below-market values to produce that cash.
Davis acknowledged that debtors and vendors were paid shortly before Coram declared bankruptcy on Aug. 8, 2000, and that most companies facing bankruptcy try to hoard cash. But he said the payments were necessary to give Coram credibility heading into the bankruptcy.