Nu-Med Denies Bribing Official to Win Contracts

Times Staff Writer

Nu-Med, an Encino-based hospital chain, on Wednesday denied allegations that it bribed a former New York City hospitals chief to get city contracts.

An indictment issued Tuesday in Manhattan alleged that John J. McLaughlin, former president of New York City Health & Hospitals Corp., profited through a special purchase of stock from Nu-Med in 1983 designed “to influence McLaughlin to give Health & Hospitals Corp. contracts to Nu-Med.”

Nu-Med was not named as a defendant in the indictment, nor were any of its executives or employees. In a brief statement, the company said it “categorically denies any wrongdoing and specifically denies offering or paying a bribe to Mr. McLaughlin or any other city official.”

Assistant Manhattan Dist. Atty. Michael McManus, who presented the case to the grand jury, said in a telephone interview that further indictments are expected, but he declined to say if any would involve Nu-Med officials. He said no Nu-Med officials were called to testify before the grand jury.


Nu-Med did provide the district attorney’s office with documents used in the investigation, the company said.

Bought 10,000 Shares of Nu-Med

McLaughlin pleaded innocent Tuesday to charges of receiving a bribe.

According to the indictment, McLaughlin, an attorney, purchased 10,000 shares of stock from Nu-Med for a client in 1983, paying $17,500, although he reportedly valued the stock at $150,000. The stock was unregistered “letter stock,” which is a security purchased privately from an issuer that may be converted at a later date to common stock selling at current market prices, McManus said.


McLaughlin is accused of later getting much of the profit for himself in another deal with his client involving the purchase of an apartment.

The stock purchase occurred sometime between June and October, 1983, McManus said, while McLaughlin was president of New York’s Financial Services Corp., an agency that promotes economic development in the city. McManus said, however, that McLaughlin at the time was awaiting an appointment to become president of Health & Hospitals Corp., a $2-billion city organization that oversees hospitals. He previously had served as its general counsel in 1981 and 1982.

At the time that it sold the stock, Nu-Med was seeking two separate city contracts, according to the indictment. It eventually received one of them, a $1-million pact to provide consulting services to Harlem Hospital. That contract began in November, 1983, and ended in April, 1985, McManus said.

The second contract, which Nu-Med did not get, involved providing roving medical management consultants to various hospitals in the city and would have paid Nu-Med $130 per hour for each consultant provided.


McLaughlin, 40, allegedly bought the Nu-Med stock in the name of Ann Louise Maytag, one of his clients and the granddaughter of Frederick Louis Maytag, founder of the Maytag washing machine company. McLaughlin handled her financial affairs, district attorney officials said, and last September was indicted on separate charges of stealing more than $250,000 from her.

According to the indictment, McLaughlin made money in the deal by deducting part of the value of the Nu-Med stock when he purchased a lower Manhattan apartment from her.

Nu-Med is a fast-growing hospital chain with 15 acute care hospitals and 11 medical office buildings in the United States and two hospitals in England. In the fiscal year ended April 30, 1985, Nu-Med earned $7.5 million on $200.6 million in revenue. In the nine months ended Jan. 31, Nu-Med earned $4 million on sales of $225.4 million.

Nu-Med’s stock closed Wednesday at $6.50 a share in over-the-counter trading, unchanged from Tuesday.