General Hospital, Closed in March, Files for Bankruptcy

Officials for the beleaguered San Diego General Hospital Inc. have declared bankruptcy under Chapter 7 of the federal Bankruptcy Code, the attorney for hospital employees said Wednesday.

The hospital, formerly known as San Diego Physicians and Surgeons Hospital, in Southeast San Diego, has been closed since early March and charges of mismanagement and threats of lawsuits have mounted ever since.

Attorney James Peters represents 65 employees who have claims against the hospital. Peters said Wednesday that the plaintiffs had “threatened to put the hospital in involuntary bankruptcy, but they (hospital management) beat us to the punch.”

The employees’ claims may be among the least of the problems faced by the hospital’s owners. They also owe millions of dollars to the Internal Revenue Service, the state and medical suppliers and contractors.

The bankruptcy action was filed in Federal Bankruptcy Court in San Diego on May 2, according to court records. The filing was confirmed Wednesday by the California Labor Commission.

Peters said the employees’ action is in addition to an action being pursued in state court by NME Hospitals Inc., which sold the hospital to the current owners two years ago.

NME initiated foreclosure proceedings against San Diego General last month, seeking to seize properties in San Diego and Riverside counties that the buyers had put up as collateral for the purchase. Principal owners of San Diego General are Benjamin Davis Jr. of Coronado and John Motte of Riverside County.

Peters listed the following employees’ allegations:

* Hospital managers were taking money earmarked as insurance premiums from employees’ paychecks and keeping it themselves, to be used for “some other purpose,” Peters said.

“Affected were a woman with cancer, who suddenly found out that her insurance carrier hadn’t been paid,” he said. “A woman carrying a baby found out the $7,000 in pregnancy-related expenses had not been paid. That sort of thing.

“She had been paying the premiums, but the hospital was keeping the money and not turning it over to the carrier.”

* Most employees had no jobs after late February or early March, Peters said. But many received no money from the time of their last paycheck in February to the point when the company laid them off.

“That’s a misdemeanor under California labor law,” Peters said.

Furthermore, because the employees were technically furloughed until the hospital reopens, and not laid off, they have had trouble qualifying for unemployment compensation.

* Many employees had accrued vacation days, for which they were entitled to paid reimbursement.

“It was more than 2,000 days of collective vacation benefits,” Peters said. “It’s due on termination. But none of it was paid.”

Peters said he may take action against the individuals responsible for not properly paying the insurance premiums.

“They were the ones who made the decisions not to use the monies withheld in the way they should have been used,” he said. “So, we may sue them.”

Officials for San Diego General Hospital Inc. were unavailable for comment.