A powerful group of senators have pressed for answers about the bankruptcy of the private prison healthcare provider formerly known as Corizon Health.
In a letter sent Tuesday to executives of Corizon's successor companies — YesCare and Tehum Care Services — the lawmakers say Corizon employed an "abusive" bankruptcy strategy to avoid paying not just medical-malpractice lawsuits but also "bills for tens of millions of dollars' worth of goods and services provided to Corizon by hospitals, small businesses, and your own former employees."
The nine senators include Elizabeth Warren, Bernie Sanders, Cory Booker, Judiciary Committee chair Dick Durbin, and Finance Committee chair Ron Wyden. They raise questions in the seven-page letter about the company's "largely anonymous investors," the company's "obfuscation of its ownership structure," the assets it has transferred to "affiliated entities," and its attempts to escape liability for hundreds of medical-malpractice lawsuits filed by current and former prisoners.
"The bankruptcy system has many aims, but it was not designed to provide an avenue for companies to evade accountability for wrongdoing," the lawmakers write.
Tehum filed for bankruptcy in February — the final step in a controversial legal maneuver in which Corizon moved to Texas and split in two. As a result of the tactic, dubbed the Texas Two-Step, one company, called YesCare, got all of Corizon's corrections contracts while the other, Tehum, was saddled with Corizon's civil suits and most of its debt. Insider first reported on the company's use of the Two-Step in August.
In the letter, addressed to YesCare CEO Jeffrey Sholey and Isaac Lefkowitz, Tehum's sole director, the senators blasted Corizon's attempt "to manipulate bankruptcy law with the aim of skirting accountability for the harms that incarcerated individuals have endured under Corizon's care."
"The Texas Two-Step is a distorted use of the U.S. bankruptcy system by corporations to evade mass tort liability," the senators write. "Your company has taken this abusive strategy a step farther."
The lawmakers urge Sholey and Lefkowitz to use "the full financial capabilities" of YesCare, Tehum, and other related entities to "provide full relief for meritorious claims against Corizon by all incarcerated people, their families, former employees, and third-party medical providers." Those claims total more than $1.2 billion, and Tehum is seeking to settle them for $37 million.
The senators have given Tehum and YesCare two weeks to answer nine detailed questions about their leadership, ownership structure, corporate assets, affiliated entities, the civil suits against them, and the bankruptcy settlement negotiations themselves.
"For too long, corporations like Corizon have taken advantage of our bankruptcy system, engaging in maneuvers like the Texas Two-Step to hide from victims who deserve to be treated fairly," Sen. Warren told Insider. "I'm calling for answers from Corizon."
Sholey, Lefkowitz, YesCare, and Tehum did not immediately respond to requests for comment.
Corizon was once one of the nation's largest private prison healthcare providers, but claims of malpractice and patient neglect had been mounting against it for years.
The senators excoriate Corizon for its repeated failure to provide adequate healthcare to prisoners, itemizing what they describe as "glaring instances of neglect."
The letter specifically mentions the case of Hector Garcia, a father of four who died three days into a six-day sentence at a New Mexico jail, a case Insider profiled. The letter says "Corizon providers ignored complaints of intense pain caused by an entirely treatable existing condition providers should have been aware of."
As his son Hector Garcia Jr. told Insider, "It's not like he had a chance to call an ambulance himself."
'Unknown investors and associates'
The lawmakers' letter criticizes Corizon's use of the Texas Two-Step "to pay pennies on the dollar to claimants that deserve recompense for poor health outcomes." And it says serious questions remain about the opaque ownership behind YesCare and Tehum, issues first raised in Insider's reporting.
"Reporting suggests that the largely unknown investors and associates that spearheaded the Texas Two-Step have engaged in questionable and unjust tactics," the letter says. "This misuse of the bankruptcy system is unacceptable, and we are concerned that it may result in the denial of hundreds of claims stemming from the substandard care incarcerated people have received under Corizon's watch."
Warren had already expressed concern about one company affiliate. In January 2021, she sent a letter to the national nursing home chain Genesis Healthcare, questioning why the company had paid top executives millions of dollars in bonuses even though it had received $300 million in government aid and more than 2,800 residents died on its watch during the pandemic. According to an Alabama bid document obtained by Insider, YesCare is managed and financially supported by Geneva Consulting LLC, a wholly owned subsidiary of Genesis.
Lefkowitz, the sole director of Tehum, is now also a director at Genesis.
The bid says YesCare entered into a management service agreement with Geneva Consulting — and the relationship between the two companies caught the senators' attention. They write that evidence suggests "YesCare may in fact be owned by Geneva Consulting or its parent, the nursing home giant Genesis HealthCare Inc."
"Corizon's obfuscation of its ownership structure," they write, "heightens our concern that the company is attempting to evade liability."
Unconvincing claims of 'corporate separateness'
Until recently, the bankruptcy looked to be on its way to a swift conclusion. Tehum and its largest creditors had submitted a joint bankruptcy plan proposing the $37 million settlement, which would have given current and former incarcerated patients just $5,000 apiece for their medical-malpractice claims — even in cases where prisoners under Corizon's care.
Then the judge who oversaw the settlement talks, David Jones, suddenly resigned after Insider published allegations that he was in an undisclosed romantic relationship with an attorney who represented YesCare in the negotiations.
Meanwhile, the US Trustee Program, in charge of watching over the integrity of the bankruptcy system, filed an objection in bankruptcy court, citing Jones' involvement in the mediation and other concerns. In the latest blow, Christopher Lopez, the federal bankruptcy judge overseeing the case, said at a hearing last week that creditors needed more time to review the settlement — rejecting attempts by Tehum's attorneys to expedite approval.
So far, the company has attempted to wall off YesCare's assets from Tehum's creditors, claiming that the two companies are separate. The senators forcefully pushed back on that in the letter, writing that claims of "corporate separateness" are "a transparent and unconvincing attempt to avoid adequately compensating victims."
Warren and Durbin have taken a hard line on the Texas Two-Step, which was attempted most famously by Johnson & Johnson to try to shed tens of thousands of talc-powder lawsuits. Five of the signers of Tuesday's letter are members of the Senate Judiciary Committee, which held a hearing last month on the Two-Step with the sharply worded title "Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy."
In July 2021, Warren introduced a bill that would have amended US bankruptcy code to allow judges to dismiss a case if the bankrupt company had used a divisional merger over the prior 10 years in order to separate its assets from its liabilities. The divisional merger, legal only in Texas and a few other states, is the maneuver underlying the Two-Step.
Durbin, Sanders, Booker, Warren, and Wyden were joined in Tuesday's letter by Democratic Sens. Richard Blumenthal of Connecticut, Mazie Hirono of Hawaii, Jeff Merkley of Oregon, and Peter Welch of Vermont. YesCare and Tehum have until November 8 to respond.
