By the time Baltimore Behavioral Health Inc. sought bankruptcy protection Dec. 28, the once-high-flying drug treatment and mental health clinic had been showing signs of financial trouble for two years.
But even as the private nonprofit's debts mounted, members of the family that long oversaw the West Pratt Street clinic continued to be well paid, recently released tax records show.
In 2011, five family members received $1.1 million in salary and contract payments, according to records filed with the Internal Revenue Service in September. That's 19 percent of the clinic's $5.9 million in total revenue.
(One relative, Morris Hill, disputed the filing. In an email he said BBH paid $123,304 to Sandy Hill Associates, the management firm led by him and his wife Sandra Hill — not the $636,000 BBH reported to the IRS.)
In addition, two other family members, Nicholas and Susan Scotto, received $70,000 in loans from BBH for an unspecified "advance," the tax records show, half of it still unpaid at year's end. The Scottos could not be reached for comment. Hill said he did not know why that was on the tax form.
During 2011, BBH made headlines for these reasons: The clinic failed to meet payroll. Bank of America alleged it defaulted on up to $2.5 million in loans. The U.S. Labor Department sued it for access to records while investigating employees' claims about missing pension money.
None of the family members still work at BBH, which was established in 1997 and became one of the city's largest drug treatment providers. A 2010 investigation by The Baltimore Sun documented unusually high Medicaid billings and six-figure salaries paid to the family members who controlled its board.
State regulators forced a shake-up of the board. With the state curtailing some kinds of Medicaid payments for mental health care, reimbursements to BBH fell and the clinic went through layoffs. A fifth family member, William K. Hathaway, CEO until last May, did not respond to messages.
In its bankruptcy filing, BBH lists creditor claims of $5.5 million and estimates assets of less than $500,000. Among the creditors is Sandy Hill Associates. In August the firm sued BBH in Baltimore Circuit Court, claiming to be owed around $840,000 in unpaid loans and consulting fees.
Current CEO Terry T. Brown, a longtime BBH executive who is not part of the family, called the lawsuit "ridiculous." He said he hoped the bankruptcy and new management would lead to sounder footing for the clinic, now a fraction of its former size. "The accounting system was nothing I would take to the bank," he said.
Brown acknowledged hiring his sister as his administrative assistant, a move he defended by saying she is qualified and that he needed someone he could trust.
And Brown, too, took issue with something in the 2011 tax filing — an entry showing he received an $8,000 advance. He said BBH actually owed him that money. "When I saw that," he said, "I was livid."Copyright © 2015, Los Angeles Times