Universal Health Care overstated assets, submitted misleading statements
WASHINGTON, DC: A high profile Indian American entrepreneur in Florida, who was a luminary of the Republican Party for his fundraising abilities, has had a hard crash: Universal Health Care founder Dr. Akshay Desai filed for bankruptcy last month after it came to light that the company overstated assets and submitted misleading financial statements. Desai also resigned from his positions as finance chairman of the Republican Party of Florida and the State Board of Education.
Universal Health Care executives overstated assets and submitted “misleading financial statements” to the state and a major creditor, according to state documents released last month by the Office of Insurance Regulation, reported Florida Health News.
The Surat-born Desai, a major fundraiser for the party, and was close to presidential contender Mitt Romney, said he resigned from his two political positions “to devote 100 percent of my time to deal with my current business challenges.”
Ironically in an interview six months ago, Desai had claimed: “My company is now doing business in 20 states and this year we are expecting revenue of $1.5 billion.”
The state documents portray Universal, based in St. Petersburg, as a company in deep financial distress and badly mismanaged. Insurance Commissioner Kevin McCarty said that allowing it to stay in operation “poses a serious danger to the financial safety” of the public – particularly the thousands of Medicare and Medicaid patients who are members of its managed-care plans.
The accusations are contained in an affidavit accompanying a letter from McCarty to Chief Financial Officer Jeff Atwater. McCarty said Universal is insolvent and asks Atwater, who heads the Department of Financial Services, to refer the company to DFS’ Division of Rehabilitation and Liquidation.
That division sometimes works out a way to have a distressed company taken over by one that is larger and more stable. But if that can’t be done, its assets could be divided among the creditors. Ultimately a judge will have to decide.
McCarty’s letter was accompanied by an affidavit from Toma L. Wilkerson, director of OIR’s Life & Health Financial Oversight division. In her affidavit, Wilkerson said Universal Health Care’s assets “have been materially overstated” on official filings.
She said Bank United, which gave Universal a credit line of $60 million last year, alleges that the financial statements Universal provided at the time “were incorrect, false, and/or misleading.”
Wilkerson also noted that the company had five chief financial officers in six years, and went without a CFO for 18 months in 2011-12.
Wilkerson’s affidavit also mentioned that two other states in which Universal has Medicare plans, Georgia and Ohio, got the company to stop enrolling near the end of 2012 because of its shaky finances. The affidavit does not say why Florida, where Universal is based and where most of its enrollees are located, was slower to act, says the report.
Attached to the affidavit were around 280 pages of exhibits, including:
*A letter from Ernst & Young last June to Universal’s directors that listed several deficiencies in the company’s process of reporting financials.
*Letters in October, November and December from Bank United to Universal saying that it was in default of their agreement earlier in the year that gave Universal access to $60 million in credit. The letters said Universal’s presentation of its financial condition when it sought the loan amounted to a “misrepresentation” that turned out to be off by $62 million. The bank said it didn’t know whether the massive error was a result of negligence or fraud.
On its last annual report filed with the state in May 2012, the parent company, Universal Health Care Group, listed Desai as President and CEO; Steve Schaefer as treasurer, and Sandip Patel as secretary. The same persons appear as officers of the HMO and insurance subsidiaries.
Another exhibit in the packet is Universal’s PowerPoint presentation in January to MBF Partners. The Miami investment group led by Miguel “Mike” Fernandez had expressed interest in buying Universal, but backed away two days later without comment after seeing the presentation.
Since then, Dr. Kiran Patel of Tampa – who has a track record of turning around failing HMOs – has expressed interest in taking over Universal.
The presentation attached to the OIR affidavit includes a chart showing the company with HMOs in Florida, Texas and Nevada and licensed to offer other managed-care products in 19 states plus D.C.
Universal listed its Medicare Advantage membership as 90,000, Medicaid enrollees as 64,000. About 43 percent of the HMO members in Florida are patients who require extra care – and bring in higher premiums from Medicare – because they have diabetes, lung disease or dementia.
A chart shows the company has brought in more than $1 billion in premiums a year, most of it from Medicare. Yet, according to another chart, the company lost $61 million in 2011 and $3 million last year.
Desai obtained his medical degree from Government Medical College, India. He achieved his Master’s Degree in Administrative Medicine while attending the George Washington University in Washington, D.C. He is certified by the American Boards of Internal Medicine, Geriatrics, and Quality Assurance. He is married to Seema Desai and they have three children, Priyanka, Parth and Crystal.
In the past, Desai has served as Chief of Staff and Chairman of the Board of Trustees at Northside Hospital and Heart Institute as well as St. Petersburg General Hospital in St. Petersburg, Florida. He has served on numerous committees of various Hospitals and Health Plans throughout the Tampa Bay area.
Desai was the Chairman of the Council for Education Policy, Research and Improvement (CEPRI) for the state of Florida and was appointed to this position by Governor Jeb Bush.
He also served as Commissioner and Chairman of Health Committee, White House Commission on Asian American, Pacific Islander advising the President on issues effecting Asian Americans.