State asks court to OK plan to sell HMO PrimeHealth Corp.

Original owners question validity of transaction

May 03, 2000|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

Maryland insurance officials are asking a Circuit Court judge to approve a plan to sell embattled HMO PrimeHealth Corp. to a physicians group for $2 million, but they refuse to disclose whether it was the highest bid.

The plan to sell PrimeHealth to Universal Health Plan Inc. of Lanham was filed yesterday in Baltimore Circuit Court by attorneys for state Insurance Commissioner Steven B. Larsen.

Before Larsen's plan was filed yesterday, attorneys for the original owners of PrimeHealth filed a motion seeking an injunction to block the sale, contending that the state seizure of the health care company in fall 1998 was unjustified.

"There is no evidence PrimeHealth was insolvent," said a spokesman for Goldmark Friendship, the company that formed PrimeHealth. "The question is: `What are they trying to hide?' " he said, calling data released by state officials "insufficient."

Under the proposal, PrimeHealth's creditors, who originally claimed they were owed about $21 million, would likely share a payment of about $5.5 million.

State Deputy Insurance Commissioner Dennis W. Carroll said the exact amount creditors receive would depend on a series of payments due to PrimeHealth from the state and other sources. Carroll said an audit whittled creditors' claims to a little more than $9 million.

The deputy commissioner declined to disclose whether Universal's bid was the highest or to provide details of other bids. At least one other company, Maryland Physicians Care, submitted a bid.

In the court filings, attorneys for Larsen said they had concluded that the sale to Universal was "fair and equitable and in the best interests" of all parties.

PrimeHealth, a Lanham-based health care company serving more than 15,000 Maryland welfare recipients, was placed in receivership in 1998 after a series of investigations of then-state Sen. Larry Young and his relationship with the business. The West Baltimore Democrat was expelled from the General Assembly on ethics charges, but was later acquitted of bribery and extortion.

Universal's initial application to operate an HMO was rejected, but it would take over PrimeHealth's license under the terms of the current proposal.

State records show that 550,000 shares of Universal Health were pledged as collateral for a loan from Newcourt Financial USA in August. The loan, records show, was taken out by Universal Health Equity LLC, a corporation formed by some of the investors in Universal Health.

State officials said they were unaware of the stock pledge, but said financing and other related issues would be addressed now that the reorganization plan has been filed. Richard Slater, a consultant for Universal, said he was unaware of the details of the loan or its current status.

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