Former Hospitals Chief, $4 Million May Be in China : Disappearance: Dan S. Young may be attempting to do business in the communist country with money he allegedly embezzled from the Orange-based medical care network he founded.

For the past several years, Dan S. Young has been well regarded within the health-care industry as a can-do entrepreneur whose company, Affiliated Medical Enterprises Inc., was a model hospital management firm.

Today, he is reportedly in China, knocking on the doors of state health officials with a plan to duplicate his successes by opening up a hospital there. The problem, said a lawyer for Orange-based Affiliated Medical Enterprises’ lenders, is that Young is attempting to do so with stolen money.

Young, 46, and his 28-year-old daughter, Rebecca Hume, are accused of making off with as much as $4 million from the firm that Young founded six years ago, vanishing until recently and sending the company to the auction block just as it was about to emerge from almost two years of bankruptcy court protection.

While skirting a civil suit and possible criminal charges in California, Young, a Chinese-born executive, is reportedly alive and well in Beijing, seeking to build a hospital for “American expatriates,” said lawyer Bob Crockett of Latham & Watkins, a Los Angeles law firm.

Despite a lawsuit filed in U.S. Bankruptcy Court to recover as much of the missing funds as possible, Young remains “out of our hands” as long as he is in the Republic of China.

Instead, the lawsuit that Crockett filed on Nov. 16 names 13 defendants who reportedly have knowledge of Young’s alleged embezzlement scheme and are therefore liable for the lost funds.

Dr. Albert Goh, described by Crockett as “a prominent Orange County physician,” is among those named in the lawsuit. Goh’s attorney, Kim Gage, did not return a request for comment Tuesday.

Those familiar with the case say that the alleged embezzlement was discovered immediately after Young and his daughter vanished Nov. 9. They describe a masterful scheme that involved a complicated series of bogus transactions, dummy corporations and vendors--and a mysterious disappearance that is just now coming to light.

Young, who founded the company in 1986, built it from scratch to a network of five community hospitals in Huntington Beach, Sun Valley, Palmdale, Ojai and Portales, N.M.

The company’s troubles began after it borrowed $100 million to buy four of the hospitals from American Health Group International in 1988.

Crockett’s clients, including First National Bank of Boston, Toronto Dominion Bank and Equitable Life Insurance Inc., were among the lenders who provided funding for the acquisition.

By July, 1991, Young said he could no longer repay the remaining $88 million in debt and filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The hospitals, including Pacifica Community Hospital in Huntington Beach, remained open for business.

That, say those familiar with the case, is when Young allegedly began diverting funds.

As part of the company’s bankruptcy reorganization, the court ordered it to sell the five hospitals, a condition that Young and the lenders agreed to meet, those familiar with the case say.

A group called Hiawatha Investment surfaced and offered to buy the hospitals by late summer, 1991, said Tom Singleton, senior vice president of Quorum Health Resources in Nashville, Tenn., the company that is now managing the company’s liquidation.

But neither Stapleton nor other company officials realized at the time what they allege now: that Hiawatha was a front company for Young.

By the time the alleged embezzlement was discovered, Young had reportedly funneled $1.2 million through wire transfers to Hiawatha. Young’s daughter, Hume, was a de facto chief financial officer, Singleton said, in charge of all money payouts and transfers.

After receiving several deadline extensions from the U.S. Bankruptcy Court in Santa Ana, Hiawatha failed to purchase the hospitals by Oct. 15, the latest deadline. Quorum was then ordered by the lenders to take control of Affiliated Medical Enterprises, Singleton said.

Meanwhile, Quorum was hired to manage the sale of the five hospitals. It was also given power to control Affiliated Medical Enterprises if the sale could not be completed and the lenders became the owners, Singleton said. By September, Quorum accountants began to be “concerned about the cash situation. It looked more like a company that was getting ready to go into bankruptcy, not out of bankruptcy.”

By the beginning of November, Quorum was given the green light to take over management from Young. On Saturday, Nov. 7, Young was notified that he was out.

“He seemed to be agreeable at the time,” Singleton said. He was supposed to remain at the helm for six months, however, during the transition and the sale of the hospitals to individual buyers.

Pacifica Community Hospital, with about 100 beds, is set to be sold by year’s end. Negotiations are underway for sale of the other hospitals in 1993.

On Nov. 9, when Young and Hume failed to show up for work, Quorum accountants dug deeper, Singleton said. They found out that Young had called his auto leasing company over the weekend and told them to pick up his two late-model Mercedes-Benzes. One was found at Los Angeles International Airport.

Lawyer Crockett said that, within a day or two after Young and Hume disappeared, the accountants found that Young had ordered his daughter to transfer as much as $1.2 million to Hiawatha, also known as Western Enterprises. He also allegedly diverted funds to consultants who were never paid, Crockett said. One consultant who supposedly received $500,000 did not exist.

Singleton said that another $800,000 was wired to a Taiwan bank. In all, about $4 million is missing.

Crockett said that Quorum immediately asked the FBI, the U.S. attorney’s office, the Orange County district attorney’s office and bankruptcy officials to help track down Young and Hume. Before those agencies could turn up anything, he said, an inquiry he made to the U.S. ambassador’s office in China confirmed that Young is there, out of the reach of authorities in California. It is not known if his daughter is with him, Crockett said.

Young is also out of reach of Crockett and the lenders, who will likely get back only $15 million of the $100 million that they loaned to Affiliated Medical Enterprises, Crockett said.

“He used (Affiliated Medical Enterprises) as his own personal cash register and ignored the fact that, once you put the business in bankruptcy, it is the lenders’ money.”