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Thursday, June 1, 2023

Hospital Shareholders at Odds

On Monday, the lobby of Hospital CIMA San José, a massive private health-care facility in the western San José suburb Escazú, bustled with visitors and staff members moving to and fro. Outside, construction workers toiled to build two new medical towers that will house hundreds more doctors’ offices.

Everything seemed up to par for an institution that, according to CEO Carole Veloso, is preparing for “playing at a world level.”

Just two months earlier, however, a raid by officials of the Judicial Investigation Police (OIJ) had onlookers filling the same lobby with rumors and uncertainty about the hospital’s future – uncertainty Veloso is eager to dispel. The OIJ agents who visited the site Nov. 26 were collecting information regarding complaints that Consorcio Hospitalario Internacional, S.A. (CHI), the majority shareholder in CIMA, and minority shareholder Grupo Promotor Hospital San José, S.A. (GP), have filed against each other.

It’s a bi-national legal battle that officially began last year, though it has its roots in the early years of the two companies’ collaboration to build CIMA, according to CHI lawyer Alfredo Pizarro. When, in 2006, GP filed a criminal complaint against Consorcio Hospitalario before the Costa Rican Prosecutor’s Office, CHI staff members reviewed old records and discovered what they claim are irregularities, Pizarro said.

Now, not only has Consorcio Hospitalario filed a complaint against Grupo Promotor in Costa Rica, but the Dallas-based International Hospital Corporation, which owns CHI, is also suing GP in U.S. district court alleging mismanagement, embezzlement, sexual harassment and defamation.

The Tico Times was unable to speak with Grupo Promotor representatives this week. After calling Grupo Promotor members listed in a copy of the U.S. lawsuit provided by the Northern District of Texas, Dallas Division, The Tico Times spoke with one of the people accused of defamation in the U.S. suit; but he told The Tico Times to contact GP lawyer Jonathan Picado, who did not return phone calls by press time.

The company does not appear to be listed in national telephone directories, and a visit to the Grupo Promotor business address listed in the lawsuit – which turned out to be the office of lawyer Harry Carranza, who said he once advised GP but has no idea how to contact the company now – was fruitless. The Tico Times requested information about the complaints from the Judicial Branch, but did not receive a response by press time.

Veloso claims that Grupo Promotor – which once had a 100% stock in the hospital but gradually sold its shares and now has less than 1% – is trying to regain control of the hospital, which has become more successful since CHI took over its operations in 2002.

“They (made) the first punch, which has caused a whole chain of events,” she told The Tico Times this week. “We feel GP is interested in the hospital because of (its recent success)… in the past four or five years when the

hospital could have used an influx of funds or support from them, they weren’t interested.”

A Troubled Partnership

According to Pizarro, Grupo Promotor – which the U.S. suit states “originally conceived the need for a hospital in the region” – began selling stock in 1996 to raise capital for what would become Hospital CIMA.

With the funds, the company purchased the land on which the hospital is now situated. In 1997, CHI purchased 25% of the stock from Grupo Promotor for $4 million, with the understanding that GP had paid an equal amount for the land in Escazú.

According to the U.S. suit, construction began in 1997, overseen by Alvaro Monge, a member of the GP Board of Directors. The hospital opened in 2000 under the direction of another GP board member, Francisco González. However, the hospital was losing money, and CHI negotiated favorable composition of the board of directors, then named Alfonso Chapa as the new CEO, the document states. Following the staffing change, the hospital’s annual revenues increased by 76%.

Attorney Pizarro said improvement has continued, and CIMA cut a profit for the first time in 2006.

“It’s been a steady change since 2002,” Veloso said.

Also in 2006, however, GP filed suit against CHI, prompting the now-majority shareholder to review Hospital CIMA’s records, according to Pizarro.

They found, among other irregularities, that Grupo Promotor had paid approximately $2 million for the hospital land, not $4 million or more as originally indicated, according to Veloso.

“The accounting records were altered,” Pizarro alleged.

Reviewing the records also showed that during construction, the hospital paid drastically inflated prices for services, Veloso said. The U.S. suit claims that Monge, the construction director from GP, overpaid contractors and subcontractors “in exchange for kickbacks, purchasing equipment and supplies through related party companies, and general incompetence result(ing) in cost of construction exceeding the budget by $5 million.”

Another alleged irregularity deals with Grupo Promotor’s subsequent sale of stock.

Veloso said that following “an agreement at which GP bought stock and then was supposed to be selling it,” GP sold the stock for “hugely inflated prices” of as much as $2,500, rather than the $1,000 value – which CHI discovered only when disgruntled purchasers complained, the U.S. court documents state.

Pizarro said that while this isn’t illegal in Costa Rica, since Hospital CIMA is not registered in the National Stock Exchange, “of course it’s unethical.”

Finally, the U.S. lawsuit accuses former hospital director González of mismanagement, embezzlement and sexual harassment of hospital employees. It alleges that he received kickbacks from suppliers after paying them well above market rates.

The Tico Times attempted to contact Monge, González and Carlos Alberto Alvarado, listed in the lawsuit as Grupo Promotor’s former president. No numbers were listed for the latter two, while the person who answered the call at the listing for Monge said it was a wrong number.

Two Companies, Three Suits

Why suits in both Costa Rica and Texas? According to Veloso, the reason is that during the early years of the two companies’ collaboration, many of the meetings and agreements took place at Dallas, home of the International Hospital Corporation.

Alleged irregularities stemming from those meetings are included in the U.S. case, while alleged irregularities taking place in Costa Rica are part of the suit before the Prosecutor’s Office.

Hugh Hackney, the Dallas lawyer representing IHC in the Texas suit, had previously spoke briefly with The Tico Times about the suit, but did not return recent phone calls requesting further details.

Veloso called what she says are Grupo Promotor’s aspirations to regaining control of the hospital “a pipe dream” and said her priority in all of this is to reassure patients that the dispute has not, and will not, affect patient care.

“We’re still operating, and growing,” she said.



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