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
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.
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.