More Complications
The SEC files suit against the lender for the owner of several OC hospitals, while another lawsuit reveals a strange hospital-porn connection
The bizarre saga that for years has engulfed a local hospital company and a whistleblower who claims he was framed on gun charges is now getting even stranger. The weirdness began in 2005, when Integrated Healthcare Holdings Inc. (IHHI), which owns several Orange County hospitals, sued one of its own doctors, Dr. Michael Fitzgibbons, for slander and interfering with company business. FitzgibbonsN crime? Sending an e-mail to colleagues speculating IHHI might default on a $50 million loan provided by Tustin-based Medical Capital Holdings Inc. (MCH).
The following year, just days after a judge dismissed that lawsuit, police arrested Fitzgibbons for allegedly waving a gun during a road-rage incident after confiscating the alleged weapon and a pair of black gloves from his car (see “Doctored Evidence?” July 31, 2008). Fitzgibbons claimed he was set up by IHHINs then-CEO Bruce Mogel. According to a lawsuit a group of doctors later filed against IHHI and Mogel, the CEO bragged that “nobody knows how powerful I am” as he watched Fitzgibbons being arrested.
The latest development in this strange tale: On June 16, the U.S. Securities and Exchange Commission (SEC) filed suit against IHHINs lender, MCH, charging it with defrauding investors by illegally collecting $18.5 million in administrative fees. According to the SEC, MCH promised investors that none of the $76.9 million it raised would be diverted to such fees. The suit doesnNt explain what MCH did with those fees but also contends that MCH lied to investors about the solvency of its loans, several of which had either been defaulted or were in late-payment mode. Then, on July 20, U.S. District Judge David O. Carter froze MCHNs assets pending an Aug. 3 hearing, at which the SEC will demand the companyNs top officers, CEO Sidney M. Field and president Joseph J. Lampariello, return any ill-gotten gains.
Meanwhile, corporate records and legal documents show that, aside from any allegations of ripping off investors, there appears to have been even more strangeness going on between IHHI and MCH. HereNs the background: IHHI accepted a $50 million loan from MCH at interest rates ranging from 14 percent to 37 percent, according to IHHINs financial records. The terms of that loan included a stipulation that Mogel would have to remain CEO or the loan would be in default. MCH dropped that demand in 2007, and Mogel resigned in late 2008.
The Weekly has also learned that Mogel helped facilitate a $5 million loan from MCH to Internet advertising company E Mark Advertising Inc., which specializes in pornographic website advertising, of which corporate records show MCH holds a 50 percent ownership interest. In depositions with lawyers from the Santa Ana-based law firm of Callahan N Blaine, who represented the doctors in IHHINs lawsuit against them, Mogel claimed he had no knowledge of this arrangement. However, IHHI attorneys later submitted to Callahan N Blaine e-mails Mogel had sought to delete from his computer. A Feb. 3, 2009, court transcript shows that IHHI attorney David Robinson told a judge that MogelNs laptop had been seized by the company. “We were able to determine there were documents that had been deleted on it, and . . . we then retained the services of an outside forensic firm to actually reconstruct that data to the extent possible.” Those e-mails included summaries of E MarkNs advertisers, the companyNs corporate structure, balance sheets, correspondence between Mogel and Lampariello relating to the companyNs business profits, and a list of pornographic web servers.
What reason a hospital company and a medical lender would have for being in business with Internet pornographers remains a mystery. IHHI settled suits with Callahan N BlaineNs clients in April for $2.7 million. Lawyers for IHHI and MCH did not return telephone calls for this story. But even more mysterious is the fact that corporate records name Rolf Hirschmann as E MarkNs CEO. Hirschmann could not be located for an interview, but according to the Arizona Corporation Commission, a man named Rolf Hirschmann is the CEO of the Scottsdale-based Internet company Form Labs, which Mogel personally authorized to receive $10,000 in unspecified consulting fees, even though IHHI already had another company contracted for web consulting. As the Weekly previously reported, there is no indication whatsoever (other than the fact that Form Labs has an amateurish website and that an unnamed person has answered e-mails sent through that site) that the company has ever done any actual business for IHHI or anyone else. According to Callahan N BlaineNs lawsuit against IHHI, Form Labs did no work for IHHI. “Based on information and belief,” the suit alleged, “Mogel used $10,000 of IHHINs funds to arrange and pay for the black gloves and gun to be planted in Dr. FitzgibbonsN vehicle, leading to his arrest.”
In July 2008, Bruce Mogel released the following statement through a public-relations firm: “I want everyone to know the allegations in this lawsuit are outrageous and untrue. However, legal prudence dictates that I not discuss the case in the press. The truth will come out.”
Also last year, IHHI attorney Robinson said the company was investigating the allegations. “I donNt know when the results of their investigation will be complete,” he said, “but I know they are turning over every rock, and they are doing a thorough and detailed job.”
The settlement agreement reached in April makes no mention of these charges.
Award-winning investigative journalist Nick Schou is Editor of OC Weekly. He is the author of Kill the Messenger: How the CIA’s Crack Cocaine Controversy Destroyed Journalist Gary Webb (Nation Books 2006), which provided the basis for the 2014 Focus Features release starring Jeremy Renner and the L.A. Times-bestseller Orange Sunshine: The Brotherhood of Eternal Love’s Quest to bring Peace, Love and Acid to the World, (Thomas Dunne 2009). He is also the author of The Weed Runners (2013) and Spooked: How the CIA Manipulates the Media and Hoodwinks Hollywood (2016).