What happens to the Hospital $86 million?

[Bill Call]

Whatever hospital assets that are left after wind down costs will be donated to the Cleveland Clinic. The value of the cash, cash equivalents and investments was about $86 million.


The Master Agreement is a strange document. In a normal agreement assets are listed individually. Inventory, real property, cash, receivables and investments are listed along with how those assets will be distributed. The Master Agreement lumps all those assets (except the real estate) together as "assets". However, the agreement was detailed enough to mention plaques and other art work:


( 4) All plaques, donor walls and works of art located within Lakewood
Hospital that are not owned by the Clinic and described on Exhibit E, which items will be
transferred to the Lakewood Hospital Foundation for appropriate care and disposition
(collectively the "Excluded Personal Property"). A representative of Lakewood Hospital
Foundation is confirming the inventory set forth on Exhibit E, and the parties agree the same
shall be supplemented as necessary.


Strange. Why not just come out and say $86 million in cash and investments and receivables will be donated to the Cleveland Clinic?

If the City is giving the Clinic $86 million then isn't the money "donated" to the new Foundation by the Clinic really City money?

Why all the complexity? Why didn't the City just cash out?


The Master agreement states that the City's beneficial interest in the Lakewood Hospital Foundation is not included.
What happens to that beneficial interest?
Does that beneficial interest still exist?
What good is a beneficial interest controlled by others?

[Mark Kindt]

Mr. Call, here is one answer from the City of Lakewood to your inquiry:

[Mark Kindt]

Here is another document from the City of Lakewood that also is relevant to your inquiry.

City_Lakewood_16-Cuyahoga CAFR 59.jpg (387.68 KiB) Viewed 4062 times

[Mark Kindt]

The financial reporting by the City of Lakewood with respect to the liquidation of the hospital is quite cryptic; amounts and sources of those amounts are blended in ways that make it difficult to distinguish LHA assets (like the Columbia Road building) from LHA Lakewood Hospital assets.

First, you have to review the Master Agreement.

Then, you have to review the 2015 CAFR and the 2016 CAFR.

And, finally, you have to review the financial affidavit filed in Skindell v. Madigan.

Then you have to build a comparative spreadsheet, which I have not yet done.

But, by understanding the magnitudes of these reported values, you'll see that the vast bulk of the LHA Lakewood Hospital assets did not revert to the City of Lakewood as per the earlier contracts, but went elsewhere under the Master Agreement.

I have not taken the time to attempt to reconcile the relevant amounts. I'm not an accountant.

However, it would be a worthwhile and interesting exercise. Mr. Call, you are on the right track.

[Stan Austin]

For us non lawyer - non accountant folks--- how can millions of dollars just evaporate? I am reminded of Enron, where it ultimately turned out that it was creativity value. But another question comes to mind---Do Summers/Butler/Pae really have the intellectual chops to do this kind of scam?

[Mark Kindt]

Mr. Austin, we can track some of the decision-making process via the available documents and the various legal cases.

The city administration intended to do what it did and did it with reasonable success.

The hospital is closed; the FHC is under construction; the new foundation is being planned; and the hospital site is moving toward redevelopment.

The city administration was aided by sophisticated law firms, public relations firms and other consulting firms. They had more than enough expertise to achieve their goals.

Governments make poor decisions on a regular basis.

The decision to liquidate the hospital was a poor decision.

But, It is a public policy failure of epic proportions because its implementation violated ethical, fiduciary, and legal norms. (The subjects of "Honesty in Local Government I thru IV".)

I'm beating a dead-horse here and I know it. Without a continuing drumbeat of municipal reform, our city administration will continue these kinds of violations now and in the future. We can't settle for this.

[Peter Grossetti]

Without a continuing drumbeat of municipal reform, our city administration will continue these kinds of violations now and in the future. We can't settle for this.

And that, dear friends, is precisely what elections are for.

[Dan Alaimo]

Without a continuing drumbeat of municipal reform, our city administration will continue these kinds of violations now and in the future. We can't settle for this.

And that, dear friends, is precisely what elections are for.

...and possibly recall elections.

Probably besides the point of the above numbers: Why was the hospital property sold for $1?

[Bill Call]

This post by Brain Essi is relevant:

http://lakewoodobserver.com/forum/viewtopic.php?t=23447

In the post Councilman Anderson writes, "Mr. Essi -

The LHA September of 2015 financial statements were provided to you which shows a book value of the hospital building and land at $20.0 M. This remains in City/taxpayer possession and was not sold as your headline claimed. In addition, the city is receiving lease payments from the Clinic for the continued use of a portion of the building for the ER.

How is it possible to sell something yet still,own it and collect rent?

David Anderson"

Mr. Anderson is implying that the Hospital was not sold, the City states the Hospital was sold for $6.4 million. What was sold? Well, the $6.4 million was the money received by the City for the Columbia Road property. The implication is that the City received nothing for the Hospitals assets.

The City states that the assets of the Hospital were used for wind down costs. Really? $86 million to stop doing business? Accounting is simple. In this case the City has $86 million and then it doesn't. It would be nice if the City would publish a simple spread sheet showing where the money went.

The Master Agreement states that the assets of the Hospital were transferred to the Cleveland Clinic. Those assets included $86 million. Where is the money now? Where was the public discussion regarding the transfer of $86 million to the Clinic?

When I first read the Master Agreement I assumed that "assets" transferred meant the equipment, supplies and other items. It never occurred to me that the City would give away cash and investments worth $86 million.

The Master Agreement IS a strange document. It contains explicit details regarding the disposition of wall plaques but makes no mention of cash and investments.

[Bridget Conant]

The entire “agreement” was constructed and written in a way to obsfucate what was REALLY happening. Yes, the Clinic sure has some good lawyers - good at pulling the wool over your eyes.

One minute we own it, next we don’t. The money is over here, NO, It’s over HERE.

Doesn’t everyone understand this was carefully thought out and planned to be this way? There is no other rational explanation for the complete lack of clarity in the agreement. None of the dollar amounts match up at all.

It’s all gobbledygook.

[Mark Kindt]

I am going to take the time to spreadsheet the proceeds received by the City of Lakewood using the City's documents when I have a chance.

If we focus only on the sale of the hospital assets, under the Master Agreement the City of Lakewood is slated to receive $7,000,000 for hospital site demolition and site preparation ($500K has already been received), but otherwise this is a future contractual payment obligation to be paid at a future date.

The other funds received by the City do not relate to the sale of the hospital itself, but relate to other assets--the Columbia Road building and the building/site the City sold the Clinic.

The media has reported that the $7,000,000 is going to the benefit of the proposed developer for the old hospital site. This looks like a complete pass-through to me of funds that haven't been received.

I need to really dig into all of the documents and the numbers to substantiate this. It's going to take a bit of work.

As I have stated earlier, the vast bulk of the value of Lakewood Hospital did not return to the City of Lakewood.

I have the distinct impression from looking at the annual reports that the City of Lakewood itself has received or will receive very little from the liquidation of its local community hospital.

None of this is new to readers of the Lakewood Observer or the Observation Deck. It has already been reported on extensively.

We traded our hospital for a family health center, a future health care foundation and a future housing/retail block. The direct future benefits of this trade to the City of Lakewood have never, to my knowledge, been accurately quantified by the City.

In my opinion, this has all been a reckless gamble tainted with improprieties.

[Jim O'Bryan]

I am going to take the time to spreadsheet the proceeds received by the City of Lakewood using the City's documents when I have a chance.

If we focus only on the sale of the hospital assets, under the Master Agreement the City of Lakewood is slated to receive $7,000,000 for hospital site demolition and site preparation ($500K has already been received), but otherwise this is a future contractual payment obligation to be paid at a future date.

The other funds received by the City do not relate to the sale of the hospital itself, but relate to other assets--the Columbia Road building and the building/site the City sold the Clinic.

The City of Lakewood took a bath on all of this.

The media has reported that the $7,000,000 is going to the proposed developer for the old hospital site. This looks like a complete pass-through to me.

As a practical matter, the City of Lakewood might not have received anything for the "sale" of its hospital.

However, and this is a big however, I need to really dig into all of the documents and the numbers to substantiate this. It's going to take a bit of work.

All

This morning I had the pleasure of running into Mark Kindt at the Root Cafe, and we were discussing the first story he worked on for the LO and the loss of the hospital debacle, when who should walk in by Jim Farley, another person from that first article they worked on, but it would be the fourth month since the LO broke the story.

If you remember correctly, when the story broke, I/the LO was called liars, the hospital was not closing, but many if not all of the people involved in closing the hospital and making off with the loot from the city's give away of the hospital. In that article was a graph we had all worked on and agreed with, that even today is spot on for what the city got for the hospital and long range economic impact from the giveaway of the hospital.

In that story we mentioned the value as over $178 million, and that the money every penny the Mayor and supporters said the City would get originated as the community's funds already. In other words, we lost every penny, but the Mayor's friends, would get millions, while the residents got nothing but bills and a royal screwing. Over the next 3 years, the LO and the writers of this article and others were proven right again and again and again. While the city and the supporters most of who were in line for some of the assets repeatedly call LO members liars.

The reason I bring this up, is that edition of the paper had something called a bleed. A bleed in printing rems is something that runs off the the edge of the paper, and has to be trimmed down to size. This rises the cost of printing, both in plates, trimming and putting the paper together. But at the time, everyone at the table thought the impact, and the factual basis for the chart was worth the extra money it would cost to print. I am posting the front cover, not to say again how were were right, and city hall lied, but to help underline what Mark Kindt is speaking of, once again 3 years later. The other article is whited out, so that you can focus on the chart, and the financial impact to the city long term, the last bar in the chart.



That's right, from day one we pointed out we were getting screwed and the Mayor was lying, and the impact would eventually run off the bottom of the page financially breaking the city, and those days are now here.

As I have said since September 2014, we have been played. Now watch as LHF, makes a play for the remaining money being returned to the new foundation. They thought they were in line to pocket $60 million plus, but their deal was so bad and so badly constructed, they got less than half of that sum to play with. Now, by hook or by CROOK, they will come for the rest. Bet on it. Watch for the con game called, "Health Zones."

.

[cmager]

Mr. Anderson is implying that the Hospital was not sold, the City states the Hospital was sold for $6.4 million. What was sold? Well, the $6.4 million was the money received by the City for the Columbia Road property. The implication is that the City received nothing for the Hospitals assets.

The City states that the assets of the Hospital were used for wind down costs. Really? $86 million to stop doing business? Accounting is simple. In this case the City has $86 million and then it doesn't. It would be nice if the City would publish a simple spread sheet showing where the money went.

Mr. Call,
Were the City to attempt such a spreadsheet, per recent testimony, it might tax the City's server and IT infrastructure to a slow crawl. So we dare not ask. To avoid that, and in advance of Mr. Kindt's more serious analysis, I offer this lost spreadsheet that was to have been included in the Master Agreement. Bonus > pictures, not numbers.
LH SS

[Bill Call]

Mr. Call,
Were the City to attempt such a spreadsheet, per recent testimony, it might tax the City's server and IT infrastructure to a slow crawl. So we dare not ask. To avoid that, and in advance of Mr. Kindt's more serious analysis, I offer this lost spreadsheet that was to have been included in the Master Agreement. Bonus > pictures, not numbers.
LH SS

That's VERY clever.

[Stan Austin]

There seems to be about $120 million missing from all of these calculations