A new round of litigation has broken out between the management of Integrated Healthcare Holdings, Santa Ana, Calif., and physicians who control more than 40% of the companys shares.
Just a year ago, Integrated and the Orange County (Calif.) Physicians Investment Network, or OCPIN, settled two lawsuits by agreeing to add a seventh board member. That broke a stalemate between management and the OCPIN, each of which controls three board seats, and allowed the company to proceed with a $90 million refinancing.
Last month, however, the OCPIN filed two lawsuits in Orange County Superior Court against Integrated, one of which names Bruce Mogel, the companys president and chief executive officer, as a defendant. Again, Integrateds debt-management plans are involved in the row.
The physicians network alleges in a lawsuit filed July 8 that Integrated has diluted the physician investors share in the company by selling new shares to a large, controversial shareholder, Kali Chaudhuri, M.D. The original stock purchase agreement between Integrated and OCPIN included the right to maintain their ownership percentage if the company sought new investment, according to the lawsuit.
That clause was left outinadvertently or fraudulently, OCPIN allegeswhen a second printed version of the agreement was executed, according to the lawsuit. A second lawsuit, filed July 15, alleges fraud, breach of fiduciary duty and other misconduct by Mogel. The OCPIN alleges in the lawsuit that Mogel had a gun planted in the car of a physician critic who later won $100,000 in legal fees.
Integrated denies the allegations in both lawsuits. The company says that the OCPIN did not assert its right to maintain its ownership percentage in several securities filings made over the past three years. Integrated described the July 15 lawsuit as the latest in a series of desperate maneuvers by the head of the OCPIN, physician Anil Shah, M.D.
In his own written statement, Mogel says that the allegations in the July 15 lawsuit are outrageous and untrue, but as the case is pending, he can say no more. Mogel adds that Integrateds management has made major progress in putting its four hospitals on solid financial ground.
Late last month, Integrated said that it reached an agreement for up to $10.7 million in new investment from Chaudhuri. Integrated says that it plans to use the proceeds to pay down debt.What do you think? Write us with your comments at [email protected]. Please include your name, title and hometown.