The Carlyle Group & Bush's White House

Two weeks before Hurricane Katrina made landfall on the Gulf Coast, The Carlyle Group purchased LifeCare Hospitals, a long term acute care hospital company. After Katrina struck, LifeCare's New Orleans facility had the highest patient death toll. Patients suffered in horrific conditions for up to five days waiting for rescue.

In front of cameras President Bush asked FEMA Chief Mike Brown about hospital patients the day Katrina struck. The nation watched in horror as words turned into inaction. After the federal government's botched response the President commissioned Frances Townsend to investigate with the intention of performing "an honest" assessment and doing better next time.

The White House Lessons Learned report released in early 2006 had several glaring omissions. First it failed to mention the hospital organizations with the highest patient death toll. Carlyle's LifeCare and Tenet's Memorial Hospital shared the same facility. Second, it made no mention of the trade group that coordinated hospital patient evacuations while FEMA stumbled. The Louisiana Hospital Association worked frantically to mobilize resources to evacuate patients suffering in dead facilities. However, the White House report's most glaring error is it never said whose responsibility it was to evacuate patients in the first place, much less evaluate how they performed their duties. Without this critical information, how can we do better next time?

Fast forward to 2007 as Carlyle's LifeCare tries to defend itself in wrongful death civil lawsuits. How does the federal silence help their case? This comes from LifeCare's annual report to shareholders:

"The company is currently defending itself against a variety of Katrina related lawsuits... We intend to vigorously defend ourselves in these lawsuits"

The same LifeCare annual report says this about their services. "A long term acute care hospital serves patients with serious and complicated illnesses or injuries requiring extended hospitalization. Long term acute care hospitals are specifically designed to accommodate such patients and provide them with a higher level of care than a skilled nursing facility or inpatient rehabilitation facility, each of which is often incapable of treating and delivering the same outcome as a long term acute care hospital."

So what is LifeCare's defense? They contend that as soon as FEMA and the Coast Guard began evacuating people from New Orleans their patients became wards of the federal government. If the evacuation began in earnest on Tuesday, then LifeCare had no obligation to their patients for how many hours or days? Who was responsible for providing that higher level of care LifeCare's patients needed?

This defense is laughable as the feds didn't make evacuating patients from dead hospitals and nursing homes a high priority. The Louisiana Hospital Association and HCA are proof of that. HCA hired medical helicopters to transfer patients from its dead facilities. Why couldn't The Carlyle Group? One might expect a private equity firm with over $50 billion under management to pull off such a feat while the Charity Hospitals of the region have to wait.

Why did the White House Lessons Learned report omit the information needed to paint a clear picture of the evacuation of hospital patients post Katrina? Did they do so as a favor to their private equity friends just down Pennsylvania Avenue? How does the blank slate of the White House Lessons Learned report help them defend their "variety of Katrina related lawsuits."

Just as the little folks suffered after the Exxon Valdez oil spill, the little person will take it on the chin courtesy of the government's incompetence and hand holding of major corporate interests. There's a plan here somewhere. What does it portend for Bush's widespread privitization strategies? The Carlyle Group just announced it intends to gobble up Manor Care, a nursing home chain. Will they do any better with those patients post disaster, man made or natural? Want to bet the Bush Justice Department doesn't even ask the question?

Bush Commutes Scooter's Sentence

BBC's news ticker says "President Bush commutes jail sentence for ex-White House official Lewis Libby". The NY Times reported more details on Bush's effort to "free Scooter". Apparently crime does pay in America.

Now that he's a free man, which private equity firm will employ Scooter? One is badly in need of a White House insider to defend its wrongful death civil lawsuits post Hurricane Katrina. Could Scooter help the Carlyle Group's LifeCare Hospitals with the highest death toll post landfall? Might he help Carlyle's planned acquisition of Manor Care avoid legal levee failures?

Scooter's a hard worker. His only rap is you never know who he's really working for...

Justice Department Should Look Closely at Carlyle, Manor Care Deal

I wrote the Justice Department with my concerns about the Carlyle Group's just announced acquisition of Manor Care, Inc. The text is below:

Dear Justice Department Representative,

My background is hospital administration. Having been through several mergers I have some understanding of what you can and cannot consider. If a sale would jeopardize patient safety, can it be held up?

My concern is The Carlyle Group's acquisition of Manor Care in light of their poor performance keeping patients in another health care subsidiary safe after Hurricane Katrina. Carlyle closed the LifeCare Hospitals deal just weeks before the category 3 storm made landfall.

The news is full of reports of the poor management of patients in both the LifeCare Hospital and Tenet's Memorial Hospital as they shared a building.

Both a doctor and a number of nurses have been charged criminally in the case and numerous civil cases have been brought against Tenet and LifeCare. The Carlyle sub's defense is why serious thought should be given to approving the Manor Care acquisition.

LifeCare claims the federal government became responsible for their patients when President Bush declared the federal disaster. While they may be free to claim this in court in an effort to discard any liability, this should be considered as Carlyle tries to acquire other health care companies housing large numbers of patients.

They proved their inability to keep non credentialed providers away from their patients in Memorial Hospital to the detriment of those in their care. Your office should give this serious thought if it has any review responsibility for the Carlyle Group/Manor Care deal.

A Conspiracy Theorist Couldn't Make This Up

Hospital patients suffered mightily for 5 days in Memorial Hospital's LifeCare Unit after Hurricane Katrina's landfall. As a separate hospital organization LifeCare employed doctors and nurses to care for patients while contracting with Tenet's Memorial for other services. Doctors were credentialed and given specific privileges to provide care for LifeCare's long term acute care patients. Nurses had to meet basic competencies for hire and needed to show on an ongoing basis their ability to perform their duties. None of this went away after Hurricane Katrina struck as both LifeCare and Memorial implemented their disaster plans.

Yet, somehow in the aftermath LifeCare administrators couldn't keep Memorial clinicians away from their patients. A number of patients were reported euthanized and both a doctor and nurses have been criminally charged.

The company would have us believe their legal duty to patients evaporated upon the disaster decree of President Bush and the arrival of FEMA reps in New Orleans. However this unusual defense follows other strange happenings in this case. The most notable is the White House Lessons Learned report's failure to mention the hospital with the highest number of patient deaths post Katrina. Such an obvious omission raised questions in my mind over a year ago, including what benefit might Carlyle get in those wrongful death civil lawsuits from federal silence?

The public heard nothing from crackerjack White House "investigators"on hospital patient evacuations other than a few hero stories. This lack of information grew when a court sealed a settled civil suit between the two hospital companies, LifeCare and Tenet. The two firms divided up responsibility for the aftermath, but the public remains in the dark.

Now Carlyle's ace legal team is trying to move the case to federal court away from any sympathetic jurors. If approved, appeals would lead to the newly business friendly Supreme Court. Are patients like class action shareholders or taxpayers?

If the White House and Carlyle are in cahoots over this case how might it run? First, the feds don't weigh in at all on the Carlyle sub's actions. Check, done that. Second, blame it on the federal government thus increasing the chances of going through friendlier federal courts. Check, done that. Third, have the feds blame state and local authorities for not evacuating patients as required by FEMA. Ditto, completed. Fourth, the federal court throws out the cases or rules against plaintiffs because the federal government is not liable. Fifth, let the process run long enough that all statutes of limitations run.

Three down, two to go. I'm sure a more astute legal mind could add or detract from this scenario. As a hospital administrator who endured for days in a river flooded 725 bed hospital in Virginia and evacuated a Texas Gulf Coast 150 bed facility before then record Hurricane Gilbert, I may empathize with patients and staff enduring in such horrific conditions. I find it hard to round up any compassion for the bureaucrats writing drivel in the Lessons Learned report or for Carlyle's attorneys making up patently ridiculous defenses.

For those watching today's business news, do you want The Carlyle Group owning one of the largest long term care chains in the U.S.? They just signed a deal to acquire Manor Care. Will they do any better post disaster with Manor Care patients than they did with LifeCare's? We already know they claim no liability for the later. Someone should challenge the acquisition on this basis alone...

How Much Did Matteo Fontana Make on His Education Learning Stock?

The news revealed a federal employee in charge of the student loan database owned 10,500 shares of Education Lending Group as of September 2003. It traded at $9.50 a share at the time giving it a value of over $100,000. The question is when did Matteo sell his shares? Did he hold them until February 2005 when ELG was acquired by CIT Group? If so, Mr. Fontana grossed $200,000 on his holdings given CIT's cash purchase price of $19.05 per ELG share.

That's a heckuva investment return for a federal bureaucrat managing a computer database. Now how did he get those shares to begin with? And did the company get preferrential access to potential customers from this arrangement?

Don't count on the Bush administration to come clean or conduct even a cursory examination into the matter. I'm still waiting on why the Bush team completely omitted the hospital with the largest number of patient deaths from its post Hurricane Katrina "Lessons Learned" report. The Carlyle Group likely is most appreciative that Frances Townsend left their newly purchased LifeCare Hospital out of her post mortem on the Bush performance. It's easier to defend their wrongful death civil suits with the feds silent on the matter...

Stilted Age of Neo-Puritan Robber Barons

Exactly when America crossed the line, I can't precisely determine. But two thematic nightmares currently haunt our country. The first involves "goodness" with punishment for those failing to live up to high standards. Guantanamo Bay is the modern day stockade complete with dunking pole.

Did I mention those setting the rules get a free pass? Yes, widespread corruption and illegal behavior by business or governmental leaders results in little more than a hand slap. The Hewlett Packard spying case went from major felonies to misdemeanors, even no charges whatsoever for the Board President. Will an investigation occur for the politically connected firm that sold defective pumps to the Army Corps of Engineers to save New Orleans from a future drowning? The Carlyle Group's LifeCare Hospitals got a free pass in the White House Lessons Learned report despite having the highest patient death total post Katrina.

This leads to the second major specter, the pursuit of rewards at any cost. America worships free markets and profit, well, the more the better. Wall Street investment firms continue to rake in record earnings, big oil not far behind. Money from the modern day robber barons flows to elected officials who in turn, enact policy or legislation favorable to their donors. One only need watch the timing of the AIPAC policy meeting and Congress' dropping any constraints to President Bush's unleashing the dogs of war on Iran.

Of course the two nightmares haunt America simulataneously...