Hidden investors took over Corizon Health, a leading prison healthcare company. Then they deployed the Texas Two-Step.
The next day Garcia collapsed again. "Help me!" he yelled, describing his pain as a 10 out of 10. Video footage obtained by Insider shows him wriggling on the ground in agony before corrections officers and medical staff assist him into a wheelchair.
The nurse practitioner on duty that day was employed by Corizon Health, Inc., one of the nation's largest private prison healthcare providers.
She examined Garcia for five minutes and attributed his symptoms to constipation, even though, as a lawsuit later filed by the family alleges, he had a history of peptic ulcers and had been at the jail multiple times. Later that day, medical records show, the nurse noted that his abdomen was distended, that he was in severe pain, and that he was vomiting a dark brown or orange bile substance, a possible sign of internal bleeding. Instead of sending Garcia to the hospital, medical staff suggested that he be placed in an observation cell in the facility's Medical Housing Area. There, he succumbed to hallucinations.
Early the following morning, Corizon staff finally sent Garcia to the hospital. Even then, they didn't call an ambulance but instead loaded him into a security van. Bryan Baker, who was named director of the jail a year after Garcia's death, said all decisions related to the use of ambulances are handled by medical staff — who, at Doña Ana, are employed by Corizon.
Sometime during that ride, shackled in the back seat, Garcia went into cardiac arrest, according to medical records and the civil complaint. The next day, he was dead.
Garcia's family filed their lawsuit in 2021, joining what, as of July, was at least 475 active suits alleging medical negligence over Corizon's provision of healthcare at jails and prisons across the country. But the Garcias' lawsuit and all the others have now been stayed, as the company split and filed for bankruptcy in a controversial maneuver designed to wall off its assets from such claims. The bankruptcy has also stayed claims against some codefendants.
If Corizon prevails, the malpractice suits against the company could be settled for pennies on the dollar, along with 44 employment-law suits over allegations including discrimination, wage theft, and wrongful termination, and at least $88 million in claims such as unpaid invoices from medical providers, according to bankruptcy filings.
The jilted vendors include the University of Missouri Health Care system and a local hospital, which claim the company owes them $12 million in unpaid invoices for providing prisoners with hospital care, and the Arizona Department of Corrections, Rehabilitation, and Reentry, which says it's spent up to $2 million on legal costs defending lawsuits the department claims Corizon should have handled.
The cast of characters behind the bankruptcy stretches from Houston to the exurbs of New York's Rockland County, sweeping up a hedge fund debt specialist and a group of closely connected Orthodox Jewish business partners, who have left a trail of lawsuits and bankruptcies in their wake.
The tactic they deployed with Corizon has been dubbed the Texas Two-Step.
Johnson & Johnson deployed the novel tactic two years ago in an attempt to minimize a wave of costly legal claims that its talcum powder caused cancer. The Two-Step involves splitting a company into parts — one with most of the assets and the other with the bulk of the liabilities — and then filing the debt-laden company into bankruptcy. J&J's bankruptcy was shot down this year by a federal court. For now, the legitimacy of the Two-Step remains an open question. No court has clearly established its legality.
In Corizon's case, a group of investors bought out the company in 2021 and within months created a new company called YesCare, home to most of Corizon's valuable assets — including hundreds of millions of dollars in taxpayer-funded contracts with prisons and jails. The liability-laden Corizon was renamed Tehum and, in February of this year, filed for bankruptcy.
Tehum has transferred tens of millions of dollars to entities some of its investors control, according to a financial statement the company filed in the bankruptcy case.
"It's outrageous that investors' profits could have greater legal protections than incarcerated patients and their families," Sen. Elizabeth Warren, who sits on the Senate Banking Committee, said in a statement to Insider. "I've been fighting in the Senate to close the Texas Two Step loophole and this legal maneuver should be an alarming red flag."
The goal of Corizon's Two-Step may have been laid bare in a recent civil complaint. It describes an alleged meeting in which a Tehum director, a man named Isaac Lefkowitz, says the Texas Two-Step can be used to "force plaintiffs into accepting lower settlements."
A former Corizon CEO, James Hyman, who sued YesCare over his 2021 ouster from the company, describes the planned Two-Step in his lawsuit as "an old-fashioned bankruptcy fraud scheme."
YesCare, in a March filing, denied the claim of fraud.
It's taken relentless questioning by civil-rights attorneys representing incarcerated people and their families, like the Garcias, to partially uncover the identities of Corizon's new owners. And their identities still have not been disclosed to state and county agencies that have signed seven-, eight-, or nine-figure contracts for the company's healthcare services.
Through leaked documents, business filings, public-records requests, voluminous court filings, and interviews with inside sources, Insider has been able to identify many of the players who led Corizon into the Two-Step. Three of them have had leadership roles in companies on both sides of the Two-Step.
In taking over and restructuring Corizon, they have extended that strategy to something as sensitive as the life or death of prisoners — a unique set of patients who have no ability to seek second opinions or outside care.
In June, several creditors filed a motion asking the court to appoint an independent trustee, arguing that Corizon and Tehum had engaged in self-dealing tantamount to a "fraudulent transfer" of assets outside the reach of creditors. And Insider has uncovered indications that Lefkowitz, the Tehum director, may have made at least one false representation under oath during a creditor call.
Under federal law, a bankruptcy judge may respond to evidence of self-dealing or perjury by appointing a trustee to take control of the bankrupt company, bankruptcy experts told Insider.
If successful, Corizon's Two-Step would avoid a much wider range of liabilities than previous companies who've used it — not just injury lawsuits, like J&J, but the routine debts to vendors that companies rack up every day. If the company succeeds, it provides a "roadmap for eliminating virtually any unsecured liability owed by any corporate entity, regardless of whether that entity is solvent," Ian Cross, a Michigan civil-rights attorney who represents multiple prisoners who have sued Corizon, wrote in a procedural objection in April.
"People wouldn't for a minute accept it if they understood it," Lynn LoPucki, a corporate-law professor at the University of Florida, said of the divisional merger law that makes the Two-Step possible.
"If this law is read literally and people take advantage of it, it will completely change the American economy."
A deadly six-day sentence
The quality of Corizon's care has been a subject of contention for many years. Corizon contracts were canceled in Virginia and New York in the wake of prisoner deaths. Multiple localities have investigated Corizon, finding care deficiencies in Oregon and hiring standards in New York so lax that "serious red flags" were missed. And thousands of prisoners or their families have filed lawsuits over the years alleging that medical neglect by Corizon harmed or killed them, some resulting in massive judgments.
Tracey Grissom filed a complaint in 2019 saying she was forced to live in her own feces for four months after Corizon contractors at the Alabama prison where she was held failed to provide a properly fitted ostomy bag. Adree Edmo, a transgender prisoner, filed a claim in 2017 saying she attempted suicide after Corizon providers in an Idaho prison denied her gender-affirming care. William Kelly, one of Cross' clients, struggles with constant pain from kidney cancer that progressed from stage 1 to stage 4 while he was incarcerated in Michigan prisons.
There, he said in a 2022 civil complaint, Corizon failed to provide appropriate treatment. "I was deteriorating fast and I was really weak. I knew something was wrong, was extremely wrong with me," Kelly told Insider. "But they don't give you any kind of understanding of what's going on with you."
Corizon disputed all three claims in court. All are now stayed.
For Garcia, 55, a few days under Corizon's care at the detention facility in New Mexico proved fatal.
Garcia always stood out in his family as a kid, with his dirty blond hair and a wide smile. He was an avid basketball player who also had a knack for the arts, and in his late teens he found work at a local bakery, where he whipped up fresh, sugary doughnuts and pastries he'd bring home to his family.
As Garcia and his wife built their family, it also became clear that he was struggling with drug addiction, something family members said had landed him in jail and prison countless times over the years.
When Garcia saw two of his sons for what would ultimately be the last time in August of 2019, he had just been released from jail. He walked a mile to the home of his son Hector Garcia Jr. to say how sorry he was.
For two hours that day, Garcia sat down over pizza with Hector Jr. and his younger brother Ricky as he apologized for his years of addiction and the ways it had disrupted their lives. When Hector Jr. dropped his dad at his grandma's house that evening, Garcia said that he loved him.
When Garcia's family heard that he was back, three weeks later, at the Doña Ana County Detention Center, they didn't think much of it. One of his friends was pulled over while driving and, during the stop, law-enforcement officers discovered that Garcia, in the passenger's seat, had an outstanding warrant stemming from a shoplifting charge. Unable to afford the $242 fine, he was booked for a six-day sentence.
"We figured he's going to stay there for a few days and pay his fine," said his sister, Belen Lowery, "because he wasn't going to ask us for money." That weekend she bought a futon for her brother so he'd have a place to sleep in their mother's new house following his release.
He never got to sleep on it.
Hector Jr. will never forget finding his spirited father unconscious in a hospital bed, hooked up to multiple tubes. He died a couple of hours later.
As Hector Jr. was absorbing the news, he said, a hospital nurse approached him to say she found the detention center's treatment of his father suspicious and suggested that the family hire a lawyer. Two years later, he filed a lawsuit on behalf of the family against Corizon, the warden, and other defendants claiming that medical workers employed by Corizon had violated Garcia's Eighth Amendment rights by denying him adequate medical care.
Lawsuits against prisons and jails are extremely difficult to win, but, in this case, the family's attorney, Matt Coyte, thought he had an ironclad case. Medical personnel had admitted in depositions that they violated standard of care when treating Garcia, and Coyte had obtained surveillance video that he said documented extreme forms of medical negligence. Corizon has denied the Garcias' allegations. But Coyte told Insider he expected to win millions of dollars in damages at an August trial.
Just six months before the Garcia family was scheduled to have their day in court, Corizon filed for bankruptcy. Their lawsuit, along with hundreds of others, was indefinitely stayed.
A debt specialist is put in charge of prisoner care
Healthcare in correctional institutions began to be widely outsourced and privatized in the 1980s. In recent years the field has been dominated by a few major firms, Corizon among them. Founded in 1978 as Prison Health Services, Inc., the company changed its name to Corizon in 2011 after merging with a competitor, making it the country's largest private prison healthcare provider.In 2013, Corizon told a Florida news outlet the company had been a defendant in 660 malpractice lawsuits over the previous five years. In 2015, Corizon lost a $154 million contract with New York City; four years later it lost a $200 million contract with Arizona. A New York state panel found Corizon's treatment "so incompetent and inadequate as to shock the conscience."
The revenue instability resulted in a series of ownership changes.
As of 2014, Corizon had 14,000 employees, and the company brought in $1.5 billion the following year. But by June 2020, payroll had dropped to 5,000 employees responsible for annual revenue of about $800 million, according to a Nashville business journal. That's when investment firm BlueMountain Capital Management sold Corizon for an undisclosed sum to a small Florida investor called Flacks Group. In late 2021 the company lost its two largest remaining contracts, with corrections departments in Michigan and Missouri, worth more than $400 million in annual revenue. Revenue would shrink to roughly $600 million that year, and keep falling.
In December 2021, Flacks Group offloaded Corizon to the unidentified buyers who would execute the Texas Two-Step. Even Hyman, then Corizon's CEO, didn't know who the buyers were, according to the lawsuit he filed against YesCare and other parties over his severance; the lawsuit was dismissed in July. He refers to them in the suit as "one or more persons or entities whose identities are unknown" and the "unknown buyer."
Either sale could have been a chance to turn the beleaguered correctional healthcare company around and provide quality care to its tens of thousands of incarcerated patients. (As of January, according to a YesCare slide deck, the company provided care to 72,000 prisoners nationwide.)
But instead of bringing on an experienced healthcare administrator to clean up the delivery of care, the new owners hired a distressed-debt specialist named Sara Tirschwell with a background in turning around troubled businesses.
Once registered in Texas, Tirschwell and the new owners split the company in two. One company, called Tehum Care Services, Inc., they saddled with liabilities and eventually filed into bankruptcy. The other, called CHS TX, Inc., got the old Corizon's C-suite and more than $300 million in public contracts. It would conduct business under the name YesCare.
Tirschwell was named CEO of YesCare, where she quickly got to work reaching out to the state and county agencies whose contracts with Corizon had suddenly moved to the new company.
YesCare did not respond to detailed queries. Jason S. Brookner, an attorney for Tehum, provided a brief statement. "We are proceeding with court-ordered mediation," he said, "where substantially all of these issues will be addressed. We have no further comment."
A mysterious 'healthcare conglomerate'
Okaloosa County, a midsize county in Florida's panhandle, has been working with Corizon for decades. In May 2022, the director of corrections there received an email from a Corizon staffer sharing an announcement from Tirschwell that described YesCare as a new partnership."Monday morning, we will be announcing that the dedicated employees of Corizon Health have teamed up with a healthcare conglomerate to create YesCare, launching our new vision for correctional healthcare nationwide," she wrote.
But she left the agencies in the dark about who, exactly, they were now doing business with.
YesCare Holdings LLC — the majority owner of YesCare's parent company — had been set up only two days before the email was sent. The message didn't name the "healthcare conglomerate," and two contracting agencies, including Doña Ana County, told Insider they were not made aware of the conglomerate's identity.
Subsequent emails mention the new ownership. But in referencing a "Corizon rebranding" and "our announcement on our name change," YesCare employees led Okaloosa officials to believe the change was a rebrand, not a change in ownership.
At one point, Okaloosa officials expressed confusion. The name "YesCare" didn't show up in the state's online business portal — an indication that it wasn't registered to do business in Florida.
"Can you please take care of that and provide me an email confirmation when complete?" a senior contracts and lease coordinator for the county emailed the YesCare staffer.
"We will address," the YesCare staffer replied. "Many thanks."
Nick Tomecek, a spokesperson for Okaloosa County, told Insider in a statement that despite any organization changes, "we have the same staff and providers that we have worked with for years" and their contract was subject to "meticulous scrutiny" and "protects the County's interests."
Similar communications mentioning a name change went out to other public agencies that were doing business with Corizon, such as the Wyoming Department of Corrections and counties in Florida and New Mexico. But experts said the divisional merger signaled a change in control that should have triggered more robust disclosure.
"If you've made differences in arrangements that go to the concept of 'Who am I working with on this contract?' then that's not a name change," Christopher Atkinson, an associate professor in the public-administration program at the University of West Florida, told Insider.
Insider obtained contracts or correspondence from 19 county and state agencies with an active Corizon contract that moved over to YesCare. At least four contracts, all in Florida, specify that the agency can immediately terminate if the company files for bankruptcy.
Yet some public officials running agencies with multimillion-dollar Corizon contracts weren't aware at the time that an ownership change had taken place — or that one Corizon entity, renamed Tehum, later filed for bankruptcy.
In June 2022, for example, a month after the divisional merger, a Wyoming Department of Corrections contract manager, Wendy McGee, was still under the impression that Corizon had simply changed its name. She had no idea then that YesCare was a new company, according to her response to an Insider records request.
The agency had agreed just a year earlier to a two-year, $33 million contract with Corizon. McGee said in April that the company had yet to alert her about its February bankruptcy filing. She found out by reading an article online.
While Wyoming's 2021 contract with Corizon requires the company to provide notice of any "sale, transfer, merger, or consolidation of assets," an agency spokesperson, Stephanie Kiger, said in a statement that there was "no way for the department to enforce that prior to a sale or transfer being completed."
"Terminating the contract would have resulted in a large gap in necessary medical services for WDOC inmates," she said.
In other words, there was no plan B for providing prisoners with medical care.
She said Wyoming was rebidding the medical contract this month.
Public officials in two other states told Insider that substantial contracts with YesCare would not be renewed — one for $3.6 million in Shawnee County, Kansas, and another for $14.5 million in Bernalillo County, New Mexico.
Bryan Baker, the current director of the Doña Ana County Detention Center, where Corizon was responsible for Garcia's care in the days before his death, also received a June 2022 email from YesCare. That email, from YesCare's vice president of operations, said YesCare had acquired all the active business of Corizon — and said no additional agency steps were required.
"Because CHS was split from Corizon through a merger transaction, your contract has not been assigned or transferred and no other action with respect to the contract is necessary," she wrote.
Anita Skipper, a spokesperson for Doña Ana County, said the county discussed the change and determined that "the contracted services being provided and the Corizon staff providing the services were not changing, for the County's purpose the only change is their name."
Insider obtained another document through a public records request, a proposal that YesCare submitted last year to the Alabama Department of Corrections in an effort to win a multiyear contract. In the 736-page document, YesCare relies on Corizon's "years of experience" in correctional healthcare to prove its bona fides, noting that the company "includes most of the former Corizon Health employees" and "holds the former Corizon Health correctional health contracts."
It's a 180 from the stance that YesCare has taken in court, where the company has insisted on "corporate separateness" from Corizon, rebranded as Tehum.
Atkinson, the University of West Florida public-policy expert, finds that troubling. "It sounds like for certain purposes they're a different company, and for other purposes they're the same company," he said. "They can't have it both ways."
And if YesCare and Corizon are effectively the same company, then why should YesCare's assets be off limits to prisoners and their families?
A director is evasive under oath
On May 12, more than a dozen people dialed into a conference call hosted by the US Trustee's office, which is overseeing the Corizon bankruptcy. It was one of a series of so-called 341 meetings — a chance for creditors owed money by a bankrupt company to get their questions answered. Representing Tehum, the company now saddled with Corizon's debts, were the chief restructuring officer and Tehum's director, Isaac Lefkowitz, who would speak under oath.Civil rights and bankruptcy attorneys, lawyers for a committee of the unsecured creditors, including the University of Missouri, and two Insider reporters were on the three-hour call, as Lefkowitz explained why bankruptcy was Corizon's best option.
Before entering correctional healthcare, Lefkowitz dabbled over the decades in real estate, oncology, medical practice management — even the sale of mixed nuts. In many business endeavors, records show, he has been sued; he also once landed in trouble with regulators. He's been involved in at least six bankruptcies — including four as an owner or manager — and has also been accused in court filings of fraud or bad-faith conduct on multiple occasions that have resulted in settlements. A brief filed in the bankruptcy case describes Lefkowitz as a "prolific filer of Chapter 11 petitions" who often leverages the bankruptcy process to "avoid unsatisfactory outcomes."
He was once sued by the son of a close friend, who claimed in a lawsuit that Lefkowitz swindled the son's late father out of millions of dollars while advising on his US real-estate portfolio. The son, Simche Steinberger, told Insider that Lefkowitz showed off his wealth like "the Queen of England" and convinced Steinberger's dad he'd be lucky to invest. Lefkowitz and the father shared "unconditional trust," the complaint said, as "they knew and socialized with each other and came from an extraordinarily insular and exceptionally close-knit religious community." The complaint also accuses Lefkowitz of fraud, deceit, embezzlement, and purloining funds. "This guy's a crook," Steinberger said. "He knows how to play around with laws." The case was dismissed for lack of standing.
Michael Flacks, the chairman and CEO of Flacks Group, which sold Corizon to the new buyers, confirmed that Lefkowitz has enjoyed a lavish lifestyle, telling Insider Lefkowitz has vacationed for years on Fisher Island, an exclusive Florida island that is home to the country's richest ZIP code.
Lefkowitz appears to have had no previous experience with prisons and jails before landing director roles first at Corizon and then at Tehum and YesCare. He's also a director for a company called M2 HoldCo, the company that owns Tehum, and M2 LoanCo, which put more than $39 million into Tehum — under the condition, awaiting court approval, that Tehum not seek funds from YesCare to pay its creditors.
During the May creditors meeting, Lefkowitz couldn't answer such basic questions as why he changed Corizon's name to Tehum, and he casually informed attendees that the company's records — potentially including thousands of pages of prisoner healthcare files — were stored on his email or in a Dropbox account.
Ian Cross, the civil-rights attorney, had joined the call on behalf of several prisoners who had active claims against Corizon when the company, rebranded as Tehum, filed for bankruptcy. One of them is William Kelly, the Michigan man who is now living with late-stage cancer. In June 2022, with a couple of his cases headed for trial, Cross discovered that Corizon, the defendant, no longer existed.
Cross and the other attorneys who dialed into the call that day were mostly met with evasion. After Lefkowitz shared, for the first time, the name of Tehum's parent company, a limited-liability company called Perigrove 1018, Cross pressed.
Lefkowitz reluctantly acknowledged that he had an ownership interest in Perigrove 1018, revealing only after further questioning that he "was part of the group that formed it." When Cross pushed on who else was in the group, Lefkowitz said just, "A large group of investors."
The stonewalling was so extreme that in June, lawyers for the unsecured creditors filed a procedural objection complaining that they had been "met with hostility and withholding of information" by numerous parties.
Insider sent detailed queries to Lefkowitz at Perigrove, a private-equity firm where he's a director. He responded from a YesCare email, saying, "Our policy is not to comment during pending company litigation."
He later followed up from a Perigrove email, saying, "The subject companies in your proposed write-up provide a vital service to the incarcerated because we believe healthcare is a basic human right that should be afforded to everyone, regardless of past mistakes."
"The adverse accusations in your proposed piece are sourced from allegations in public filings that are riddled with false accusations and inaccurate information," he added. "The Corizon bankruptcy is presently in a court ordered mediation, and we are seeking a global resolution for all the parties involved."
A Lefkowitz deposition filed in court in June revealed that he had a 5% stake in Perigrove 1018. He also finally named two others in the group of investors: David Gefner and Abraham Goldberger.
Lawsuits that claim fraud, embezzlement
Like Lefkowitz, Gefner and Goldberger are associated with multiple business that have filed for bankruptcy or faced allegations of fraud.Gefner, who turns 30 this month, says on LinkedIn he founded Perigrove, the private equity firm, in 2012, while he was still a teenager. Since then, documents show, he has spun out more than a dozen Perigrove entities, registered in his name at the same address in Suffern, a New York suburb in Rockland County. Among them, Perigrove 1018.
Perigrove was a central player in the purchase of Corizon from Flacks Group, according to Flacks and the lawsuit filed by Hyman, Corizon's former CEO.
Gefner's LinkedIn profile describes him as a "visionary entrepreneur" who has closed several merger-and-acquisition transactions across real estate and healthcare. It says that in 2009, when he would have been in high school, he served as an acquisitions specialist "for an exclusive network of family offices and ultra-high net worth investors."
Gefner also says on LinkedIn that he's a board member at Consulate Health Care, once the country's sixth-largest nursing-home chain. Consulate gained notoriety after a federal civil jury found in 2017 that the company had defrauded taxpayers with inflated billings for resident care. That case was nearing a settlement in March 2021 when Consulate, in a surprise move, filed for bankruptcy. The Justice Department ultimately agreed to settle the $256 million civil fraud judgment for just $4.5 million. Consulate's CEO and Gefner's attorney, Terrence A. Oved, did not respond to queries seeking confirmation of Gefner's claim.
As recently as March of this year, a pair of companies Gefner set up faced a fraud lawsuit over claims they'd failed to repay millions of dollars in loans intended to develop a boutique Brooklyn hotel; Gefner personally settled before the suit was filed, according to the complaint.
Oved responded to queries on Gefner's behalf with a statement saying, "David Gefner has never personally filed for bankruptcy or been involved in a litigation where he has been accused of fraud; nor does he control any company that has filed for bankruptcy. The attempt to tarnish his reputation by association and implication is regrettable."
Gefner has been on both sides of the Corizon Two-Step. He was for a time listed as a director for Tehum. And incorporation records show he's the organizer for YesCare Holdings LLC — the holding company with a 95% ownership stake in YesCare Corp., which in turn owns YesCare, the company with Corizon's active contracts.
He's also listed in a December 2022 business filing as YesCare Corp.'s president.
The other investor Lefkowitz named, Goldberger, has an equally tumultuous business background — and his name is also associated with a range of Corizon-related companies.
Goldberger, who, like Lefkowitz and Gefner, has a Perigrove email address, was once listed in business filings as a director and officer of Corizon and as a director of Tehum. He's listed too as the authorized person for M2 HoldCo and M2 LoanCo, the company that gave Tehum $39 million.
Goldberger has a history of suing his business partners — and being sued by contractors over failure to pay. In 2013 he was accused in court of embezzling funds from a charter-jet company, a case that was settled for an undisclosed sum. He's now CEO of a temporary-staffing agency called United Staffing Solutions that, as of 2019, had revenue of roughly $34 million and describes itself, in a wild exaggeration, as "one of the largest privately-owned businesses in America."
In 2022, shortly after Goldberger became an officer for Corizon, his family formed a slew of staffing services entities with names like "Corizon Health Charlotte, Inc." associated with locations where Corizon does business. Each company was registered to the same Manhattan address as that of United Staffing Solutions.
Days later, those entities were dissolved to make way for a new slate of businesses, with the names slightly tweaked: Now they echoed CHS TX, the company that does business as YesCare, such as "CHS Okaloosa, Inc." and "CHS Dana Anna, Inc."
These new companies list Goldberger; his wife, Faigy; and their children — including a 21-year-old daughter — as presidents. The same year the Goldbergers formed those companies, Corizon awarded United Staffing Solutions a contract, for an unknown amount, to staff nurses in their facilities across the country, according to a list of contracts in the company's divisional merger plan.
Goldberger's company got that contract while he was serving as a director on Corizon's board.
Now, according to the October 2022 YesCare proposal to the Alabama Department of Corrections, United Staffing Solutions is doing business with YesCare, too.
"Our exclusive staffing relationships create synergies for our clients that no other company in the industry can match," the proposal says. The document does not disclose the conflict of interest.
An office above an auto-parts shop
Two people with knowledge of the Flacks Group sale of Corizon place Lefkowitz, Gefner, and Goldberger at the heart of the deal.One of them, Michael Flacks, who sold the company to the new owners, said Gefner and Lefkowitz handled the purchase on behalf of Perigrove, something Hyman also says in his civil complaint. Flacks said Perigrove invested on behalf of high-net-worth individuals including Goldberger, who, he said, "was deeply involved in driving the transaction to a successful conclusion."
Flacks called Goldberger "Mr. Moneyman."
He also named Joel Landau, someone with a background in skilled nursing facilities, as a minority investor.
Goldberger's attorney, Joseph Haspel, responded to queries with a statement saying that "Mr. Goldberger is a passive investor" in Corizon, Tehum, YesCare, Perigrove, and Perigrove 1018. "He takes the position that it is for the Courts to address legal issues," Haspel said. "He has not engaged in any wrongdoing."
But Landau's attorney, Andrew Levander, said in a statement that any "suggestion that Mr. Landau has ever had an ownership interest or investment in YesCare, Tehum or M2 is false."
"Mr. Landau has no direct or indirect ownership interest in any of those entities."
The buyers conducted a couple of weeks of diligence, Flacks said. A Corizon source who was present on early calls to discuss the sale in December 2021 said the talks moved quickly. Lefkowitz and Goldberger were initially interested in exploring a purchase of Corizon's pharmacy-management subsidiary, Pharmacorr, the source said. Within the week, they had decided to buy the entire company.
"We were able to successfully negotiate a corporate downsizing as well as the spinoff of the pharmacy business," Flacks said. "We believe this was the best outcome for the employees and the patients."
When Lefkowitz gathered with Corizon executives the following Sunday, the executives had already drafted a press release to announce the sale, the Corizon source said. Lefkowitz shut down the discussion, saying he worked with partners who ran nursing homes, who didn't want their patients to know they were also getting into prison healthcare.
In a December 2021 email to Lefkowitz, filed as an exhibit in former CEO James Hyman's lawsuit, Hyman asks: "When we talk to customers and say 'we've been bought, the financial guys are gone, the new guys are committed to healthcare, etc.' and the customer asks, 'so who are they?', what do you want us to say?"
Besides their multiple associations with Lefkowitz, Gefner, and Goldberger, a few of the companies associated with Corizon have something else in common.
YesCare Holdings and Perigrove share the same address, the 46th floor of 7 World Trade Center, a sparkling high-rise in Manhattan's downtown financial district.
While Perigrove holds itself out as a sleek, Manhattan-based financial company, the company doesn't have any filings with the Securities and Exchange Commission that would suggest it had raised significant money. Incorporation records and a report from the short-seller Hindenburg Research show the company's office isn't even in Manhattan but rather an hour's drive away in Rockland County, above a Suffern auto-parts shop. A paper sign with "Perigrove" in big letters was taped on the glass door of the two-story brick building, layered over another signed that read "Perigove LLC" — without the "R".
An Insider reporter asked an auto-parts employee at the building whether Gefner was often at the office. "You here to give him a summons?" the man replied, in between bites of lunch. When asked whether that happened a lot, he responded with a laugh, "No comment."
Perigrove shares the Suffern address with numerous other companies. Incorporation records list Gefner as the organizer for dozens of Perigrove-related entities, with names like "Perigrove 1021A LLC" and "Perigrove 1028 LLC," all registered at the office above the auto-parts store. The unassuming office space near a Kosher grocery store and an Orthodox synagogue is also the home of Perigrove 1018 LLC, the ultimate parent company of Tehum.
Gefner is listed as the company's organizer.
Potential signs of perjury
The Alabama Department of Corrections proposal that YesCare submitted last year contained another pivotal detail about the company's backing, one Lefkowitz avoided revealing under intense questioning in May.YesCare says it is managed and financially supported by a company called Geneva Consulting LLC, "a wholly-owned subsidiary of the Genesis Healthcare group of companies."
Geneva Consulting was incorporated in 2021 with Gefner as general partner and registered to the same 7 World Trade Center address.
A month after Geneva was formed, Hyman discovered something that alarmed him: Lefkowitz, as a representative of Corizon's new owners, had signed off on a $3 million payment to Geneva for future services described only as "corporate restructuring." Hyman asked Lefkowitz about the transaction, he said in his lawsuit, and was immediately terminated.
Lefkowitz later explained, on a creditors call in June, that Geneva served as an intermediary between M2 LoanCo, the lender, and Tehum, the company Corizon saddled with its debts, making payments on behalf of Tehum to various vendors. He said it was his job to review invoices before Geneva sent payments from its accounts.
But he said he held no official title with Geneva nor received any compensation. And Lefkowitz said under oath on the June creditor's call that he didn't know the identity of Geneva's principals.
That sworn testimony may be false.
According to a motion in the $12 million lawsuit filed against Tehum by the University of Missouri Health Care system and the local hospital over nonpayment, Lefkowitz had a controlling interest in Geneva. In a motion filed in June to force compliance with a subpoena, lawyers for the unsecured creditors committee cite Geneva's attorney saying his "client contact" there was Lefkowitz. According to an attachment in Geneva's exhibit list, Lefkowitz has one of just 11 email addresses at Geneva. He is listed on a company website as a director of Genesis Healthcare, Geneva's owner.
When asked about Genesis on the May creditors call, Lefkowitz said, "It's possible, I'm not 100 percent certain" that the company has an investment in Perigrove 1018.
Genesis Healthcare is one of the biggest nursing-home systems in the United States, with more than 200 facilities in 21 states. It's also another deeply troubled company: In 2021, after several years of poor financial performance, Genesis was taken over and delisted from the New York Stock Exchange.
According to a Genesis press release, the money for the purchase came from an affiliate of a private-equity firm called Pinta Capital Partners that was founded in 2012 by David Harrington and Landau — the investor who Flacks said was part of the group who purchased Corizon. Landau was later described by The American Prospect as a "serial liar with a history of conning his way into nursing home takeovers."
Landau gained notoriety several years ago for his role in a scandal during the Bill de Blasio administration. That's when another Landau company purchased a former 219-bed Lower East Side nursing home called Rivington House. City officials lifted deed restrictions on the property after Landau made a commitment to local officials that there'd be no changes for residents. But he quickly reneged and sold the property to developers, netting $72 million.
Landau has ties with both Lefkowitz and Gefner. According to the Hindenburg report, Gefner once worked for Pinta Capital. An archived 2009 video shows Lefkowitz and Landau shaking hands and smiling with then New York Gov. David Paterson.
A strategy 'to benefit insider individuals'
The complex web of business relationships appears to have led to self-dealing. There were Corizon and YesCare's contracts with the Goldberger-controlled United Staffing Solutions. There was the $3 million consultancy between Corizon and Geneva whose discovery may have gotten Hyman fired.The Alabama proposal document says YesCare also entered into an agreement with Geneva, paying Geneva to provide administrative support services, capital financing, and bonding requirements.
Insider's analysis of financial records filed by Tehum in bankruptcy court shows that since the new buyers purchased Corizon, the company has transferred more than $48 million to entities controlled by Lefkowitz and Gefner, potentially limiting the pool of funds available for settling claims with creditors like the Garcias.
For example, Corizon gave Perigrove $6 million from April to June 2022, the period in which the company became Tehum. And Corizon sent $7.5 million to another Gefner company, DG Realty, in December 2021.
(A footnote indicates Tehum has also received $24 million from five parties, but it doesn't break down the payments.)
"The most egregious form of the Two-Step is the kind of thing that bankruptcy is designed to prevent," Mark Roe, a professor at Harvard Law School who teaches bankruptcy and corporate law, told Insider. "A transfer of assets to our friends or ourselves, and to avoid paying liabilities."
Oved, Gefner's attorney, said in the statement, "Corizon was on the verge of filing bankruptcy when it was acquired" and that "Corizon has done nothing wrong by availing itself of the same laws and protections afforded every other company in this country and any implication to the contrary is false."
The ACLU, Public Justice, and other civil-rights organizations filed an amicus brief in May on behalf of pro se incarcerated plaintiffs. In it, they argue that the level of self-dealing among the principals has weakened the ability of creditors to repossess assets that may have been wrongly moved out of their reach. Lawyers for the unsecured creditors also argued, in a June filing opposing Tehum's attempts to draw out the timeline, that "this bankruptcy process is serving to benefit insider individuals and affiliated entities."
LoPucki, the University of Florida scholar, said that the case, if it's resolved in favor of Tehum's owners, could signal "a fundamental change in the law governing debt," effectively rewriting the rules of the bankruptcy code laid down by Congress over a century ago.
"As this case shows, corporations will keep trying to manipulate bankruptcy to game the justice system unless Congress puts a stop to it," Sen. Dick Durbin, chair of the Senate Judiciary Committee, told Insider.
In January 2022, just a few months before the divisional merger that created YesCare, Lefkowitz was trying another maneuver to siphon money out of the cash-strapped Corizon.
According to allegations in a 2022 lawsuit, he and two business partners, including someone identified on a wire transfer as "DAVID," planned to purchase hundreds of thousands of COVID test kits from a company called Seven Trade, registered to the same World Trade Center address and organized by Gefner. Lefkowitz and Gefner describe themselves in legal documents as its director and sole member, respectively.
The complaint, filed by Seven Trade against the test-kit supplier, says they planned to resell the tests to Corizon at a 57% markup. If the deal hadn't fallen through, it would have netted them almost $1.2 million; Seven Trade won a $2.9 million judgment.
In June, Cross, the civil-rights attorney, joined other creditors in filing a motion for the court to appoint an independent trustee, arguing that the Seven Trade episode "is perhaps the clearest available evidence that Mr. Lefkowitz is unlikely to act as a responsible fiduciary." (In an objection, attorneys for Tehum said the company "disputes the implications or the specific allegations.")
"The Debtor's directors," the motion said of Tehum, "engaged and attempted to engage in various self-dealing transactions while the Debtor was insolvent," including the Seven Trade deal and Tehum's "payment of millions of dollars to Geneva Consulting LLC, a newly-formed entity controlled by insiders."
In May 2022, just three months after Seven Trade filed suit and right around the time of the divisional merger, Tirschwell, YesCare's founding CEO, was looking to sign up new business. YesCare had its eyes on one particularly lucrative call for bids: the one from the state of Alabama.
The Alabama Department of Corrections is one of the most notorious prison systems in the country. The department has been the subject of a federal investigation since 2016 over horrific conditions and pervasive violence, and it's still fighting a class-action lawsuit filed in 2014 by the Southern Poverty Law Center over claims of inadequate healthcare. The stakes were high for whoever would come in to handle medical care for the system's more than 18,000 prisoners.
After reviewing five bids, the state awarded a billion-dollar contract to YesCare, a company that had been established only a couple of months earlier. The decision was shrouded in controversy. A corrections department attorney acknowledged a potential conflict of interest. And Wexford, a competitor for the massive bid, alleged in a letter to the governor obtained by Insider that YesCare's CEO — then Tirschwell — violated a "cone of silence" period by having dinner with the department's top corrections official during the bidding process. Alabama rebid the contract, but YesCare prevailed again.
There was another striking revelation in YesCare's proposal — one that hints at why the group of investors wanted to take over Corizon in the first place.
YesCare and Geneva Consulting, the proposal explains, intend to create a prison-to-nursing-home pipeline.
They say YesCare plans to develop and manage skilled nursing facilities to house medically fragile older people on medical furlough from prison, on parole, or who recently finished their sentence, creating a direct path from the prisons to their centers. The proposal lists 11 facilities across Alabama, nine of them run by Genesis, that collectively can house more than 700 people.
"In more cases than not, releasing patients are denied access to nursing homes due to their history of violence or their infectious disease status," the proposal says, referencing a chart of the Genesis facilities. "YesCare has access to the facilities below to assist the ADOC with nursing home placements."
The proposal describes the arrangement as "an innovative means to transfer significant healthcare costs away from State budgets."
Seven of the nine Genesis facilities listed, according to ProPublica's nursing-home database, received "D," "E" , "F", "J", and "K" ratings from the federal Centers for Medicare and Medicaid Services, on a scale of A to L. Insider found at least 80 documented deficiencies over the past five years in which these facilities failed to meet care requirements, resulting in over $44,000 in fines.
Bankruptcy was in her playbook
After the new owners quietly took over Corizon, they appointed someone as CEO with no prior experience in corrections.Sara Tirschwell, a Texas native with piercing hazel eyes, spent much of her career at Davidson Kempner, the distressed-debt pioneer. There, she served as interim CFO for an addiction-treatment center in Maine, sat on the board of a cannabis transport company, and helped to restructure an Israeli automotive supplier. She went on to become a managing director at Quest Turnaround Advisors, a firm specializing in managing flailing businesses.
Then, before joining Corizon, she decided to run for New York City mayor.
By all accounts, it was a spectacular debacle. She failed even to collect enough signatures to get onto the Republican primary ballot. And yet she may have violated campaign-finance laws, according to a July 2022 complaint submitted to the city's Campaign Finance Board, by failing to properly report expenditures and in-kind contributions. When a board employee had contacted her some months earlier with questions about outstanding liabilities owed by her campaign, according to notes of the call, Tirschwell responded that she "would simply file for bankruptcy at the federal level to ensure the CFB could not come after her." (A spokesperson for the CFB, Tim Hunter, declined to comment on whether the board opened an investigation.)
That instinct may have presaged what came next.
About six months after Tirschwell dropped out of the race, she sold her Manhattan condo for $2.6 million, rented an apartment on the 29th floor of a high-rise building in Houston, and embarked on another adventure in bankruptcy, Corizon's Texas Two-Step.
That apartment was more than her personal residence: Incorporation records show that Tirschwell listed her apartment as the business address for YesCare Corp., the company that owns YesCare.
During her short tenure at Corizon, and then YesCare, Tirschwell bid for new business, including in Alabama, and reached out to corrections officials to reassure them about the transfer of ownership. Bryan Baker, the director of the New Mexico jail where Hector Garcia's health catastrophically collapsed, recalled an in-person visit Tirschwell made to the facility, some three years after Garcia died, where they briefly discussed the business.
But it seems clear in retrospect that Tirschwell was brought on to accomplish one thing.
Bankruptcy was in Tirschwell's playbook. Her Quest profile says she "has been a guest lecturer on the subject of bankruptcy investing." Back in 2004, after many companies with asbestos tort liabilities had been driven into bankruptcy, she joined with other hedge funds in meeting with members of the Senate Judiciary Committee to discuss the idea of establishing a trust fund to pay those claims. A decade later, companies with asbestos claims were the first to deploy the Texas Two-Step.
She was the only Corizon leader based in Texas, where the Two-Step is legal, and the timeline suggests she may have been brought on specifically to oversee the company's legal maneuvers in Texas. She was referred to as part of the company's "transitional leadership team" in a February email sent from a YesCare administrator to a county agency in Michigan.
Three days after the bankruptcy, Tirschwell was out the door, with Corizon's long-standing CFO Jeff Sholey taking the company's reins. Sholey did not respond to detailed requests for comment.
Though she was CEO for just 15 months, she was rewarded with a 5% ownership stake in YesCare Corp. Despite the bankruptcy, Tirschwell writes of YesCare on her LinkedIn page that she executed the "successful turnaround of a 45 year old correctional healthcare company."
Steven Storch, Tirschwell's attorney, declined to comment on her behalf, citing pending litigation, and did not respond to detailed follow-up questions. But he said she "has long been a passionate advocate for improvements to the prison healthcare system."
In June, an Insider reporter stopped by the Doña Ana County Detention Center, the low-slung facility in Las Cruces, on the edge of the Chihuahuan Desert, that Tirschwell had visited a year before — the place where Hector Garcia spent his final days.
In the facility's nursing station, where Garcia's family said in a civil complaint that he'd received "inadequate medical care," YesCare and Corizon posters are now plastered side-by-side.
The hallway's fluorescent lights added a harshness to the already desolate environment. The prison gave off a musty, almost putrid smell and in the cells, men lay on their metal bunks, turned to the wall.
This facility is where Garcia collapsed just three days into his six-day sentence; where a corrections officer found him crawling on the floor and moaning; where a nurse practitioner from Corizon responded to his severe pain, distended abdomen, and his vomiting of dark brown bile by putting him in a medical observation cell.
According to the family's lawsuit, emergency rooms frequently encounter perforated ulcers and a routine surgery can treat the condition. Left untreated, however, the condition can be fatal. Time matters, and Corizon staffers waited until early in the morning on August 6 — two days after the onset of Garcia's symptoms — to send him to the hospital.
"How can our system allow this to people?" Hector Garcia Jr. said in an interview. "It's not like he had a chance to call an ambulance himself."
The Garcias may never get a chance to make the case that his death could have been prevented. If Tehum's owners get their way during the settlement negotiations scheduled for this week, they could skirt accountability not just for Hector Garcia's death, but for the for hundreds of vulnerable prisoners who say they experienced serious harm at the hands of a company paid hundreds of millions of dollars to keep them safe.
This project was completed with the support of a grant from Columbia University's Ira A. Lipman Center for Journalism and Civil and Human Rights in conjunction with Arnold Ventures.
Credits
Reporters: Nicole Einbinder, Dakin Campbell, Katherine Long, Jack Newsham, Hannah BecklerVisuals: Kazi Awal, Isabel Fernandez-Pujol, Annie Fu, Rebecca Zisser
Video: Erica Domena, Havovi Cooper
Photography: Sylvia Jarrus, Adria Malcolm, Storm Harper
Research: Narimes Parakul
Copy Editor: Kevin Kaplan