Not a bribe, Modesto company’s lawyer says of job offer, $150,000 check for hospital CEO

Addressing a federal judge, a lawyer representing a Modesto-based hospital management company stressed that his client back in May wasn’t trying to “bribe” a Central San Joaquin Valley hospital executive when they handed her a $150,000 check and a job offer amid negotiations.

Hamid Rafatjoo, a partner with Raines Feldman Littrell LLP and lawyer for American Advanced Management Inc., told U.S. Judge René Lastreto II over Zoom in court on Tuesday that his client wasn’t trying to gain competitive advantage in a bidding process to take over operations of bankrupt Madera Community Hospital.

“Obviously, there were better ways of handling that process,” Rafatjoo said, “but it didn’t come from a place of trying to bribe anyone.”

“My client did what it did,” he said, adding that the actions took place before he was retained.

A business law expert contacted by The Bee said there was nothing illegal about the offer, though it looks “irregular” and “awkward” and the circumstances suggest it should have been fully disclosed in bankruptcy court.

Rafatjoo also took the opportunity Tuesday to tell the judge that AAMI’s offer to take over operations of Madera Community Hospital was superior to the current proposed partner and that it should have been considered more seriously months ago.

AAMI is offering to put in $30 million of their own money into the deal, in addition to an allocated state loan of $50 million for Madera Community Hospital, Rafatjoo said.

“We’re trying to give this estate $30 million dollars, your honor, and we don’t understand why no one wants to take it,” he said.

“I guess we’ll find out,” Lastreto, the judge, responded, after asking Rafatjoo to wrap up his comments because he had other matters to get through that day.

$150,000 check and a job offer for hospital executive

Last week, attorneys for the Madera hospital alleged in court documents that AAMI back in May attempted to “improperly influence” the hospital’s decision-making. It reported to the bankruptcy court in a Friday filing that executives at AAMI gave Madera Community Hospital Chief Executive Karen Paolinelli an “unsolicited” job offer and a $150,000 check made out to her personally during the competitive bidding process to find a financial partner to take over Madera hospital operations.

Paolinelli, who in a court declaration said the interaction made her “very uncomfortable,” notified the hospital’s board vice chair, and then sent a certified letter response returning the check and declining the offer, according to bankruptcy court records. Rafatjoo stressed to the judge Tuesday that AAMI was not trying to gain an unfair advantage.

According to Rafatjoo, AAMI executives at the time believed they were the only party engaged in discussions with the hospital as a potential reopening partner. He said they wanted to make sure Paolinelli was involved with future operations, which is why they made her the offer and offered her the signing bonus.

In the ensuing months, AAMI didn’t hear anything but “crickets” from Madera Community Hospital about their proposal, Rafatjoo said. “For the life of me,” he said, “I cannot understand why no one has said ‘Thank you, how can we get this done?”

Madera hospital working on deal with reopening partner

AAMI is just one of the interested third parties that Madera hospital has talked to since December, after plans to sell the hospital to Trinity Health, owners of Fresno-based St. Agnes Medical Center, fell through. Any agreement that the hospital enters into is subject to state and court approval.

The hospital closed its doors in late December and filed for bankruptcy in March, leaving 160,000 Madera County residents without access to an acute medical care facility in their county for the better part of a year.

The hospital announced in late July that they signed a letter of intent with Adventist Health, a faith-based, nonprofit health system operating in California, Oregon and Hawaii. The two groups are currently negotiating a management services agreement for Adventist Health to take over hospital operations.

According to the letter of intent, Adventist is not providing its own money and has required millions in state loan funds to be approved for the deal to work. It’s unclear why Madera Community Hospital did not accept the AAMI offer. Paolinelli told The Bee in an Aug. 29 email that the hospital board “felt Adventist Health would be able (to) serve the health care needs of our community in the future.”

A month after the proposed Adventist partnership was announced, AAMI made public their interest to be considered as a potential reopening partner for the shuttered hospital, despite having signed a non-disclosure agreement.

Another bankruptcy hearing is scheduled for Sept. 28 at 9:30 am.