NEW IBERIA — A group of plaintiffs including more than 10 South Dakota doctors has filed a lawsuit over proposed investment in a Louisiana hospital.
According to a report by the Argus Leader, the doctors already had invested more than $8 million in three Louisiana hospitals, located in Winnfield, Marksville and Oakdale.
Mike Hurlburt, a former CEO at the Center for Neurosciences, Orthopedic & Spine and the chief operating officer for Progressive Acute Care, had introduced the doctors to the company and was part of the group that came up the idea of buying a fourth hospital in New Iberia. He allegedly told doctors they could receive up to 10 times their original investment, and three or four times was considered a given.
The doctors who invested in PAC were all from Dakota Dunes and were primarily orthopedic surgeons and neurosurgeons. They decided to invest another $3 million for the fourth hospital in New Iberia.
Questions arose, though, when it came to the financials of the New Iberia hospital transaction.
The doctors decided to file suit against Hurlburt and three other hospital administrators. The suit was filed in U.S. District Court in Sioux Falls, South Dakota. The three other defendants named in the suit were Wayne Thompson, Daniel Rissing and Daniel Newell.
In their suit, the doctors claimed they owned 40 percent of the preferred equity in PAC. They also claim that the financials of the fourth hospital were falsified by defendants, citing a memo that showed PAC had manipulated the profitability of the fourth hospital.
“What the physicians did not know was that each of these representations was based on fraudulently manipulated data or was highly misleading based on the omission of material facts,” the suit said.
In their suit, the doctors also said that the defendants did not provide an audit that detailed many “deficiencies of the company’s financial controls.”
PAC filed for bankruptcy in 2016 after losses stacked up following the purchase of the fourth hospital. Within 12 months of the purchase of the fourth hospital, PAC defaulted on the acquisition loan because it missed its earnings forecast.
“As a result of these misrepresentations and omissions, the physicians’ and others’ entire equity investment in PAC of approximately $8 million — including the additional $3 million of Series B Preferred Units they obtained to fund the Dauterive acquisition — is now worthless,” the lawsuit said.
The defendants have yet to file a response to the complaint, according to the report.
The plaintiffs filing suit were Wade Jensen, Dan Kensinger, Raymond Sherman, Steven Stokesbary, Steve Meyer, Grant Shumaker, Thomas Kenny, Tom Jacobson, Sarah Powell, Ryan Meis, Matthew Johnson and Elisabeth Noel, wife of the late Stephen Noel. They have requested a jury trial.