Steward Health Care claims former executives' "greed and bad faith misconduct" led to hospitals chain's bankruptcy

CBS News

3 days ago

Steward Health Care, an embattled hospital chain that has been the focus of federal scrutiny, has filed new court papers blaming the company's financial woes on its founding chief executive. The company alleges that the ex-CEO and three former colleagues misappropriated hundreds of millions of dollars and drove the chain into bankruptcy.
Steward accuses its founder Ralph de la Torre and three others — Michael Callum, James Karam, and Sanjay Shetty — of defrauding the company of more than $245 million.
"Through their greed and bad faith misconduct, [these former insiders] operated Steward with the aim of enriching themselves at the expense of the Company, its creditors, and the patients and communities that Steward served," the new filing alleges. "These insiders pilfered Steward's assets for their own material gain, while leaving the Company and its hospitals perpetually undercapitalized and insolvent."
Once the nation's largest for-profit hospital chain, Steward operated hospitals in Massachusetts, Texas, Florida, Pennsylvania and other states. CBS News found that de la Torre pushed for the company's expansion. By working with a real estate investment firm, Medical Properties Trust, de la Torre helped purchase new medical properties, sell off the real estate, and force the hospitals into costly lease-back arrangements.
A CBS News investigation that spanned nearly two years documented allegations of how private equity investors and de la Torre followed this formula, extracting hundreds of millions of dollars in dividends from the real estate sales, while health care workers and patients struggled to get the life-saving supplies they needed as a result.
Records reviewed by CBS News showed Steward hospitals around the country left a trail of unpaid bills, at times risking a shortage of potentially life-saving supplies. That included a case in a Massachusetts hospital where medical staff says a device that could have stopped the bleeding in a new mother's liver was repossessed by the manufacturer weeks earlier. After being transferred to another hospital, the young woman died just hours after giving birth to her first daughter.
Last August, after filing for bankruptcy, the company sold off six Massachusetts hospitals. The sale of the final two facilities in the state left about 1,200 workers jobless, according to state officials. In a 2024 interview with CBS News, Massachusetts Gov. Maura Healey did not hold back in her assessment of the conduct of Steward executives.
"I'm disgusted. It's selfish. It's greed," she said.
At the time of the patient's death, a spokesperson for Steward told CBS News company executives always put patients first and said they "deny that any other considerations were placed ahead of that guiding principle."
In an earlier statement, the spokesperson said Steward "has actively and meaningfully invested" in its hospital system since its formation, including in Massachusetts, where it took over hospitals that were "failing" and "about to close."
De la Torre also defended the company's actions.
"Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment," de la Torre said in a company statement in 2024.
This week's complaint lists three major transactions that de la Torre and executives allegedly profited from while leaving Steward hospitals struggling for funds to operate.
In January 2021, de la Torre allegedly took a $111 million dividend payout while the company was struggling financially. The former CEO also pocketed $81.5 million according to the complaint. The court filing also lists the former executives who benefited: Callum, who as vice president for physician services at Steward received $10.3 million. Shetty, then-president of Steward Health Care System received $1.8 million and Karam, who remains a member of Steward's board, received $728,456.
The complaint also claims Steward Health Care International, the international arm of Steward that's majority-owned by de la Torre, received $4.3 million of the dividend payout.
Later that year, Steward claims de la Torre overpaid by $200 million for five Miami-based hospitals acquired from Tenet Healthcare Corporation. The complaint alleges the former CEO pushed for the $1.1 billion deal based on his "personal desire to build a hospital empire in the Miami area, rather than on any independent financial analysis."
According to the complaint, de la Torre then sold assets related to Steward's Medicare Advantage business to a company called CareMax in 2022.
Steward, through its physicians organization, allegedly received $60.5 million in cash, while the bulk of the proceeds — almost $134 million in stock of CareMax — ultimately went to a holding company that was majority-owned by de la Torre, Callum, Shetty and Karam. The complaint alleges de la Torre and named board members "sold valuable" assets and "diverted the proceeds to themselves" while the company went insolvent.
"De la Torre, Callum, and Karam were grossly negligent and breached their duties of care, loyalty, and good faith," according to the filing.
CareMax filed for bankruptcy in February.
While Steward's hospitals were struggling, CBS News previously reported on de la Torre's lavish personal spending, including the purchase of a $30 million yacht in 2021, a multimillion-dollar Texas horse ranch in 2022, and two corporate jets valued at $95 million.
Steward Health Care is now being run by a court-appointed administrator and is trying to claw back funds from its former leaders to pay off its creditors.
De la Torre, who founded the company in 2010, is at the center of a federal probe focused on potential fraud, embezzlement and violations of the Foreign Corrupt Practices Act, sources told CBS News. In 2024, he refused to appear before the Senate Health, Education, Labor and Pensions Committee that had been looking into Steward's bankruptcy, despite being issued a subpoena. Senators took the rare step of holding him in contempt for that failure to appear.
In a statement, a spokesperson for de la Torre says the former CEO "disputes the allegations of wrongdoing and will vigorously defend himself against them."