Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Universal Care Group Seeks Bankruptcy Protection Amid State Takeover
Author: Joel R. Glucksman
Date: March 7, 2013
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An investigation into Florida-based Universal Health Care Inc., has prompted the insurer to file for Chapter 11 bankruptcy protection while regulators attempt to take over the company.
The Medicare insurer operated by Dr. A.K. Desai recently underwent a state investigation, in which regulators report that “a pattern of mismanagement” and unlawful financial management has left the company “insolvent or about to become insolvent,” according to the Tampa Bay Times. In addition, the report noted that Universal grossly overstated its assets. Further, a high turnover rate among the Chief Financial Officer position may have also been a factor in the company’s volatile position.
Further, Universal was at risk of defaulting on its $60 million credit line with BankUnited three times since October, and financial statements reveal that the company was insolvent by as much as $12.6 million as of Dec. 31, 2012, the news source reports. The bank noted that many of the statements provided by the company were inaccurate or misleading, the newspaper notes.
The findings of the investigation resulted in state seizure of the insurer and prompted it to seek protection under bankruptcy law. However, company CEO Desai said in an emailed statement to the Tampa Bay Business Journal that the two courses of action are unrelated. A high rate of defection as a result of poor quality may be a contributing factor to the company’s bankruptcy, according to the Times.
Although the company plans to reorganize under Chapter 11, analysts argue that its ability to do so will rely on the final results of the state investigation. The company was founded in 2002, and grew to cover residents in 20 states across the country. However, it has already signed agreements to merge some of its companies in Florida, Texas, and Nevada to begin its cost-cutting measures.
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