Crozer’s buyer, seller duke it out in $20M dispute
MEDIA COURTHOUSE » Attorneys for the non-profit Crozer-Keystone Health System and CrozerKeystone Community Foundation made their case Wednesday on a petition to recover $20 million they claim is still owed from a sale to for-profit Prospect Medical Holdings Inc. and Prospect Crozer LLC last year.
Rocco P. Imperatrice III, attorney for the plaintiffs, told Delaware County Common Pleas Court Judge Barry C. Dozer that the petition hinges on an agreement in the $300 million sale for payment of an estimated net working capital of $52,996,000 in cash, due at closing on June 30, 2016. As part of the sale, CKHS also consolidated two foundations into CKCF, which would be the ultimate recipient of the proceeds.
Former Crozer board Chairman Bruce Fisher told Imperatrice that Prospect never objected to that figure prior to closing and the agreement governing the sale was never amended to reflect a lower dollar amount, which would have required board approval.
Prospect paid just $20 million at closing, however, due to a cash-shortage issue, said Fisher. He said the board had agreed to accept $20 million at the time of closing with the expectation that the remainder would be paid within 90 days, but that never happened.
Prospect did pay an additional $12.9 million approximately 130 days after closing. Prospect attorney Thomas Musi argued that was a voluntary payment based on a later calculation of the net working capital performed by Prospect.
“At settlement, $20 million was tendered and $20 million was accepted for the capital account and the transaction closed,” said Musi in opening remarks. “That’s the bottom line.”
But John Washlick, the health care transaction attorney who helped facilitate the sale for Crozer, said he had no recollection of the board agreeing to accept only $20 million and there is no record of that figure as the final sale price.
Washlick did acknowledge on cross examination that the agreement indicated the buyer would pay to the seller “the estimated purchase price at time of closing” and that there was no provision for an additional payment later on.
Former Chief Executive Officer Joan Rivers testified Ryan and Fischer told her a portion of
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