Back in 2000-2001, the Detroit-based company that manages health care for Medicaid patients was in the ditch. Its publicly traded stock (symbol: UAHC) was selling for around $1. Business was lousy. It was about to lose its management contract with the state of Michigan. Then the company found financial salvation via a lifeline to Memphis and Nashville through Ford.
Using the time-tested Memphis practices of cronyism, strong-arming the state Senate, turning low-income Ford voters into revenue-generating customers, and according to a new federal indictment corruption, Ford helped turn UAHC around.
By 2002, UAHC was enrolling thousands of new members, most of them coming from Tennessee’s TennCare plan. Its headquarters was still in Detroit, but its business was in Memphis and West Tennessee. Operating as OmniCare, the CEO was Ford’s friend Osbie Howard, who was city of Memphis treasurer from 1992 to 1995 under Mayor Willie Herenton and Herenton’s campaign treasurer in 1999. Another key executive was Stephanie Mebane Dowell, formerly Herenton’s administrative assistant and later legislative director for Methodist Le Bonheur Healthcare until 2001.
Things were rosy for a few years. The stock soared to $7 a share. Howard was earning over $300,000 a year and had 83,000 shares of stock and options on 130,000 shares. Ford was secretly collecting “consulting fees” from UAHC of $10,000 a month, totaling more than $400,000 by 2005.
But that was the year the roof caved in. Two OmniCare employees, including in-house attorney Felicia Corbin Johnson, blew the whistle on illegal acts in civil lawsuits. Federal investigations targeted Ford’s ties to OmniCare and other HMOs and, in a separate investigation, bribes he allegedly took from an FBI undercover company called E-Cycle Management.
Howard resigned, and UAHC publicly admitted he was “involved” with Ford in a partnership called Managed Care Services Group (MCSG) that was “not approved by UAHC and [was] not consistent with UAHC’s code of conduct.” The stock price plunged from $6 to $2. A few weeks later, Ford was indicted for the first time.
The new indictment, released Monday in Nashville, charges Ford with wire fraud and concealing his so-called consulting work for TennCare contractors. Howard is not mentioned by name, but the indictment refers to an “Individual B” described as “a high-level executive with UAHC, with United American of Tennessee and with OmniCare and also a 30 percent owner of MCSG.”
Howard could not be reached for comment. In the 1999 Herenton campaign, he was pleasantly low-key and accurately predicted that the mayor would get about 46 percent of the vote. Among the losing candidates was Joe Ford, John’s brother. That Herenton campaign, managed by A C Wharton, was notable for the amount of money spent more than $800,000 in a fairly short time in a race that was not close.
According to the indictment, John Ford, as an influential senator and a member of the TennCare Oversight Committee, was the key to the growth of OmniCare, and OmniCare was the key to the growth of United American Health Care. With Ford’s help, OmniCare enrolled more than 100,000 uninsured West Tennesseans in its managed-care network.
“After November 1, 2002, substantially all of UAHC’s revenues were derived from its ownership of, and provision of services to, OmniCare through UAHC’s wholly owned subsidiary,” the indictment says. U.S. attorney Craig Morford said it shows Ford’s “appalling willingness” to use his public position for personal gain.
Ford was scheduled to make an initial court appearance this week.
According to recent financial filings, UAHC’s business plan is basically unchanged. It plans to “grow business in Tennessee” where it has 115,000 members and relationships with 19 hospitals and 900 doctors. Dowell is chief executive officer of UAHC Health Plan, OmniCare’s successor.
For the first quarter of fiscal year 2007, UAHC had revenues of $4.2 million. Last week, four days before the indictment was unsealed, UAHC successfully completed a private placement of new shares of stock, raising $6.5 million. The stock was selling this week at slightly under $9 a share.
The other company mentioned in the latest Ford indictment is Doral Dental. Again, the parent company is conveniently based out of state (Wisconsin) where its ties to Ford were less likely to be scrutinized. Doral Tennessee had the TennCare dental contract, thanks to Ford, and allegedly paid him more than $400,000.
Whether or not they knew all the details, Ford’s senate colleagues were aware of his consulting business (he listed consulting as his occupation in the Tennessee Blue Book) and the fortunes being made in the stock market. Some were apparently envious. In secret tapes played at his bribery trial, former Senator Roscoe Dixon talks about the subtleties of steering business to certain dentists and HMOs and says “everybody got some semi-hustle.”
The whole premise of phony E-Cycle Management and Tennessee Waltz was high-rollers using lucrative state contracts to boost their revenues and credibility and make a killing in the market. And the template was real companies such as UAHC and Nashville-based Corrections Corporation of America.
The Flyer erroneously reported last week that Southland Park Gaming and Racing is owned by Penn National Gaming. It is owned by Delaware North Company.