Steward Health Care is gearing up to claw back money that its current owners claim former investors and then-CEO Dr. Ralph de la Torre siphoned out of the company in the years leading up to its disastrous 2024 collapse.
In a filing with federal bankruptcy court on Friday, internal investigators for Steward Health Care flagged potentially fraudulent transactions involving the Dallas-based company’s previous private equity owner, Cerberus Capital Management, and payouts to de la Torre and other former executives.
While preliminary, the filing sets the stage for bankruptcy trustees to sue de la Torre and others to pay back any ill-gotten gains, and it comes as they seek to develop a plan to pay back the large number of creditors still owed money.
The report’s findings are consistent with reporting by the Globe, which detailed the cozy relationship between Steward and its landlord, Medical Properties Trust, that many experts likened to a Ponzi scheme. Members of Congress have previously criticized the millions of dollars private equity owners took out from the system even as it staggered to insolvency.
The clawback effort comes after years of self-enrichment by Steward’s corporate owners, leading to unpaid bills and substandard care that contributed to the deaths of at least 15 patients, Globe reporting has found.
In the aftermath of the financial fallout and patient problems, all of Steward’s hospitals across the country have been sold to new owners and two of its hospitals in Massachusetts have closed.
Friday’s filing stems from an internal investigation launched by a special committee of Steward’s board members, and pointed to nearly $800 million in previously disclosed payouts made to Cerberus, de la Torre, and others after the firm and hospital group sold Steward’s real estate to MPT in 2016.
Investigators also flagged the previously disclosed $111 million distribution paid to corporate insiders and MPT in 2021, saying it came after de la Torre amended the system’s governing documents to unilaterally pay himself the distribution.
In his report, Alan Carr, a member of the internal investigative committee, said both distributions were fraudulent.
In a statement, Medical Properties Trust said the settlement it signed with Steward in September, which was approved by the bankruptcy court, released it from any claims recently identified.
“The release followed a broad investigation by Steward and its creditors in which MPT fully cooperated by providing large volumes of documents as well as testimony,“ MPT said in a statement. ”While the relevant claims may be pursued against other parties, any released claims against MPT would be entirely baseless given MPT’s financial support for Steward over many years.”
The investigation, which has been underway since December 2023, involved the review of hundreds of thousands of documents and emails, interviews of directors and employees, and various other analyses, the filing said.
Though the filing sets the stage for potential clawbacks, it is no guarantee all that money will be recouped. To claw back money from insiders in this fashion, bankruptcy experts say, the claim would likely have to prove Steward was insolvent at the time the transactions occurred.
There’s also a time element. One Massachusetts bankruptcy attorney, who asked not to be named because he is actively involved in the Steward case, said some states allow clawbacks of transactions up to four years prior to a bankruptcy filing. Cerberus’ 2016 distribution may fall outside that window.
Investigators questioned a number of key moments on Steward’s corporate timeline, including the way executives used its medical malpractice insurer, TRACO. As the Globe previously reported, executives treated TRACO like a piggy bank, pulling cash from it and depleting the assets meant to cover claims of medical harm.
TRACO is currently being managed by three former board members: de la Torre, Dr. Michael Callum, and Ruben King-Shaw — who previously were all officers or directors at Steward. According to the investigation, the actions involving TRACO amount to breach of fiduciary duties of care.
“The conduct of TRACO’s directors and officers resulted in significant harm to the (Steward’s) Estates,” the report said.
The investigation also examined the distribution of $194 million from the 2022 sale of part of Steward’s business to CareMax. As part of that deal, de la Torre received $99 million in CareMax stock, Callum received $11.8 million, and Dr. Sanjay Shetty received approximately $2.8 million.
“Through the CareMax transaction, Dr. de la Torre orchestrated the sale of valuable assets of the Debtors and then effectively issued to himself and other insiders most of the proceeds of that sale in the form of CareMax stock, all while the Debtors were insolvent,” the filing said.
Investigators also pointed at the personal use of company assets, including $14.5 million in payments related to planes used by de la Torre and family members, and a $2.5 million donation in 2023 to the private school that de la Torre’s sons attend.
The findings also propose releasing a number of individuals from potential suits, including Steward’s former chief medical officer, Dr. Joseph Weinstein, Dr. Octavio Diaz, who led its Massachusetts operations, and Nathalie Hibble, deputy general counsel of Steward Health Care.
The investigation also did not uncover any wrongdoing by several board members, releasing retired General H.R. McMaster and former House Speaker John Boehner from liability. While the board approved Steward’s vision for years, the investigation said none of the members were involved in operations of the hospital and relied on presentations given to them.
Beyond clawbacks of funds from corporate insiders, Steward has already sent demands to 495 vendors seeking a total of $250 million, and started lawsuits against 174 vendors covering $51 million. Steward said in the filing that it would commence another 150 to 180 clawbacks for another $196 million in the coming weeks.
The strategy had already already started to pay off. Steward has settled 126 claims and suits for approximately $6.5 million.
As part of other recoveries, Steward is seeking $589 million in damages as part of a lawsuit with property insurers over disputes involving Norwood Hospital. The hospital closed after catastrophic flooding in 2020, and Steward subsequently sued its insurers, saying they didn’t properly adjust their insurance claim. The case is set for trial in January 2026.
Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her @ByJessBartlett.