Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Baltimore Behavioral Health Files For Bankruptcy Protection
Author: Joel R. Glucksman
Date: January 17, 2013
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Filing for Bankruptcy Protection
A mental health rehabilitation and addiction facility in Baltimore has filed for Chapter 11 bankruptcy protection under bankruptcy law as a result of heavy debt to creditors and to the Internal Revenue Service.
Baltimore Behavioral Health listed more than $5.5 million in liabilities during its filing, noting that it also owed roughly $4 million in payroll taxes to the IRS. Failure to turn over payroll taxes withheld from employees’ wages can generate significant personal liability for the controlling principals of a business.
The debtor listed assets of less than $500,000 in its filing. The bankruptcy filing comes after years of both legal and financial issues, ranging from investigations into payroll taxes to questionable treatment practices. Shortfalls in its retirement plan also led to a federal investigation in 2011, especially after the high salaries of top executives were exposed.
The group’s CEO, Terry Brown, said the center will remain open and functional during its bankruptcy proceedings, telling the Baltimore Sun that “there’s a need for us to be here.”
Brown also noted that issues with management have largely contributed to the center’s financial woes. A 2010 investigation and testimony from patients, doctors and employees found that the nonprofit was diagnosing some patient with mental illness, rather than legitimate issues. The misdiagnoses allowed the center to provide unnecessary care which resulted in higher and more steady profits for the company.
As a result, many of the family members that founded the organization and sat on the board of directors saw their voting privileges taken away, and many were removed altogether from management. Although the group is now under new management, it is still suffering from financial disputes, lawsuits brought on my employees and negative stigma. While Brown says bankruptcy will allow the BBH to get back on track and improve its finances, he has not given a timeline of when it expects to emerge from proceedings.
If you face bankruptcy issues in your business or would like to discuss the topic above, please call me, Joel Glucksman.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
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