Durbin, Warren, Lawmakeers Call on Corizon Health, INC. to Answer for Use of 'Texas Two-Step,' Evasion of Liability By Abusing Bankruptcy System
“The bankruptcy system has many aims, but it was not designed to provide an avenue for companies to evade accountability for wrongdoing” Corizon has positioned itself “to pay pennies on the dollar to claimants that deserve recompense for poor health outcomes and unpaid debts”
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, and U.S. Senator Elizabeth Warren (D-MA), along with U.S. Senators Mazie Hirono (D-HI), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Ron Wyden (D-OR), Bernie Sanders (I-VT), Peter Welch (D-VT), and Cory Booker (D-NJ), today sent a letter to Corizon Health, Inc.-affiliated companies Tehum Care Services, Inc. and YesCare Corporation (together, “Corizon”), condemning Corizon’s use of the Texas Two-Step maneuver to evade liability after years of wrongdoing, and requesting greater transparency in the company’s bankruptcy and settlement negotiations.
“We urge you to use the full financial capabilities of YesCare, Tehum, and any other entities as appropriate, to provide full relief for meritorious claims against Corizon by all incarcerated people, their families, former employees, and third-party medical providers — notwithstanding your attempts to circumvent these claims through the bankruptcy process,” wrote the lawmakers.
Corizon, one of the largest providers of prison health care services in the country, is facing an onslaught of serious claims, including malpractice, patient neglect, and contractual claims. Thousands of victims have filed lawsuits against the company, detailing often life-or-death circumstances where Corizon failed to attend to the care and safety of its patients.
“Rather than facing victims and their families in court, Corizon attempted to shield itself by employing the so-called ‘Texas Two-Step,’ a maneuver through which companies leverage bankruptcy proceedings to attempt to evade liability and, as characterized by Tehum Director Isaac Lefkowitz, ‘force plaintiffs into accepting lower settlements,’” wrote the lawmakers.
Corizon carried out this evasive maneuver in 2022 by changing the incorporation of the company from Delaware to Texas and then splitting it in two, creating YesCare and Tehum. YesCare was given Corizon’s assets and revenue, while Tehum received the company’s liabilities. Tehum, essentially a shell company, filed forChapter 11 bankruptcy protection earlier this year, “attempting to dispose of claims by victims and families as well as contractual claims by former employees and contractors alleging failure by Corizon to satisfy their agreements.” The companies have attempted to extend bankruptcy protections to the non-bankrupt entity YesCare, sheltering its assets from victims and freezing litigation against it.
“Your company has taken this abusive strategy a step farther — using it not only to escape tort lawsuits, but also to avoid paying your bills for tens of millions of dollars’ worth of goods and services provided to Corizon by hospitals, small businesses, and your own former employees,” wrote the lawmakers.
In addition to their serious concern with Corizon’s abuse of the system and the detrimental effect it will have on claimants, the lawmakers also requested that YesCare and Tehum answer questions regarding: the nature of their corporate structure and Lefkowitz’s role in the companies; Corizon’s split into YesCare and Tehum; which claims against Corizon and related companies would be affected by the bankruptcy filing; and the companies’ behavior during the bankruptcy, particularly given the secret romantic relationship between the attorney representing YesCare during the bankruptcy plan negotiations and the judge mediating the negotiations.
“This misuse of the bankruptcy system is unacceptable, and we are concerned that it may result in the denial of hundreds of claims stemming from the substandard care incarcerated people have received under Corizon’s watch,” concluded the lawmakers.
A copy of the letter is available here.
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