Senator Elizabeth Warren is bringing fresh scrutiny to the controversial bankruptcy of private prison healthcare company Corizon Health.
Yesterday, the senator sent a sharply worded letter to the Department of Justice's U.S. Trustee Program and one of its regional offices in Texas encouraging officials to oppose the bankruptcy plan and join a motion to dismiss the case — and blasting the company for claiming not to know its own ownership structure. Warren asked the officials to respond to her requests by February 14.
"Corizon is misusing the bankruptcy system to evade accountability and block the company's victims and their families from obtaining justice," Warren said in a statement to Business Insider. "The U.S. Trustee's office has acted powerfully to protect the rights of victims harmed by corporations that seek to escape liability. Likewise, it should stand up to Corizon's abusive tactics for the sake of our bankruptcy system."
Warren applauded the US Trustee Program, which oversees the federal bankruptcy system, for making a rare decision last year to file an objection in court to Corizon's bankruptcy plan. The move came after a Business Insider series exposing the company's attempts to shed responsibility for hundreds of lawsuits alleging medical neglect.
Business Insider's reporting revealed that Corizon had engaged in a controversial legal maneuver called the Texas Two-Step, which involved splitting into two companies. One company, YesCare, got all of Corizon's active corrections contracts while the other company, Tehum Care Services, was saddled with the company's liabilities and filed for bankruptcy. The maneuver, Warren wrote, was done "explicitly to evade its liabilities."
Corizon's current bankruptcy plan, she wrote, "will deny Corizon's creditors, including incarcerated individuals, adequate restitution for the company's serious harms."
Jason Brookner, an attorney representing Tehum, declined to comment, saying the company had not received the letter. Representatives for YesCare didn't immediately respond to a request for comment.
In November, the US Trustee intervened in the case, pushing for the creation of a committee to represent the hundreds of current and former incarcerated patients who allege they were harmed under Corizon's care. Those plaintiffs had been allocated a disproportionately small share of the initial proposed settlement. Earlier this month, that committee moved to dismiss the bankruptcy, citing "a bad faith settlement."
"I encourage you to promptly review the motion and join it if you find the motion meritorious," Warren wrote to the US Trustee officials. Warren said she believed the motion "argues persuasively that bankruptcy is not the appropriate venue for dealing with Corizon's harms, and that the purpose of the bankruptcy is not to fairly compensate all creditors but to transfer value from victims to investors."
Emma Dulaney, press secretary for the Department of Justice, which oversees the US Trustee Program, confirmed receipt of the letter but declined to comment.
This is the second time Warren has weighed in on the Corizon bankruptcy. In October, she joined eight other Senators, including Senate Judiciary Chair Dick Durbin, in sending a letter to Tehum and YesCare demanding answers about the companies' ownership and corporate structures.
Warren also encouraged the US Trustee to investigate Corizon's transfer of significant assets to YesCare or any entities affiliated with Corizon's owners. Under federal bankruptcy law, a trustee can reverse asset sales or transfers that took place within two years of a bankruptcy filing if certain conditions are met, Warren wrote, saying Corizon's transfers "warrant serious examination."
"All in all, Corizon transferred at least $200 million to YesCare and to entities affiliated with its private equity owner prior to declaring bankruptcy," Warren wrote in yesterday's letter.
She also asked the US Trustee to continue digging into Corizon's owners.
"The identity of other investors in the private equity firm that acquired Corizon in December 2021 is still not publicly known," she wrote, "as is whether they or their affiliated companies received assets prior to the bankruptcy filing."
Warren and her Senate colleagues sought answers to that question in their first letter, but she said the companies failed to provide details in their responses. Warren made the companies' responses public this morning.
For instance, Warren noted that YesCare said, in its response signed by counsel Raphael Prober, that it doesn't know its ownership structure. "YesCare is wholly owned by YesCare Holdings, LLC," the response reads. "The ownership structure of YesCare Holdings, LLC is not information that is publicly available or known to YesCare."
Ultimately, Warren said, the US Trustee should challenge any plan that doesn't offer enough compensation to victims. The company initially offered a $37 million settlement before increasing it to $54 million after a second round of mediation began in the wake of BI's investigation.
Warren's letter questioned Corizon's Two-Step itself — which walled off its lucrative assets in YesCare, out of reach of the Tehum bankruptcy. "Corizon's bankruptcy is premised on the fact that it does not have sufficient resources to pay victims and other creditors," she wrote. "The links between Corizon and YesCare accentuate questions about whether the company should even be in bankruptcy proceedings, and further highlight the insufficiency of the bankruptcy plan's proposed offer to victims."
