MDI Holdings Inc. owes the Duke University Health System more than $8 million but has no money to honor that debt.
MDI, a Florida-based company, contracts health care for small businesses and government agencies but has recently suffered financial issues and gone into receivership, leaving the assets, by court order, in the custody of a consulting company. The order came after Wells Fargo filed a $30 million lawsuit. Because the company owes Wells Fargo a considerably larger sum of money than it owes DUHS, Duke has not received repayment for the approximate $8.3 million debt, Conor Brockett, associate general counsel with the North Carolina Medical Society, told The Raleigh News and Observer.
DUHS doctors were subcontracted through MDI to administer health care for some of the 5,000 inmates at Butner Federal Correctional Complex, a prison 45 minutes northeast of Durham that houses white-collar criminals including Bernie Madoff. These doctors provided treatment to inmates at Durham Regional Hospital and the Duke Ambulatory Surgical Center.
MDI’s multimillion dollar debt to DUHS was one reason Wells Fargo sued the contracting company to take control from CEO Richard Willich. The bank feared that the Butner prison would decide not to renew its contract with MDI, which accounted for 35 percent of MDI’s income, according to Wells Fargo’s complaint.
Wells Fargo lent MDI $37.5 million over a number of years, and won $30 million from MDI in the lawsuit, forcing the company into receivership. MDI does not have sufficient funds to recoup the $30 million to Wells Fargo, so the bank will be awarded any money MDI still has, Brockett said.
Because all of MDI’s remaining funds will be funneled to Wells Fargo, Duke and any other creditors will not receive any money from MDI, as they are unsecured creditors, he added. The North Carolina Medical Society has started to investigate whether the Federal Bureau of Prisons must honor MDI’s outstanding bills for providing treatment to its prisoners.
“At this point, our take is that they have no chance of getting anything out of MDI because Wells Fargo, as a secured creditor, was first in line, and they are squeezing as much as possible out of the remaining assets to satisfy that debt,” Brockett told the News and Observer.
The remaining value of MDI’s assets is thus far unclear. Media has not been able to reach for contact MDI or the court-appointed receiver, Ronald Winters of Alvarez and Marsal Holdings’ health care group. A spokesperson for the Federal Bureau of Prisons declined to disclose the other prisons where MDI operated and how MDI’s contracts were adminstered.
DUHS doctors continue to provide care to Butner inmates as a new company has taken over the prison’s health care contracts, said Sarah Avery, DUHS media relations strategist.
Avery added that Duke’s outstanding balance with MDI has been subject to arbitration outside of the courts, but she said the results are confidential.
In its case against MDI, Wells Fargo attributed the company’s inability to pay its debt to some questionable financial decisions. The bank said Willich borrowed more than $5 million from MDI to purchase a cattle ranch and the rights to a biography and screenplay about his life. In addition to this loan, Wells Fargo cited a $1.1 million wire transfer payment to an attorney shortly after MDI fired a financial restructuring officer and lease payments for an $110,000 electric sports car.
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